SUPPLEMENT DATED JULY 11, 1995 TO PROSPECTUS DATED MAY 1, 1995
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
FORM P1142 4/94
Pursuant to investment advisory agreements between Aon Advisors, Inc. ("AAI")
and Life of Virginia Series Fund, Inc. (the "Fund"), AAI has agreed to reimburse
each of the portfolios of the Fund for any operating expenses in excess of
certain limits established for the portfolio. The total annual expenses for
Common Stock Index Portfolio and Money Market Portfolio shown in the table on
page 8 of the prospectus reflect such reimbursements. Since the International
Equity Portfolio and Real Estate Securities Portfolio were recently organized
and have little or no operating history, the expenses for these portfolios are
estimates provided by the Fund and reflect anticipated reimbursements from AAI.
The applicable investment advisory agreements require AAI to reimburse the
International Equity Portfolio for expenses in excess of 1.75% of the first $30
million of average daily net assets and 1.00% of such assets in excess of $30
million and to reimburse the Real Estate Securities Portfolio for expenses in
excess of 1.50% of the first $30 million of average daily net assets and 1.00%
of such assets in excess of $30 million. In addition, on a voluntary basis
(outside the investment advisory agreements) AAI has agreed until May 1, 1996,
to reimburse these two portfolios for expenses in excess of the following
amounts: International Equity Portfolio, 1.50% of the first $30 million of
average daily net assets; Real Estate Securities Portfolio, 1.25% of the first
$30 million of average daily net assets. Although AAI may end the voluntary
reimbursements after May 1, 1996, it currently has no intention of doing so.
For additional information, see the prospectus for the Fund.
The information contained in the FEE TABLE (pp. 7-14) for those portfolios is
hereby deleted and replaced by the following which reflects the voluntary
expense reimbursement mentioned above:
Life of Virginia Series Fund Annual Expenses
(as a % of average net assets)
INTERNATIONAL REAL ESTATE
EQUITY SECURITIES
PORTFOLIO PORTFOLIO
Management Fees 1.00% .85%
Other Expenses (after any expense reimbursements) .50% .40%
Total Fund Annual Expenses 1.50% 1.25%
EXAMPLES
A Policyowner would pay the following expense on a $1,000 investment,
assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (including the elective death benefit
rider):
SUBDIVISION INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
1. If you surrender your Policy
at the end of the applicable
period:
International Equity Portfolio $88.74 $160.37 $215.51 $372.49
Real Estate Securities Portfolio 86.38 153.42 203.87 349.24
2. If you annuitize, or do not
surrender your Policy:
International Equity Portfolio $33.85 $103.70 $176.52 $372.49
Real Estate Securities Portfolio 31.36 96.33 164.40 349.24
<PAGE>
A Policyowner would pay the following expense on a $1,000 investment,
assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (excluding the elective death benefit
rider):
SUBDIVISION INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
1. If you surrender your Policy at
the end of the applicable period:
International Equity Portfolio $85.38 $150.04 $197.43 $331.78
Real Estate Securities Portfolio 83.03 143.05 185.45 308.01
2. If you annuitize, or do not
surrender your Policy:
International Equity Portfolio $30.30 $ 92.73 $157.68 $331.78
Real Estate Securities Portfolio 27.81 85.32 145.45 308.01
For purposes of these examples, the $25 Annual Policy Maintenance Charge has
been translated into an assumed charge at an annual rate of 0.10% of Account
Value. The actual amount of the policy maintenance charge attributable to a
$1,000 investment will depend on the amount of the total investment in the
Policy. Surrender includes annuitization over a period of less than 5 years.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL; PAST OR FUTURE ANNUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
PROSPECTUS FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1142 4/94
Offered by
THE LIFE INSURANCE COMPANY OF VIRGINIA
6610 West Broad Street, Richmond, Virginia 23230
(804) 281-6000
This Prospectus describes the above-named individual flexible premium variable
deferred annuity policy ("Policy") issued by The Life Insurance Company of
Virginia ("Life of Virginia"). The Policy is designed to aid individuals in
long-term financial planning and provides for the accumulation of capital on a
tax-deferred basis for retirement or other long-term purposes. The Policy may
be used in connection with retirement plans, some of which may qualify for
favorable federal income tax treatment under the Internal Revenue Code.
The Premium Payments are placed in Life of Virginia Separate Account 4
("Account 4"). Premium payments from other flexible premium variable deferred
annuity policies issued by Life of Virginia are also placed in Account 4. The
Owner allocates premiums among selected Investment Subdivision(s) of Account 4.
Each Investment Subdivision of Account 4 will invest solely in a designated
investment portfolio that is part of a series-type mutual fund. Currently,
there are seven such funds with 27 portfolios available under this Policy. The
Funds and their currently available portfolios are on the following page.
This Prospectus must be read along with the current prospectuses for the Funds.
This Prospectus sets forth the basic information that a prospective investor
should know before investing. A Statement of Additional Information containing
more detailed information about the Policies and Account 4 is available free by
writing Life of Virginia at the address above or by calling (800) 352-9910. The
Statement of Additional Information, which has the same date as this Prospectus,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
Please Read This Prospectus Carefully And Retain It For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES IN THE FUNDS AND INTERESTS IN THE POLICIES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A BANK, AND THE SHARES AND
INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Date of This Prospectus Is May 1, 1995.
<PAGE>
Fidelity Variable Insurance Products Fund:
Money Market Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio and Overseas Portfolio
Fidelity Variable Insurance Products Fund II:
Asset Manager Portfolio and Contrafund Portfolio*
Neuberger & Berman Advisers Management Trust:
Balanced Portfolio, Growth Portfolio and Limited Maturity Bond Portfolio
Life of Virginia Series Fund, Inc.:
Money Market Portfolio, Government Securities Portfolio, Common Stock Index
Portfolio, Total Return Portfolio, International Equity Portfolio* and Real
Estate Securities Portfolio*.
Oppenheimer Variable Account Funds:
Oppenheimer Money Fund, Oppenheimer High Income Fund, Oppenheimer Bond Fund,
Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund and
Oppenheimer Multiple Strategies Fund
Janus Aspen Series:
Growth Portfolio, Aggressive Growth Portfolio and Worldwide Growth Portfolio
Insurance Management Series:
Utility Fund* and Corporate Bond Fund*
*The Contrafund Portfolio, the International Equity Portfolio, the Real Estate
Securities Portfolio, the Utility Fund and the Corporate Bond Fund are not
currently available to California policyowners.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
The Life Insurance Company of Virginia and Life of Virginia Separate Account 4 . 18
The Life Insurance Company of Virginia . . . . . . . . . . . . . . . . . . . . 18
Account 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Additions, Deletions, or Substitutions of Investments . . . . . . . . . . . . . 18
The Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Variable Insurance Products Fund . . . . . . . . . . . . . . . . . . . . . . . 19
Variable Insurance Products Fund II . . . . . . . . . . . . . . . . . . . . . . 19
Neuberger & Berman Advisers Management Trust . . . . . . . . . . . . . . . . . 20
Life of Virginia Series Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . 20
Oppenheimer Variable Account Funds . . . . . . . . . . . . . . . . . . . . . . 21
Janus Aspen Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Insurance Management Series . . . . . . . . . . . . . . . . . . . . . . . . . 21
Resolving Material Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 22
Total Return and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Purchasing the Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Allocation of Premium Payments . . . . . . . . . . . . . . . . . . . . . . . . 24
Accumulation of Account Value . . . . . . . . . . . . . . . . . . . . . . . . . 25
Value of Accumulation Units . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Dollar-Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Examination of Policy (Refund Privilege) . . . . . . . . . . . . . . . . . . . 27
Distributions Under the Policy . . . . . . . . . . . . . . . . . . . . . . . . . 27
Surrender (Withdrawal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Death Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Restrictions on Distributions from Certain Policies . . . . . . . . . . . . . . 30
Charges and Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Charges Against Account 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Policy Maintenance Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Transfer Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Governmental Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Reduction of Charges for Group Sales . . . . . . . . . . . . . . . . . . . . . 34
Income Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Monthly Income Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Determination of Monthly Income Benefits . . . . . . . . . . . . . . . . . . . 35
Optional Payment Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Non-Qualified Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Qualified Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
IRA Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Simplified Employee Pension Plans . . . . . . . . . . . . . . . . . . . . . . . 41
Section 403(b) Annuities . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Other Qualified Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . 42
Legal and Tax Advice for Qualified Plans . . . . . . . . . . . . . . . . . . . 43
Federal Income Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
<PAGE>
TABLE OF CONTENTS (Cont.)
