As Filed with the Securities and Exchange Commission on ________________
Registration No. 333-41031
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUST
REGISTERED ON FORM N-8B-2
LIFE OF VIRGINIA SEPARATE ACCOUNT II
(Exact name of trust)
THE LIFE INSURANCE COMPANY OF VIRGINIA
(Name of depositor)
6610 West Broad Street
Richmond, Virginia 23230
(Complete address of depositor's principal executive offices)
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Name and complete address of agent for service: Copy to:
<S> <C>
J. Neil McMurdie, Esq.
The Life Insurance Company of Virginia Stephen E. Roth, Esq.
6610 West Broad Street Sutherland, Asbill & Brennan, L.L.P.
Richmond, Virginia 23230 1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2404
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Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement
Securities Being Offered: Flexible Premium Variable Life Insurance Policies
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
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
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
PROSPECTUS DATED _____________
Flexible Premium Variable Life Insurance Policy
Form 1250 CR 10/97
LIFE OF VIRGINIA SEPARATE ACCOUNT II
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
Telephone (800) 352-9910
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
FEDERALDEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
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TABLE OF CONTENTS
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Page Page
SUMMARY AND DIAGRAM OF 5 HYPOTHETICAL ILLUSTRATIONS 28
THE POLICY REQUESTING PAYMENTS AND 40
Fund Charges 8 TELEPHONE TRANSACTIONS
DEFINITIONS 10 Requesting Payments 40
PREMIUMS 12 Telephone Transactions 40
Applying for a Policy 12 OTHER POLICY BENEFITS AND 40
Free Look Right to Cancel 12 PROVISIONS
Premiums 12 Exchange Privilege 40
Periodic Premium Plan 12 Optional Payment Plans 40
Premium to Prevent Lapse 13 Other Policy Provisions 41
Minimum Premium Payment 13 Owner 42
Death Benefit Guarantee 13 Beneficiary 42
Crediting Premium to the Policy 13 Reinstatement 42
ALLOCATION OPTIONS 14 Trustee 42
Net Premium Allocations 14 Other Changes 42
Investment Subdivisions 14 Reports 42
Transfers 19 Change of Owner 42
Dollar-Cost Averaging 19 Supplemental Benefits 43
Portfolio Rebalancing 19 Using the Policy as Collateral 43
Powers of Attorney 20 Reinsurance 43
CHARGES AND DEDUCTIONS 20 LIFE OF VIRGINIA 43
Premium Charge 20 The Life Insurance Company of Virginia 43
Mortality and Expense Risk 20 State Regulation 43
Charge Executive Officers and Directors 43
Monthly Deduction 20 Separate Account II 44
Surrender Charge 20 Changes to Separate Account II 45
Cost of Insurance 21 Voting of Fund Shares 45
Other Charges 22 TAX CONSIDERATIONS 46
Reduction of Charges for Group Sales 22 Tax Status of the Policy 46
HOW YOUR ACCOUNT VALUE VARIES 22 Tax Treatment of Policy Proceeds 47
Account Value 22 Tax Treatment of Policy Loans 48
Surrender Value 23 and Other Distributions
Investment Subdivision Values 23 Taxation of Life of Virginia 48
DEATH BENEFITS 23 Income Tax Withholding 49
Amount of Death Benefit Payable 23 Other Considerations 49
Death Benefit Options 23 LEGAL DEVELOPMENTS - 49
Changing the Death Benefit Option 24 REGARDING EMPLOYMENT
Accelerated Benefit Rider 24 RELATED BENEFIT PLANS
Effect of Partial Surrenders on 25 ADDITIONAL INFORMATION 49
Life Insurance Proceeds Sale of Policies 49
Change in Existing Coverage 25 Other Information 50
Changing the Beneficiary 26 Litigation 50
LOAN BENEFITS 26 Legal Matters 50
Interest 26 Experts 50
Repayment of Policy Debt 26 Change in Auditors 50
Effect of Policy Loan 26 Financial Statements 51
SURRENDER BENEFITS 27
Full Surrender 27
Partial Surrender 27
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<PAGE>
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made. No person is authorized to make any
representations in connection with this offering other than those
representations contained in this prospectus and the Fund prospectuses and
Statements of Additional Information.
<PAGE>
SUMMARY AND DIAGRAM OF THE POLICY
The following summary of prospectus information and diagram of the important
features of the Policy should be read in conjunction with the more detailed
information appearing elsewhere in this prospectus. Unless otherwise indicated,
the description of the Policy in this prospectus assumes that the Policy is in
force and there is no Policy Debt. Definitions of certain terms used in this
prospectus may be found by referring to the DEFINITIONS section immediately
following the diagram.
Purpose of the Policy. The Policy is designed to provide insurance
benefits with a long-term investment element. The Policy should be considered in
conjunction with your other insurance. It may not be advantageous to replace
existing insurance with the Policy.
Comparison with Universal Life Insurance. The Policy is similar in many
ways to universal life insurance. As with universal life insurance: the Owner
pays premiums for insurance coverage on the Insured; the Policy provides for the
accumulation of Surrender Value that is payable if the Policy is surrendered
during the Insured's lifetime; and the Surrender Value may be substantially
lower than the premiums paid. However, the Policy differs from universal life
insurance in that the Surrender Value may decrease if the investment performance
of the Investment Subdivisions to which Account Value is allocated is
sufficiently adverse. If the Surrender Value becomes insufficient to cover
charges when due and the Continuation Period is not in effect, the Policy will
lapse without value after a grace period. See "Premium to Prevent Lapse."
Tax Considerations. We intend for the Policy to satisfy the definition of a
life insurance contract under section 7702 of the Internal Revenue Code of 1986,
as amended (the "Code"). Under certain circumstances, a Policy could be treated
as a "modified endowment contract." We will monitor Policies and will attempt to
notify you on a timely basis if your Policy is in jeopardy of becoming a
modified endowment contract. For further discussion of the tax status of a
Policy and the tax consequences of being treated as a life insurance contract or
a modified endowment contract, see the "TAX CONSIDERATIONS" section below.
Free Look Right to Cancel. For a limited time after the Policy is issued,
you have the right to cancel your Policy and receive the sum of all charges
deducted from premiums paid plus Net Premiums adjusted by investment gains and
losses or, if required by state law, a full refund of all premiums paid. See
"Free Look Right to Cancel" and "Net Premium Allocations."
Other Policies. We offer other variable life insurance policies which also
invest in the same portfolios of the Funds. These Policies may have different
charges that could affect the value of the Investment Subdivisions and may offer
different benefits more suitable to your needs. To obtain more information about
these policies, contact your agent, or call (800) 352-9910.
Inquiries. If you have any questions, you may write or call our Home Office
at 6610 West Broad Street, Richmond, Virginia 23230, (800) 352-9910.
<PAGE>
DIAGRAM OF POLICY
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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."
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DEDUCTION FROM PREMIUMS
- Currently, a 8% premium charge (10% 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."
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- -------------------------------------------------------------------------------
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:
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Janus Aspen Series GE Investments Funds, Inc. (Continued)
Growth Portfolio Total Return Fund
Aggressive Growth Portfolio International Equity Fund
International Growth Portfolio Real Estate Securities Fund
Worldwide Growth Portfolio Global Income Fund
Balanced Portfolio Value Equity Fund
Flexible Income Portfolio Income Fund
Capital Appreciation Portfolio Oppenheimer Variable Account Funds
Variable Insurance Products Fund Oppenheimer Bond Fund
Equity-Income Portfolio Oppenheimer Capital Appreciation Fund
Overseas Portfolio Oppenheimer Growth Fund
Growth Portfolio Oppenheimer High Income Fund
Variable Insurance Products Fund II Oppenheimer Multiple Strategies Fund
Asset Manager Portfolio Federated Insurance Series
Contrafund Portfolio Federated American Leaders Fund II
Variable Insurance Products Fund III Federated Utility Fund II
Growth & Income Portfolio Federated High Income Bond Fund II
Growth Opportunities Portfolio The Alger American Fund
GE Investments Funds, Inc. Alger American Growth Portfolio
S&P 500 Index Fund Alger American Small Capitalization Portfolio
Money Market Fund PBHG Insurance Series Fund, Inc.
PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio
</TABLE>
See "Investment Subdivisions Options."
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DEDUCTION 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 0.70%) 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 current monthly policy charge of $15 in the
first Policy Year ($15 per month maximum in the first Policy Year) and $6
per month thereafter ($12 per month maximum after the first Policy Year),
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."
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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."
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- --------------------------------------------------------------------------------
CASH BENEFITS
- Policy loans are available for amounts up to 90% of Account Value less any
Surrender Charges, less any Policy Debt. See "LOAN BENEFITS" for
discussion of interest on Policy loans and additional rules and limits.
See also "TAX CONSIDERATIONS."
- Partial surrenders are available under the Policy. The minimum partial
surrender amount is $500, and a fee equal to the lesser of $25 or 2% of
the amount of the partial surrender will apply to each Partial Surrender.
See "Partial Surrender" for rules and limits.
- The Policy can be surrendered at any time for its Surrender Value (Account
Value minus Policy Debt and minus any applicable surrender charge).
A surrender charge will apply during the first 15 Policy Years. See
"Full Surrender" and "Surrender Charge."
- A variety of payment options are available. See "Requesting Payments."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEATH BENEFITS
- The minimum Specified Amount available is $100,000.
- A death benefit is available under one of two options: Option A (greater
of Specified Amount plus Account Value, or a specified percentage
of Account Value); or Option B (greater of Specified Amount, or a
specified percentage of Account Value). See "DEATH BENEFITS."
- A death benefit is payable as a lump sum or under a variety of payment
options.
- The Specified Amount and the Death Benefit Option may be changed See
"Change in Existing Coverage" and "Changing the Death Benefit Option"
for rules and limits.
- During the Continuation Period, the death benefit guarantee keeps the
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."
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<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.
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<CAPTION>
Management
Fees
(after fee Other Expenses
waiver as (after reimbursement- Total Annual
Fund applicable) as applicable) Expenses
<S> <C>
Janus Aspen Series:
Growth Portfolio 0.65% 0.04% 0.69%
Aggressive Growth Portfolio 0.72% 0.04% 0.76%
Worldwide Growth Presentation 0.66% 0.14% 0.80%
International Growth Portfolio 0.05% 1.21% 1.26%
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 & Income Portfolio 0.50% 0.20% 0.70%
Growth Opportunities Portfolio 0.61% 0.16% 0.77%
GE Investments Funds, Inc.:
S&P 500 Index Fund 0.35% 0.13% 0.48%
Money Market Fund 0.10% 0.05% 0.15%
Total Return Fund 0.50% 0.10% 0.60%
International Equity Fund 1.00% 0.50% 1.50%
Real Estate Securities Fund 0.85% 0.22% 1.07%
Global Income Fund * 0.60% 0.30% 0.90%
Value Equity Fund * 0.65% 0.26% 0.91%
Income Fund* 0.50% 0.13% 0.63%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund 0.74% 0.04% 0.78%
Oppenheimer Capital Appreciation Fund 0.72% 0.03% 0.75%
Oppenheimer Growth Fund 0.75% 0.04% 0.79%
Oppenheimer High Income Fund 0.75% 0.06% 0.81%
Oppenheimer Multiple Strategies Fund 0.73% 0.04% 0.77%
Federated Insurance Series:
Federated Utility Fund II 0.24% 0.61% 0.85%
Federated High Income Bond Fund II 0.01% 0.79% 0.80%
Federated American Leader Fund II 0.53% 0.32% 0.85%
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.:
PBHG Growth II Portfolio * 0.85% 0.30% 1.15%
PBHG Large Cap Growth Portfolio * 0.72% 0.38% 1.10%
</TABLE>
*The Global Income Fund, Value Equity Fund and Income Fund of the GE Investments
Funds, Inc., the Capital Appreciation Portfolio of the Janus Aspen Series, and
the Growth II Portfolio and Large Cap Growth Portfolio of the PBHG Insurance
Series Fund, Inc. had not yet commenced operations as of December 31, 1996.
Therefore, the fees and expenses for these portfolios are estimates.
<PAGE>
The purpose of this table is to assist the Owner in understanding the various
costs and expenses that an Owner will bear, directly and indirectly. Except as
noted below, the Table reflects charges and expenses of Separate Account II as
well as the underlying Funds for the most recent fiscal year. For more
information on the charges described in this table, see Charges and Deductions
and the Prospectuses for the underlying Funds which accompany this Prospectus.
The expense information regarding the Funds was provided by those Funds. The
Janus Aspen Series, Variable Insurance Products Fund, Variable Insurance
Products Fund II, Variable Insurance Products Fund III, Oppenheimer Variable
Account Funds, Federated Insurance Series, The Alger American Fund, and PBHG
Insurance Series Fund, Inc. and their investment advisers are not affiliated
with Life of Virginia. While Life of Virginia has no reason to doubt the
accuracy of these figures provided by these non-affiliated Funds, Life of
Virginia has not independently verified such information. The annual expenses
listed for the Funds are net of certain reimbursements by the Funds' investment
advisers, as described below. Life of Virginia cannot guarantee that the
reimbursements will continue.
Absent certain reimbursements that are reflected in the table, the total
annual expenses of the portfolios of the Janus Aspen Series during 1996 would
have been .83% for Growth Portfolio, .83% for Aggressive Growth Portfolio, 0.91%
for Worldwide Growth Portfolio, 2.21% for International Growth Portfolio, and
1.07% for Balanced Portfolio. The Other Expenses listed for the Capital
Appreciation Portfolio of Janus Aspen Series are estimates provided by the Fund
because the portfolio had not yet commenced operations as of December 31, 1996.
The total expenses absent fee waivers are estimated to be 1.30%.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund during 1996 would have been 0.56% for VIP Equity-Income Portfolio, 0.92%
for VIP Overseas Portfolio and 0.67% for VIP Growth Portfolio.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund II during 1996 would have been 0.73% for VIP Asset Manager Portfolio and
0.71% for VIP Contrafund Portfolio.
Absent certain reimbursements and reductions that are reflected in the table,
the total annual expenses of the portfolios of the Variable Insurance Products
Fund III during 1996 would have been 0.77% for VIP Growth Opportunities
Portfolio.
GE Investment Management Incorporated currently serves as investment adviser
to GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.).
Prior to May 1, 1997, Aon Advisors, Inc. served as investment adviser to this
Fund and had agreed to reimburse the Fund for certain expenses of each of the
Fund's portfolios. Absent certain fee waivers or reimbursements, the total
annual expenses of the portfolios of GE Investments Funds, Inc. during 1996
would have been 0.48% for S&P 500 Index Fund, 0.55% for Money Market Fund, 0.60%
for Total Return Fund, 1.56% for International Equity Fund, and 1.07% for Real
Estate Securities Fund,. The Other Expenses for the Global Income Fund, the
Value Equity Fund and the Income Fund are estimates by the Fund since these
portfolios were recently organized and have no operating history, and actual
expenses may be greater or less than those shown.
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of the Federated Insurance Series during 1996 would have been 1.36%
for Federated Utility Fund II, 1.39% for Federated High Income Bond Fund II, and
1.07% for Federated American Leaders Fund II.
The Other Expenses listed for the Growth II Portfolio and Large Cap Growth
Portfolio of PBHG Insurance Series Fund, Inc. are estimates provided by the Fund
because the portfolios were recently organized and have a brief operating
history. Actual expenses may be greater or less than those shown.
<PAGE>
DEFINITIONS
Account Value - Account Value is the total amount under the Policy in each
Investment Subdivision and the General Account.
Age - The age on the Insured's birthday nearest the Policy Date or a Policy
Anniversary.
Attained Age - The Insured's Age on the Policy Date plus the number of full
years since the Policy Date.
Beneficiary - The person or entity designated by you to receive the death
benefit payable at the death of the Insured.
Continuation Amount - A cumulative amount set forth on the Policy data pages for
each month of the Continuation Period representing the minimum Net Total Premium
required to keep the Policy in force during the Continuation Period.
Continuation Period - The number of Policy years during which the Policy will
not lapse if the Net Total Premium is at least equal to the Continuation Amount
for the number of Policy Months that the Policy has been in force. The
Continuation Period varies by issue Age as follows: 25 years for Ages 0 - 45; 20
years for Ages 46 - 55; 15 years for Ages 56 - 70; and 10 years for Ages 71 and
older.
Eligible Proceeds - Total Proceeds subject to a maximum of $250,000 from all our
policies or certificates covering the Insured.
Fund - Any open-end management investment company, or unit investment trust, in
which Separate Account II invests. General Account - Assets of Life of Virginia
other than those allocated to Separate Account II or any of our other separate
accounts.
Home Office - Life of Virginia's offices at 6610 West Broad Street, Richmond,
Virginia 23230, 1-804-281-6000.
Insured - The person upon whose life the Policy is issued.
Investment Subdivision - A subdivision of Separate Account II, the assets of
which are invested exclusively in a corresponding Fund.
Life Insurance Proceeds - The amount payable upon the death of the Insured. The
Life Insurance Proceeds will be reduced by outstanding Policy Debt and past due
charges, if any, to determine the death benefit payable under the Policy.
Life of Virginia - The Life Insurance Company of Virginia. "We," "us," or "our"
refers to Life of Virginia.
Monthly Anniversary Day - The same day in each month as the Policy Date.
Net Premium - The portion of each premium paid allocated to one or more
Investment Subdivision, and used in determining the Account Value.
Net Premium Factor - The factor used in determining the Net Premium which
represents a deduction from each premium paid.
Net Total Premium - On any date, Net Total Premium equals the total of all
premiums paid to that date less (a) divided by (b), where:
(a) is any outstanding Policy Debt, plus the sum of any partial
surrenders to date; and (b) is the Net Premium Factor.
Optional Payment Plan - A plan under which Life Insurance Proceeds or Surrender
Value proceeds can be used to provide a series of periodic payments to you or a
Beneficiary.
Owner - The Owner of the Policy. "You" or "your" refers to the Owner.
Contingent Owners may also be named.
Planned Periodic Premium - A level premium amount scheduled for payment at fixed
intervals over a specified period of time.
Policy - The Policy with any attached application(s), and any riders and
endorsements.
Policy Date - The date as of which the Policy is issued and as of which it
becomes effective. Policy Years and Anniversaries are measured from the Policy
Date.
Policy Debt - The amount of outstanding loans plus accrued interest.
Policy Month - A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
Separate Account II - The segregated asset account of Life of Virginia to which
Net Premiums are allocated.
Specified Amount - An amount used in determining the insurance coverage on an
insured life.
Surrender Value - The amount payable to you upon surrender of the Policy.
Total Proceeds - Life Insurance Proceeds plus any additional term insurance on a
terminally ill Insured added to the Policy by rider, not including the
Children's Insurance Rider. Total proceeds will not include any proceeds payable
under the Accidental Death Benefit Rider or any proceeds payable under the
Policy or any additional term insurance rider on the Insured that would expire
within 24 months of the date we receive proof of terminal illness. No adjustment
to the Total Proceeds will be made for any Policy Debt, but adjustments will be
made for any misstatement of age or sex of a terminally ill Insured.
Unit Value - Unit of measure used to calculate the Account Value for each
Investment Subdivision.
Valuation Day - For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
Valuation Period - The period that starts at the close of regular trading on the
New York Stock Exchange on any Valuation Day and ends at the close of regular
trading on the next succeeding Valuation Day.
<PAGE>
PREMIUMS
Applying for a Policy. To purchase a Policy, you must complete an
application and submit it to us at our Home Office at 6610 West Broad Street,
Richmond, VA 23230. You also must pay an initial premium of a sufficient amount.
See "Premiums," below. Your initial premium can be submitted with your
application or at a later date. Coverage becomes effective as of the Policy
Date.
Generally, we will issue a Policy covering an Insured up to Age 85 if
evidence of insurability satisfies our underwriting rules. Required evidence of
insurability may include, among other things, a medical examination of the
Insured. We may, in our sole discretion, issue a Policy covering an Insured over
Age 85. We reserve the right not to accept an application for any lawful reason.
Free Look Right to Cancel. During your "free-look" period, you may
cancel your Policy and receive a refund of all charges deducted from premiums
paid, plus the Net Premiums allocated to Separate Account II adjusted for
investment gains and losses. Some states require the refund of all premiums
paid. Generally, the free look period expires 10 days after you receive your
Policy. Some states may require a longer period. If you decide to cancel the
Policy, you must return it by mail or other delivery to us or to our authorized
agent. Immediately after mailing or delivery, the Policy will be deemed void
from the beginning.
Premiums. The premium amounts sufficient to fund a Policy depend on a
number of factors, such as the Age, sex (where appropriate) and risk class of
the proposed Insured, the desired Specified Amount, any supplemental benefits,
and investment performance of the Investment Subdivisions. After the initial
premium is paid, unscheduled premium payments may be paid in any amount and at
any time. We reserve the right, however, to limit the number and amount of any
unscheduled premium payment. Additionally, total premiums paid may not exceed
guideline premium limitations for life insurance set forth in the Code. We
reserve the right to reject any premium, or portion thereof, that would result
in the Policy being disqualified as life insurance under the Code and will
refund any rejected premium along with any interest accrued thereon. In
addition, we will monitor Policies and will attempt to notify you on a timely
basis if your Policy is in jeopardy of becoming a modified endowment contract
under the Code. See "TAX CONSIDERATIONS."
Periodic Premium Plan. When you apply for a Policy, you select a
periodic premium payment plan. You may choose to send premiums directly to us
either annually, semi-annually, or quarterly. You can also arrange for annual,
semi-annual, quarterly or monthly premium payments to be paid via automatic
deduction from your bank account or a similar account acceptable to us. You are
not required to pay premiums in accordance with this premium plan; rather, you
can pay more or less than planned or skip a planned premium payment entirely.
You can change the amount of planned premiums and payment arrangements, or
switch between frequencies, whenever you want by providing satisfactory written
or telephone instructions to our Home Office, which will be effective upon our
receipt of the instructions. Depending on the Account Value at the time of an
increase in the Specified Amount and the amount of the increase requested, a
change in your periodic premium payments may be advisable. See "Change in
Existing Coverage."
Premium to Prevent Lapse. Failure to make a planned premium payment
will not automatically cause a Policy to lapse. Generally, a Policy will lapse
if the Surrender Value is not sufficient to cover the monthly deduction when
due. However, a Policy will not lapse during the Continuation Period, regardless
of the sufficiency of the Surrender Value, so long as the Net Total Premium is
at least equal to the Continuation Amount. See "Monthly Deduction." If
additional premium is necessary to prevent a Policy from lapsing, we will mail
to you notice of the amount required to be paid to keep the Policy in force, and
you will have a 61-day grace period from the date we mail the notice to make the
required premium payment.
Your Policy will remain in effect during the grace period. If the
Insured should die during the grace period before the required premium is paid,
the death benefit will still be payable to the Beneficiary, although the amount
of the Life Insurance Proceeds will be reduced by the amount of premium that
would have been required to keep the Policy in force. See "DEATH BENEFITS --
Amount of Death Benefit Payable." If the required premium has not been paid
before the grace period ends, your Policy will lapse. It will have no value and
no benefits will be payable. But see "Death Benefit Guarantee" and
"Reinstatement" for a mention of your reinstatement rights.
A grace period also may begin if Policy Debt on any Monthly Anniversary
Day exceeds the Account Value less any applicable surrender charges. See "Effect
of Policy Loan" for details.
Minimum Premium Payment. Generally, the minimum amount of premium we
will accept in connection with a periodic premium payment plan is $20 ($15 for
payments made via automatic deduction from your bank or similar account).
Notwithstanding payment of this minimum amount, a Policy may lapse. See "Premium
to Prevent Lapse." For purposes of the minimum premium payment requirements, any
payment is deemed a planned periodic premium if it is received within 30 days
(before or after) of the scheduled date for a planned periodic premium payment
and the percentage difference between the planned amount and the actual payment
amount is not more than 10%. All other premium payments will be deemed
unscheduled premium payments.
Death Benefit Guarantee. On any Monthly Anniversary Day during the
Continuation Period, so long as the Net Total Premium is at least equal to the
Continuation Amount for your Policy, the Policy will remain in force, regardless
of the sufficiency of Surrender Value to cover the monthly deduction. At the end
of the Continuation Period, you may, however, have to make an additional premium
payment to keep the Policy in force. See "Premium to Prevent Lapse."
An increase in Specified Amount will increase the Continuation Amounts.
Any termination and subsequent reinstatement of the Policy will reduce the
Continuation Amounts. Notwithstanding termination and reinstatement, the
Continuation Period will be as though the Policy had been in effect continuously
from its original Policy Date. See "Reinstatement."
Crediting Premium to the Policy. Your initial premium payment will be
credited to the Policy on the Policy Date. Any subsequent premium payment (see
"Net Premium Allocations," below) will be credited to the Policy on the
Valuation Day it is received at our Home Office.
<PAGE>
ALLOCATION OPTIONS
Net Premium Allocations. When you apply for a Policy, you specify the
percentage of Net Premium to be allocated to each Investment Subdivision. You
may not allocate your Net Premiums and Account Value to more than seven
Investment Subdivisions at any given time. You can change the allocation
percentages at any time by sending satisfactory written instructions to our Home
Office. The change will apply to all premiums received with or after we receive
your instructions. Net Premium allocations must be in percentages totaling 100%,
and each allocation percentage must be a whole number of at least 1%.
In general, during the free look period Net Premiums will be allocated
to the Investment Subdivisions based on the Net Premium allocation percentages
specified in the application. However, for states requiring the refund of
premiums during the free look period, all Net Premiums will be allocated to the
Investment Subdivision investing in the Money Market Fund of GE Investments
Funds. Fifteen days following this allocation, the Account Value is transferred
to the Investment Subdivisions based on the Net Premium allocation percentages
selected by you. See "How Your Policy Account Values Vary."
Investment Subdivisions. Separate Account II currently invests in nine
series-type mutual funds. Each of the Funds currently available under the Policy
is registered with the Securities and Exchange Commission ("SEC") as a
diversified open-end management investment company under the Investment Company
Act of 1940, as amended (the "1940 Act"). There are currently thirty-four
Investment Subdivisions available under the Policy. Each Investment Subdivision
invests exclusively in a designated investment portfolio of one of the Funds.
The assets of each portfolio are separate from other portfolios of that Fund and
each portfolio has separate investment objectives and policies. As a result,
each portfolio operates as a separate investment portfolio and the investment
performance of one portfolio has no effect on the investment of any other
portfolio. The Funds may, in the future, activate additional portfolios.
Before choosing the Investment Subdivisions to allocate your Net
Premium and Account Value, carefully read the individual prospectuses for the
Funds, along with this prospectus. The investment objectives of each of the
portfolios are summarized below. There is no assurance that these objectives
will be met.
Janus Aspen Series. The Janus Aspen Series has seven portfolios that
are currently available under the Policy: Growth Portfolio, Aggressive Growth
Portfolio, Worldwide Growth Portfolio, International Growth Portfolio, Balanced
Portfolio, Flexible Income Portfolio and Capital Appreciation Portfolio.
Growth Portfolio has the investment objective of long-term capital
growth in a manner consistent with the preservation of capital. The Growth
Portfolio is a diversified portfolio that pursues its objectives by investing in
common stocks of companies of any size. Generally, this Portfolio emphasizes
larger, more established issuers.
Aggressive Growth Portfolio has the investment objective of long-term
growth of capital. The Aggressive Growth Portfolio is a non-diversified
portfolio that will seek to achieve its objective by normally investing at least
50% of its equity assets in securities issued by medium-sized companies.
Worldwide Growth Portfolio has the investment objective of long-term
growth of capital in a manner consistent with the preservation of capital. The
Worldwide Growth Portfolio will seek to achieve its objective by investing in a
diversified portfolio of common stocks of foreign and domestic issuers of all
sizes. The Portfolio normally invests in issuers from at least five different
countries including the United States.
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 Overseas Portfolio, and VIP Growth Portfolio.
VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these securities,
the portfolio will also consider the potential for capital appreciation. The
portfolio's goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's Composite Index of 500 Stocks.
VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. The portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
VIP Growth Portfolio seeks to achieve capital appreciation. The
portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund.
Variable 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 currently available under the Policy: VIP
Growth & Income Portfolio and VIP Growth Opportunities Portfolio.
VIP Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing mainly in
equity securities.
VIP Growth Opportunities Portfolio seeks capital growth by investing
primarily in common stock and securities convertible to common stock.
Fidelity Management & Research Company serves as investment adviser to
the Variable Insurance Products Fund III.
GE Investments Funds, Inc. GE Investments Funds, Inc. ("GE Investments
Funds") has eight portfolios that are currently available under the Policy: S&P
500 Index Fund, Money Market Fund, Total Return Fund, International Equity Fund,
Real Estate Securities Fund, Global Income Fund, Value Equity Fund and Income
Fund are available to Owners through Separate Account II.
S&P 500 Index Fund1 has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange, the American
Stock Exchange and, to a limited extent, in the over-the-counter markets.
Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in high quality money market securities.
Total Return Fund has the investment objective of providing the highest
total return, composed of current income and capital appreciation, as is
consistent with prudent investment risk by investing in common stocks, bonds and
money market instruments, the proportion of each being continuously determined
by the investment adviser.
International Equity Fund has the investment objective of providing
long-term capital appreciation. The portfolio seeks to achieve its objective by
investing primarily in equity and equity-related securities of companies that
are organized outside of the U.S. or whose securities are principally traded
outside of the U.S.
Real Estate Securities Fund has the investment objective of providin
maximum total return through current income and capital appreciation. The
portfolio seeks to achieve its objective by investing primarily in securities
of U.S. issuers that are principally engaged in or related to the real
estate industry including those that own significant real estate assets. The
portfolio will not invest directly in real estate.
- ------------------
1"Standard & Poor's," "S&P," and "S&P 500" are trademarks of
McGraw-Hill Companies, Inc. and have been licensed for use by GE Investment
Management Incorporated. The S&P 500 Index Fund is not sponsored, endorsed, sold
or promoted by Standard & Poor's, and Standard & Poor's makes no representation
or warranty, express or implied, regarding the advisability of investing in this
Fund or the Policy.
Global Income Fund has the investment objectives 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 foreign
and domestic income-bearing debt securities and other foreign and domestic
income-bearing instruments.
Value Equity Fund has the investment objective of providing long-term
capital appreciation. The portfolio seeks to achieve this objective by investing
primarily in common stock and other equity securities that are undervalued by
the market and offer above-average capital appreciation potential.
Income Fund has the investment objective of providing maximum income
consistent with prudent investment management and preservation of capital by
investing primarily in income-bearing debt securities and other income bearing
instruments.
GE Investment Management, Inc. serves as investment adviser to GE
Investments Funds.
Oppenheimer Variable Account Funds. Oppenheimer Variable Account Funds
has five portfolios that are currently available under the Policy: Oppenheimer
Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund,
Oppenheimer High Income Fund, and Oppenheimer Multiple Strategies Fund.
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 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 Multiple Strategies Fund seeks a total investment return
(which includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities, bonds and
other debt securities, and "money market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to Oppenheimer
Variable Account Funds.
Federated Insurance Series. The Federated Insurance Series has three
portfolios that are currently available under the Policy: Federated Utility
Fund II, Federated High Income Bond Fund II and Federated American Leaders
Fund II.
Federated Utility Fund II has the investment objective of high current
income and moderate capital appreciation. The Federated Utility Fund II will
seek to achieve its objective by investing primarily in equity and debt
securities of utility companies.
Federated High Income Bond Fund II has the investment objective of high
current income. The Federated High Income Bond Fund II will seek to achieve its
investment objective by investing primarily in a diversified portfolio of
professionally managed fixed-income securities. The fixed-income securities in
which the Fund intends to invest are lower-rated corporate debt obligations,
commonly referred to as "junk" bonds. The risks of these securities are
described in the prospectus for the Federated Insurance Series, which should be
read carefully before investing.
Federated American Leaders Fund II has the primary investment objective
of long-term growth of capital, and a secondary objective of providing income.
The Federated American Leaders Fund II will seek to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue chip" companies.
Federated Advisers serves as investment adviser to the Federated
Insurance Series.
The Alger American Fund. The Alger American Fund has two portfolios
that are currently available under the Policy: Alger American Growth Portfolio
and Alger American Small Capitalization Portfolio.
Alger American Growth Portfolio has the investment objective of
long-term capital appreciation. Except during temporary defensive periods, this
portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase, have a total market capitalization of
$1 billion or greater.
Alger American Small Capitalization Portfolio seeks long-term capital
appreciation. Except during temporary defensive periods, the portfolio invests
at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P Small
Cap 600 Index, updated quarterly. Both indexes are broad indexes of small
capitalization stocks. The portfolio may invest up to 35% of its total assets in
equity securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
Fred Alger Management, Inc. serves as the investment manager to The
Alger American Fund.
PBHG Insurance Series Fund, Inc. PBHG Insurance Series Fund, Inc
("PBHG Insurance Series Fund") has two portfolios that are currently available
under the Policy: Growth II Portfolio and Large Cap Growth Portfolio.
PBHG 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.
PBHG 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, but we reserve the right
to limit the number of transfers to twelve each calendar year. However, there is
a $10 transfer charge for each transfer after the first transfer in any calendar
month. The transfer charge is taken from the amount transferred. For purposes of
assessing this fee, each transfer request is considered one transfer, regardless
of the number of Investment Subdivisions affected by the transfer. We reserve
the right to modify, restrict, suspend or eliminate the transfer privileges,
including telephone transfer privileges, at any time, for any reason.
Dollar-Cost Averaging. The dollar-cost averaging program permits you to
systematically transfer on a monthly or quarterly basis a set dollar amount from
the Investment Subdivision investing in the Money Market Fund of GE Investments
Funds to any combination of other Investment Subdivisions. The dollar-cost
averaging method of investment is designed to reduce the risk of making
purchases only when the price of units is high, but you should carefully
consider your financial ability to continue the program over a long enough
period of time to purchase units when their value is low as well as when it is
high. Dollar-cost averaging does not assure a profit or protect against a loss.
You may participate in the dollar-cost averaging program by selecting
the program on the application, completing a dollar-cost averaging agreement, or
calling our Home Office. To use the dollar-cost averaging program, you must
transfer at least $100 from the Money Market Investment Subdivision with each
transfer. Any amount allocated or transferred must also conform to the minimum
percentage requirements for Net Premium allocations. See "Net Premium
Allocations." Once elected, dollar-cost averaging remains in effect from the
date we receive your request until the value of the Investment Subdivision from
which transfers are being made is depleted, or until you cancel the program by
written request or by telephone if we have your telephone authorization on file.
There is no additional charge for dollar-cost averaging. A transfer under this
program will not count toward the free transfer permitted each calendar month
nor any limit on the maximum number of transfers we may impose for a calendar
year. We reserve the right to discontinue offering or to modify the dollar-cost
averaging program at any time and for any reason.
Portfolio Rebalancing. Once your money has been allocated among the
Investment Subdivisions, the performance of each Investment Subdivision may
cause your allocation to shift. You may instruct us to automatically rebalance
(on a quarterly, semi-annual or annual basis) your Account Value to return to
the percentages specified in your allocation instructions. You may elect to
participate in the portfolio rebalancing program at any time by completing the
portfolio rebalancing agreement. Your percentage allocations must be in whole
percentages and be at least 1% per allocation. Subsequent changes to your
percentage allocations may be made at any time by written or telephone
instructions to the Home Office. Once elected, portfolio rebalancing remains in
effect from the date we receive your written request until you instruct us to
discontinue portfolio rebalancing. There is no additional charge for using
portfolio rebalancing, and a portfolio rebalancing transfer is not considered a
transfer for purposes of assessing a transfer charge nor for calculating any
limit on the maximum number of transfers we may impose for a calendar year. We
reserve the right to discontinue offering the portfolio rebalancing program at
any time and for any reason. Portfolio rebalancing does not guarantee a profit
or protect against loss.
Powers of Attorney. As a general rule and as a convenience to you, we
allow the use of powers of attorney whereby you give a third party the right to
effect transfers on your behalf. However, when the same third party possesses
powers of attorney executed by many Owners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can disrupt
the orderly management of the Funds underlying the Policy, can result in higher
costs to Owners, and are generally not compatible with the long-range goals of
Owners. We believe that such simultaneous transfers effected by such third
parties are not in the best interests of all shareholders of the Funds
underlying the Policies, and this position is shared by the managements of those
Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, we may not honor such powers of attorney and have instituted or will
institute procedures to assure that the transfer requests that we receive have,
in fact, been made by the Owners in whose names they are submitted. These
procedures will not, however, prevent Owners from making their own transfer
requests.
CHARGES AND DEDUCTIONS
The following charges are deducted. Certain of the charges depend on a
number of variables, and are illustrated in the hypothetical illustrations
below. The charges are for the services and benefits provided, costs and
expenses incurred, and risks assumed by us under or in connection with the
Policies. The services and benefits provided include: the cash and death
benefits provided by the Policy; investment options, including Net Premium
allocations, dollar-cost averaging and portfolio rebalancing programs;
administration of various elective options under the Policy; and the
distribution of various reports to Owners. The costs and expenses incurred
include: those associated with underwriting applications, increases in Specified
Amount, and riders; various overhead and other expenses associated with
providing the services and benefits provided by the Policy; sales and marketing
expenses; and other costs of doing business, such as federal, state and local
premium and other taxes and fees. The risks assumed include the risks that
insureds may live for a shorter period of time than estimated, resulting in the
payment of greater death benefits than expected, and that the costs of providing
the services and benefits under the Policies will exceed the charges deducted.
Premium Charge. We currently deduct an 8% charge (10% 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 0.70% 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 $15 in the first Policy Year ($15 per month
maximum in the first Policy Year) and $6 per month thereafter ($12 per month
maximum after the first Policy Year), and (3) any charges for additional
benefits added by riders to the Policy (see "Supplemental Benefits"). If an
increase in Specified Amount becomes effective, there will be a one-time charge
(per increase) of $1.50 per $1,000 of increase included in the monthly deduction
(it can not exceed $300 per increase). See "Change in Existing Coverage."
Surrender Charge. If the Policy is fully surrendered during the
surrender charge period, we will deduct a surrender charge. The surrender charge
is calculated bymultiplying a factor times the lowest Specified Amount in effect
prior to the surrender, divided by 1000. The Factor depends on the issue age,
sex (where applicable), and risk class to the Insured. 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. (See Partial Surrenders under SURRENDER
BENEFITS.)
Surrender charges are disclosed on the data pages to the policy. Upon
request, we will furnish you with an illustration showing the surrender charges
applicable to your Policy.
A surrender charge is not imposed in connection with a partial
surrenders. (See "Partial Surrenders" under "SURRENDER BENEFITS".)
Cost of Insurance. The cost of insurance is a significant charge under
your Policy because it is the primary charge for the death benefit provided by
your Policy. The cost of insurance charge depends on a number of variables that
cause the charge to vary from Policy to Policy and from Monthly Anniversary Day
to Monthly Anniversary Day. It is calculated separately for the Specified Amount
at issue and for any increase in the Specified Amount. The cost of insurance is
calculated on each Monthly Anniversary Day and is based on the net amount at
risk. The net amount at risk is calculated by dividing the Life Insurance
Proceeds by 1.0032737, and then subtracting the Account Value. To determine the
cost of insurance for a particular Policy Month, we divide the net amount at
risk by 1000 and multiply that result by the applicable cost of insurance rate.
If Option B is in effect, and the Specified Amount has increased, the Account
Value is first considered part of the initial Specified Amount. If the Account
Value is more than the initial Specified Amount, it will be considered part of
the increased Specified Amounts resulting from increases in the order of the
increases.
The monthly cost of insurance rate is based on the Insured's sex (where
appropriate), Age at issue, policy duration and risk class. The risk class (and,
therefore, the cost of insurance rates) will be determined separately for the
initial Specified Amount and for any increase in the Specified Amount requiring
evidence of insurability. The maximum cost of insurance rates allowable under
the Policies are based on the Commissioners' 1980 Standard Ordinary Mortality
Table. The rates we currently charge are, at most ages, lower than the maximum
permitted under the Policies and are determined by us according to our
expectation of future experience with respect to mortality, expenses,
persistency, and taxes. The rates may be changed from time to time at our sole
discretion, but will never be more than the rates shown in the Table of
Guaranteed Maximum Insurance Rates contained in the Policies. A change in rates
will apply to all persons of the same Age, sex (where appropriate), and risk
class and whose Policies have been in effect for the same length of time.
The monthly cost of insurance rate generally increases as the Insured's
Age increases. Therefore, the older the Insured, the higher the investment
experience necessary to achieve the same impact on Life Insurance Proceeds and
Account Value. See "Hypothetical Illustrations" for examples showing the effects
of the cost of insurance charge.
Other Charges. If you request a projection of illustrative future life
insurance under the Policy and Policy values, we reserve the right to charge a
maximum fee of $25 for the cost of preparing the projection. See also
"Transfers," for a discussion of the transfer charge, and "Partial Surrenders,"
for a discussion of the partial surrender processing fee.
Reduction of Charges for Group Sales. Charges and/or deductions may be
reduced for sales of the Policies to a trustee, employer or similar entity
representing a group or to members of the group where such sales result in
savings of sales or administrative expenses. The entitlement to such a reduction
in charges or deductions will be determined by us based on the following
factors:
1. The size of the group. Generally, the sales expenses for each
individual owner for a larger group are less than for a
smaller group because more Policies can be implemented with
fewer sales contacts and less administrative cost.
2. The total amount of premium payments to be received from a
group. Per Policy sales and other expenses are generally
proportionately less on larger premium payments than on
smaller ones.
3. The purpose for which the policies are purchased. Certain
types of plans are more likely to be stable than others. Such
stability reduces the number of sales contacts and
administrative and other services required, reduces sales
administration and results in fewer Policy terminations. As a
result, our sales and other expenses are reduced.
4. The nature of the group for which the Policies are being
purchased. Certain types of employee and professional groups
are more likely to continue Policy participation for longer
periods than are other groups with more mobile membership. If
fewer Policies are terminated in a given group, our sales and
other expenses are reduced.
5. There may be other circumstances of which we are not presently
aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, we determine that a
group purchase would result in reduced sales expenses, such a group may be
entitled to a reduction in charges and/or deductions. Reductions in these
charges and/or deductions will not be unfairly discriminatory against any
person, including the affected owners and all other owners of Policies funded by
Separate Account II.
<PAGE>
HOW YOUR ACCOUNT VALUE VARIES
Account Value. The Account Value serves as a starting point for
calculating certain values under a Policy. It is the sum of the Account Value in
each Investment Subdivision and the Account Value held in the General Account to
secure Policy Debt. See "Loan Benefits." The Account Value is determined first
on the Policy Date and thereafter on each Valuation Day. The Account Value will
vary to reflect the performance of the Investment Subdivisions to which amounts
have been allocated and Policy Debt, charges, transfers, partial surrenders,
Policy loan interest, and Policy loan repayments. It may be more or less than
premiums paid.
Surrender Value. The Surrender Value on a Valuation Day is the Account
Value reduced by both any surrender charge that would be deducted if the Policy
were surrendered that day and any Policy Debt.
Investment Subdivision Values. On any Valuation Day, the value of an
Investment Subdivision is equal to the number of Investment Subdivision units
credited to the Policy multiplied by the Unit Value for that day. When
allocations are made to an Investment Subdivision, either by Net Premium
allocation, transfer of Account Value, transfer of loan interest from the
General Account, or repayment of a Policy loan, your Policy is credited with
units in that Investment Subdivision. The number of units is determined by
dividing the amount allocated, transferred or repaid to the Investment
Subdivision by the Investment Subdivision's Unit Value for the Valuation Day
when the allocation, transfer or repayment is effected. The number of units
credited to a Policy will decrease whenever the allocated portion of the monthly
deduction is taken from the Investment Subdivision, a Policy loan is taken from
the Investment Subdivision, an amount is transferred from the Investment
Subdivision, a partial surrender is taken from the Investment Subdivision, or
the Policy is surrendered.
Unit Values. An Investment Subdivision's Unit Value varies to reflect
the investment experience of the underlying Fund, and may increase or decrease
from one Valuation Day to the next. The unit value for each Investment
Subdivision was arbitrarily set at $10 when the Investment Subdivision was
established. For each Valuation Period after the date of establishment, the Unit
Value is determined by multiplying the value of a unit for an Investment
Subdivision for the prior Valuation Period by the net investment factor for the
Investment Subdivision for the current Valuation Period.