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Changes by the Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Payment Under The Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Distribution of the Policies . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Voting Rights and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Statement of Additional Information Table of Contents . . . . . . . . . . . . . . 46
</TABLE>
<PAGE>
DEFINITIONS
ACCOUNT VALUE -- The value of the Policy equal to the Account Value allocated
to the Investment Subdivisions of Account 4.
ACCOUNT 4 -- Life of Virginia Separate Account 4, a separate investment
account established by Life of Virginia to receive and invest premiums paid
under the Policies, and other variable annuity policies issued by Life of
Virginia.
ACCUMULATION UNIT -- An accounting unit of measure used in calculating the
Account Value prior to the Maturity Date.
ADDITIONAL PREMIUM PAYMENT -- Any Premium Payment made after the initial
Premium Payment.
ANNUITANT -- The Annuitant is the person named in the Policy upon whose age
and sex Monthly Income Benefits are determined. The Annuitant must be the Owner
of the Policy unless the Policy is owned by a trust established for the benefit
of the Annuitant. If a Joint Annuitant is named in the Policy, unless stated
otherwise, references to "Annuitant" mean both the Annuitant and the Joint
Annuitant.
ANNUITY UNIT -- An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Income Payment.
BUSINESS DAY -- Any day that the New York Stock Exchange is open for business
and any other day in which there is a material change in the value of the assets
in Account 4.
CODE -- The Internal Revenue Code of 1986, as amended.
DEATH BENEFIT -- The optional benefit provided under a Policy upon the death
of an Annuitant prior to the Maturity Date.
DESIGNATED BENEFICIARY(IES) -- The person(s) designated in the Policy who is
alive (or in existence for non-natural designations) on the date of an
Annuitant's death and who will be treated as the sole owner of the Policy
following such a death.
DUE PROOF OF DEATH -- Proof of death that is satisfactory to Life of Virginia.
Such proof may consist of the following if acceptable to Life of Virginia:
(a) A certified copy of the death certificate; or
(b) A certified copy of the decree of a court of competent jurisdiction as to
the finding of death.
FINAL ANNUITANT -- If a Joint Annuitant was named and either the Annuitant or
the Joint Annuitant dies, the survivor becomes the Final Annuitant.
FIXED INCOME PAYMENTS -- Payments made pursuant to an optional payment
plan the value of which are guaranteed by Life of Virginia.
FUNDS -- The mutual funds available to the Investment Subdivisions under this
Policy. Currently there are seven: Variable Insurance Products Fund, Variable
Insurance Products Fund II, Neuberger & Berman Advisers Management Trust, Life
of Virginia Series Fund, Inc., Oppenheimer Variable Account Funds, Janus Aspen
Series, and Insurance Management Series.
GENERAL ACCOUNT -- The assets of Life of Virginia that are not segregated in
any of the separate investment accounts of Life of Virginia.
HOME OFFICE -- The principal offices of The Life Insurance Company of Virginia
at 6610 West Broad Street, Richmond, Virginia 23230.
INCOME PAYMENT -- One of a series of payments made under either a Monthly
Income Benefit or one of the optional payment plans.
INVESTMENT SUBDIVISION -- A subdivision of Account 4 available to the
Policies. Premiums will be allocated, in accordance with the instructions of
the Owner, among no more than seven of the twenty-seven investment subdivisions
of Account 4 available to the Policies, each of which invests exclusively in
shares of a designated portfolio of one of the Funds. All twenty-seven
investment subdivisions may not be available in all states.
<PAGE>
JOINT ANNUITANT -- The person, if named in the policy, whose age and sex is
used with those of the Annuitant to determine the amount of the Monthly Income
Benefits.
JOINT OWNER -- Joint Owners own the Policy equally. If one Joint Owner dies,
the surviving Joint Owner becomes the sole owner of the Policy.
IRA POLICY -- An individual retirement annuity policy that receives favorable
federal income tax treatment under Section 408 of the Code.
MATURITY DATE -- The date stated in the Policy on which Income Payments are
scheduled to commence, if an Annuitant is living on that date.
MONTHLY INCOME BENEFIT -- The monthly amounts payable to the Annuitant
beginning on the Maturity Date.
NET INVESTMENT FACTOR -- An index applied to measure the investment
performance of an Investment Subdivision from one Valuation Period to the next.
NON-QUALIFIED POLICY -- Policies not sold or used in connection with
retirement plans receiving favorable federal income tax treatment under the
Code.
OWNER -- The Owner is entitled to the ownership rights stated in the Policy.
The original Owner is named in the Policy.
POLICY -- The variable annuity policy issued by Life of Virginia and described
in this Prospectus. The term "Policy" or "Policies" includes the Policy
described in this Prospectus, the policy application, any supplemental
applications, and any endorsements.
POLICY DATE -- Generally, the date on which the application was signed and the
initial premium was paid.
PREMIUM PAYMENT(S) -- An amount paid to Life of Virginia by the Owner or on
the Owner's behalf as consideration for the benefits provided by the Policy.
QUALIFIED POLICIES -- Policies used in connection with retirement plans which
receive favorable federal income tax treatment under the Code.
SURRENDER VALUE (OR "WITHDRAWAL VALUE") -- The Account Value less any
applicable surrender charge.
VALUATION PERIOD -- The period between the close of business on a Business Day
and the close of business on the next succeeding Business Day.
VARIABLE INCOME PAYMENTS -- Payments made pursuant to a payment plan and which
fluctuate based on the investment performance of Investment Subdivisions
selected by the Owner.
WITHDRAWAL VALUE (OR "SURRENDER VALUE") -- The Account Value less any
applicable surrender charge.
<PAGE>
FEE TABLE
Owner Transaction Expenses:
Sales Charge on Premium Payments none
Maximum Contingent Deferred Sales Charge (as a percentage
of premium payments) 6.00%
Other surrender fees none
Transfer charge
First transfer each month none
Subsequent transfers $10.00
Annual Expenses
(as a percentage of account value)
Mortality and expense risk charge 1.25%
Administrative Expense Charge .15%
Total Annual Expenses 1.40%
Other Annual Expenses
Annual Policy Maintenance Charge $25.00
Maximum Annual Death Benefit Charge (as a percentage of average
benefit amount) .35%*
* If elective death benefit applies.