Net Investment Factor. The net investment factor is an index used to
measure the investment performance of an Investment Subdivision from one
Valuation Period to the next. The net investment factor reflects the change in
the net asset value of each share of the Fund held in the Investment Subdivision
from one Valuation Period to the next, adjusted for the daily deduction of the
mortality and expense risk charge from assets in the Investment Subdivision. If
any "ex-dividend" date occurs during the Valuation Period, the per share amount
of any dividend or capital gain distribution is taken into account. Also, if any
taxes need to be reserved, a per share charge or credit for any taxes reserved
for, which is determined by us to have resulted from the operations of the
Investment Subdivision, is taken into account.
DEATH BENEFITS
As long as the Policy remains in force, we will pay the death benefit
upon receipt at our Home Office of satisfactory proof of the Insured's death.
See "Requesting Payments." The death benefit will be paid to the Beneficiary.
Amount of Death Benefit Payable. The amount of death benefit payable
equals the Life Insurance Proceeds determined under the Death Benefit Option in
effect on the date of the Insured's death, plus any supplemental death benefits
provided by rider, minus any Policy Debt on that date and, if the date of death
occurred during a grace period, minus the premium that would have been required
to keep the Policy in force. Under certain circumstances, the amount of the
death benefit payable may be further adjusted. See "OTHER POLICY PROVISIONS --
Incontestability" and "Misstatement of Age or Sex."
Death Benefit Options. Under Option A, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount plus the Account Value, or (2)
the applicable corridor percentage of the Account Value as determined using the
table of percentages shown below. Under Option B, the Life Insurance Proceeds
equals the greater of (1) the Specified Amount, or (2) the applicable corridor
percentage of the Account Value as determined using the table of percentages
shown below. Under both options, the Specified Amount and Account Value are
determined on the date of the Insured's death. The percentage is 250% to Age 40
and declines thereafter as the Insured's Attained Age increases. If the table of
percentages currently in effect becomes inconsistent with any federal income tax
laws and/or regulations, we reserve the right to change the table.
<TABLE>
<CAPTION>
<S> <C>
----------------------------------------------------------------------------------------------------------------------
Table of Percentages of Account Value
----------------------------------------------------------------------------------------------------------------------
Corridor Corridor Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
------------ ---------- ------------ ---------- ------------ ----------
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75 - 90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94+ 101%
52 171% 66 119%
53 164% 67 118%
------------------ ------------------- ----------------- -------------------- -------------------- -------------------
</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.
Accelerated Benefit Rider. Provided the Accelerated Benefit Rider to
the Policy is approved in your state, you may elect an accelerated benefit if
the Insured is terminally ill. For purposes of determining if an accelerated
benefit is available, terminal illness is defined as a medical condition
resulting from bodily injury, or disease, or both: (1) which has been diagnosed
by a licensed physician; (2) which diagnosis is supported by clinical,
radiological, laboratory or other evidence which is satisfactory to us; and (3)
which a licensed physician certifies is expected to result in death within 12
months from the date of such certification. Any request for payment of an
accelerated benefit must be in a form satisfactory to us, and any payment of an
accelerated benefit requires satisfactory proof of a terminal illness and is
subject to our administrative procedures as well as the conditions set forth in
the Accelerated Benefit Rider.
The accelerated benefit available under the Accelerated Benefit Rider
equals the Eligible Proceeds: (1) discounted for the life expectancy of the
Insured at the rate of interest charged for Policy loans;(2) less the product of
the ratio of the Eligible Proceeds to the Total Proceeds and the amount of the
single premium required to keep the Policy in effect for the life expectancy of
the Insured assuming current cost of insurance rates, current expense charges,
and the interest rate stated; and (3) less the product of the ratio of the
Eligible Proceeds to the Total Proceeds and the Policy Debt on the date of the
accelerated benefit payment.
If the Eligible Proceeds are equal to the Life Insurance Proceeds
otherwise payable on the death of the Insured, then payment of the accelerated
benefit will result in termination of all insurance coverage on the life of the
Insured and any insurance coverage under the Policy and riders on any other
named insured will be treated as if the Insured had died. If the Eligible
Proceeds are less than the Life Insurance Proceeds otherwise payable on the
death of the Insured, then the Policy will continue with the Specified Amount,
Account Value, Policy Debt and any additional term rider coverage on such
Insured reduced by the ratio of Eligible Proceeds to Total Proceeds. We will
waive any surrender charge for the resulting decrease in Specified Amount as
well as the minimum Specified Amount requirement under the Policy. Other rider
benefits will continue without reduction.
Effect of Partial Surrenders on Life Insurance Proceeds. A partial
surrender will reduce both the Account Value and the Life Insurance Proceeds by
the amount of the partial surrender. We will not permit partial surrenders
during the first Policy Year if Death Benefit Option B is in effect.
Change in Existing Coverage. After a Policy has been in effect for one
year, you may increase or decrease the Specified Amount. To make a change, you
must send a written request and the Policy to our Home Office. Any change in the
Specified Amount may affect the cost of insurance rate and the net amount at
risk, both of which will affect your cost of insurance. See "Monthly Deduction"
and Cost of Insurance." In addition, any change in the Specified Amount affects
the maximum premium limitation. If decreases in the Specified Amount cause the
premiums to exceed new lower limitations required by federal tax law, the excess
will be withdrawn from Account Value and refunded so that the Policy will
continue to meet these requirements. The Account Value so withdrawn and refunded
will be withdrawn from each Investment Subdivision in the same proportion that
the Account Value in that Investment Subdivision bears to the total Account
Value in all Investment Subdivisions under the Policy at the time of the
withdrawal (i.e. on a pro-rata basis).
Any decrease in the Specified Amount will become effective on the
Monthly Anniversary Day after the date the request is received. The decrease
will first apply to coverage provided by the most recent increase, then to the
next most recent increases successively, then to the coverage under the original
application. During the Continuation Period, we will not allow a decrease unless
the Account Value less any Policy Debt is greater than the surrender charge. The
Specified Amount following a decrease can never be less than the minimum
Specified Amount for the Policy when it was issued. A decrease may cause a
surrender charge to be assessed and may require a payment to you of excess
Account Value.
To apply for an increase, you must complete a supplemental application
and submit evidence of insurability satisfactory to us. Any approved increase
will become effective on the date shown in the supplemental policy data page. An
increase will not become effective, however, if the Policy's Surrender Value is
insufficient to cover the monthly deduction for the Policy Month following the
increase.
If there is an increase in Specified Amount, there will be a one-time
charge (per increase) of $1.50 per $1,000 of increase to cover underwriting and
administrative costs associated with the increase. This charge will be included
in the monthly deduction for the month the decrease becomes effective. This
charge will never exceed $300 per increase.
A change in the existing insurance coverage may have federal
tax consequences. See "TAX CONSIDERATIONS."
Changing the Beneficiary. If the right is reserved, the Beneficiary may
also be changed during the Insured's life. To make a change, send a written
request to our Home Office. The request and the change must be in a form
satisfactory to us and must actually be received by us. The change will take
effect as of the date you signed the request.
LOAN BENEFITS
You may borrow up to 90% of the difference between (1) your Account
Value at the end of the Valuation Period during which the loan request is
received, and (2) any surrender charges on the date of the loan. See "Requesting
Payments." Requests for Policy loans may be made in writing or by telephone. See
"REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS." Outstanding Policy Debt,
including accrued interest, reduces the amount available for new loans.
When a loan is made, an amount equal to the loan proceeds is
transferred from the Account Value in Separate Account II to our General Account
and is held as "collateral" for the loan. If you do not direct an allocation for
this transfer when requesting the loan we will make it on a pro-rata basis. When
a loan is repaid, an amount equal to the repayment is transferred from our
General Account to Separate Account II and allocated as you direct when
submitting the repayment. If you provide no direction, the amount will be
allocated in accordance with your standing instructions for Net Premium
allocations.
A portion of Policy loans taken or existing on or after the Preferred
Loan Availability Date (as shown on the Policy data pages) will be designated as
Preferred Policy Debt. In Policy Years 11 through 20, Preferred Policy Debt will
be that portion of Policy Debt which equals the difference between the Account
Value and the sum of all premium payments made. After the 20th Policy Year,
Preferred Policy Debt will be that portion of Policy Debt which equals 130% of
the difference between the Account Value and 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 current 8% 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.
<PAGE>
HYPOTHETICAL ILLUSTRATIONS
The following illustrations show how certain values under a sample
Policy change with assumed investment performance over an extended period of
time. In particular, they illustrate how Account Values, Surrender Values and
Life Insurance Proceeds payable under a Policy covering an Insured of a given
Age on the Policy Date, would vary over time. The illustrations assume planned
premiums were paid annually and the return on the assets in the Investment
Subdivisions were a uniform gross annual rate of 0%, 6% or 12%, before deduction
of any fees and charges. The values reflect the deduction of all Policy and Fund
fees and charges. The tables also show planned premiums accumulated at 5%
interest. The values under a Policy would be different from those shown if the
returns averaged 0%, 6% or 12% but fluctuated over and under those averages
throughout the years shown. The hypothetical investment rates of return are
illustrative only and should not be deemed a representation of past or future
investment rates of return. Actual rates of return for a particular Policy may
be more or less than the hypothetical investment rates of return used in the
illustrations.
The illustrations assume an average annual expense ratio of .82% of the
average daily net assets of the Funds available under the Policies, based on the
estimated expense ratios of each of the Funds for the first year of operations.
For information on Fund expenses, see the prospectus for the Funds accompanying
this prospectus. The illustrations also take into account the charge by Life of
Virginia to an Investment Subdivision for assuming mortality and expense risks,
made daily at an annual rate of .70% of the net assets of the Investment
Subdivision. After deduction of these amounts, the illustrated gross annual
investment rates of return of 0%, 6% and 12%, correspond to approximate net
annual rates of -1.52%, 4.48% and 10.48%, respectively.
The illustrations also reflect the monthly deduction for the
hypothetical Insured. Our current charges and the higher guaranteed charges we
have the contractual right to charge are reflected in separate illustrations on
each of the following pages. All the illustrations reflect the fact that no
charges for Federal or state income taxes are currently made against Separate
Account II and assume no Policy Debt or charges for supplemental benefits.
The illustrations are based on our sex distinct rates for non-tobacco
users. Upon request, we will furnish a comparable illustration based upon the
proposed Insured's individual circumstances. Such illustrations may assume
different hypothetical rates of return than those illustrated.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 65 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $14,300
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 15,015 0 9,752 250,000 0 10,441 250,000 42 11,132 250,000
2 30,781 8,183 19,273 250,000 10,190 21,280 250,000 12,285 23,375 250,000
3 47,335 17,367 28,457 250,000 21,343 32,433 250,000 25,665 36,755 250,000
4 64,717 26,213 37,303 250,000 32,837 43,927 250,000 40,337 51,427 250,000
5 82,967 34,723 45,813 250,000 44,704 55,794 250,000 56,485 67,575 250,000
6 102,131 44,418 54,401 250,000 58,494 68,477 250,000 75,820 85,803 250,000
7 122,252 54,173 63,046 250,000 73,133 82,005 250,000 97,474 106,347 250,000
8 143,380 64,128 71,890 250,000 88,798 96,561 250,000 121,839 129,602 250,000
9 165,564 74,267 80,922 250,000 105,528 112,183 250,000 149,206 155,861 250,000
10 188,857 84,647 90,192 250,000 123,417 128,962 250,000 179,929 185,474 250,000
15 324,002 127,941 127,941 250,000 225,177 225,177 250,000 390,898 390,898 410,443
20 496,485 156,165 156,165 250,000 351,154 351,154 368,711 724,064 724,064 760,267
25 716,622 179,916 179,916 250,000 503,260 503,260 528,423 1,258,519 1,258,519 1,321,445
30 997,579 204,316 204,316 250,000 692,567 692,567 699,493 2,132,639 2,132,639 2,153,965
35 1,356,159 236,598 236,598 250,000 932,636 932,636 941,962 3,582,227 3,582,227 3,618,049
</TABLE>
(1) The values illustrated assume the planned premium of $ 14,300 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $13,100
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 13,755 6,851 10,979 260,979 7,545 11,673 261,673 8,240 12,367 262,367
2 28,198 17,711 21,838 271,838 19,790 23,918 273,918 21,954 26,082 276,082
3 43,363 28,343 32,471 282,471 32,520 36,648 286,648 37,040 41,167 291,167
4 59,286 38,746 42,874 292,874 45,750 49,877 299,877 53,634 57,762 307,762
5 76,005 48,917 53,044 303,044 59,496 63,623 313,623 71,889 76,016 326,016
6 93,560 59,280 62,993 312,993 74,202 77,915 327,915 92,399 96,112 346,112
7 111,993 69,416 72,716 322,716 89,471 92,771 342,771 114,935 118,235 368,235
8 131,348 79,312 82,199 332,199 105,310 108,197 358,197 139,691 142,579 392,579
9 151,670 88,969 91,444 341,444 121,742 124,217 374,217 166,899 169,374 419,374
10 173,009 98,370 100,433 350,433 138,774 140,836 390,836 196,792 198,855 448,855
15 296,813 143,948 143,948 393,948 236,440 236,440 486,440 400,341 400,341 650,341
20 454,822 182,648 182,648 432,648 353,709 353,709 603,709 730,078 730,078 980,078
25 656,486 213,756 213,756 463,756 494,325 494,325 744,325 1,266,753 1,266,753 1,516,753
30 913,866 234,834 234,834 484,834 660,510 660,510 910,510 2,140,109 2,140,109 2,390,109
35 1,242,356 242,798 242,798 492,798 854,246 854,246 1,104,246 3,563,223 3,563,223 3,813,223
</TABLE>
(1) The values illustrated assume the planned premium of $ 13,100 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR
SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $5,000
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 5,250 0 3,444 250,000 0 3,683 250,000 0 3,921 250,000
2 10,763 2,691 6,818 250,000 3,385 7,513 250,000 4,110 8,237 250,000
3 16,551 5,957 10,084 250,000 7,331 11,458 250,000 8,822 12,949 250,000
4 22,628 9,112 13,240 250,000 11,394 15,522 250,000 13,972 18,100 250,000
5 29,010 12,152 16,280 250,000 15,575 19,702 250,000 19,602 23,730 250,000
6 35,710 15,490 19,202 250,000 20,292 24,004 250,000 26,179 29,891 250,000
7 42,746 18,695 21,995 250,000 25,121 28,421 250,000 33,332 36,632 250,000
8 50,133 21,759 24,646 250,000 30,059 32,946 250,000 41,119 44,007 250,000
9 57,889 24,671 27,146 250,000 35,103 37,578 250,000 49,607 52,082 250,000
10 66,034 27,417 29,480 250,000 40,244 42,306 250,000 58,864 60,926 250,000
15 113,287 38,265 38,265 250,000 67,331 67,331 250,000 120,214 120,214 250,000
20 173,596 40,531 40,531 250,000 94,237 94,237 250,000 219,200 219,200 267,424
25 250,567 31,572 31,572 250,000 121,926 121,926 250,000 381,841 381,841 442,935
30 348,804 982 982 250,000 149,501 149,501 250,000 643,713 643,713 688,773
35 474,182 * * * 176,248 176,248 250,000 1,070,546 1,070,546 1,124,073
</TABLE>
* Premium in addition to the planned premium is required to keep policy in
effect.
(1) The values illustrated assume the planned premium of $ 5,000 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the maximum expense charges and
cost of insurance rates allowable under the Policy. Accordingly, if the
assumed hypothetical gross annual investment return were earned, the
values and benefits of an actual Policy with the listed specifications
could never be less than those shown, and in some cases may be greater
than those shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 45 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $5,000
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rate (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 5,250 0 3,652 250,000 0 3,899 250,000 20 4,148 250,000
2 10,763 3,180 7,308 250,000 3,909 8,037 250,000 4,669 8,796 250,000
3 16,551 6,733 10,860 250,000 8,184 12,312 250,000 9,758 13,885 250,000
4 22,628 10,179 14,307 250,000 12,600 16,728 250,000 15,332 19,460 250,000
5 29,010 13,516 17,644 250,000 17,160 21,288 250,000 21,442 25,569 250,000
6 35,710 17,168 20,881 250,000 22,296 26,008 250,000 28,570 32,282 250,000
7 42,746 20,715 24,015 250,000 27,594 30,894 250,000 36,363 39,663 250,000
8 50,133 24,147 27,035 250,000 33,052 35,940 250,000 44,887 47,775 250,000
9 57,889 27,464 29,939 250,000 38,680 41,155 250,000 54,226 56,701 250,000
10 66,034 30,652 32,714 250,000 44,473 46,536 250,000 64,460 66,523 250,000
15 113,287 46,680 46,680 250,000 78,306 78,306 250,000 135,069 135,069 250,000
20 173,596 58,711 58,711 250,000 117,894 117,894 250,000 250,176 250,176 305,214
25 250,567 66,682 66,682 250,000 166,542 166,542 250,000 438,686 438,686 508,876
30 348,804 68,756 68,756 250,000 228,496 228,496 250,000 746,464 746,464 798,716
35 474,182 62,087 62,087 250,000 308,446 308,446 323,869 1,251,768 1,251,768 1,314,357
</TABLE>
(1) The values illustrated assume the planned premium of $ 5,000 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 55 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $8,300
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3) Cost of Insurance Rates (2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 8,715 0 5,287 250,000 0 5,670 250,000 0 6,053 250,000
2 17,866 3,563 10,378 250,000 4,663 11,478 250,000 5,812 12,627 250,000
3 27,474 8,419 15,234 250,000 10,578 17,393 250,000 12,927 19,742 250,000
4 37,563 13,034 19,849 250,000 16,600 23,415 250,000 20,642 27,457 250,000
5 48,156 17,389 24,204 250,000 22,719 29,534 250,000 29,014 35,829 250,000
6 59,279 22,152 28,285 250,000 29,609 35,741 250,000 38,794 44,927 250,000
7 70,958 26,622 32,072 250,000 36,579 42,029 250,000 49,383 54,833 250,000
8 83,220 30,766 35,536 250,000 43,611 48,381 250,000 60,866 65,636 250,000
9 96,097 34,556 38,644 250,000 50,690 54,777 250,000 73,351 77,439 250,000
10 109,616 37,950 41,358 250,000 57,792 61,200 250,000 86,963 90,370 250,000
15 188,057 47,881 47,881 250,000 93,506 93,506 250,000 179,263 179,263 250,000
20 288,170 36,194 36,194 250,000 125,018 125,018 250,000 336,081 336,081 359,606
25 415,942 * * * 153,747 153,747 250,000 592,946 592,946 622,593
30 579,015 * * * 181,231 181,231 250,000 997,714 997,714 1,047,600
35 787,141 * * * 214,647 214,647 250,000 1,617,056 1,617,056 1,697,909
</TABLE>
* Premium in addition to the planned premium is required to keep policy in
effect.
(1) The values illustrated assume the planned premium of $ 8,300 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the maximum expense charges and
cost of insurance rates allowable under the Policy. Accordingly, if the
assumed hypothetical gross annual investment return were earned, the
values and benefits of an actual Policy with the listed specifications
could never be less than those shown, and in some cases may be greater
than those shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 55 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $8,300
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 8,715 0 5,815 250,000 0 6,219 250,000 0 6,624 250,000
2 17,866 4,719 11,534 250,000 5,897 12,712 250,000 7,127 13,942 250,000
3 27,474 10,227 17,042 250,000 12,562 19,377 250,000 15,098 21,913 250,000
4 37,563 15,521 22,336 250,000 19,404 26,219 250,000 23,794 30,609 250,000
5 48,156 20,595 27,410 250,000 26,427 33,242 250,000 33,296 40,111 250,000
6 59,279 26,326 32,458 250,000 34,521 40,653 250,000 44,580 50,712 250,000
7 70,958 32,056 37,506 250,000 43,048 48,498 250,000 57,112 62,562 250,000
8 83,220 37,800 42,570 250,000 52,045 56,815 250,000 71,047 75,817 250,000
9 96,097 43,586 47,673 250,000 61,563 65,651 250,000 86,567 90,655 250,000
10 109,616 49,441 52,849 250,000 71,654 75,061 250,000 103,866 107,274 250,000
15 188,057 74,679 74,679 250,000 127,121 127,121 250,000 221,514 221,514 256,957
20 288,170 89,793 89,793 250,000 191,904 191,904 250,000 412,093 412,093 440,939
25 415,942 97,322 97,322 250,000 278,410 278,410 292,331 724,804 724,804 761,044
30 579,015 92,373 92,373 250,000 385,750 385,750 405,038 1,231,120 1,231,120 1,292,676
35 787,141 63,516 63,516 250,000 514,911 514,911 540,657 2,043,163 2,043,163 2,145,321
</TABLE>
(1) The values illustrated assume the planned premium of $ 8,300 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 65 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $14,300
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 15,015 0 7,433 250,000 0 8,041 250,000 0 8,653 250,000
2 30,781 3,318 14,408 250,000 5,017 16,107 250,000 6,798 17,888 250,000
3 47,335 9,781 20,871 250,000 13,064 24,154 250,000 16,654 27,744 250,000
4 64,717 15,719 26,809 250,000 21,091 32,181 250,000 27,221 38,311 250,000
5 82,967 21,100 32,190 250,000 29,086 40,176 250,000 38,606 49,696 250,000
6 102,131 26,975 36,957 250,000 38,122 48,105 250,000 52,023 62,006 250,000
7 122,252 32,033 40,906 250,000 46,929 55,802 250,000 66,388 75,261 250,000
8 143,380 36,419 44,182 250,000 55,679 63,441 250,000 82,077 89,839 250,000
9 165,564 39,874 46,529 250,000 64,183 70,838 250,000 99,204 105,859 250,000
10 188,857 42,265 47,810 250,000 72,386 77,931 250,000 118,091 123,636 250,000
15 324,002 33,120 33,120 250,000 108,183 108,183 250,000 260,608 260,608 273,639
20 496,485 * * * 123,879 123,879 250,000 502,039 502,039 527,141
25 716,622 * * * 85,523 85,523 250,000 873,395 873,395 917,065
30 997,579 * * * * * * 1,470,013 1,470,013 1,484,713
35 1,356,159 * * * * * * 2,447,462 2,447,462 2,471,936
</TABLE>
* Premium in addition to the planned premium is required to keep policy in
effect.