Variable Insurance Products Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
MONEY HIGH EQUITY
MARKET INCOME INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Management Fees 0.20% 0.61% 0.52% 0.62% 0.77%
Other Expenses (after any expense reimbursement) 0.07% 0.10% 0.06% 0.07% 0.15%
Total Fund Annual Expenses 0.27% 0.71% 0.58% 0.69% 0.92%
</TABLE>
Variable Insurance Products Fund II Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
ASSET
MANAGER CONTRAFUND
PORTFOLIO PORTFOLIO
<S> <C> <C>
Management Fees 0.72% 0.62%
Other Expenses (after any expense reimbursement) 0.08% 0.27%
Total Fund Annual Expenses 0.80% 0.89%
</TABLE>
Neuberger & Berman Advisers Management Trust Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
LIMITED
BALANCED GROWTH MATURITY BOND
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
Annual Operating Expenses .80% .79% .60%
Other Expenses (after any expense reimbursement) .17% .12% .13%
Total Fund Annual Expenses .97% .91% .73%
</TABLE>
<PAGE>
Until May 1, 1995, the Portfolios of the Advisers Management Trust had a
istribution Plan pursuant to Rule 12b-1 which provided for the reimbursement of
Neuberger & Berman Management for certain Trust distribution expenses up to a
maximum of 0.25% on an annual basis of each Portfolio's average daily net
assets. The "Total Fund Annual Expenses" shown above would be increased by the
following percentages if the 12b-1 fees for the months of January through April,
1995 were taken into account: 0.02% for the Balanced Portfolio; 0.02% for the
Growth Portfolio; and 0.02% for the Limited Maturity Bond Portfolio.
Because of a new structure that took effect May 1, 1995, Annual Operating
Expenses are annualized projections based on current administrative and
management fees for each Portfolio. Other Expenses are based on each
Portfolio's actual expenses for the past fiscal year. For further information,
see the Prospectus for the Fund.
Life of Virginia Series Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
COMMON REAL
MONEY GOVERNMENT STOCK TOTAL INTERNATIONAL ESTATE
MARKET SECURITIES INDEX RETURN EQUITY SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waiver) .21% .50% .35% .50% 1.00% .90%
Other Expenses (after any expense reimbursement) .21% .31% .40% .27% .75% .60%
Total Fund Annual Expenses .42% .81% .75% .77% 1.75% 1.50%
</TABLE>
Oppenheimer Variable Account Funds Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
OPP. OPP. OPP.
OPP. HIGH OPP. CAPITAL MULTIPLE OPP.
MONEY INCOME BOND APPRECIATION STRATEGIES GROWTH
FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
Management Fees .45% .75% .75% .75% .74% .75%
Other Expenses .05% .06% .06% .05% .05% .06%
Total Fund Annual Expenses .50% .81% .81% .80% .79% .81%
</TABLE>
Janus Aspen Series Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
Management Fees 0.66% 0.77% 0.69%
Other Expenses (after any expense reimbursement) 0.22% 0.28% 0.49%
Total Fund Annual Expenses 0.88% 1.05% 1.18%
</TABLE>
Federated Insurance Management Series Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
CORPORATE
UTILITY BOND
FUND FUND
<S> <C> <C>
Management Fees (after fee waiver) 0.00% 0.00%
Other Expenses (after any expense reimbursements) 0.85% 0.80%
Total Fund Annual Expenses 0.85% 0.80%
</TABLE>
<PAGE>
The purpose of this table is to assist the Owner in understanding the various
costs and expenses that a Owner will bear directly and indirectly. Except as
noted below, the Tables reflect charges and expenses of the Separate Account as
well as the underlying Funds for the most recent fiscal year. For more
information on the charges described in these Tables see Charges and Deductions
on page 31 and the Prospectuses for the underlying Funds which accompany this
Prospectus. In addition to the expenses listed above, governmental charges,
including premium taxes, ranging from 0 to 3.5% may be applicable.
The annual expenses listed for all the Funds are net of certain reimbursements
and fee waivers by the Funds' investment advisors. Life of Virginia cannot
guarantee that the reimbursements will continue.
Absent reimbursements, the total annual expenses during 1994 for the
portfolios of Variable Insurance Products Fund were 0.60% for Equity-Income
Portfolio and 0.70% for Growth Portfolio.
Absent reimbursements, the total annual expenses during 1994 for the Asset
Manager Portfolio of Variable Insurance Products Fund II were 0.81%.
The Contrafund Portfolio was recently organized and has no operating history.
Based on the Group Management Fees for October 1994, as described in the VIPF II
prospectus, the total management fee for 1994 would have been 0.62% of the
portfolio's average net assets. The VIPF II provided an estimate for 1995 of
0.27% for other expenses. The adviser has agreed to reimburse the portfolio to
the extent that total expenses exceed 1.00% The adviser may terminate this
voluntary reimbursement at any time. Life of Virginia does not represent that
this estimate is true and complete, and disclaims all responsibility for such
figures. Actual expenses may be greater or less than those shown.
Absent reimbursements, the total annual expenses during 1994 for the
portfolios of Life of Virginia Series Fund would have been 1.16% for Common
Stock Index Portfolio and .71% for Money Market Portfolio.
Since the International Equity Portfolio and the Real Estate Securities
Portfolio were recently organized and have no operating history, the expenses
for these portfolios are estimates provided by the Fund. The estimated total
annual expenses are 1.75% for International Equity Portfolio, and 1.50% for Real
Estate Securities Portfolio. Actual expenses may be different than those shown.
Absent certain expense waivers, the total annual expenses for the portfolios
of the Janus Aspen Series would have been 1.22% for Growth Portfolio, 1.28% for
Aggressive Growth Portfolio, and 1.49% for Worldwide Growth Portfolio for the
fiscal year ended December 31, 1994.
The total annual expenses for the Utility Fund and the Corporate Bond Fund are
0.85% and 0.80%, respectively, of the average daily net assets. The adviser has
agreed to waive all or a portion of its fee so that the total annual expenses
would not exceed 0.85% of average net assets for the Utility Fund and 0.80% of
average net assets for the Corporate Bond Fund. The adviser can terminate this
voluntary waiver at any time at its sole discretion. Without this waiver, the
advisory fee would be 0.75% of average annual net assets for the Utility Fund
and 0.60% of average annual net assets for the Corporate Bond Fund, and the
total annual expenses for the Utility Fund and the Corporate Bond Fund would be
1.60% and 1.40%, respectively, of average net assets.
<PAGE>
EXAMPLES
A Policyowner would pay the following expense on a $1,000 investment, assuming a
5% annual return on assets and the charges and expenses reflected in the Fee
Table above (including the elective death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
SUBDIVISIONS INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $77.06 $115.45 $164.09 $246.01
High Income Portfolio 81.28 128.56 187.69 296.81
Equity-Income Portfolio 80.05 124.83 181.14 283.72
Growth Portfolio 81.09 127.99 186.68 294.81
Overseas Portfolio 83.27 134.56 198.16 317.57
Variable Insurance Products Fund II
Asset Manager Portfolio 82.13 131.13 192.19 305.76
Contrafund Portfolio 82.98 133.71 196.67 314.63
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 83.74 135.98 200.64 322.44
Growth Portfolio 83.17 134.28 197.67 316.59
Limited Maturity Bond Portfolio 81.47 129.13 188.69 298.81
Life of Virginia Series Fund, Inc.
Money Market Portfolio 78.49 119.78 171.70 261.34
Government Securities Portfolio 82.23 131.42 192.69 306.75
Common Stock Index Portfolio 81.66 129.71 189.69 300.80
Total Return Portfolio 81.85 130.28 190.69 302.79
International Equity Portfolio 91.08 157.89 236.61 395.10
Real Estate Securities Portfolio 88.74 150.93 225.25 372.49
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 79.25 122.04 175.58 268.67
Oppenheimer High Income Fund 82.23 131.42 192.69 306.75
Oppenheimer Bond Fund 82.23 131.42 192.69 306.75
Oppenheimer Capital Appreciation Fund 82.13 131.13 192.19 305.76
Oppenheimer Multiple Strategies Fund 82.04 130.85 191.69 304.77
Oppenheimer Growth Fund 82.23 131.42 192.69 306.75
Janus Aspen Series
Growth Portfolio 82.89 133.42 196.18 313.65
Aggressive Growth Portfolio 84.50 138.25 204.42 330.18
Worldwide Growth Portfolio 85.73 141.94 210.49 342.62
Federated Insurance Management Series
Utility Fund 82.61 132.56 194.68 310.70
Corporate Bond Fund 82.13 131.13 192.19 305.76
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
<PAGE>
2. If you annuitize, or do not surrender* your Policy:
<TABLE>
<CAPTION>
SUBDIVISIONS INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $21.51 $ 66.46 $114.09 $246.01
High Income Portfolio 25.97 80.22 137.69 296.81
Equity-Income Portfolio 24.67 76.30 131.14 283.72
Growth Portfolio 25.77 79.62 136.68 294.81
Overseas Portfolio 28.07 86.52 148.16 317.57
Variable Insurance Products Fund II
Asset Manager Portfolio 26.87 82.92 142.19 305.76
Contrafund Portfolio 27.77 85.62 146.67 314.63
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 28.57 88.01 150.64 322.44
Growth Portfolio 27.97 86.22 147.67 316.59
Limited Maturity Bond Portfolio 26.17 80.82 138.69 298.81
Life of Virginia Series Fund, Inc.