(1) The values illustrated assume the planned premium of $ 14,300 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the maximum expense charges and
cost of insurance rates allowable under the Policy. Accordingly, if the
assumed hypothetical gross annual investment return were earned, the
values and benefits of an actual Policy with the listed specifications
could never be less than those shown, and in some cases may be greater
than those shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 65 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $14,300
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 15,015 0 9,752 250,000 0 10,441 250,000 42 11,132 250,000
2 30,781 8,183 19,273 250,000 10,190 21,280 250,000 12,285 23,375 250,000
3 47,335 17,367 28,457 250,000 21,343 32,433 250,000 25,665 36,755 250,000
4 64,717 26,213 37,303 250,000 32,837 43,927 250,000 40,337 51,427 250,000
5 82,967 34,723 45,813 250,000 44,704 55,794 250,000 56,485 67,575 250,000
6 102,131 44,418 54,401 250,000 58,494 68,477 250,000 75,820 85,803 250,000
7 122,252 54,173 63,046 250,000 73,133 82,005 250,000 97,474 106,347 250,000
8 143,380 64,128 71,890 250,000 88,798 96,561 250,000 121,839 129,602 250,000
9 165,564 74,267 80,922 250,000 105,528 112,183 250,000 149,206 155,861 250,000
10 188,857 84,647 90,192 250,000 123,417 128,962 250,000 179,929 185,474 250,000
15 324,002 127,941 127,941 250,000 225,177 225,177 250,000 390,898 390,898 410,443
20 496,485 156,165 156,165 250,000 351,154 351,154 368,711 724,064 724,064 760,267
25 716,622 179,916 179,916 250,000 503,260 503,260 528,423 1,258,519 1,258,519 1,321,445
30 997,579 204,316 204,316 250,000 692,567 692,567 699,493 2,132,639 2,132,639 2,153,965
35 1,356,159 236,598 236,598 250,000 932,636 932,636 941,962 3,582,227 3,582,227 3,618,049
</TABLE>
(1) The values illustrated assume the planned premium of $ 14,300 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 75 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $25,800
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 27,090 0 8,673 250,000 0 9,639 250,000 0 10,614 250,000
2 55,534 4,508 16,251 250,000 7,062 18,805 250,000 9,761 21,503 250,000
3 85,401 10,910 22,653 250,000 15,702 27,444 250,000 21,006 32,748 250,000
4 116,761 16,089 27,832 250,000 23,808 35,551 250,000 32,778 44,520 250,000
5 149,689 19,930 31,672 250,000 31,330 43,072 250,000 45,267 57,009 250,000
6 184,264 23,389 33,957 250,000 39,314 49,881 250,000 59,855 70,422 250,000
7 220,567 24,970 34,362 250,000 46,390 55,782 250,000 75,637 85,030 250,000
8 258,685 24,199 32,417 250,000 52,263 60,481 250,000 92,985 101,203 250,000
9 298,710 20,425 27,470 250,000 56,531 63,576 250,000 112,461 119,506 250,000
10 340,735 12,831 18,701 250,000 58,715 64,585 250,000 134,988 140,858 250,000
15 584,563 * * * 5,216 5,216 250,000 341,793 341,793 358,882
20 895,757 * * * * * * 696,157 696,157 703,118
25 1,292,927 * * * * * * 1,273,161 1,273,161 1,285,892
</TABLE>
* Premium in addition to the planned premium is required to keep policy in
effect.
(1) The values illustrated assume the planned premium of $ 25,800 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the maximum expense charges and
cost of insurance rates allowable under the Policy. Accordingly, if the
assumed hypothetical gross annual investment return were earned, the
values and benefits of an actual Policy with the listed specifications
could never be less than those shown, and in some cases may be greater
than those shown.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
Male Issue Age 75 Initial Specified Amount $250,000
Preferred Nonsmoker Underwriting Risk Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $25,800
<TABLE>
<CAPTION>
0% Assumed Hypothetical 6% Assumed Hypothetical 12% Assumed Hypothetical
Premiums Gross Annual Investment Gross Annual Investment Gross Annual Investment
End of Accumulated Return with Guaranteed Return with Guaranteed Return with Guaranteed
Policy At 5% Interest Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3) Cost of Insurance Rates(2)(3)
Per Year Surrender Account Death Surrender Account Death Surrender Account Death
Value Value Benefit Value Value Benefit Value Value Benefit
<S> <C>
1 27,090 5,371 17,113 250,000 6,608 18,350 250,000 7,849 19,591 250,000
2 55,534 22,174 33,917 250,000 25,784 37,526 250,000 29,555 41,297 250,000
3 85,401 38,622 50,364 250,000 45,821 57,563 250,000 53,656 65,399 250,000
4 116,761 54,785 66,528 250,000 66,891 78,634 250,000 80,628 92,370 250,000
5 149,689 70,729 82,471 250,000 89,190 100,933 250,000 111,041 122,784 250,000
6 184,264 88,262 98,829 250,000 114,621 125,189 250,000 147,184 157,752 250,000
7 220,567 106,254 115,646 250,000 142,201 151,594 250,000 188,566 197,959 250,000
8 258,685 124,737 132,955 250,000 172,114 180,331 250,000 235,908 244,125 256,331
9 298,710 143,736 150,781 250,000 204,525 211,570 250,000 288,308 295,353 310,120
10 340,735 163,271 169,141 250,000 239,488 245,358 257,626 346,015 351,885 369,479
15 584,563 261,768 261,768 274,856 434,619 434,619 456,350 729,798 729,798 766,288
20 895,757 351,449 351,449 354,964 667,944 667,944 674,624 1,344,670 1,344,670 1,358,116
25 1,292,927 436,726 436,726 441,093 962,517 962,517 972,143 2,363,625 2,363,625 2,387,261
</TABLE>
(1) The values illustrated assume the planned premium of $ 25,800 is paid at
the beginning of each Policy year. Values will be different if premiums
are paid with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient account
value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although Life of Virginia anticipates
deducting these charges for the forseeable future, THESE CHARGES ARE NOT
GUARANTEED AND COULD BE RAISED AT THE DISCRETION OF LIFE OF VIRGINIA.
Accordingly, even if the assumed hypothetical gross annual investment
return were earned, the values and benefits under an actual Policy with
the listed specifications may be less than those shown if the cost of
insurance charges were increased.
THE HYPOTHETICAL GROSS ANNUAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND
ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL
DEPEND ON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES, RATES OF
INFLATION, AND THE ALLOCATIONS MADE BY AN OWNER AMONG THE INVESTMENT OPTIONS.
THE GROSS HYPOTHETICAL INVESTMENT RATES OF RETURN OF 0%, 6% AND 12% SHOWN ABOVE
CORRESPOND TO NET ANNUAL RATES OF -1.52%, 4.48% AND 10.48%. THE DEATH BENEFIT
AND ACCOUNT VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
INVESTMENT RATE OF RETURN AVERAGES 0%, 6% AND 12% OVER A PERIOD OF YEARS, BUT
FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATIONS CAN BE MADE BY LIFE OF VIRGINIA OR THE FUNDS THAT THESE
HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR
OR SUSTAINED OVER ANY PERIOD OF TIME.
<PAGE>
REQUESTING PAYMENTS AND TELEPHONE TRANSACTIONS
Requesting Payments. Written requests for payment (except for telephone
requests) must be sent to our Home Office or given to our authorized agent for
forwarding to our Home Office. We will ordinarily pay any Life Insurance
Proceeds, loan proceeds or surrender or partial surrender proceeds in a lump sum
within seven days after receipt at our Home Office of all the documents required
for such a payment. Other than the Life Insurance Proceeds, which are determined
as of the date of the Insured's death, the amount will be determined as of the
date our Home Office receives all required documents. Life Insurance Proceeds
may be paid in a lump sum or under an optional payment plan. See "Optional
Payment Plans." Any Life Insurance Proceeds that are paid in one lump sum will
include interest from the date of death to the date of payment. Interest will be
paid at a rate set by us, or by law if greater. The minimum interest rate which
will be paid is 2.5%. Interest will not be paid beyond one year or any longer
time set by law. Life Insurance Proceeds will be reduced by any outstanding
Policy Debt and any due and unpaid charges and increased by any benefits added
by rider.
We may delay making a payment or processing a transfer request if: (1)
the disposal or valuation of Separate Account II's assets is not reasonably
practicable because the New York Stock Exchange is closed for other than a
regular holiday or weekend, trading is restricted by the SEC, or the SEC
declares that an emergency exists; or (2) the SEC by order permits postponement
of payment to protect our Policy Owners. We also may defer making payments
attributable to a check that has not cleared the bank on which it is drawn.
Telephone Transactions. You may make certain requests under the Policy
by telephone provided we have your written authorization on file at the Home
Office. These include requests for transfers, partial surrenders, Policy loans,
changes in premium allocation designations, dollar-cost averaging changes and
changes in the portfolio rebalancing program. Our Home Office will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. Such procedures may include, among others, requiring some form of
personal identification prior to acting upon instructions received by telephone,
providing written confirmation of such transactions, and/or tape recording of
telephone instructions. Your request for telephone transactions authorizes us to
record telephone calls. If reasonable procedures are not employed, we may be
liable for any losses due to unauthorized or fraudulent instructions. However,
if reasonable procedures are employed, we will not be liable for any losses due
to unauthorized or fraudulent instructions.
OTHER POLICY BENEFITS AND PROVISIONS
Exchange Privilege. During the first 24 Policy Months, you may convert
the Policy to a permanent fixed benefit policy. If you object to a material
change in the investment policy of Separate Account II or the Investment
Subdivisions, you may also convert the Policy to a permanent fixed benefit
policy within 60 days after the change. In either case, you may elect either the
same death benefit or the same net amount at risk as the existing Policy at the
time of conversion. Premiums will be based on the same Age at issue and risk
classification of the Insured as the existing Policy. The conversion will be
subject to an equitable adjustment in payments and Account Value to reflect
variances, if any, in the payments and Account Value under the existing Policy
and the new policy. See your Policy for further information.
Optional Payment Plans. The Policy currently offers the following five
optional payment plans as alternatives to the payment of a death benefit or
Surrender Value in a lump sum:
Plan 1 - Income for a Fixed Period. Periodic payments will be made for
a fixed period not longer than 30 years. Payments can be annual, semi-annual,
quarterly or monthly.
Plan 2 - Life Income. Equal monthly payments will be made for a
guaranteed minimum period. If the payee lives longer than the minimum period,
payments will continue for his or her life. The minimum period can be 10, 15 or
20 years.
Plan 3 - Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly or
monthly.
Plan 4 - Interest Income. Periodic payments of interest earned from the
proceeds will be paid. Payments can be annual, semi-annual, quarterly or monthly
and will begin at the end of the first period chosen.
Plan 5 - Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be at
least 35 years old when payments begin.
An optional payment plan can be selected in the application or by
notifying us in writing at our Home Office. Any amount left with us for payment
under an optional payment plan will be transferred to our general account.
Payments under an optional payment plan will not vary with the investment
performance of Separate Account II because they are all forms of fixed-benefit
annuities. See "Tax Treatment of Policy Proceeds." Certain conditions and
restrictions apply to payments received under an optional payment plan. For
further information, review your Policy or contact an authorized Life of
Virginia agent.
Other Policy Provisions. The Policy contains provisions addressing the
following matters:
Dividends. The Policy is non-participating. No dividends will be paid
on the Policy.
Incontestability. The Policy limits our right to contest the Policy as
issued or as increased, except for material misstatements contained in the
application or a supplemental application, after it has been in force during the
Insured's lifetime for a minimum period, generally for two years from the Policy
Date or effective date of the increase. This provision does not apply to riders
that provide disability benefits.
Suicide Exclusion. If the Insured commits suicide while sane or insane,
within two years of the Policy Date, Life Insurance Proceeds payable under the
Policy will be limited to all premiums paid, less outstanding Policy Debt and
less amounts paid upon partial surrender of the Policy.
If the Insured commits suicide while sane or insane, more than two
years after the Policy Date but within two years after the effective date of an
increase in the Specified Amount, the proceeds payable with respect to the
increase will be limited to the cost of insurance applied to the increase.
Misstatement of Age or Sex. Life Insurance Proceeds will be adjusted
if the Insured's Age or sex has been misstated in the application.
Written Notice. Any written notice should be sent to us at our Home
Office at 6610 West Broad Street, Richmond, Virginia 23230. The notice should
include the Policy number and the Insured's full name. Any notice sent by us to
you will be sent to the address shown in the application unless an appropriate
address change form has been filed with us.
Owner. You have rights in the Policy during the Insured's lifetime.
If you die before the Insured and there is no contingent Owner, ownership passes
to your estate.
Beneficiary. You designate the Primary Beneficiaries and Contingent
Beneficiaries when you apply for the Policy. If changed, the Primary Beneficiary
and Contingent Beneficiary is as shown in the latest change filed with us. One
or more Primary Beneficiaries or Contingent Beneficiaries may be named in the
application. In such a case, the proceeds will be paid in equal shares to the
survivors in the appropriate Beneficiary class, unless you request otherwise.
Unless an optional payment plan is chosen, the proceeds payable at the
Insured's death will be paid in a lump sum to the Primary Beneficiary(ies). If
the Primary Beneficiary(ies) dies before the Insured, the proceeds will be paid
to the Contingent Beneficiary(ies). If no Beneficiary(ies) survives the Insured,
the proceeds will be paid to you or your estate.
Reinstatement. If the Policy has not been surrendered, the Policy may
be reinstated within three years after lapse, subject to compliance with certain
conditions, including the payment of a necessary premium and submission of
satisfactory evidence of insurability. See your Policy for further information.
Trustee. If a trustee is named as the Owner or Beneficiary of the
Policy and subsequently exercises ownership rights or claims benefits
thereunder, we will have no obligation to verify that a trust is in effect or
that the trustee is acting within the scope of his/her authority. Payment of
policy benefits to the trustee will release us from all obligations under the
Policy to the extent of the payment. When we make a payment to the trustee, we
will have no obligation to ensure that such payment is applied according to the
terms of the trust agreement.
Other Changes. At any time we may make such changes in the Policy as
are necessary to assure compliance at all times with the definition of life
insurance prescribed by the Code; to make the Policy, our operations, or the
operation of Separate Account II conform with any law or regulation issued by
any government agency to which they are subject; or to reflect a change in the
operation of Separate Account II, if allowed by the Policy. Only the President
or a Vice-President of Life of Virginia has the right to change the Policy. No
agent has the authority to change the Policy or waive any of its terms. All
endorsements, amendments, or riders must be signed by such officer to be valid.
Reports. We maintain records and accounts of all transactions involving
the Policy, Separate Account II and Policy Debt. Within 30 days after each
Policy Anniversary, you will be sent a report showing information about your
Policy for the period covered by the report. The report will show the amount of
Life Insurance Proceeds, the Account Value in each Investment Subdivision, the
Surrender Value and Policy Debt. The report will also show premiums paid and
charges made during the Policy Year. You will also be sent an annual and a
semi-annual report for each Fund underlying an Investment Subdivision to which
you have allocated Account Value, as required by the 1940 Act. In addition, when
you pay premiums (other than by pre-authorized checking account deduction), or
if you take out a Policy loan, make transfers or make partial surrenders, you
will receive a written confirmation of these transactions.
Change of Owner. You may change the Owner of the Policy by sending a
written request on a form satisfactory to us to our Home Office while the
Insured is alive and the Policy is in force. The change will take effect the
date you sign the written request, but the change will not affect any action we
have taken before we receive the written request. A change of Owner does not
change the Beneficiary designation.
Supplemental Benefits. Supplemental benefits are available and may be
added to your Policy by rider. Monthly charges for these benefits will be
deducted from your Account Value as part of the monthly deduction. See "Monthly
Deduction." Examples of these supplemental benefits include term insurance on a
spouse or children, additional death benefits if the insured dies in an
accident, and waiver of either the monthly deduction or a stipulated amount if
the Insured becomes disabled as defined in the rider. Additional rules and
limits apply to these supplemental benefits. Please ask your authorized Life of
Virginia agent for further information or contact our Home Office.
Using the Policy as Collateral. The Policy can be assigned as
collateral security. We must be notified in writing if you assign the Policy.
Any payments made before the assignment and recorded at our Home Office will not
be affected. We are not responsible for the validity of an assignment. Your
rights and the rights of the Beneficiary may be affected by an assignment.
Reinsurance. We intend to reinsure a portion of the risks assumed under
the Policies.
LIFE OF VIRGINIA
The Life Insurance Company of Virginia. We are a stock life insurance
company operating under a charter granted by the Commonwealth of Virginia on
March 21, 1871. We are principally engaged in the offering of life insurance and
annuity policies and rank among the 25 largest stock life insurance companies in
the United States in terms of business in force. We are admitted to do business
in 49 states and the District of Columbia. Our principal offices are at 6610
West Broad Street, Richmond, Virginia 23230.
Eighty percent of our capital stock is owned by General Electric
Capital Assurance Corporation ("GE Capital Assurance"). The remaining 20% is
owned by GE Financial Assurance Holdings, Inc. GE Capital Assurance. and GE
Financial Assurance Holdings, Inc. are indirectly wholly-owned subsidiaries of
General Electric Capital Corporation ("GE Capital"). GE Capital, a New York
corporation, is a diversified financial services company whose subsidiaries
consist of specialty insurance, equipment management, and commercial and
consumer financing businesses. GE Capital's ultimate 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.
Selwyn L. Flournoy, Jr.* Director, Life of Virginia since 5/89;
Senior Vice President, Life of Virginia,
since 1980. Chief Financial Officer since
1980.
Linda L. Lanam* Director, Life of Virginia, since
2/93; Senior Vice President since 1997; Vice
President and Senior Counsel, Life of
Virginia, since 1989; Corporate Secretary
for Life of Virginia and for a number of
Life of Virginia affiliates, since 1992.
Robert D. Chinn* Director, Life of Virginia since
1997; Senior Vice President - Agency, Life
of Virginia, since 1/92; Vice President,
Life of Virginia, since 1985.
Elliott Rosenthal Senior Vice President - Investment
Products since 1997; Vice President and
Senior Investment Actuary, 1/95 - 4/97;
Investment Actuary, 1/82 - 2/95.
Victor C. Moses Director, Life of Virginia, since 5/96.
Director of GNA since April 1994. Senior
Vice President, Business Development, and
Chief Actuary of GNA since Mary 1993. Senior
Vice President and Chief Financial Officer
of GNA, 1991-1993. Vice President and Chief
Actuary of GNA, 1983-1991. Senior Vice
President, Controller and Treasurer GNA
Investors Trust, 1992-1993.
Geoffrey S. Stiff Director, Life of Virginia, since 5/96.
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, Flournoy, Chinn and Ms. Lanam are members of our Executive
Committee.
The principal business address of each person listed, unless otherwise
indicated, is The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, Virginia 23230.
The principal business address for Mr. Dolan and Mr. Stiff is First Colony
Life Insurance Company, 700 Main Street, Post Office 1280, Lynchburg, VA
24505-1280.
The principal business address for Mr. Moses is GNA Corporation, Two Union
Square, 601 Union Street, Seattle, WA 98101.
<PAGE>
Separate Account II. Separate Account II was established by us as a
separate investment account on August 21, 1986. Separate Account II currently
has thirty-four Investment Subdivisions available under the Policy, but that
number may change in the future. Each Investment Subdivision invests exclusively
in shares representing an interest in a separate corresponding portfolio of one
of the nine Funds described above. Net Premiums are allocated in accordance with
your instructions among up to seven of the thirty-four Investment Subdivisions
available under the Policy.
The assets of Separate Account II belong to us. Nonetheless, the assets
in Separate Account II attributable to the Policies are not chargeable with
liabilities arising out of any other business which we may conduct. The assets
of Separate Account II shall, however, be available to cover the liabilities of
our General Account to the extent that the assets of Separate Account II exceed
its liabilities arising under the Policies supported by it. Income and both
realized and unrealized gains or losses from the assets of Separate Account II
are credited to or charged against Separate Account II without regard to the
income, gains or losses arising out of any other business we may conduct.
Separate Account II is registered with the SEC as a unit investment
trust under the 1940 Act and meets the definition of a separate account under
the federal securities laws. Registration with the SEC does not involve
supervision of the management or investment practices or policies of Separate
Account II by the SEC.
Changes to Separate Account II. Separate Account II may include other
Investment Subdivisions that are not available under the Policy and are not
otherwise discussed in this prospectus. We may substitute another investment
subdivision or insurance company separate account under the Policy if, in our
judgment, investment in a Investment Subdivision should no longer be possible or
becomes inappropriate to the purposes of the Policies, or if investment in
another investment subdivision or insurance company separate account is in the
best interest of Owners. No substitution may take place without notice to Owners
and prior approval of the SEC and insurance regulatory authorities, to the
extent required by the 1940 Act and applicable law.
We may also, where permitted by law: (1) create new separate accounts;
(2) combine separate accounts, including Separate Account II; (3) add new
Investment Subdivisions or remove Investment Subdivisions from Separate Account
II; (4) make the Investment Subdivisions available under other policies we
issue; (5) deregister Separate Account II under the 1940 Act; and (6) operate
Separate Account II under the direction of committee or in another form.
Voting of Fund Shares. We are the legal owner of shares held by the
Investment Subdivisions and as such have the right to vote on all matters
submitted to shareholders of the Funds. However, as required by law, we will
vote shares held in the Investment Subdivisions at regular and special meetings
of shareholders of the Funds in accordance with instructions received from
Owners with Account Value in the Investment Subdivisions. To obtain voting
instructions from Owners, before a meeting of shareholders of the Funds, we will
send Owners voting instruction material, a voting instruction form and any other
related material. Shares held by an Investment Subdivision for which no timely
instructions are received will be voted by us in the same proportion as those
shares for which voting instructions are received. Should the applicable federal
securities laws, regulations or interpretations thereof change so as to permit
us to vote shares of the Funds in our own right, we may elect to do so. We may,
if required by state insurance officials, disregard your voting instructions if
such instructions would require shares to be voted so as to cause a change in
sub-classification or investment objectives of one or more of the Funds, or to
approve or disapprove an investment advisory agreement. In addition, we may
under certain circumstances disregard voting instructions that would require
changes in the investment policy or investment adviser of one or more of the
Funds, provided that we reasonably disapprove of such changes in accordance with
applicable federal regulations. If we ever disregard voting instructions, Owners
will be advised of that action and of the reasons for such action in the next
report to Owners.