Money Market Portfolio 23.02 71.00 121.70 261.34
Government Securities Portfolio 26.97 83.22 142.69 306.75
Common Stock Index Portfolio 26.37 81.42 139.69 300.80
Total Return Portfolio 26.57 82.02 140.69 302.79
International Equity Portfolio 36.33 111.01 188.48 395.10
Real Estate Securities Portfolio 33.85 103.70 176.52 372.49
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 23.82 73.37 125.58 268.67
Oppenheimer High Income Fund 26.97 83.22 142.69 306.75
Oppenheimer Bond Fund 26.97 83.22 142.69 306.75
Oppenheimer Capital Appreciation Fund 26.87 82.92 142.19 305.76
Oppenheimer Multiple Strategies Fund 26.77 82.62 141.69 304.77
Oppenheimer Growth Fund 26.97 83.22 142.69 306.75
Janus Aspen Series
Growth Portfolio 27.67 85.32 146.18 313.65
Aggressive Growth Portfolio 29.37 90.39 154.59 330.18
Worldwide Growth Portfolio 30.67 94.26 160.98 342.62
Federated Insurance Management Series
Utility Fund 27.37 84.42 144.68 310.70
Corporate Bond Fund 26.87 82.92 142.19 305.76
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
<PAGE>
EXAMPLES
A Policyowner would pay the following expense on a $1,000 investment, assuming a
5% annual return on assets and the charges and expenses reflected in the Fee
Table above (excluding the elective death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
SUBDIVISIONS INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $73.73 $105.22 $145.93 $208.39
High Income Portfolio 77.92 117.99 168.47 254.42
Equity-Income Portfolio 76.68 114.24 161.86 241.04
Growth Portfolio 77.73 117.41 167.46 252.37
Overseas Portfolio 79.90 124.02 179.05 275.63
Variable Insurance Products Fund II
Asset Manager Portfolio 78.77 120.58 173.02 263.57
Contrafund Portfolio 79.62 123.17 177.55 272.63
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 80.38 125.45 181.55 280.61
Growth Portfolio 79.81 123.74 178.55 274.63
Limited Maturity Bond Portfolio 78.11 118.56 169.48 256.46
Life of Virginia Series Fund, Inc.
Money Market Portfolio 75.16 109.60 153.67 224.32
Government Securities Portfolio 78.86 120.87 173.52 264.58
Common Stock Index Portfolio 78.30 119.15 170.49 258.49
Total Return Portfolio 78.48 119.72 171.50 260.53
International Equity Portfolio 87.73 147.48 218.84 354.90
Real Estate Securities Portfolio 85.38 140.48 207.36 331.78
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 75.92 111.92 157.78 232.72
Oppenheimer High Income Fund 78.86 120.87 173.52 264.58
Oppenheimer Bond Fund 78.86 120.87 173.52 264.58
Oppenheimer Capital Appreciation Fund 78.77 120.58 173.02 263.57
Oppenheimer Multiple Strategies Fund 78.67 120.29 172.51 262.55
Oppenheimer Growth Fund 78.86 120.87 173.52 264.58
Janus Aspen Series
Growth Portfolio 79.52 122.88 177.04 271.63
Aggressive Growth Portfolio 81.13 127.74 185.54 288.52
Worldwide Growth Portfolio 82.36 131.44 191.99 301.24
Federated Insurance Management Series
Utility Fund 79.24 122.01 175.54 268.61
Corporate Bond Fund 78.77 120.58 173.02 263.57
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
<PAGE>
2. If you annuitize, or do not surrender* your Policy:
<TABLE>
<CAPTION>
SUBDIVISIONS INVESTING IN: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $17.99 $ 55.72 $ 95.93 $208.39
High Income Portfolio 22.41 69.12 118.47 254.42
Equity-Income Portfolio 21.10 65.18 111.86 241.04
Growth Portfolio 22.21 68.51 117.46 252.37
Overseas Portfolio 24.51 75.45 129.05 275.63
Variable Insurance Products Fund II
Asset Manager Portfolio 23.31 71.84 123.02 263.57
Contrafund Portfolio 24.21 74.55 127.55 272.63
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 25.01 76.95 131.55 280.61
Growth Portfolio 24.41 75.15 128.55 274.63
Limited Maturity Bond Portfolio 22.61 69.72 119.48 256.46
Life of Virginia Series Fund, Inc.
Money Market Portfolio 19.50 60.31 103.67 224.32
Government Securities Portfolio 23.41 72.14 123.52 264.58
Common Stock Index Portfolio 22.81 70.33 120.49 258.49
Total Return Portfolio 23.01 70.93 121.50 260.53
International Equity Portfolio 32.78 100.08 169.76 354.90
Real Estate Securities Portfolio 30.30 92.73 157.68 331.78
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 20.30 62.75 107.78 232.72
Oppenheimer High Income Fund 23.41 72.14 123.52 264.58
Oppenheimer Bond Fund 23.41 72.14 123.52 264.58
Oppenheimer Capital Appreciation Fund 23.31 71.84 123.02 263.57
Oppenheimer Multiple Strategies Fund 23.21 71.53 122.51 262.55
Oppenheimer Growth Fund 23.41 72.14 123.52 264.58
Janus Aspen Series
Growth Portfolio 24.11 74.25 127.04 271.63
Aggressive Growth Portfolio 25.81 79.35 135.54 288.52
Worldwide Growth Portfolio 27.11 83.23 141.99 301.24
Federated Insurance Management Series
Utility Fund 23.81 73.34 125.54 268.61
Corporate Bond Fund 23.31 71.84 123.02 263.57
</TABLE>
For purposes of these examples, the $25 Annual Policy Maintenance Charge has
been translated into an assumed charge at an annual rate of 0.10% of Account
Value. The actual amount of the policy maintenance charge attributable to a
$1,000 investment will depend on the amount of the total investment in the
Policy.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL; PAST OR FUTURE ANNUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
*Surrender includes annuitization over a period of less than five years.
<PAGE>
The expense information regarding the Funds was provided by those Funds. The
Variable Insurance Products Fund, Variable Insurance Products Fund II, Neuberger
& Berman Advisers Management Trust, Oppenheimer Variable Account Funds, Janus
Aspen Series, and Insurance Management Series and their investment advisors 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 cannot represent that they are true and complete.
Since the Contrafund Portfolio of the Variable Insurance Products Fund II, the
International Equity Portfolio and the Real Estate Securities Portfolio of Life
of Virginia Series Fund are recently organized and have a brief operating
history, the annual expenses listed for these portfolios are estimates provided
by the Funds. Actual expenses paid may be greater or less than those shown.
Life of Virginia does not represent that such estimates are true and complete,
and disclaims all responsibility for these figures.
<PAGE>
SUMMARY
The following Summary Of Prospectus Information Should Be Read In Conjunction
With the Detailed Information Appearing Elsewhere In This Prospectus.
The Policy
The Policy allows the Owner to accumulate funds on a tax-deferred basis based
on the investment experience of the assets underlying the Policy. After the
Maturity Date, this Policy also permits Variable Income Payments to be made
based upon either the investment performance of the selected Investment
Subdivisions of Account 4 or Fixed Income Payments based upon the guarantees of
Life of Virginia. The Policy may be purchased on a non-tax qualified basis
(i.e., a Non-Qualified Policy) or it can be purchased with the proceeds from
certain retirement or savings plans qualifying for favorable federal income tax
treatment (i.e., a Qualified Policy).
The Owner can allocate premiums among up to seven Investment Subdivisions,
each of which invests solely in a designated investment portfolio which is part
of a series-type mutual fund (See The Funds, p. 19). Before the Maturity Date,
the Account Value depends on the investment experience of the selected
Investment Subdivisions; therefore, before Income Payments begin, the Owner
bears the entire investment risk under this Policy. The payee will bear the
investment risk after Income Payments begin with respect to Variable Income
Payments.
In addition, under Policies sold through certain distribution systems, Owners
can allocate premiums or transfer amounts from the Investment Subdivisions to a
Guarantee Account. Contributions and/or transfers to the Guarantee Account
become part of the General Account of Life of Virginia.
Premium Payments
Except for certain group sales, an initial Premium Payment of at least $5,000
is required. Additional Premium Payments of at least $1,000 for Non-Qualified
Policies or $100 for Qualified Policies or $50 for IRA Policies generally may be
made any time before Income Payments begin. (See Purchasing the Policies, p.
24.)
Except as stated below, Premium Payments are allocated among the Investment
Subdivisions (or, if applicable, a guarantee account) in accordance with the
Owner's written instructions. Premium payments may be allocated among up to
seven Investment Subdivisions at any one time (however, at any point in time,
Account Value may not be invested in more than seven subdivisions). The minimum
allocation permitted is 10% of each Premium Payment. The Owner may, by written
request, change the allocation of subsequent Premium Payments. In states that
require a return of Premium Payments as a refund privilege, initial Premium
Payments will be placed in the Investment Subdivision that invests in the Money
Market Portfolio of the Life of Virginia Series Fund, Inc. (See Allocation of
Premium Payments, p. 24.)
Transfers
Before Income Payments begin the Owner may transfer amounts among the
Investment Subdivisions that are available at the time the transfer is
requested. Currently, there is no limit on the number of transfers that may be
made; however, Life of Virginia reserves the right to impose such a limit in the
future. The first transfer in each calendar month will be made without a
transfer charge. Thereafter, each time amounts are transferred, a transfer
charge of $10 will be imposed. (See Transfers, p. 25.) Life of Virginia may
not honor transfers made by third parties holding multiple powers of attorney.
(See Powers of Attorney, p. 27.)
After Variable Income Payments begin, the payee may transfer Annuity Units
among the available Investment Subdivisions once each calendar year. No transfer
charge will be imposed on such transfers.
Full and Partial Surrenders (Withdrawals)
Full or partial surrenders may be made any time before Income Payments begin
provided that the surrender is for at least $500 and that the surrender will not
reduce the Account Value to below $5,000. (See Surrender, p. 27.) Amounts
surrendered will generally be subject to a surrender charge (also known as a
contingent deferred sales charge). (See Sales Charges, p. 31.)
Charges and Deductions
To cover the costs of administering the Policies, Life of Virginia deducts a
daily charge at an effective annual rate of .15% of the average daily net assets
in Account 4 attributable to the policies, and an annual policy maintenance
charge of $25 from the Account Value attributable to each Policy. The annual
charge is made at the earlier of 1) next policy anniversary, or 2) surrender.
<PAGE>
Life of Virginia does not deduct any sales charge from Premium Payments;
however, it may deduct a surrender charge (also referred to as a contingent
deferred sales charge). (See Sales Charges -- Surrender Charge, p. 32.) A
surrender charge is deducted from full surrenders and certain partial surrenders
that occur within seven years of any Premium Payments. If there is a full
surrender of the Policy during the first two years following a Premium Payment,
a maximum surrender charge equal to 6% of the amount surrendered will be
imposed. Thereafter, the charge decreases so that no surrender charge, or
portion thereof, is ever attributable to a Premium Payment made more than seven
years prior to the date of a full surrender.
Similarly, a surrender charge may be imposed on certain partial surrenders
where the Account Value surrendered is attributable to a Premium Payment made
within the last seven years. The charge is calculated by multiplying (1) the
surrender charge percentage, described above and (2) the lesser of (a) the
amount surrendered attributable to the premium payment and (b) the premium paid,
less the total of all surrender amounts previously deemed to reduce that premium
payment. The first partial surrender in a policy year is not subject to the
charge if the amount of that surrender is 10% of the Account Value, or less.
A daily charge at an effective annual rate of 1.25% of the average daily net
assets in Account 4 attributable to the policies is imposed against those assets
to compensate Life of Virginia for mortality and expense risks assumed by it.
Of this amount, approximately .90% is allocated to cover the mortality risks,
and approximately .35% is allocated to cover the expense risks. (See Charges
Against Account 4, p. 31.)
Life of Virginia may deduct a charge for any governmental charges incurred.
Any applicable governmental charge may be deducted from either the premium paid
or from proceeds (including benefits for surrender, maturity and death). (See
Governmental Charges, p. 33.)
In the event that the Owner elects to purchase a Guaranteed Minimum Death
Benefit Rider (See Elective Guaranteed Minimum Death Benefit Rider, p. 30.), a
charge will be made each year for expenses related to the Death Benefit under
the Rider not exceeding .35% of the average Guaranteed Minimum Death Benefit
during the prior year. (See Annual Death Benefit Charge, p. 31.)
Income Payments
Beginning on the Maturity Date, the Annuitant may receive Monthly Income
Benefits based upon either the investment performance of the selected Investment
Subdivisions or the guarantees of Life of Virginia. The amount of the Monthly
Income Benefits will depend on: (1) the Surrender Value on the Maturity Date;
(2) the amount of any applicable state and/or local governmental charge; (3) the
Annuitant's sex and age on the Maturity Date; and (4) the optional payment plan
chosen.
With respect to Monthly Income Benefits and any Income Payments derived from
death benefit or surrender value proceeds, the Owner may select from a number of
optional payment plans including Income Payments for the life of an Annuitant
(or a different or additional person, depending upon the benefit payable) with a
guaranteed number of Income Payments. (See Optional Payment Plans, p. 35.)
Death Provisions
Subject to a number of distribution rules, certain benefits and other policy
options are available to certain persons on the death of an Annuitant prior to
the Maturity Date while the Policy is in force. (See Distributions Under the
Policy - Death Provisions, p. 28.) Owners may also elect to purchase a
Guaranteed Minimum Death Benefit Rider. (See Elective Guaranteed Minimum Death
Benefit Rider, p. 30.)
Refund Privilege
The Owner has 10 days after the Policy is received to examine the Policy and
return it for a refund. Unless state law requires that Premium Payments be
returned as the refund, the amount of the refund will equal the Account Value.
If state law requires that Premium Payments be returned, the amount of the
refund will equal the greater of (1) the Account Value (without reduction by any
surrender charges) plus any amount deducted from the Premium Payments prior to
allocation to Account 4 and (2) the Premium Payments made. In certain states
the Owner may have more than 10 days to return the policy for a refund. (See
Examination of Policy (Refund Privilege), p. 27.)
Questions
Any questions about the Policy or the Fund portfolios in which the
subdivisions invest will be answered by Life of Virginia's Home Office. All
inquiries can be addressed to Life of Virginia, Variable Products Department,
6610 W. Broad Street, Richmond, VA 23230; if by phone, call (800) 352-9910.
<PAGE>
FINANCIAL INFORMATION
Financial statements for the Separate Account are in the Statement of
Additional Information.