TAX CONSIDERATIONS
The following discussion is general and is not intended as tax advice.
Tax Status of the Policy. The Code, in section 7702, establishes a
statutory definition of life insurance for tax purposes. We believe that the
Policy meets the statutory definition of life insurance, which places
limitations on the amount of premiums that may be paid. If the Specified Amount
of a Policy is increased or decreased, the applicable premium limitation may
change. In the case of a decrease in the Specified Amount, a partial surrender,
a change from Option A to Option B, or any other such change that reduces
benefits under the Policy during the first 15 years after a Policy is issued and
that results in a cash distribution to you in order for the Policy to continue
complying with section 7702 definitional limitations on premiums and cash
values, certain amounts prescribed in section 7702 which are so distributed will
be includable in your ordinary income (to the extent of any gain in the Policy).
Such income inclusion will also occur, in certain circumstances, with respect to
cash distributions made in anticipation of reductions in benefits under the
Policy.
The Code (section 817(h)) and regulations promulgated thereunder by the
Secretary of the Treasury (the "Treasury") prescribe diversification standards
for the investments of Separate Account II which must be met in order for the
Policy to be treated as a life insurance contract for federal tax purposes.
Separate Account II, through the Funds, intends to comply with the
diversification requirements prescribed by the Treasury. Although we do not
control the Funds, we have entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury. Thus, we believe that Separate Account
II will be treated as adequately diversified for federal tax purposes.
In certain circumstances, variable contract owners may be considered
the owners, for federal tax purposes, of the assets of the separate account used
to support such contracts. In those circumstances, income and gains from the
separate account assets would be includable in the variable contract owners'
gross income annually as earned. The Internal Revenue Service (the "Service")
has stated in published rulings that a variable contract owner will be
considered the owner of separate account assets if the owner possesses incidents
of ownership in those assets, such as the ability to exercise investment control
over the assets. The Treasury has announced, in connection with the issuance of
regulations concerning diversification requirements, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset [i.e. separate] account may cause the
investor, rather than the insurance company, to be treated as the owner of the
assets of the account." This announcement also stated that guidance would be
issued by the way of regulation or published rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts [of a
separate account] without being treated as owners of the underlying assets."
The ownership rights under the Policy are similar to, but different in
certain respects from, those present in situations addressed by the Service in
rulings in which it was determined that contract owners were not owners of
separate account assets. For example, you have the choice of more Funds to which
to allocate premiums and cash values and may be able to reallocate more
frequently than in such rulings. These differences could result in you being
considered, under the standard of those rulings, the owner of the assets of
Separate Account II. To ascertain the tax treatment of our policyowners, we have
requested, with regard to a policy similar to this Policy, a ruling from the
Service that we, and not our policyowners, are the owner of the assets of the
separate account there involved for federal income tax purposes. The Service
informed us that it will not rule on the request until issuance of the promised
guidance referred to in the preceding paragraph. Because we do not know what
standards will be set forth in the regulations or revenue rulings which the
Treasury has stated it expects to issue, we have reserved the right to modify
our practices to attempt to prevent you from being considered the owner of the
assets of Separate Account II.
Frequently, if the Service or the Treasury sets forth a new position
which is adverse to taxpayers, the position is applied on a prospective basis
only. Thus, if the Service or the Treasury were to issue regulations or a ruling
which treated you as the owner of the assets of Separate Account II, that
treatment might only apply on a prospective basis. However, if the ruling or
regulations were not considered to set forth a new position, you might be
retroactively determined to be the owner of a portion of the assets of Separate
Account II for tax purposes.
The following discussion assumes that the Policy will qualify as a life
insurance contract for federal tax purposes.
Tax Treatment of Policy Proceeds. The Policies should receive the same
Federal income tax treatment as fixed benefit life insurance. As a result, the
Life Insurance Proceeds payable under either benefit option are excludable from
the gross income of the Beneficiary under section 101 of the Code, and you will
not be deemed to be in constructive receipt of the Surrender Value under a
Policy until actual surrender. If proceeds payable upon death of the Insured are
paid under optional payment Plan 4 (interest income), the interest payments will
be includable in the Beneficiary's income. If proceeds payable on death are
applied under optional payment plan 3 and the Beneficiary is at an advanced age
at such time, such as age 80 or older, it is possible that payments would be
treated in a manner similar to that under Plan 4. If the proceeds payable upon
death of the Insured are paid under one of the other optional payment plans, the
payments will be prorated between amounts attributable to the death benefit
which will be excludable from the Beneficiary's income and amounts attributable
to interest which will be includable in the Beneficiary's income. In the event
of certain cash distributions under the Policy resulting from any change which
reduces future benefits under the Policy, the distribution will be taxed in
whole or in part as ordinary income (to the extent of gain in the Policy). See
discussion above, "Tax Status of the Policy."
For an Insured who survived beyond the end of the Commissioners' 1980
Standard Ordinary Mortality Table, there may be a question about taxation of
death benefit proceeds and constructive receipt. Because we continue to charge
for the insurance risk beyond age 100, we believe that the proceeds will
continue to be protected from taxation. Therefore, we have no current plans to
withhold or report taxes in this situation.
Except as noted below, a loan received under a Policy will be treated
as your indebtedness, so that no part of any loan under a Policy will constitute
income to you so long as the Policy remains in force, and a partial surrender
under a Policy will not constitute income except to the extent it exceeds the
total premiums paid for the Policy (reduced by any amounts previously withdrawn
which were not treated as income). However, with respect to the portion of any
loan that is attributable to cash value in excess of the total premium payments
under the Policy, it is possible that the Service could treat you as being in
receipt of certain amounts of income.
Generally, interest paid on loans under a Policy will not be tax
deductible, except in the case of certain loans under a Policy covering a "key
person." A tax adviser should be consulted before taking any policy loan.
The right to exchange the Policy for a permanent fixed benefit policy
(see "Exchange Privilege" ), the right to change Owners (see "Change of Owner"),
the provision for surrenders, the right to change from one death benefit option
to another, and other changes reducing future death benefits may have tax
consequences depending on the circumstances of such exchange, change or
surrender. Upon complete surrender, if the amount received plus the Policy Debt
exceeds the total premiums paid (less any amounts treated as previously
withdrawn by you), the excess generally will be treated as ordinary income.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Owner or Beneficiary.
Tax Treatment of Policy Loans and Other Distributions. The Technical
Miscellaneous Revenue Act of 1988 (TAMRA) includes the following provisions,
which affect the taxation of distributions (other than proceeds paid at the
death of the insured) from life insurance contracts:
1. If premiums are paid more rapidly than the rate defined by a
"7-Pay Test," the Policy will be classified as a "modified
endowment contract." This test applies a cumulative limit on the
amount of payments that can be made into a Policy in order to
avoid modified endowment contract treatment.
2. Any Policy received in exchange for a policy classified as a
modified endowment contract will be treated as a modified
endowment contract regardless of whether it meets the 7-Pay
Test.
3. Loans (including unpaid interest thereon) from a Policy
classified as a modified endowment contract will be considered
distributions.
4. Distributions (including partial surrenders, loans and loan
interest, assignments and pledges) from a Policy classified as a
modified endowment contract will be taxed first as distributions
of income from the Policy (to the extent that the cash value of
the Policy, before reduction by any surrender charge or loan,
exceeds the total premiums paid less any previous untaxed
withdrawals), and then as a non-taxable recovery of premium.
5. A penalty tax of 10% will be imposed on distributions includable
in income (including complete and partial surrenders, loans and
loan interest, assignments and pledges) from a Policy classified
as a modified endowment contract, unless such distributions are
made (1) after you attain age 59 1/2, (2) because you have
become disabled, or (3) as substantially equal annuity payments
over your life or life expectancy (or over the joint lives or
life expectancies of you and your beneficiary).
In order to avoid classification as a modified endowment contract, a
Policy must not have been issued in exchange for a modified endowment contract,
and premiums paid under the Policy must not be paid more rapidly than the 7-Pay
Test allows. We will provide you guidance as to the amount of premium payments
that may be paid if you wish to avoid treatment of the Policy as a modified
endowment contract.
Additionally, all life insurance contracts which are treated as
modified endowment contracts and which are issued by us or any of our affiliates
with the same person designated as the owner within the same calendar year will
be aggregated and treated as one contract for purposes of determining any tax on
distributions.
The provisions of TAMRA are complex and are open to considerable
variation in interpretation. You should consult your tax advisor before making
any decisions regarding increases or decreases in or additions to coverage or
distributions from your Policy.
Taxation of Life of Virginia. Because of our current status under the
Code, we do not expect to incur any Federal income tax liability that would be
chargeable to Separate Account II. Based upon this expectation, no charge is
being made currently to Separate Account II for Federal income taxes. If,
however, we determine that such taxes may be incurred, we may assess a charge
for those taxes from Separate Account II.
We may also incur state and local taxes (in addition to premium taxes
for which a deduction from premiums is currently made) in several states. At
present, these taxes are not significant. If there is a material change in state
or local tax laws, charges for such taxes attributable to Separate Account II
may be made.
Income Tax Withholding. Generally, unless you provide us with a written
election to the contrary before a distribution is made, we are required to
withhold income taxes from any portion of the money received by you upon
surrender of the Policy (and if the Policy is a modified endowment contract,
upon a partial surrender or a Policy loan). If you request that no taxes be
withheld, or if we do not withhold a sufficient amount of taxes, you will be
responsible for the payment of any taxes and early distribution penalties that
may be due on the amounts received. You may also be required to pay penalties
under the estimated tax rules, if your withholding and estimated tax payments
are insufficient to satisfy your total tax liability. You may, therefore, want
to consult a tax advisor.
The foregoing discussion is general and is not intended as tax advice.
Other Considerations. Any person concerned about these tax implications
should consult a competent tax advisor. This discussion is based on our
understanding of the present Federal income tax laws as they are currently
interpreted by the Service. No representation is made as to the likelihood of
continuation of these current laws and interpretations. It should be further
understood that the foregoing discussion is not exhaustive and that special
rules not described in this prospectus may be applicable in certain situations.
Moreover, no attempt has been made to consider any applicable state or other tax
laws.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
In 1983, the Supreme Court held in Arizona Governing Committee v.
Norris, that optional annuity benefits provided under an employee's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. The Policy contains guaranteed
cost of insurance rates and guaranteed purchase rates for certain settlement
options that distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, on any employment-related insurance
or benefit program for which a Policy may be purchased.
ADDITIONAL INFORMATION
Sale of Policies. The Policies will be sold by our licensed life insurance
agents who are also registered representatives of Capital Brokerage Corporation
Securities Corporation, the principal underwriter of the Policies, or of
broker-dealers who have entered into written sales agreements with the principal
underwriter. Capital Brokerage Corporation, a Virginia Corporation, located at
6610 W. Broad Street, Richmond, 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. Capital Brokerage 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 Capital Brokerage Corporation for acting as principal underwriter of these
other policies.
Our writing agents will receive commissions based on a commission
schedule and rules. First-year commissions depend on the Insured's Age, risk
class, and the size of the policy. In the first Policy Year, the agent will
receive a commission of up to 95% of the maximum commissionable premium plus up
to 5% of premiums paid in excess of the maximum commissionable premium. In
renewal years, the agent receives up to 8.5% of the premiums paid. A trail
commission equal to an annual rate of 0.25% of Account Value may be paid on
Policies.
Other Information. A registration statement under the Securities Act of
1933 has been filed with the SEC relating to the offering described in this
prospectus. This prospectus does not include all the information set forth in
the registration statement. The omitted information may be obtained at the SEC's
principal office in Washington, D.C. by paying the SEC's prescribed fees.
Litigation. No legal or administrative proceeding is pending that
would have a material effect upon Separate Account II.
Legal Matters. The legal matters in connection with the Policy
described in this prospectus have been passed on by J. Neil McMurdie, Associate
Counsel and Assistant Vice President of Life of Virginia. Sutherland, Asbill &
Brennan LLP of Washington, D.C. has provided advice on matters relating to the
federal securities laws.
Experts.
KPMG Peat Marwick LLP. The consolidated balance sheet of The Life
Insurance Company of Virginia and subsidiary as of December 31, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for the nine months ended December 31, 1996 and the preacquisition three months
period ended March 31, 1996, and the Statement of Assets and Liabilities of Life
of Virginia Separate Account II as of December 31, 1996 and the related
statements of operations and changes in net assets for the year or period then
ended have been included herein and in the registration statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of such firm as
experts in accounting and auditing.
Ernst & Young LLP. The consolidated financial statements of The Life
Insurance Company of Virginia and subsidiaries at December 31, 1995 and for each
of the two years in the period ended December 31, 1995 and the statements of
operations and statements of changes in net assets of Life of Virginia Separate
Account II for each of the two years or periods ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, to the extent indicated in their
reports thereon also appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
Actuarial Matters. Actuarial matters included in this prospectus have
been examined by Bruce E. Booker, an actuary of Life of Virginia, whose opinion
is filed as an exhibit to the registration statement.
Change in Auditors. Subsequent to the acquisition of us by GNA
Corporation on April 1, 1996, we selected KPMG Peat Marwick LLP to be our
auditor. Accordingly, our principal auditor has changed for the year ending
December 31, 1996, from Ernst & Young LLP, to KPMG Peat Marwick LLP. The former
auditors were dismissed and KPMG Peat Marwick LLP was retained because KPMG Peat
Marwick LLP is the auditor for GE Capital, the indirect parent of GNA
Corporation. This change of auditors was approved by the members of our Board of
Directors.
Neither KPMG Peat Marwick LLP's nor Ernst & Young LLP's reports on the
financial statements contains any adverse opinion or a disclaimer of opinion, or
was qualified or modified as to uncertainty or audit scope. Furthermore, there
were no disagreements with either on any matter of accounting principle or
practice, financial statement disclosure or auditing scope or procedure which
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports.
Financial Statements. 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.
FINANCIALS TO BE ADDED BY PRE-EFFECTIVE AMENDMENT
Part II
OTHER INFORMATION
<PAGE>
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
The Life Insurance Company of Virginia's By-laws provide, in Article V,
Section 5, for indemnification of directors, officers and employees of the
Company.
Insofar as indemnification for liability arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provision, or otherwise
under circumstances where the burden of proof set forth in Section 11(b) of the
Act has not been sustained, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REPRESENTATION PURSUANT TO SECTION 26(e)(2)(A)
Life of Virginia hereby represents that the fees and charges deducted
under the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by Life of
Virginia.
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The prospectus consisting of ___ pages. The undertaking to file
reports. The Rule 484 undertaking. Representation pursuant to Section
26(e)(2)(A).
The Signatures.
Written consents of the following persons:
(a) J. Neil McMurdie
(b) Messrs. Sutherland, Asbill & Brennan LLP
(c) Bruce E. Booker, F.S.A.
(d) KPMG Peat Marwick LLP
(e) Ernst & Young LLP
The following exhibits, corresponding to those required by paragraph A
of the instructions as to exhibits in Form N-8B-2:
(1)(a) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Separate Account II.1/
(1)(b) Resolution of the Board of Directors of Life of Virginia
authorizing the addition of Investment Subdivisions to
Separate Account II.1/
(1)(c) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Fidelity
Variable Insurance Products Fund II Asset Manager Portfolio
and Neuberger and Berman Advisers Management Trust Balanced
Portfolio.1/
(1)(d) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of Janus Aspen
Series, Growth Portfolio, Aggressive Growth Portfolio and
Worldwide Growth Portfolio.3/
(1)(e) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of Investment Subdivisions of
Separate Account II which invest in shares of the Utility Fund
of the Investment Management Series.4/
(1)(f) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account II which invest in shares of
the Corporate Bond Fund of the Insurance Management Series and
the Contrafund Portfolio of the Variable Insurance Products
Fund II.4/
(1)(g) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of four additional Investment
Subdivisions of Separate Account II which invest in shares of
the Alger American Growth Portfolio and the Alger American
Small Capitalization Portfolio of The Alger American Fund, and
the Balanced Portfolio and Flexible Income Portfolio of the
Janus Aspen Series.6/
(1)(h) Resolution of the Board of Directors of Life of Virginia
authorizing the establishment of two additional Investment
Subdivisions of Separate Account 4 investing in shares of the
Federated American Leaders Fund II of the Federated Insurance
Series, and the International Growth Portfolio of the Janus
Aspen Series. 7/
(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 Agreement1/
1A(3)(a)(i) Underwriting Agreement dated April 2, 1996, between The Life
Insurance Company of Virginia and Fourth Financial Securities
Corporation.7/
1A(3)(a)(ii) Underwriting Agreement dated December 12, 1997 between The
Life Insurance Company of Virginia and Capital Brokerage
Corporation.
1A(3)(b) Selling Agreement1/
1A(3)(b)(i) Broker-Dealer Sales Agreement
1A(4) Not Applicable
1A(5) Policy Form, Commonwealth Four.10/
1A(5)(a) Endorsement to policy
(a) Accelerated Benefit Rider
(b) Disability Benefit Rider 9/
(c) Disability Benefit Rider 9/
(d) Insurance Rider for Additional Insured Person 9/ (e)
Children's Insurance Rider 9/ (f) Accidental Death Benefit
Rider 9/ (g) Guarantee Account Rider 9/ (h) Unisex Rider 9/
(i) Unit Value Endorsement 9/
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/
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 Agreement1/
1A(10) Application for Commonwealth Four Policy1/
2 See Exhibit 1(A)5
3(a) Opinion and Consent of Counsel 11/
3(b) Consent of Messrs. Sutherland, Asbill & Brennan LLP 11/
3(c) Consent of KPMG Peat Marwick LLP 11/
3(d) Consent of Ernst & Young LLP 11/
4 Not Applicable
5 Not Applicable
6 Opinion and Consent of Bruce E. Booker, Actuary. 11/
7 Memorandum describing Life of Virginia's Issuance, Transfer,
Redemption and Exchange Procedures for the Policies.
8 Undertaking to Guarantee performance of obligations of
principal underwriter.1/
9 Power of Attorney2/
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.
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 33-965 1
9. Filed November 18, 1997 with Pre-Effective Amendment No. 1 to Form S-6
for Life of Virginia Separate Account II, Registration Number 333-32071.
10. Filed November 25, 1997 with initial filing to Form S-6 for Life of
Virginia Separate Account II, Registration Number 333-41031
11. 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 20th day of February,
1998.
Life of Virginia Separate Account II
(Seal) The Life Insurance Company of Virginia
(Depositor)
Attest: /s/LAURA C. DEUSEBIO
By:_/s/SELWYN L. FLOURNOY, JR.
Selwyn L. Flournoy, Jr.
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, The Life
Insurance Company of Virginia certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, all in the
County of Henrico in the Commonwealth of Virginia on the 20TH day of February,
1998.
(Seal) The Life Insurance Company of Virginia
Attest: /s/LAURA C. DEUSEBIO
By:/s/SELWYN L. FLOURNOY, JR.
Selwyn L. Flournoy, Jr.
Senior Vice President
Given under my hand this 20TH day of February, 1998 in the City/County
of Henrico, Commonwealth of Virginia.
/s/LAURA C, DEUSEBIO
Notary Public
My Commission Expires January 31, 2000
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date(s) indicated.
<TABLE>
<S> <C>
Signature Title Date
/s/RONALD V. DOLAN
Ronald V. Dolan Director, Chairman of the Board 2/18/98
/s/SELWYN L. FLOURNOY, JR.
Selwyn L. Flournoy, Jr. Director, Senior Vice President 2/18/98
Chief Financial Officer
/s/LINDA L. LANAM
Linda L. Lanam Director, Senior Vice President 2/18/98
/s/ROBERT D. CHINN
Robert D. Chinn Director, Senior Vice President 2/18/98
/s/VICTOR C. MOSES
Victor C. Moses Director 2/18/98
/s/GEOFFREY S. STIFF
Geoffrey S. Stiff Director 2/18/98
</TABLE>
By /s/SELWYN L. FLOURNOY, JR., pursuant to Power of Attorney executed on April
16, 1997.
<PAGE>
Exhibit List
1A(3)(a)(ii) Underwriting Agreement dated December 12, 1997 between The Life
Insurance Company of Virginia and Capital Brokerage Corporation
1A(3)(b)(i) Broker-Dealer Sales Agreement
1A(5)(a) Endorsement to Policy
Accelerated Benefit Rider
7 Memorandum describing Life of Virginia's Issuance, Transfer
Redemption and Exchange Procedure for the Policies
Exhibit 1A(3)(a)(ii)
Underwriting Agreement dated December 12, 1997
Between Life of Virginia and Capital Brokerage Corporation
<PAGE>
UNDERWRITING AGREEMENT
AGREEMENT dated December 12, 1997, by and between THE LIFE INSURANCE
COMPANY OF VIRGINIA (" Life of Virginia"), a Virginia corporation, on its own
behalf and on behalf of Life of Virginia Separate Account I, Life of Virginia
Separate Account II, Life of Virginia Separate Account III, and Life of Virginia
Separate Account 4 (the "Separate Accounts"), and CAPITAL BROKERAGE CORPORATION
(doing business in Indiana, Minnesota, New Mexico, and Texas as GE Capital
Brokerage Corporation) ("CBC"), a Washington corporation with its principal
office at 6630 West Broad Street, Post Office Box 26266, Richmond, VA 23261.