The consolidated financial statements for Life of Virginia (as well as the
auditors' reports thereon) also are in the Statement of Additional Information.
Condensed Financial Information
The Accumulation Unit Values and the number of accumulation units outstanding
for each Investment Subdivision for the periods shown are as follows:
Accumulation Accumulation No. of
Unit Values Unit Values Units
as of as of as of
FUNDS 7/21/94 12/31/94 12/31/94
VIP Fund
Money Market $ 13.16 $ 13.37 450,740
High Income 17.77 17.64 56,076
Equity-Income 18.71 19.23 276,392
Growth 19.45 20.92 141,845
Overseas 16.18 15.55 197,672
LOV Series Fund
Money Market 12.61 12.79 75,600
Government Securites 14.47 14.38 889
Common Stock Index 17.96 18.27 10,408
Total Return 17.15 17.65 12,498
International Equity Portfolio@ - - -
Real Estate Securities Portfolio@ - - -
Oppenheimer Variable Account Funds
Money 13.21 13.41 50,143
High Income 20.99 20.49 77,818
Bond 16.08 15.90 11,655
Capital Appreciation 19.39 20.90 68,052
Growth 16.88 17.67 12,276
Multiple Strategies 16.27 16.38 26,302
VIPF II
Asset Manager 15.80 15.50 450,885
Contrafund@ - - -
Neuberger & Berman Advisers
Management Trust
Balanced 12.53 12.64 22,065
Growth 10.68 10.84 13,906
Limited Maturity Bond 10.76 10.76 83,962
Janus Aspen Series
Growth 10.30 10.44 159,068
Aggressive Growth 11.51 13.48 169,799
Worldwide Growth 11.63 11.87 117,700
Insurance Management Series
Utility@ - - -
Corporate Bond@ - - -
@ Unit Values are not shown for the subdivisions investing in the
International Equity Portfolio and Real Estate Securities Portfolio of Life
of Virginia Series Fund, the Contrafund Portfolio of the VIPFII, or the
Utility Fund and Corporate Bond Fund of the Insurance Management Series as
these portfolios were not available to Separate Account Policyowners during
the periods shown.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
AND LIFE OF VIRGINIA SEPARATE ACCOUNT 4
The Life Insurance Company of Virginia
The Life Insurance Company of Virginia is a stock life insurance company
operating under a charter granted by the Commonwealth of Virginia on March 21,
1871. Life of Virginia currently is a wholly-owned subsidiary of Combined
Insurance Company of America, which is a wholly-owned subsidiary of Aon
Corporation ("Aon"), a holding corporation principally engaged through
subsidiaries in the insurance and the insurance brokerage business. Life of
Virginia is principally engaged in the offering of life insurance policies and
currently ranks among the 25 largest stock life insurance companies in the
United States in terms of business in force. The Company is admitted to do
business in 49 states and the District of Columbia. The principal offices of
Life of Virginia are at 6610 W. Broad Street, Richmond, Virginia 23230.
Account 4
Life of Virginia Separate Account 4 was established by Life of Virginia as a
separate investment account on August 19, 1987. Account 4 currently has
fifty-four investment subdivisions. Each investment subdivision invests
exclusively in an investment portfolio of one of the seven Funds described
below. Premiums are allocated in accordance with the instructions of the Owner
among up to seven of the twenty-seven investment subdivisions available under
this Policy.
Under the Code of Virginia, the assets of Account 4 are the property of Life
of Virginia. Income and both realized and unrealized gains or losses from the
assets of Account 4 are credited to or charged against the Account without
regard to the income, gains, or losses arising out of any other business Life of
Virginia may conduct. Although the assets in Account 4 attributable to the
Policies are not chargeable with liabilities arising out of any other business
which Life of Virginia may conduct, all obligations arising under the policies,
including the promise to make Income Payments, are general corporate obligations
of Life of Virginia. Furthermore, the assets of Account 4 are available to cover
the liabilities of Life of Virginia's General Account to the extent that the
assets of Account 4 exceed its liabilities arising under the Policies supported
by it.
Account 4 is registered with the Securities and Exchange Commission (the
"Commission") as a unit investment trust under the Investment Company Act of
1940 (the "1940 Act") and meets the definition of a Separate Account under the
Federal Securities Laws. Registration with the Commission, however, does not
involve supervision of the management or investment practices or policies of
Account 4 by the Commission.
Additions, Deletions, or Substitutions of Investments
Life of Virginia reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for the shares of
the Fund portfolios that are held by Account 4 or that Account 4 may purchase.
Life of Virginia also reserves the right to establish additional Investment
Subdivisions of Account 4, each of which would invest in a separate portfolio of
a Fund, or in shares of another investment company, with a specified investment
objective. One or more Investment Subdivisions may also be eliminated if, in
the sole discretion of Life of Virginia, marketing, tax, or investment
conditions warrant.
If deemed by Life of Virginia to be in the best interests of persons having
voting rights under the Policies, and, if permitted by law, Life of Virginia may
deregister Account 4 under the 1940 Act in the event such registration is no
longer required; manage Account 4 under the direction of a committee; or combine
Account 4 with other Life of Virginia separate accounts. To the extent
permitted by applicable law, Life of Virginia may also transfer the assets of
Account 4 associated with the Policies to another separate account. In
addition, Life of Virginia may, when permitted by law, restrict or eliminate any
voting rights of Owners or other persons who have voting rights as to Account 4.
<PAGE>
THE FUNDS
Account 4 currently invests in seven series-type mutual funds. All of the
Funds currently available under the Policy are registered with the Commission as
open-end, diversified investment companies. The Commission, however, does not
supervise the management or the investment practices and policies of the Funds.
Each Investment Subdivision invests exclusively in a designated investment
portfolio of one of the Funds. The assets of each such portfolio are separate
from other portfolios of that Fund and each portfolio has separate investment
objectives and policies. As a result, each portfolio operates as a separate
investment portfolio and the investment performance of one portfolio has no
effect on the investment performance of any other portfolio. Some of the Funds
may, in the future, create additional portfolios.
Each of the Funds sells its shares to Account 4 in accordance with the terms
of a participation agreement between the Fund and Life of Virginia. The
termination provisions of those agreements vary. A summary of these termination
provisions may be found in the Statement of Additional Information. Should an
agreement between Life of Virginia and a Fund terminate, the Account may not be
able to purchase additional shares of that Fund. In that event, Owners will no
longer be able to allocate Account Values or premium payments to Investment
Subdivisions investing in portfolios of that Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Account 4 despite the fact
that the participation agreement between the Fund and Life of Virginia has not
been terminated. Should a Fund or a portfolio of a Fund decide not to sell its
shares to Life of Virginia, Life of Virginia will be unable to honor Owner
requests to allocate their account values or premium payments to Investment
Subdivisions investing in shares of that Fund or portfolio.
Certain Investment Subdivisions invest in portfolios that have similar
investment objectives and/or policies; therefore, before choosing Investment
Subdivisions, carefully read the individual prospectuses for the Funds, along
with this prospectus.
Variable Insurance Products Fund
Variable Insurance Products Fund ("VIPF") currently has five portfolios: Money
Market Portfolio, High Income Portfolio, Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio.
Money Market Portfolio seeks to obtain as high a level of current income as is
consistent with preserving capital and providing liquidity. The Portfolio will
invest only in high-quality U.S. dollar denominated money market securities of
domestic and foreign issuers.
High Income Portfolio seeks to obtain a high level of current income by
investing primarily in high-yielding, lower-rated fixed-income securities, while
also considering growth of capital. Owners should read the complete risk
disclosure in the fund prospectus before investing.
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.