W I T N E S S E T H:
WHEREAS, the Separate Accounts are segregated asset accounts
established and maintained by Life of Virginia pursuant to the laws of the
Commonwealth of Virginia for certain variable annuities and variable life
insurance policies to be issued by Life of Virginia (hereinafter referred to as
the "Variable Contracts"), under which income, gains and losses, whether or not
realized, from assets allocated to such Separate Accounts, will be, in
accordance with the Variable Contracts, credited to or charged against such
Separate Accounts without regard to other income, gains or losses of Life of
Virginia;
WHEREAS, Life of Virginia has registered the Separate Accounts as a
unit investment trust-type investment companies under the Investment Company Act
of 1940 (the"1940 Act");
WHEREAS, CBC has registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "1934 Act") and is a member firm of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, Life of Virginia has registered the Variable Contracts under
Securities Act of 1933 (the "1933 Act") and proposes to issue and sell the
Variable Contracts to the public through CBC, acting as the principal
underwriter of the Variable Contracts;
NOW, THEREFORE, in consideration of the mutual agreements made herein,
Life of Virginia and CBC hereby agree as follows:
1. Underwriter.
(a) Life of Virginia grants to CBC the exclusive right, during the term
of this Agreement, subject to the registration requirements of the 1933 Act and
the 1940 Act and the provisions of the 1934 Act, to be the principal underwriter
of the Variable Contracts. CBC agrees to use its best efforts to distribute the
Variable Contracts, and to undertake to provide sales and services relative to
the Variable Contracts and otherwise to perform all duties and functions
necessary and proper for the distribution of the Variable Contracts. It is the
intent of the parties hereto that substantially similar successor variable
deferred annuity contracts hereafter issued by Life of Virginia in addition to
or in substitution for the Variable Contracts shall be covered by this Agreement
so long as this Agreement has not been previously terminated prior to date of
introduction thereof.
(b) To the extent necessary to offer the Variable Contracts, CBC shall
be duly registered or otherwise qualified under the securities laws of any state
or other jurisdiction. All registered representatives of CBC soliciting
applications for the Variable Contracts shall be duly and appropriately
licensed, registered or otherwise qualified for the sale of such Variable
Contracts (and the riders offered in connection therewith) under the federal
securities laws, the state insurance laws and any applicable state securities
laws of each state or other jurisdiction in which such Variable Contracts may
lawfully be sold and in which Life of Virginia is licensed to sell the Variable
Contracts. CBC shall be responsible for the training, supervision, and control
of its own registered representatives for purposes of the Rules of the NASD and
federal and state securities law requirements applicable to them in connection
with the offer and sale of the Variable Contracts.
(c) CBC agrees to offer the Variable Contracts for sale in accordance
with the prospectuses therefor then in effect. CBC is not authorized to give any
information or to make any representations concerning the Variable Contracts
other than those contained in the current prospectuses therefor filed with the
Securities and Exchange Commission ("Commission") or in such sales literature as
may be authorized by Life of Virginia.
(d) Payments made in connection with the Variable Contracts whether
premium or otherwise are the exclusive property of Life of Virginia. Such
payments received by CBC shall be held in a fiduciary capacity and shall be
transmitted immediately to Life of Virginia or its designated servicing agent in
accordance with the administrative procedures of Life of Virginia. Life of
Virginia will credit all payments made by or on behalf of Policyowners to their
respective accounts, and will allocate amounts to the investment subdivisions of
the Separate Accounts in accordance with the instructions of Policyowners and
the provisions of the Variable Contracts.
2. Sales and Services Agreement.
CBC is hereby authorized to enter into separate written sales or
services agreements, on such terms and conditions as CBC may determine not
inconsistent with this Agreement, with broker-dealers that are registered as
such under the Securities Exchange Act and are members of the NASD and that
agree to participate in the distribution of the Variable Contracts. All
broker-dealers that agree to participate in the distribution of the Variable
Contracts shall act as independent contractors and nothing herein contained
shall constitute the directors, officers, employees, agents, or registered
representatives of such broker-dealers as employees of CBC or Life of Virginia
for any purpose whatsoever.
3. Suitability.
Life of Virginia and CBC each wish to ensure that the Variable
Contracts distributed by CBC will be issued to purchasers for whom the Variable
Contracts will be suitable. CBC shall take reasonable steps to ensure that its
own registered representatives shall not make recommendations to an applicant to
purchase a Variable Contract in the absence of reasonable grounds to believe
that the purchase of the Variable Contract is suitable for such applicant under
the NASD Conduct Rules regarding Recommendations to Customers. While not limited
to the following, a determination of suitability shall be based on information
furnished to a registered representative after reasonable inquiry of such
applicant concerning the applicant's financial status, tax status and insurance
and investment objectives and needs.
<PAGE>
4. Prospectuses and Promotional Material.
Life of Virginia shall furnish CBC with copies of all prospectuses,
statements of additional information, financial statements and other documents
and materials which CBC reasonably requests for use in connection with the
distribution of the Variable Contracts. Life of Virginia shall have
responsibility for the preparation, filing and printing of all required
prospectuses and/or registration statements in connection with the Variable
Contracts, and the payment of all related expenses. CBC and Life of Virginia
shall cooperate fully in the design, drafting and review of sales promotion
materials, and with respect to the preparation of individual sales proposals
related to the sale of the Variable Contracts. CBC shall not use or distribute
any such materials not provided or approved by Life of Virginia.
5. Records and Reports.
CBC shall have the responsibility for maintaining records relating to
its registered representatives that are licensed, registered and otherwise
qualified to sell the Variable Contracts and relating to broker-dealers engaged
in the distribution of the Variable Contracts, and shall provide periodic
reports thereof to Life of Virginia as requested.
6. Administrative Services.
Life of Virginia agrees to maintain all required books of account and
related financial records on behalf of CBC. All such books of account and
recorded shall be maintained and preserved pursuant to Rule 17a-3 and 17a-4
under the 1934 Act (or the corresponding provisions of any future Federal
securities laws or regulations). In addition, Life of Virginia will maintain
records of all sales commissions paid to registered representatives of CBC in
connection with the sale of the Variable Contracts. All such books and records
shall be maintained by Life of Virginia on behalf of and as agent for CBC, whose
property they are and shall remain for all purposes, and shall at all times be
subject to reasonable periodic, special, or other examination by the Commission
and all other regulatory bodies having jurisdiction. Life of Virginia also
agrees to send to CBC's customers all required confirmations on customer
transactions relating to Variable Contracts. Life of Virginia shall also make
commission and such other disbursements as may be requested by CBC, in
connection with the operations of CBC, for the account and risk of CBC.
7. Compensation.
(a) For the sale of the Variable Contracts, unless otherwise expressly
agreed to in writing by the parties, sales commissions shall be paid by Life of
Virginia, and CBC authorizes such payment, directly to those registered
representatives of CBC who are also agents of Life of Virginia and to those
broker-dealers (or their affiliated insurance agencies) who have entered into
sales agreements with CBC. Such payment shall be made pursuant to the insurance
agent/agency agreement between the agent/agency and Life of Virginia, and CBC
shall not pay any sales commissions itself to such persons upon their sale of
the Variable Contracts.
(b) In recognition of the administrative services to be rendered by CBC
in coordinating the distribution activities required by this Agreement, Life of
Virginia shall pay to CBC such administrative fees as may be mutually agreed
upon in separate writings exchanged from time to time between Life of Virginia
and CBC.
8. Investigation and Proceedings.
(a) CBC and Life of Virginia agree to cooperate fully in any insurance
regulatory investigation or proceeding or judicial proceeding arising in
connection with the Variable Contracts distributed under this Agreement. CBC and
Life of Virginia further agree to cooperate fully in any securities regulatory
inspection, inquiry, investigation or proceeding or any judicial proceeding with
respect to Life of Virginia or CBC to the extent that such inspection, inquiry,
investigation or proceeding is in connection with the Variable Contracts
distributed under this Agreement. Without limiting the foregoing:
(i) CBC will be notified promptly of any customer complaint or
notice of any regulatory inspection, inquiry, investigation or
proceeding or judicial proceeding received by Life of Virginia
with respect to Life of Virginia or CBC or any broker-dealer
in connection with any Variable Contracts distributed under
this Agreement or any activity in connection with any Variable
Contracts.
(ii) CBC will promptly notify Life of Virginia of any customer
complaint or notice of any regulatory inspection, inquiry,
investigation or proceeding received by CBC with respect to
Life of Virginia or CBC or any broker-dealer in connection
with any Variable Contracts distributed under this Agreement
or any activity in connection with any such Variable
Contracts.
(b) In the case of any such customer complaint, CBC and Life of
Virginia will cooperate in investigating such complaint and arrive at a mutually
satisfactory response.
9. Termination.
This Agreement shall be effective upon its execution and shall remain
in force for a term of one (1) year from the date hereof, and shall
automatically renew from year to year thereafter, unless either party notifies
the other in writing six (6) months prior to the expiration of an annual period.
This Agreement may not be assigned and shall automatically terminate if it is
assigned. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except (i) the obligation to settle accounts hereunder,
including commissions due or to become due and payable on Variable Contracts in
effect at the time of termination or issued pursuant to applications received by
Life of Virginia prior to termination, and (ii) the obligations contained in
Paragraph 8 hereof.
10. Exclusivity.
The services of CBC hereunder are not to be deemed exclusive and CBC
shall be free to render similar services to others so long as its services
hereunder are not impaired or interfered with thereby.
11. Regulation.
This Agreement shall be subject to the provisions of the 1940 Act and
the 1934 Act and the rules, regulation, and rulings thereunder and of the NASD,
from time to time in effect, including such exemptions from 1940 Act as the
Securities and Exchange Commission may grant. CBC shall submit to all regulatory
and administrative bodies having jurisdiction over the operations of CBC, Life
of Virginia or the Separate Accounts, any information, reports or other material
which any such body by reason of this Agreement may request or require pursuant
to applicable laws or regulations. Without limiting the generality of the
foregoing, CBC shall furnish the Virginia State Corporation Commission or the
Bureau of Insurance thereof with any information or reports which the Commission
or the Bureau of Insurance may request in order to ascertain whether the
variable annuity operations of Life of Virginia are being conducted in an manner
consistent with the Commission's variable annuity contract regulations and any
other applicable law or regulations.
12. Indemnities.
(a) Life of Virginia agrees to indemnify and hold harmless CBC and each
person who controls or is associated with CBC within the meaning of the 1933 Act
or the 1934 Act against any losses, claims, damages or liabilities, joint or
several, to which CBC or such controlling or associated person may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact,
required to be stated therein or necessary to make the statements therein not
misleading, contained:
(i) in the 1933 Act Registration Statements covering the
Variable Contracts or in any related Prospectuses included
thereunder, or
(ii) in any written information or sales material authorized for,
and supplied or furnished by Life of Virginia to CBC and its
sales representatives.
Life of Virginia will reimburse CBC and each such controlling person, for any
legal or other expenses reasonably incurred by CBC or such controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or action covered by this Paragraph 12(a); provided that Life of
Virginia will not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
or omission or alleged untrue statement or omission made in reliance upon
information (including, without limitation, negative responses to inquiries)
furnished to Life of Virginia by or on behalf of CBC or its affiliates
specifically for use in the preparation of the said Registration Statements or
any related Prospectuses included therein or any amendment thereto or supplement
thereto. This indemnity agreement will be in addition to any liability which
Life of Virginia may otherwise have, the premises considered.
(b) CBC agrees to indemnify and hold harmless Life of Virginia and each
of its directors (including any person named in the 1933 Act Registration
Statements covering the Variable Contracts, with his/her consent, as nominee for
directorship), each of its officers who signed a Registration Statement and each
person, if any, who controls Life of Virginia within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages or liabilities to which
Life of Virginia and any such director or officer or controlling person may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state
a material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they were made,
not misleading, contained in the Registration
Statements or in any related Prospectuses included
therein, to the extent, but only to the extent, that
such untrue statement or omission or alleged untrue
statement or omission was made in reliance upon
information (including, without limitation, negative
responses to inquiries) furnished to Life of Virginia
by or on behalf of CBC or its affiliates as the case
may be, specifically for use in the preparation of the
Registration Statements or related Prospectuses
included therein or any amendment thereto or supplement
thereto; or
(ii) any unauthorized use of sales materials or any verbal
or written misrepresentations or any unlawful sales
practices concerning the Variable Contracts by CBC.
CBC will reimburse Life of Virginia and any director or officer or controlling
person Life of Virginia for any legal or other expenses reasonably incurred by
Life of Virginia or such director, officer or controlling person in connection
with investigating or defending any such loss, claim, damage, liability or
action covered by this Paragraph 12(b). This indemnity agreement will be in
addition to any liability which CBC may otherwise have, the premises considered.
(c) After receipt by a party entitled to indemnification ("indemnified
party") under this Section 12 of notice of the commencement of any action, if a
claim in respect thereof is to be made against any person obligated to provide
indemnification under this Section 12 ("indemnifying party"), such indemnified
party will notify the indemnifying party in writing of the commencement thereof
as soon as practicable thereafter, and the omission so to notify the
indemnifying party will not relieve it from any liability under this Section 12,
except to the extent that the omission results in a failure of actual notice to
the indemnifying party and such indemnifying party is damaged solely as a result
of the failure to give such notice. In case any such action is brought against
any indemnified party and it notifies an indemnifying party of the commencement
thereof, the indemnified party shall be entitled, to the extent it may wish,
jointly with any other indemnified party similarly notified, to participate in
the defense thereof, with separate counsel. Such participation shall not relieve
such indemnifying party of the obligation to reimburse the indemnified party for
reasonable legal and other expenses incurred by such indemnified party in
defending itself or himself, except for such expenses incurred after the
indemnifying party deposited funds sufficient to effect the settlement, with
prejudice, of the claim in respect of which indemnity is sought. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
The indemnity agreements contained in this Section 12 shall remain
operative and in full force and effect, regardless of (i) any investigation made
by or on behalf of CBC or any controlling person thereof or by or on behalf of
Life of Virginia, (ii) delivery of any Variable Contracts and payments therefor,
or (iii) any termination of this Agreement. A successor by law of CBC or of any
the parties to this Agreement, as the case may be, shall be entitled to the
benefits of the indemnity agreements contained in this Section 12.
13. Severability.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise the remainder of this Agreement shall
not be affected thereby.
14. Applicable Law.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE LIFE INSURANCE COMPANY OF VIRGINIA
Attest: By: _____________________________________
_______________________________ Title: ___________________________________
Secretary
Date: ___________________________________
CAPITAL BROKERAGE CORPORATION
Attest: By: _____________________________________
_______________________________ Title: ___________________________________
Secretary
Date: ___________________________________
<PAGE>
Exhibit 1A(3)(b)(i)
Broker-Dealer Sales Agreement
<PAGE>
g Capital Brokerage Corporation
6630 West Broad Street
Post Office Box 26266
Richmond, VA 23261
- -------------------------------------------------------------------------------
The Life Insurance Company of Virginia
BROKER-DEALER SALES AGREEMENT
Name of Broker-Dealer: Address of Broker-Dealer:
- -------------------------------------------------------------------------------
This Agreement is made this ___________ day of ___________________, 19___, by
and between Capital Brokerage Corporation (doing business in Indiana, Minnesota,
New Mexico, and Texas as GE Capital Brokerage Corporation), a Washington
corporation with its principal office as listed above ("Capital Brokerage"), and
- ----------------------
___________________________________________________________________________, a
_________________ corporation with its principal office as listed above
("Broker-Dealer").
In consideration of the mutual benefits to be derived and intending to be
legally bound the parties hereby agree to the following terms and conditions:
SECTION I - DEFINITIONS
1.1 The Life Insurance Company of Virginia ("Life of Virginia") is a
Virginia corporation which has developed certain variable life
insurance policies (hereafter referred to as the "Policies", listed in
Schedule A, which is attached hereto and made part of this Agreement)
and certain variable annuity contracts (hereafter referred to as
"Annuities", listed in Schedule B, which is attached hereto and made
part of this Agreement) registered with the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933 (the "1933
Act").
1.2 Capital Brokerage is a Broker-Dealer registered as such under the
Securities Exchange Act of 1934 (the "1934 Act") and a member of the
National Association of Securities Dealers, Inc. ("NASD"). Life of
Virginia has appointed Capital Brokerage as principal underwriter for
the Policies and Annuities.
1.3 Broker-Dealer is registered as a Broker-Dealer under the 1934 Act, is a
member of the NASD and is properly licensed and appointed to promote,
offer and sell the Policies and Annuities.
1.4 Registered Representatives are employees of the Broker-Dealer whom
Broker-Dealer wishes to have appointed by Life of Virginia to sell
Policies and Annuities.
2. REPRESENTATIONS AND WARRANTIES OF CAPITAL BROKERAGE
2.1 Capital Brokerage represents and warrants that:
a. it has full power and authority to enter into this Agreement and
that it has all appropriate licenses to carry on its business and
to market the Policies and the Annuities;
b. the 1933 Act Registration Statements pertaining to the Policies
and the Annuities filed with the SEC have been declared
effective;
c. the 1933 Act Registration Statements pertaining to the Policies
and the Annuities comply or will comply in all material respects
with the provisions of the 1933 Act, the 1934 Act, the Investment
Company Act of 1940 (the "1940 Act") and the rules and
regulations of the SEC; and
d. the 1933 Act Registration Statements do not contain an untrue
statement of a material fact or fail to state a material fact
required to be stated.
2.2 Section 2.1c. shall not apply to statements made in or omissions from
Registration Statements and any related materials, which statements or
omissions were made in reliance upon written statements furnished by
Broker-Dealer.
2.3 Capital Brokerage represents and warrants that it, or an affiliate of
Capital Brokerage, will use its best efforts to obtain insurance
licenses and appointments to allow Registered Representatives to sell
the Policies or the Annuities provided Broker-Dealer cooperates in
obtaining such licenses.
3. REPRESENTATIONS OF BROKER-DEALER
3.1 Broker-Dealer represents and warrants that it has full power and
authority to enter into this Agreement and that it has all appropriate
licenses to carry on its business and to market the Policies and the
Annuities.
3.2 Broker-Dealer represents and warrants that it is registered as a
Broker-Dealer under the 1934 Act, is a member in good standing of the
NASD, is bonded as required by all applicable laws and regulations, and
that it, or a subsidiary or affiliate, has all insurance licenses
required by the states in which the Broker-Dealer intends to market the
Policies and the Annuities.
3.3 Broker-Dealer represents and warrants that all individuals recommended
for licensing and appointment to sell the Policies and Annuities will
be Registered Representatives who are appropriately registered with the
NASD and who possess or can obtain all required insurance licenses.
3.4 Broker-Dealer further represents and warrants that:
a. it made or will make a thorough and diligent inquiry and
investigation relative to each Registered Representative it seeks
to have appointed to sell the Policies and Annuities including an
investigation of the Registered Representative's identity and
business reputation;
b. all Registered Representatives are or will be personally known to
Broker-Dealer, are of good moral character, reliable, financially
responsible and worthy of an insurance license;
c. all examinations, training, and continuing educational
requirements have been or will be met for the NASD and the
specific state(s) in which Registered Representative is
requesting an insurance license;
d. if Registered Representative is required to submit to Life of
Virginia a picture or a signature in conjunction with an
application for an insurance license, that any such items
forwarded to Life of Virginia will be those of Registered
Representative and any evidence of a securities registration
forwarded to Life of Virginia will be a true copy of the
original;
e. no Registered Representatives will apply for insurance licenses
with Life of Virginia in order to place insurance on their life
or property, the lives or property of their relatives, or
property or lives of their associates;
f. each Registered Representative will receive close and adequate
supervision consistent with the requirements of the NASD, and
Broker-Dealer will review, when necessary, any Policies or
Annuities written by Registered Representative;
g. Broker-Dealer will be responsible for all acts and omissions of
its Registered Representatives within the scope of their
appointment with Life of Virginia or as Registered
Representatives;
h. Broker-Dealer will not permit its Registered Representatives to
act as insurance agents until properly trained (including
training in the Policies and Annuities), licensed and appointed
nor will Broker-Dealer pay compensation to any Registered
Representative not properly licensed and appointed to sell the
Policies and Annuities;
i. Broker-Dealer will immediately notify Capital Brokerage and Life
of Virginia of any change in the NASD registration or insurance
licensing status of any Registered Representative and will
maintain a list of all Registered Representatives authorized to
sell the Policies or the Annuities;
j. Broker-Dealer agrees to indemnify, defend and hold Life of
Virginia and Capital Brokerage harmless against any losses,
claims, damages, liabilities or expenses, including reasonable
attorneys fees, to which Capital Brokerage or Life of Virginia
may be liable to the extent that the losses, claims, damages,
liabilities or expenses, including reasonable attorneys fees,
arise out of allegations that Broker-Dealer or any of its
registered representatives did not have the right or authority to
make discretionary purchases or to make or change a client's
asset allocation; and
k. Broker-Dealer, in the conduct of its business selling Policies
and the Annuities, shall observe high standards of commercial
honor and just and equitable principles of trade consistent
with the
Conduct Rules of the NASD.
4. SALE OF POLICIES AND ANNUITIES
4.1 Soliciting Applications.
a. Broker-Dealer is hereby authorized by Capital Brokerage to
solicit applications for the purchase of Policies and
Annuities through its Registered Representatives in states
where the Broker-Dealer and its Registered Representatives are
appropriately licensed and appointed. This authorization is
non-exclusive and is limited to the states in which Policies
and Annuities have been approved for sale.
b. Broker-Dealer shall have no authority on behalf of Capital Brokerage
or Life of Virginia to:
(1) make, alter or discharge any contract;
(2) waive or modify any terms, conditions or limitations
of any Policy or Annuity;
(3) extend the time for payment of any premiums, bind
Life of Virginia to the reinstatement of any
terminated Policy, or accept notes for payment of
premiums;
(4) adjust or settle any claim or commit Life of Virginia
with respect thereto;
(5) incur any indebtedness or liability, or expend or
contract for the expenditure of funds; or
(6) enter into legal proceedings in connection with any
matter pertaining to Capital Brokerage 's or Life of
Virginia's business without the prior consent of
Capital Brokerage or Life of Virginia, unless
Broker-Dealer is named as a party to the proceedings.
c. Broker-Dealer acknowledges that only applications bearing the
signature of a Registered Representative who is on the list of
properly licensed Registered Representatives provided by
Broker-Dealer, according to this Agreement, will be processed
by Life of Virginia.
4.2 Suitability.
a. Capital Brokerage wishes to ensure that the Policies and
Annuities solicited by Broker-Dealer through Registered
Representatives will be issued to persons for whom they will
be suitable.
b. Broker-Dealer shall take reasonable steps to ensure that none
of its Registered Representatives makes recommendations to any
applicant to purchase a Policy or Annuity in the absence of
reasonable grounds to believe that the purchase is suitable
for the applicant under the NASD Conduct Rules regarding
Recommendations to Customers.
c. A determination of suitability for the purchase of a Policy or
Annuity shall include, but not be limited to, a reasonable
inquiry of each applicant concerning the applicant's financial
status, tax status, and insurance and investment objectives
and needs.