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.
Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities. The Portfolio provides a means for investors
to diversify their own portfolios by participating in companies and economies
outside of the United States.
Fidelity Management & Research Company ("FMR") serves as investment adviser to
VIPF.
Variable Insurance Products Fund II
Variable Insurance Products Fund II ("VIPF II") currently has five portfolios,
two of which, Asset Manager Portfolio and Contrafund Portfolio, are available to
Owners through Account 4. THE CONTRAFUND PORTFOLIO IS NOT AVAILABLE IN
CONNECTION WITH POLICIES ISSUED TO CALIFORNIA POLICYOWNERS.
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
<PAGE>
Contrafund Portfolio seeks capital appreciation by investing in securities of
companies believed to be undervalued or out-of-favor.
FMR serves as investment advisor to VIPF II.
Neuberger & Berman Advisers Management Trust
Neuberger & Berman Advisers Management Trust, ("AMT") which is managed by
Neuberger & Berman Management Incorporated, currently has seven portfolios,
three of which, the Balanced Portfolio, the Growth Portfolio and the Limited
Maturity Bond Portfolio, are available to Owners through Account 4.
Balanced Portfolio has the investment objective of long term capital growth
and reasonable current income without undue risk to principal. The Balanced
Portfolio will seek to achieve its objective through investment of a portion of
its assets in common stocks and a portion of its assets in debt securities.
Growth Portfolio seeks capital growth through investments in common stocks of
companies that the Investment Adviser believes will have above average earnings
or otherwise provide investors with above average potential for capital
appreciation. To maximize this potential, the Investment Adviser may also
utilize, from time to time, securities convertible into such common stocks,
warrants and options to purchase such stocks.
Limited Maturity Bond Portfolio's primary investment objective is the highest
current income consistent with low risk to principal and liquidity. As a
secondary objective, the Limited Maturity Bond Portfolio also seeks to enhance
its total return through capital appreciation when market factors, such as
falling interest rates and rising bond prices, indicate that capital
appreciation may be available without significant risk to principal.
Life of Virginia Series Fund, Inc.
Life of Virginia Series Fund, Inc. ("Life of Virginia Series Fund") currently
has six portfolios: the Common Stock Index Portfolio, the Government Securities
Portfolio, the Money Market Portfolio, and the Total Return Portfolio, the
International Equity Portfolio, and the Real Estate Securities Portfolio. THE
INTERNATIONAL EQUITY PORTFOLIO AND THE REAL ESTATE SECURITIES PORTFOLIO ARE NOT
AVAILABLE IN CONNECTION WITH POLICIES ISSUED TO CALIFORNIA POLICYOWNERS.
Money Market Portfolio has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in high quality money market securities.
Government Securities Portfolio has the investment objective of seeking high
current income and protection of capital through investments in intermediate and
long-term debt instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
Common Stock Index Portfolio has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange, the American
Stock Exchange and, to a limited extent, in the over-the-counter markets.
Total Return Portfolio 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 Portfolio 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 Portfolio has the investment objective of providing
maximum total return through current income and capital appreciation. The
Portfolio seeks to achieve its objective by investing primarily in securities of
U.S. issuers that are principally engaged in or related to the real estate
industry including those that own significant real estate assets. The Portfolio
will not invest directly in real estate.
Aon Advisors, Inc. serves as investment adviser to the Life of Virginia Series
Fund, Inc.
<PAGE>
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds ("OVAF") currently has nine portfolios, six
of which are currently available to Owners through Account 4: Oppenheimer Money
Fund, Oppenheimer High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital
Appreciation Fund, Oppenheimer Growth Fund, and Oppenheimer Multiple Strategies
Fund.
Oppenheimer Money Fund seeks the maximum current income from investments in
"money market" securities consistent with low capital risk and the maintenance
of liquidity.
Oppenheimer High Income Fund seeks a high level of current income from
investments 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. Owners should read the complete risk disclosure
in the fund prospectus before investing.
Oppenheimer Bond Fund primarily seeks a high level of current income from
investment in high yield fixed income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, it seeks capital
growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Oppenheimer Management Corporation serves as investment adviser to the OVAF.
Janus Aspen Series
Janus Aspen Series ("JAS") currently has seven portfolios, three of which are
currently available to Owners through Account 4: Growth Portfolio, Aggressive
Growth Portfolio, and Worldwide Growth Portfolio.
Growth Portfolio has the investment objective of long-term capital growth in a
manner consistent with the preservation of capital. The Growth Portfolio is a
diversified portfolio that pursues its objective by investing in common stocks
of issuers of all sizes. Generally, this portfolio emphasizes issuers with
larger market capitalizations.
Aggressive Growth Portfolio has the investment objective of long-term capital
growth in a manner consistent with the preservation of capital. The Aggressive
Growth Portfolio will seek to achieve its objective by normally maintaining an
average market capitalization between $1 billion and $5 billion.
Worldwide Growth Portfolio has the investment objective of long-term capital
growth 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.
Janus Capital Corporation serves as investment adviser to JAS.
Insurance Management Series
The Insurance Management Series ("IMS") currently has five portfolios, two of
which, Utility Fund and Corporate Bond Fund, are available to policyowners
through Account 4. THE UTILITY FUND AND THE CORPORATE BOND FUND ARE NOT
AVAILABLE IN CONNECTION WITH POLICIES ISSUED TO CALIFORNIA POLICYOWNERS.
Utility Fund has the investment objective of high current income and moderate
capital appreciation. The Utility Fund will seek to achieve its objective by
investing primarily in equity and debt securities of utility companies.
<PAGE>
Corporate Bond Fund has the investment objective of high current income. The
Corporate Bond Fund will seek to achieve its objective by investing primarily in
a diversified portfolio of professionally managed fixed-income securities. The
fixed income securities in which the Fund intends to invest are lower-rated
corporate debt obligations, commonly referred to as "junk bonds". The risks of
these securities are described in the prospectus for the IMS, which should be
read carefully before investing.
Federated Advisers serves as investment adviser to the IMS.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES
AND POLICIES OF ANY OF THE FUNDS WILL BE ACHIEVED.
More detailed information concerning the investment objectives and policies of
the Funds and their investment advisory services and charges can be found in the
current prospectuses for the Funds which accompany or precede this Prospectus
and the Funds' current statements of additional information. A current
prospectus for each Fund can be obtained by writing or calling Life of Virginia
at its Home Office. The prospectus for each Fund should be read carefully
before any decision is made concerning the allocation of Premium Payments or
transfers among the Investment Subdivisions.
Resolving Material Conflicts
The Funds are used as investment vehicles for both variable life insurance and
variable annuity policies issued by Life of Virginia. In addition, all of the
Funds, other than Life of Virginia Series Fund, Inc., are also available to
registered separate accounts of insurance companies other than Life of Virginia
offering variable annuity and variable life policies. As a result, there is a
possibility that an irreconcilable material conflict may arise between the
interests of Owners owning Policies whose account values are allocated to
Account 4 and of Owners owning policies whose Account Values are allocated to
one or more other separate accounts investing in any one of the Funds.
In addition, Neuberger & Berman Advisers Management Trust, Janus Aspen Series
and Life of Virginia Series Fund, Inc. may sell shares to certain retirement
plans. As a result, there is a possibility that a material conflict may arise
between the interests of Owners generally or certain classes of Owners, and such
retirement plans or participants in such retirement plans.
In the event of a material conflict, Life of Virginia will take any necessary
steps, including removing Account 4 from the Fund, to resolve the matter. See
the individual Fund Prospectus for additional details.
TOTAL RETURN AND YIELDS
From time to time, Life of Virginia may advertise total return and/or yield
for the Investment Subdivisions. These figures are based on historical earnings
and do not indicate or project future performance. Each Investment Subdivision
may, from time to time, advertise performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance information appears in the
Statement of Additional Information.