4.3 Delivery of Prospectus(es) by Broker-Dealer.
a. The current Prospectus(es), the Statement(s) of Additional
Information where required by law, and all Supplements
relating to the Policies and the Annuities shall be delivered
by Broker-Dealer to every applicant seeking to purchase a
Policy or Annuity prior to the completion of an application.
b. Broker-Dealer shall not give any information or make any
representations concerning the Policies or the Annuities, Life
of Virginia or Capital Brokerage unless the information or
representations are contained in the current Prospectus(es) or
are contained in sales literature or advertisements furnished
or approved in writing by Life of Virginia and Capital
Brokerage.
4.4 Issuance of Policies or Annuities.
a. Life of Virginia, at its sole discretion, will determine
whether to issue a Policy or an Annuity.
b. Once a Policy or Annuity has been issued:
(1) Life of Virginia will mail it promptly, accompanied
by any required notice of withdrawal rights and any
additional required documents to the individual or
entity designated by the Broker-Dealer;
(2) Life of Virginia will confirm to the owner, with a
copy to Broker-Dealer, the allocation of the initial
premium under the Policy or the Annuity; and
(3) Life of Virginia will also notify the owner of the
name of the Broker-Dealer through whom the Policy or
the Annuity was solicited.
4.5 Life of Virginia will administer all Policies and Annuities issued
according to the terms and conditions set forth in the Policy or
Annuity.
4.6 Capital Brokerage or Life of Virginia, at their own expense, will
furnish to Broker-Dealer, in reasonably sufficient quantities, the
following materials:
a. The current Prospectus(es) for the Policies and Annuities and
any underlying mutual funds;
b. Any Prospectus Supplement for the Policies and Annuities and
any underlying mutual funds, including any Statement(s) of
Additional Information if requested by client or required by
law;
c. Advertising materials and sales literature approved for use by
Capital Brokerage and Life of Virginia; and
d. Applications for Policies and Annuities.
4.7 Money due Life of Virginia or Capital Brokerage.
a. All money payable in connection with the Policies or the
Annuities whether as premium or otherwise is the property of
Life of Virginia.
b. Money due Life of Virginia and received by the Broker-Dealer
under this Agreement shall be held in a fiduciary capacity and
shall be transmitted immediately to Life of Virginia in
accordance with the administrative procedures of Life of
Virginia.
c. Unless express prior written consent to the contrary is given
to Broker-Dealer by Life of Virginia, money due Life of
Virginia shall be forwarded without any deduction or offset
for any reason, including by example, but not limitation, any
deduction or offset for compensation claimed by Broker-Dealer.
d. Unless express prior written consent to the contrary is given
to Broker-Dealer by Life of Virginia, checks or money orders
in payment for Policies or Annuities, shall be drawn to the
order of "The Life Insurance Company of Virginia" or "Life of
Virginia."
e. Checks drawn by or money orders purchased by the Registered
Representative will not be accepted by Life of Virginia or
Capital Brokerage.
5. INDEMNIFICATION
5.1 Capital Brokerage agrees to indemnify and hold harmless Broker-Dealer
against any losses, claims, damages, liabilities or expenses, including
reasonable attorneys fees, to which Broker-Dealer may be liable to the
extent that the losses, claims, damages, liabilities or expenses,
including reasonable attorneys fees, arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of material fact contained in the 1933 Act
Registration Statement covering the Policies or the Annuities or in the
Prospectuses for the Policies or the Annuities or in any written
information or sales materials authorized and furnished to
Broker-Dealer by Capital Brokerage or Life of Virginia.
5.2 Capital Brokerage will not be liable to the extent that such loss,
claim, damage, liability or expense, including reasonable attorneys'
fees, arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon
information provided by Broker-Dealer, including, without limitation,
negative responses to inquiries furnished to Capital Brokerage or Life
of Virginia by or on behalf of Broker-Dealer, specifically for use in
the preparation of the 1933 Act Registration Statement covering the
Policies or the Annuities or in any related Prospectuses.
5.3 Broker-Dealer agrees to indemnify and hold harmless Capital Brokerage
and Life of Virginia, against any losses, claims, damages, liabilities
or expenses, including reasonable attorney's fees, to which Capital
Brokerage, Life of Virginia and any affiliate, parent, officer,
director, employee or agent may be liable to the extent that the
losses, claims, damages, liabilities or expenses, including reasonable
attorneys fees, arise out of or are based upon:
a. Any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission of a material fact contained
in the Registration Statement covering the Policies or the
Annuities or related Prospectuses but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission is made in reliance upon information, including,
without limitation, negative responses to inquiries, furnished to
Capital Brokerage or Life of Virginia by or on behalf of
Broker-Dealer specifically for use in the preparation of the 1933
Act Registration Statement covering the Policies or the Annuities
or in any related Prospectuses;
b. Any unauthorized use of advertising materials or sales literature
or any verbal or written misrepresentations or any unlawful sales
practices concerning the Policies or the Annuities by
Broker-Dealer, its Registered Representatives or its affiliates;
and
c. Claims by Registered Representatives or employees of
Broker-Dealer for commissions or other compensation or
remuneration of any type.
5.4 The party seeking indemnification agrees to notify the indemnifying
party within a reasonable time of receipt of a claim or demand. In the
case of a lawsuit, the party seeking indemnification must notify the
indemnifying party within ten (10) calendar days of receipt of written
notification that a lawsuit has been filed.
5.5 Broker-Dealer agrees that Life of Virginia or Capital Brokerage may
negotiate, settle and or pay any claim or demand against them which
arises from:
a. any wrongful act or transaction of Broker-Dealer or its
Registered Representatives. Wrongful act or transaction includes,
but is not limited to, fraud, misrepresentation, deceptive
practices, negligence, errors or omissions;
b. the breach of any provision of this Agreement; or
c. the violation or alleged violation of any insurance or securities
laws.
Upon sufficient proof that the claim or demand arose from the
occurrences listed above, Capital Brokerage or Life of Virginia may
request reimbursement for any amount paid plus any reasonable expenses
incurred in investigating, defending against and/or settling the claim
or demand. Broker-Dealer agrees to reimburse Capital Brokerage or Life
of Virginia for these expenses.
Broker-Dealer shall immediately notify Capital Brokerage and Life of
Virginia, in writing of any complaint or grievance relating to the
Policies or the Annuities, including, but not limited to any complaint
or grievance arising out of or based on advertising or sales
literature approved by Life of Virginia or the marketing or sale of
the Policies or Annuities.
Broker-Dealer shall promptly furnish all written materials requested
by Capital Brokerage or Life of Virginia in connection with the
investigation of any such complaint and will cooperate in the
investigation. Life of Virginia or Capital Brokerage will notify in a
timely manner the Broker-Dealer of any complaint.
Broker-Dealer shall immediately notify Capital Brokerage and Life of
Virginia, in writing of any state, federal, or self regulatory
organization investigation or examination regarding the marketing and
sales practices relating to the Policies or Annuities or any pending
or threatened litigation regarding the marketing and sales practices
relating to the Policies or Annuities.
6. TERMINATION
This Agreement may be terminated by either Capital Brokerage or
Broker-Dealer at any time, for any reason, upon thirty (30) calendar
days advance written notice delivered to the other party under the
terms of Section 10.10 of this Agreement.
This Agreement will terminate immediately:
a. If the Broker-Dealer is dissolved, liquidated, or otherwise
ceases business operations;
b. If the Broker-Dealer fails, in Capital Brokerage's sole judgment,
to comply with any of its obligations under this Agreement;
c. If the Broker-Dealer ceases to be registered under the 1934 Act
or a member in good standing of the NASD; or
d. In the event one party assigns or transfers its rights or
liabilities under this Agreement to any third party without the
prior written consent of the other party.
6.3 The following provisions of the Agreement shall survive termination:
a. Section One - Definitions
b. Section Two - Representations
c. Section Five - Indemnification
d. Section Nine - Recordkeeping
e. Section Ten - General Provisions, Sub-Section 10 - Notices
7. COMPENSATION
7.1 Unless otherwise expressly agreed to in writing by the parties, no
compensation shall be payable to Broker-Dealer for its services under
this Agreement. All compensation payable with respect to sales of the
Policies and the Annuities by Broker-Dealer shall be paid in accordance
with the terms of the General Agent Agreement in effect between Life of
Virginia and Broker-Dealer, or a duly licensed subsidiary or affiliate
thereof.
8. ADVERTISEMENTS
8.1 Broker-Dealer shall not use any advertisements or sales literature for
the Policies or the Annuities or any advertisements or sales literature
referencing Life of Virginia or Capital Brokerage without prior written
approval of Life of Virginia or Capital Brokerage. This includes
brochures, letters, illustrations, training materials, materials
prepared for oral presentations and all other similar materials.
9. RECORDKEEPING
9.1 Each party agrees to keep all records required by federal and state
laws, to maintain its books, accounts, and records so as to clearly and
accurately disclose the precise nature and details of transactions, and
to assist one another in the timely preparation of records.
9.2 Each party grants to the other and/or its representatives the right and
power at reasonable times to inspect, check, make extracts from, and
audit each of its books, accounts and records as they relate to this
Agreement, including, but not limited to advertisements and sales
materials, for the purpose of verifying adherence to each of the
provisions of this Agreement.
10. GENERAL PROVISIONS
10.1 Effective. This Agreement shall be effective upon execution by both
parties and will remain in effect unless terminated as provided in
Section Six.
10.2 Assignment. This Agreement may not be assigned or transferred to any
third party by either Capital Brokerage or Broker-Dealer without the
other party's prior written consent.
10.3 Governing Law. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Virginia.
10.4 Severability. If any provision of this Agreement shall be held or
rendered invalid by a court decision, state or federal statute,
administrative rule or otherwise, the remainder of this Agreement shall
not be rendered invalid.
10.5 Complete Agreement. The parties declare that, other than the General
Agent's Agreement between Broker-Dealer (or its affiliated insurance
agency) and Life of Virginia (or its affiliated marketing company)
there are no oral or other agreements or understandings between them
affecting this Agreement or relating to the offer or sale of the
Policies or the Annuities and that this constitutes the entire
Agreement between the parties.
10.6 Waiver. Forbearance by Capital Brokerage to enforce any of the terms of
this Agreement shall not constitute a waiver of such terms.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.8 Independent contractors. Broker-Dealer is an independent contractor.
Nothing contained in this Agreement shall create, or shall be construed
to create, the relationship of employer and employee between Capital
Brokerage and Broker-Dealer or Broker-Dealer's directors, officers,
employees, agents or Registered Representatives.
10.9 Cooperation. Each party to this Agreement shall cooperate with the
other and with all governmental authorities, including, without
limitation, the SEC, the NASD and any state insurance or securities
regulators, and shall permit such authorities reasonable access to its
books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated under this
Agreement.
10.10 Notices. All notices, requests, demands and other communications which
must be provided under this Agreement shall be in writing and shall be
deemed to have been given on the date of service if served personally
on the party to whom notice is to be given or on the date of mailing if
sent by United States registered or certified mail, postage prepaid.
Notices should be sent to the parties at the addresses first listed in
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
representatives.
CAPITAL BROKERAGE CORPORATION ___________________________________
Name of Broker-Dealer)
- -------------------------------------- -----------------------------------
(Signature) (Signature)
- -------------------------------------- -----------------------------------
(Name) (Name)
- -------------------------------------- -----------------------------------
(Title) (Title)
Date: _________________________________ Date: _____________________________
<PAGE>
SCHEDULE A
to
BROKER-DEALER SALES AGREEMENT
VARIABLE LIFE INSURANCE POLICIES:
<PAGE>
SCHEDULE B
to
BROKER-DEALER SALES AGREEMENT
VARIABLE ANNUITY CONTRACTS:
<PAGE>
Exhibit 1A(5)(a)
Endorsement to Policy
Accelerated Benefit Rider
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
ACCELERATED BENEFIT RIDER
This rider adds an accelerated benefit to the Policy, subject to the conditions
described below.
Notice: You may be taxed on benefits received under this rider. Please consult
your personal tax advisor. This statement is required by Virginia law. There
have been revisions to the tax law. In our opinion, an accelerated benefit will
qualify as a life insurance benefit payment under tax law and is not subject to
tax.
Upon your election and subject to the provisions of this rider, we will pay you
an accelerated benefit if the Insured is terminally ill. Payment will be made in
a lump sum.
Terminal Illness
Terminal illness is a medical condition, resulting from bodily injury, or
disease, or both:
- which has been diagnosed by a licensed physician; and
- for which the diagnosis is supported by clinical, radiological,
laboratory or other evidence of the medical condition which is
satisfactory to us; and
- which a licensed physician certifies is expected to result in death
within 12 months of such certification.
Before payment of any accelerated benefit, we will require satisfactory proof
that the Insured has a terminal illness. Satisfactory proof will include a
properly completed claim form and a written statement from a licensed physician.
The licensed physician must be someone other than you or the Insured. We reserve
the right to obtain a second medical opinion at our expense.
Total Proceeds
Total Proceeds means the Life Insurance Proceeds of the Policy plus any
additional term insurance of the Insured added to the Policy by rider. (Not
including Children's Insurance Rider.)
Total Proceeds:
- will not have an adjustment for any Policy Debt; but
- will have adjustments for the misstatement of age or sex which
would be made to Life Insurance Proceeds at the death of the
Insured, as described in the Policy; and
- will exclude any Accidental Death Benefit; and - will exclude any
coverage from the Policy or from any additional term insurance rider
on the Insured that would expire within 24 months of the date we
receive proof of terminal illness.
Eligible Proceeds
Eligible Proceeds is the Total Proceeds subject to a maximum $250,000 for the
total of all of our policies or certificates covering the Insured.
Living Benefit
The Living Benefit is the amount of the accelerated benefit that we will pay to
you under this rider.
The Living Benefit is equal to the Eligible Proceeds:
- discounted for the life expectance of the Insured at the rate of
interest charged for policy loans; and
- minus the product (1) the ratio of the Eligible Proceeds to the
Total Proceeds, and (2) the amount of the single premium required to
keep the Policy in effect for the life expectance of the Insured
assuming current cost of insurance rates, current expense charges,
and the interest rate stated above; and
- minus the product of (1) the ratio of the Eligible Proceeds to the
Total Proceeds, and (2) the Policy Debt on the date of the
accelerated benefit payment.
Effect on Living Benefit on the Policy
If the Eligible Proceeds are equal to the amount which would otherwise be
payable upon the death of the Insured, then upon payment of any benefit under
this rider:
- any insurance under the Policy on the life of someone other than the
Insured will be treated as though the Insured had died; and
- all insurance under the Policy on the life of the Insured, including
any riders, will end.
If the Eligible Proceeds are less than the amount which would otherwise be
payable upon the death of the Insured, then upon payment of any benefit under
this rider:
- the Policy will continue with the Specified Amount, Account Value
and any Policy Debt reduced appropriately, by the ratio of the
Eligible Proceeds to the Total Proceeds; and
- we will waive any surrender charge for the resulting decrease in
Specified Amount; and we will waive any minimum Specified Amount
requirement for the resulting decrease in Specified Amount; and
- any additional term insurance rider on the Insured will continue
with the amount of insurance reduced by the ratio of the Eligible
Proceeds to the Total Proceeds; and
- any other rider benefits will continue with no reduction.
Conditions
Payment of the Living Benefit is subject to the following conditions:
- The Policy and any additional term insurance rider on the Insured
must be in force on the date we receive proof of terminal illness.
- The release of any collateral assignees and the approval of any
irrevocable beneficiaries is required.
- The policy may not be in the grace period on the date we receive
proof of the terminal illness. You are not eligible for the
Living Benefit:
(a) if you are required by law to use the Living Benefit to meet
the claims of creditors, whether in bankruptcy or otherwise;
or
(b) if you are required by a government agency to use the Living
Benefit in order to apply for, obtain, or otherwise keep a
government benefit or entitlement.
Effective Date
This rider is effective on the Policy Date unless a different effective date is
shown on the policy data page.
There is no charge for this rider.
All provisions of the Policy apply to this rider unless otherwise specified.
For The Life Insurance Company of Virginia
/s/PAUL E. RUTLEDGE III
President
Exhibit 7
Memorandum describing Life of Virginia's Issuance,Transfer
Redemption and Exchange Procedure for the Policies
<PAGE>
DESCRIPTION OF ISSUANCE, TRANSFER AND REDEMPTION PROCEDURES PURSUANT TO RULE
6e-3(T)(b)(12)(iii) UNDER THE INVESTMENT COMPANY ACT OF 1940 FOR THE LIFE
INSURANCE COMPANY OF VIRGINIA FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
This document sets forth the administrative procedures that will be
followed by The Life Insurance Company of Virginia ("we", "us" or "our") in
connection with the issuance of its Flexible Premium Variable Life Insurance
Policy ("Policy" or "Policies") and acceptance of payments thereunder, the
transfer of assets held thereunder, and the redemption by owners of the Policy
("Owners") of their interests in those Policies. Capitalized terms used herein
have the same meaning as in the prospectus for the Policy that is included in
the current registration statement on Form S-6 for the Policy (File No.
333-41031) as filed with the Securities and Exchange Commission ("Commission" or
"SEC").
I. Procedures Relating to Purchase and Issuance of the Policies and
Acceptance of Premiums
A. Offer of the Policies; Application; Initial Premiums; and
Issuance
1. Offer of the Policies. The Policies will be offered and
issued for premiums pursuant to underwriting standards in
accordance with state insurance laws. Premiums for the
Policies will not be the same for all Owners selecting the
same Specified Amount. Insurance is based on the principle of
pooling and distribution of mortality risks, which assumes
that the Owner of each Policy pays a premium commensurate with
the Insured's mortality risk as actuarially determined,
utilizing factors such as age, sex, health and occupation. A
uniform cost of insurance for all Insureds would discriminate
unfairly in favor of those Insureds representing greater risk.
Although there will be no uniform cost of insurance for all
Insureds, there will be a uniform cost of insurance for all
Insureds of the same risk classification.
2. Application. Persons wishing to purchase a Policy must
complete an application and submit it to us through our
authorized agent. The applicant must specify the name of the
Insured, and provide certain required information about the
Insured. The applicant must pay an initial premium of a
sufficient amount and specify a periodic premium payment plan,
which contemplates level premiums at specified intervals,
annually, semi-annually, or quarterly), designate Net Premium
allocation percentages, select the initial Specified Amount
and name the Beneficiary. Before an application will be deemed
complete so that underwriting will proceed, the application
must include the applicant's signature and the Insured's date
of birth, a signed authorization, and suitability information.
The initial premium and Specified Amount must meet certain
minimums for the Policy.
3. Receipt of Application and Underwriting. Upon receipt of a
completed application from an applicant, we will follow
certain insurance underwriting (risk evaluation) procedures
designed to determine whether the proposed Insured is
insurable. This process may involve such verification
procedures as medical examinations and may require that
further information be provided about the Insured before a
determination can be made.
4. Issuance of Policy. When the underwriting procedure has
been completed and, the application has been approved, and an
initial premium of sufficient amount has been received, the
Policy is issued.
5. Initial Premium. An applicant must pay an initial premium
of sufficient amount which, if not submitted with the
application or during the underwriting period, must be
submitted when the Policy is delivered before the Policy will
be issued. The premium amounts sufficient to fund the 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, and any supplemental benefits.
Coverage becomes effective on the Policy Date. The Policy Date
is used to measure Policy Months, Policy Years, and Policy
Anniversaries. A Policy Date is assigned each Policy when
issued. The Policy Date will normally be a date between the
date the application is signed and the date the Policy is
issued; however, the Policy Date may be any other date
mutually agreeable to Life of Virginia and the Owner. If the
Policy Date would have occurred on the 29th, 30th or 31st day
of any month, we will designate the 28th day of the month as
the Policy Date.
6. Additional Premiums.
a. Additional Premiums Permitted. Additional premiums may be
paid in any amount and at any time, subject to the following
limits: A planned periodic premium must be at least $20
unless paid monthly by pre-authorized check in which case
the minimum is $15. - We reserve the right to limit the
number and amount
of any unscheduled premium payment.
- Total premiums paid in a Policy Year may not exceed
guideline premium limitations for life insurance set
forth in the Internal Revenue Code of 1986, as amended
(the "Code").
- We will monitor Policies and will attempt to notify an
Owner on a timely basis if the Owner's Policy is in
jeopardy of becoming a modified endowment contract
under the Code.
7. Refund of Excess Premium Amount. We reserve the right to
reject any premium, or portion thereof, if at any time a
premium payment would result in the Policy being
disqualified as life insurance under the Code. We will
refund any excess premium along with interest accrued
thereon.
8. Planned Premium. At the time of application, each Owner will
select a plan for paying premiums at specified annual,
semi-annual or quarterly intervals. The Owner is not
required to pay premiums in accordance with this plan. The
Owner may change the planned premium frequency (between
annual, semi-annual and quarterly) and amount by providing a
written notice or telephone instructions (if we have an
authorization for telephone instructions on file) to our
Home Office. Any such change must comply with the premium
limits for additional premiums discussed above.
9. Crediting Premiums
a. Initial Premium. The initial premium will be
credited to the Policy on the Policy Date. b.
Additional Premiums. Any additional premium received
by us will be credited to the Policy on the Valuation
Day it is received at our Home Office. c. Electronic
Funds Transfer. The Owner may arrange with us to have
annual, semi-annual, quarterly or monthly premiums
paid via pre-authorized,automatic deductions from the
Owner's bank account or similar account acceptable to
us. We will notify the Owner's bank or account holder
of the automatic deduction, and funds will be
deducted from the Owner's account and credited to the
Owner's Policy on the next Valuation Day.
B. Premiums Upon Increase in Specified Amount, Premiums During a
Grace Period, and Premiums Upon Reinstatement
1. Premiums Upon Increase in Specified Amount. Generally, no
premium is required for an increase in Specified Amount.
However, depending on Surrender Value at the time of an
increase in the Specified Amount and the amount of the
increase requested, an additional premium or change in the
amount of planned premiums may be necessary. Also, during the
Continuation Period an increase in the Specified Amount will
increase the Continuation Amount.
2. Premiums During a Grace Period. If the Surrender Value on a
Monthly Anniversary Day is less than the amount of the monthly
deduction due on that date, and the Continuation Period is not
in effect, the Policy will be in default and a grace period
will begin. During the Continuation Period, the Policy will
remain in force, regardless of the sufficiency of the
Surrender Value, if the Net Total Premium is at least equal to
the Continuation Amount. The Continuation Amount is a
cumulative minimum amount that is required to keep the Policy
in force during the Continuation Period. The Continuation
Amount is based in part on the sex, Age, and risk class of the
Insured, the requested Specified Amount and any supplemental
benefits. - The grace period will end 61 days after the date
on which
we send a grace period notice to the Owner's last known
address stating the amount required to be paid to prevent
the Policy from lapsing. The Policy will not lapse, and
the insurance coverage continues, until the expiration of
this grace period.
- If the grace period ends prior to the end of the
Continuation Period and the Policy is reinstated prior to
the end of the Continuation Period, the required premium
must equal,
- the Continuation Amount as of the date of
reinstatement,
- minus the sum of monthly deductions that would have
been made during the period between termination and
reinstatement, divided by the Net Premium factor,
- minus the Net Total Premium on the date of
termination, and plus the premium sufficient to
keep the Policy in effect for two months after the
date of reinstatement.
- If the grace period ends prior to the end of the
Continuation Period and the Policy is reinstated after the
end of the Continuation Period, the required premium,
after multiplying by the Net Premium factor, must equal
- the surrender charge on the date of termination,
- plus the monthly deduction for two months after
the date of reinstatement,
- minus the Account Value on the date of
termination.
- If the grace period ends after the end of the Continuation
Period and the Policy is reinstated, the required premium
must be large enough to keep the Policy in effect for at
least two months.
- Failure to make a sufficient payment within the grace
period will result in lapse of the Policy without value or
benefits payable.
- A Policy that lapses without value may be reinstated at
any time within three years alter lapse by submitting: an
application for reinstatement, evidence of the Insured's
insurability satisfactory to us, and payment of a required
premium.
D. Allocations of Net Premiums to the Variable Account
1. Net Premium. The Net Premium is equal to the premium paid
times the Net Premium Factor.
2. Separate Account II. An Owner may allocate Net Premiums
to one or more of the investment Subdivisions of Life of
Virginia Separate Account II ("Separate Account II").
Separate Account II currently consists of thirty-four
Investment Subdivisions, the assets of which are used to
purchase shares of a designated corresponding investment
portfolio of nine series-type mutual funds (the "Funds").
Each Fund is registered under the Investment Company Act of
1940 as an open-end management investment company.
Additional Investment Subdivisions may be added from time to
time to invest in any of the portfolios of the Funds or any
other investment company.
When an Owner allocates an amount 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, the Policy is
credited with units in that Investment Subdivision. The
number of units is determined by dividing the amount
allocated to the Investment Subdivision by the Investment
Subdivision's unit value for the Valuation Day when the
allocation or transfer is effected. An Investment
Subdivision's unit value is determined for each Valuation
Period after the date of establishment (the unit value for
each Investment Subdivision was arbitrarily set at $10 when
the Investment Subdivision was established) 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. The
net investment factor is an index used to measure the
investment performance of an Investment Subdivision from one
Valuation Period to the next.
3. Allocations Among the Investment Subdivision. Net Premiums
are allocated to the investment Subdivisions in accordance
with the following procedures:
a. General. In the application for the Policy, the
Owner will specify the percentage of Net Premium to
be allocated to each Investment Subdivision of
Separate Account II. The percentage of each Net
Premium that may be allocated to any Investment
Subdivision must be a whole number not less than 1%,
and the sum of the allocation percentages must be
100%. Such allocation percentages may be changed at
any time by the Owner submitting written instructions
to our Home Office, provided that the 1%/100%
requirements described above are met. An Owner may
not allocate Net Premiums and Account Value to more
than seven Investment Subdivisions at any given time.
b. Allocation During Free-Look Period. 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. 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 and
allocated to the Investment Subdivisions based on the
Net Premium allocation percentages then in effect.
For this purpose, the Company assumes the free-look
period starts 5 days after the Policy is issued.
c.Allocation After Free-Look Period. Additional Net
Premiums received after the free-look period expires
will be credited to the Policy and allocated to the
Investment Subdivisions in accordance with the
allocation percentages in effect on the Valuation Day
that the premium is received at our Home Office.
Allocation percentages can be changed at any time.
<PAGE>
E. Policy Debt Repayments and Interest Payments
1. Repaying Policy Debt. The Owner may repay all or part of
the Policy Debt at any time while the Policy is in force and
the Insured is living. Policy Debt is equal to the sum of
all outstanding Policy loans plus any accrued interest. Loan
repayments must be sent to our Home Office and will be
credited as of the date received. Loan repayments will not
be subject to the current premium charge. If the Life
Insurance Proceeds become payable while Policy Debt is
outstanding, the Life Insurance Proceeds will be reduced by
outstanding Policy Debt to determine the death benefit
payable.
2. Allocation for Repayment of Policy Debt. On the date we
receive a repayment of all or part of Policy Debt, an amount
equal to the repayment will be transferred from the General
Account to the Investment Subdivisions and allocated as
directed by the Owner when submitting the repayment. If no
direction is provided, the amount will be allocated in
accordance with the Owner's current Net Premium allocation
percentages.
3. Interest on Policy Debt. A portion of Policy loans taken
or existing on or after the Preferred Loan Availability Date
(defined in the Policy data pages) will be designated as
Preferred Policy Debt. In Policy Years 11 through 20,
Preferred Policy Debt will be that portion of Policy Debt
which equals the difference between the Account Value and
the sum of all premium payments made. After the 20th Policy
Year, Preferred Policy Debt will be that portion of Policy
Debt which equals 130% of the difference between the Account
Value and 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. II.
Transfers
A. Transfers Among the Investment Subdivisions
In general, after the Policy is issued the Owner may
transfer Account Value among the Investment Subdivisions by
written or telephone request to our Home Office (if we have
the Owner's telephone authorization on file). For states
requiring the refund of premiums during the free-look period,
no transfers may be made until after the end of the free-look
period. For this purpose, we assume the free-look period
starts 5 days after the Policy is issued.
In any Policy Year, the Owner may make an unlimited
number of transfers; however, we reserve the right to limit
the number of transfers to twelve each calendar year. A $10
transfer charge is assessed for each transfer after the first
transfer in any calendar month. For purposes of the transfer
charge, each transfer request is considered one transfer,
regardless of the number of Investment Subdivisions affected
by the transfer. Any unused "free" transfers do not carry over
to the next calendar month.
We reserve the right to modify, restrict, suspend, or
eliminate the transfer privileges (including telephone
transfer privileges) at any time and for any reason.
B. Dollar Cost Averaging
The dollar-cost averaging program permits Owners 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 Fund to any combination of
other Investment Subdivisions. Owners may elect to 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, Owners must transfer at least $100 from the
Money Market Investment Subdivision with each transfer. Once
elected, dollar-cost averaging remains in effect from the date
we receive the Owner's request until the value of the
Investment Subdivision from which transfers are being made is
depleted, or until the Owner cancels the program by written
request or by telephone (if the Owner's telephone
authorization is on file). There is no additional charge for
dollar-cost averaging. A transfer under this program does not
count toward the free transfer permitted each calendar month
nor any limit on the maximum number of transfers we may impose
for a calendar year. We reserve the right to discontinue
offering or modify the dollar-cost averaging program at any
time and for any reason.
C. Portfolio Rebalancing
An Owner may instruct us to automatically rebalance
(on a quarterly, semi-annual or annual basis) the Account
Value to return to the percentages specified in the Owner's
allocation instructions. An Owner may elect to participate the
portfolio rebalancing program at any time by completing the
portfolio rebalancing agreement. The percentage allocations
must be in whole percentages and be at least 1% per
allocation. Subsequent changes to the percentage allocations
may be made at any time by written or telephone instructions
to our Home Office (provided the Owner's telephone
authorization is on file). Once elected, portfolio rebalancing
remains in effect from the date an Owner's written request is
received until the Owner instructs us to discontinue portfolio
rebalancing. There is no additional charge for using portfolio
rebalancing, and a portfolio rebalancing transfer is not
considered a transfer for purposes of assessing a transfer
charge nor for calculating any limit on the maximum number of
transfers we may impose for a calendar year. We reserve the
right to discontinue offering the portfolio rebalancing
program at any time and for any reason. Portfolio rebalancing
is not available while an Owner is participating in the
dollar-cost averaging program.
D. Transfer Errors
In accordance with industry practice, Life of
Virginia will establish procedures to address and to correct
errors in amounts transferred among the Investment
Subdivisions, except for de minimis amounts. We will correct
non-de minimis errors we make and will assume any risk
associated with the error. Owners will not be penalized in any
way for errors made by us. We will take any gain resulting
from the error.
III. "Redemption" Procedures
A. Free-Look Rights
The Policy provides for an initial free-look right during
which an Owner may cancel the Policy by returning it to us or
our agent before the end of 10 days after the Owner receives
the Policy. The free-look period may be longer in some states.
Upon returning the Policy to us or to our authorized agent for
forwarding to our Home Office, the Policy will be deemed void
from the beginning. Within seven days after we receive the
cancellation request and Policy, we will pay 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.
B. Surrenders
1. Requests for Surrender Value. The Owner may surrender the
Policy at any time for its Surrender Value. The Surrender
Value on any Valuation Day is the Account Value less any
applicable surrender charge minus any Policy Debt. The
Surrender Value will be determined by us on the Valuation Day
our Home Office receives a surrender request signed by the
Owner and the Policy. The surrender request must include the
Policy number, signature of the Owner, and clear instructions
regarding the request. We will cancel the Policy as of the
date the written request is received at our Home Office and we
will ordinarily pay the Surrender Value within seven days
following receipt of the request.
2. Surrender of Policy - Surrender Charge. If the Policy is
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 based on an amount per $1,000
of the lowest Specified Amount in effect prior to the
surrender. The surrender charge is calculated by multiplying a
factor times the lowest Specified Amount in effect prior to
surrender, divided by 1000. 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 the 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.
A surrender charge is not imposed in connection with a partial
surrender.
C. Partial Surrenders
1. When Partial Surrenders are Permitted. At any time, the
Owner may, by submitting a written or telephone request to our
Home Office, withdraw a portion of the Surrender Value subject
to the following conditions:
- 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 when
each partial surrender is made. The partial surrender
processing fee will be deducted from the Account Value
along with the amount requested for the partial surrender.
- When the Owner requests a partial surrender, the Owner may
direct how it will be deducted from the Account Value. If
no directions are provided, the partial surrender will be
deducted from the Account Value in the Investment
Subdivisions on a pro-rata basis.
- We generally will pay a partial surrender request within
seven days after receipt by our Home Office of all the
documents required for such a payment.
D. Delayed Payments
We may delay making payment for partial or full
surrender 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.
E. Lapses
If a sufficient premium has not been received by the
61st day after a grace period notice is sent, the Policy will
lapse without value and no amount will be payable to the
Owner.
F. Monthly Deduction
On the Policy Date and each Monthly Anniversary Day,
redemptions in the form of deductions will be made from
Account Value for the Monthly Deduction, which is a charge
compensating us for the services and benefits provided, costs
and expenses incurred, and risks assumed by us in connection
with the Policy. The Monthly Deduction consists of three
components: (a) the cost of insurance charge; (b) a current
monthly policy charge of $15 in the first Policy Year ($15 per
month maximum in the first Policy Year) and $6 per month
thereafter ($12 per month maximum after the first Policy
Year); and (c) any charges for additional benefits added by
riders to the Policy. 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). The
Monthly Deduction will be deducted from the Investment
Subdivisions on a pro rata basis.
1. Cost of Insurance Charge. The cost of insurance charge is
the primary charge for the death benefit provided by the
Policy. The cost of insurance charge is calculated monthly,
and depends on a number of variables, including the Age, sex
(where appropriate), policy duration and risk class of the
Insured. The charge varies from Policy to Policy and from
Monthly Anniversary Day to Monthly Anniversary Day. The charge
is calculated separately for the Specified Amount at issue and
for any increase in the Specified Amount.
The cost of insurance charge is equal to the net
amount at risk under the Policy divided by 1000 then
multiplied by our current cost of insurance rate for the
Insured. The net amount at risk is calculated by dividing the
Life Insurance Proceeds by 1.0032737, and then subtracting the
Account Value.
Our current cost of insurance rates may be less than
the guaranteed maximum rates permitted under the Policy.
Current cost of insurance rates will be determined based on
our expectations as to future mortality, persistency, taxes,
and expenses. These rates may change from time to time, but
they will never be more than the guaranteed maximum rates set
forth in the Owner's Policy. We can change the rates without
notice to Owners, unless state law requires that we provide
such notice. The maximum cost of insurance rates are based on
the Insured's age at the nearest birthday to the start of the
Policy Year, sex (where appropriate), and, where appropriate,
tobacco use. For issue ages 0 - 14, the Commissioner's 1980
Standard Ordinary Mortality Table without distinction for
tobacco use or non-tobacco use is used through attained age
14, after which the Commissioner's 1980 Standard Ordinary
Nonsmoker Mortality Table is used. For issue ages 15 - 17, the
Commissioner's 1980 Standard Ordinary Nonsmoker Mortality
Table is used. For issue ages 18 and above, the Commissioners'
1980 Standard Ordinary Smoker or Non-Smoker Table applies.
Modifications are made for rate classes other than standard.
2. Current Monthly Policy Charge. The current monthly Policy
charge is $15 per month in the first Policy Year ($15 per
month maximum in the first Policy Year) and $6 per month
thereafter ($12 per month maximum after the first Policy
Year). This charge is designed to reimburse us for expenses
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.
3. Supplemental Benefit Charges. An Owner may add supplemental
benefits to the Policy. Such benefits are made available by us
through riders to the Policy. If any additional benefits are
added to a Policy, charges for these benefits will be deducted
monthly as part of the Monthly Deduction.
G. Death Benefits
No change in death benefits will be permitted that
will result in the Policy being disqualified as a life
insurance policy under section 7702 under the Code.
1. Payment of Death Proceeds. As long as the Policy remains in
force, we will pay the death benefit to the Beneficiary upon
receipt at our Home Office of the Policy, due proof of the
Insured's death. The death benefit is equal to the Life
Insurance Proceeds determined under the Death Benefit Option
in effect on the date of the Insured's death, plus any
supplemental death benefit provided by riders, 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. The death benefit will
be paid to the Beneficiary in a lump sum generally within
seven days after the Valuation Day by which we have received
at our Home Office all materials necessary to constitute due
proof of death. If an Optional Payment Plan is elected, the
death benefit will be applied to the option within seven days
after the Valuation Day by which we received due proof of
death and payments will begin under that option when provided
by the option.
2. Death Benefit Options. The Owner can elect one of two Death
Benefit Options under the Policy. 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 set forth in the prospectus. 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 set forth in the prospectus. The corridor
percentage is 250% to Age 40 and declines thereafter as the
Insured's Attained Age increases. We may change the table if
the table of percentages currently in effect becomes
inconsistent with any federal income tax laws and/or
regulations.
Under Option A, the Life Insurance Proceeds 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 the Owner
changes the Specified Amount.
3. Changing the Death Benefit Option. The Death Benefit Option
is selected in the application for the Policy. The Owner, by
written request submitted to, and received by, our Home
Office, may change the Death Benefit Option on the Policy
subject to the following rules; however, no change will be
permitted that may result in the Policy being disqualified as
a life insurance policy under section 7702 of the Code:
- The effective date of the change will be the Monthly
Anniversary Day after we receive the request;
- When a change from Death Benefit Option A to Death Benefit
Option B is made, the Specified Amount will be increased
by the Account Value on the effective date of the change;
and
- When a change from Death Benefit Option B to Death Benefit
Option A is made, the Specified Amount after the change
will be decreased by the Account Value on the effective
date of the change.
4. Changing the Specified Amount. The initial Specified Amount
is set at the time the Policy is issued. The Owner may
increase or decrease the Specified Amount after the first
Policy Year, subject to the following conditions; however, no
change will be permitted that may result in the Policy being
disqualified as a life insurance policy under section 7702 of
the Code: Rules for Increases
- To increase the Specified Amount, the Owner send to our
Home Office a written request and the Policy, a completed
supplemental application, and evidence of insurability
satisfactory to us.
- When an increase in Specified Amount is requested, we
conduct underwriting before approving the increase to
determine whether a different rate class will apply to the
increase. If an increase in Specified Amount is approved,
a different rate class may apply to the increase based on
the Insured's circumstances at the time of the increase.
- There must be enough Surrender Value to make a Monthly
Deduction for the Policy Month following the increase.
- If approved, the increase in Specified Amount will become
effective on the date shown in the supplemental policy
data pages sent to the Owner and the Account Value will be
adjusted to the extent necessary to reflect a pro rata
portion of the Monthly Deduction attributable to the
increase as of the effective date based on the increase in
Specified Amount.
- We will assess a one-time charge (per increase) of $1.50
per $1,000 of increase to cover underwriting and
administrative costs associated with the increase. This
charge will be included in the monthly deduction for the
month the increase becomes effective. The charge will not
exceed $300 per increase.
Rules for Decreases
- To decrease the Specified Amount, the Owner must submit a
written request and the Policy to our Home Office.
- The effective date of any decrease in Specified Amount
will be the Monthly Anniversary Day after the date the
written request is received by our Home Office.
- Any decrease will first be used to reduce the most recent
increase, then the next most recent increases
successively, then the initial Specified Amount.
- 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 surrender charge may be assessed in connection with a
decrease in Specified Amount.
- If decreases in Specified Amount cause premium to exceed
new lower limitations required by federal tax law, the
excess will be withdrawn from Account Value and
refunded to you so that the Policy will continue to meet
the requirements. Account Value so withdrawn and
refunded will be withdrawn from each
Investment Subdivision in the same proportion that the
Account Value in the Investment Subdivision bears to the
total Account Value in all Investment Subdivisions under
the Policy at the time of withdrawal (i.e. on a pro rata
basis).
H. Policy Loans
1. Policy Loans. The Owner may obtain a Policy loan from us at
any time by submitting a written or telephone request to our
Home Office (if the Owner's telephone authorization is on
file). The Owner may borrow up to 90% of the difference
between (1) the Owner's 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. Policy
loans will be processed as of the Valuation Day the request is
received and loan proceeds generally will be sent to the Owner
within seven days thereafter. Outstanding Policy Debt,
including accrued interest reduces the amount available for
new loans.
2. Collateral for Policy Loans. When a Policy loan is made, an
amount equal to the loan proceeds is transferred from the
Account Value in the Investment Subdivisions to our General
Account. If the Owner does not direct an allocation for this
transfer when requesting the loan, we will make it on a pro
rata basis.
3. Interest on Policy Loans. We charge interest daily on any
outstanding Policy loan at an effective annual interest 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. An amount equal to the unpaid amount of interest is
transferred to our General Account from each Investment
Subdivision on a pro-rata basis according to the respective
values in each Investment Subdivision.
4. Effect on Death Benefit. If the death benefit becomes
payable while a Policy loan is outstanding, 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, the Policy will
lapse without payment of a required loan payment. In either
event, we will mail to the Owner notice of the amount required
to be paid to keep the Policy in force, and the Owner will
have a 61-day grace period from the date we mail the notice to
make the required loan payment.
I. Optional Payment Plans
The Policy currently offers five optional payment plans as
alternatives to the payment of a death benefit or Surrender
Value in a lump sum. An optional payment plan can be selected
in the application or by notifying us in writing at our Home
Office. Any proceeds 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. Proceeds will
earn interest at a minimum annual rate of 3%. We reserve the
right, however, to credit a higher rate of interest. Certain
conditions and restrictions apply to payments received under
an optional payment plan. The optional payment plans are
described below.
- Income for a Fixed Period. We will make equal periodic
payments for a fixed period, not longer than 30 years.
Payments can be annual, semi-annual, quarterly or monthly.
- Life Income. We will make equal monthly payments for a
guaranteed minimum period. If the payee lives longer than
the minimum period, payments will continue for his or her
life. The minimum period can be 10, 15 or 20 years.
- Income of a Definite Amount. We will make equal periodic
payments of a definite amount. Payments can be annual,
semi-annual, quarterly or monthly.
- Interest Income. We will make periodic payments of
interest earned from the proceeds left with us. Payments
can be annual, semi-annual, quarterly or monthly, and will
begin at the end of the first period chosen.
- Joint Life and Survivor Income. We will make equal monthly
payments to two payees for a guaranteed minimum of 10
years. Each payee must be at least 35 years old when
payments begin. Payments will continue as long as either
payee is living.
J. Lump Sum Payments
Lump sum payments of partial surrenders, surrenders,
loan proceeds or Life Insurance Proceeds will be ordinarily
made within seven days of the Valuation Day on which we
receive the request and all required documentation at our Home
Office. We may postpone the payment or processing of any such
transaction for any of the following reasons:
1. If the disposal or valuation of Separate Account II assets
is not reasonably practicable because the New York Stock
Exchange ("NYSE") is closed for trading other than for
customary holiday or weekend closings, trading on the NYSE is
otherwise restricted, or the Securities and Exchange
Commission ("SEC") declares that an emergency exists.
2. If the SEC by order permits postponement of payment for the
protection of Owners.
3. If the payment is attributable to a check that has not
cleared the bank on which it is drawn.
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.
K. Exchange Privilege
During the first 24 Policy Months, the Owner may
convert the Policy to a permanent fixed benefit policy. If the
Owner objects to a material change in the investment policy of
Separate Account II or the Investment Subdivisions, the Owner
may also convert the Policy to a permanent fixed benefit
policy within 60 days after the change. In either ease, the
Owner 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.
L. Redemption Errors
In accordance with industry practice, we will
establish procedures to address and to correct errors in
amounts redeemed from the Investment Subdivisions, except for
de minimis amounts.
M. Misstatement of Age or Sex
Life Insurance Proceeds will be adjusted if the
Insured's Age or sex has been misstated in the application.
The Life Insurance Proceeds after the adjustment will be the
sum of:
the Account Value at the time of the Insured's death and
the unadjusted Life Insurance Proceeds, reduced by the
Account Value at the time of the Insured's death, and
multiplied by the ratio of(1) the most recent monthly
deduction based on the Age and sex shown in the
application, to (2) the most recent monthly deduction
based on the true Age or sex.
All amounts are those in effect, with respect to the Insured,
in the Policy Month of the Insured's death.
<PAGE>
N. 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.
O. 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.