Total returns and yields for the Investment Subdivision are based on the
investment performance of the corresponding investment portfolios of the Funds.
Each portfolio's performance in part reflects its expenses. See the
Prospectuses for the Funds.
Total return for an Investment Subdivision refers to quotations made assuming
that an investment under a Policy has been held in that Investment Subdivision
for various periods of time including, but not limited to, a period measured
from the date the Investment Subdivision commenced operations. When an
Investment Subdivision has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided.
An average annual total return quotation represents the average annual
compounded rate of return that would equate a hypothetical initial investment of
$1,000 (as of the first day of the period for which the total return quotation
is provided) to the redemption value of that investment (as of the last day of
the period). Such quotations show the average annual percentage change in the
value of a hypothetical investment during the periods specified. The
standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the
Investment Subdivision (including any surrender charge that would apply if an
Owner terminated the Policy at the end of each period indicated, but excluding
charges for the Guaranteed Minimum Death Benefit Rider, and any deductions for
premium taxes).
<PAGE>
In addition to the standardized version described above, total return
performance quotations computed on non-standard bases may be used in
advertisements. For example, average annual total return information may be
presented, computed on the same basis as described above, except deductions will
not include sales or administrative charges. Average annual total returns that
exclude sales or administrative expenses, or both, will be greater than
standardized average annual total returns for comparable periods. Life of
Virginia may from time to time disclose average annual and/or cumulative total
return in other non-standard formats.
The yield of a "money market" Investment Subdivision refers to the income
generated by an investment in that Investment Subdivision over a specified
seven-day period, which is then annualized. Yield is calculated by assuming
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The effective yield is calculated similarly but
the income earned by an investment in that money market Subdivision is assumed
to be reinvested each period. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The yield of an Investment Subdivision (other than a "money market"
Subdivision) refers to the income generated by an investment in that Investment
Subdivision over a specified 30-day (or one-month) period. The income generated
over the period is assumed to be generated and reinvested each month for six
months. The resulting semi-annual yield is then doubled.
Life of Virginia may from time to time also disclose yield, standard total
returns, and non-standard total returns for periods prior to the date of
inception of the Investment Subdivisions.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Investment
Subdivision may be compared to the performance of other variable annuity issuers
in general or to the performance of particular types of variable annuities
investing in mutual funds, or investment portfolios of mutual funds with
investment objectives similar to each of the Investment Subdivisions. Lipper
Analytical Services, Inc. ("Lipper") and the Variable Annuity Research Data
Service ("VARDS") are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as variable
annuity issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS each rank such issuers on the
basis of total return, assuming reinvestment of distributions, but do not take
sales charges, redemption fees, or certain expense deductions at the separate
account level into consideration. In addition, VARDS prepares risk adjusted
rankings, which consider the effects of market risk on total return performance.
This type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives.
Advertising and sales literature may also compare the performance of each
Investment Subdivision to various widely recognized indices. One such index is
the Standard & Poor's 500 Composite Stock Price Index, a measure of stock market
performance. This unmanaged index does not consider tax consequences or the
expense of operating or managing an investment portfolio, and may not consider
reinvestment of income dividends.
Life of Virginia may also report other information including the effect of
tax-deferred compounding on an Investment Subdivision's investment returns, or
returns in general, which may be illustrated by tables, graphs, or charts. All
income and capital gains derived from the Investment Subdivisions' investments
in the Funds are reinvested on a tax-deferred basis.
<PAGE>
THE POLICY
The Policy is an individual flexible premium variable deferred annuity policy.
The rights and benefits of the Policy are described below and in the Policies.
There may be differences in your Policy because of requirements of the state
where your Policy is issued. Any such differences will be included in your
Policy.
Purchasing the Policies
Individuals wishing to purchase a Policy must complete an application and
submit it to an authorized registered agent or to Life of Virginia at its Home
Office (6610 W. Broad Street, Richmond, Virginia 23230). The minimum initial
Premium Payment required under the Policy is $5,000. However, in certain cases
where policies are being offered to members of a group of individuals, Life of
Virginia may agree to waive the $5,000 initial premium requirement. Acceptance
of an application or a premium payment is subject to Life of Virginia's rules,
and Life of Virginia reserves the right to reject any application or initial
Premium Payment for any lawful reason and in a manner such that similarly
situated purchasers are treated in a consistent manner and unfair discrimination
is avoided.
If the application can be accepted in the form received, the initial Premium
Payment will be credited to the policy within two Valuation Periods after the
later of receipt of the application or receipt of the initial Premium Payment by
Life of Virginia at its Home Office. If the initial Premium Payment cannot be
credited within five Business Days after receipt by Life of Virginia because the
application is incomplete, Life of Virginia will contact the applicant, explain
the reason for the delay, and refund the initial Premium Payment immediately,
unless the applicant specifically consents to Life of Virginia retaining the
initial Premium Payment until the application is made complete. If Life of
Virginia retains the initial Premium Payment, it will be credited within two
Valuation Periods after the necessary requirements are fulfilled.
The Owner may make Additional Premium Payments before the earliest of (1) the
date which is ten years preceding the maturity date, (2) the date the Annuitant
attains age 86 and (3) the date Income Payments begin. Subject to applicable
state requirements, Additional Premium Payments must be for $1,000 or more if
the policy is a Non-Qualified policy, $50 or more if the policy is an IRA
Policy, and $100 or more if the policy is a Qualified Policy other than an IRA
Policy. Additional Premium Payments made under Qualified Policies are limited
to proceeds from certain qualified plans. Additional Premium Payments are
credited as of the next close of business (on a Business Day) following receipt
of the payment at the Home Office.
The Policy Date is generally the date on which both the application was signed
and the initial Premium Payment was paid.
"Policy Years" for the initial Premium Payment are measured from the Policy
Date. With regard to the determination of charges attributable to Additional
Premium Payments, however, "years" are measured from the receipt of the
Additional Premium Payment by Life of Virginia at its Home Office. (See Sales
Charges, p. 31.)
Allocation of Premium Payments
The Owner, by written instructions, allocates Premium Payments among the
Investment Subdivisions. The Owner may allocate Premium Payments totally to one
Investment Subdivision of Account 4, or partially to any one of the available
Investment Subdivisions; however, at any one point in time, the Account Value
may not be invested in more than seven Investment Subdivisions. Allocations of
less than 10% of any Premium Payment to any one Investment Subdivision are not
permitted.
In those states which require that Premium Payments be returned during the
right to examine Policy period (see Examination of Policy (Refund Privilege), p.
27), during an initial period commencing on the date the initial Premium Payment
is credited to the Policy, Premium Payments will be placed in the Investment
Subdivision that invests exclusively in the Money Market Portfolio of Life of
Virginia Series Fund, Inc. The Premium Payments will remain in that subdivision
until the earlier of 15 calendar days from the date the initial Premium Payment
is credited to the Policy or, if the Policy is not accepted by the Owner, when
all amounts due are refunded. At the end of the 15-day period, the Account
Value at that time, and all subsequent Premium Payments, will be allocated among
the Investment Subdivisions in accordance with the Owner's instructions.
The Owner may change the allocation of subsequent Premium Payments at any
time, without charge, by sending acceptable written notice to Life of Virginia
at its Home Office. The allocation will apply to any Premium Payments received
after Life of Virginia records the change. The Account Value will vary with the
investment performance of the Investment Subdivisions the Owner selects, and the
Owner bears the entire investment risk for the Account Value in any particular
Investment Subdivision. The allocation of Premium Payments will affect not only
the Account Value prior to the Maturity Date, but it may also affect the Death
Benefit payable upon an Annuitant's death. The Owner should periodically review
his allocation of Account Value in light of market conditions and overall
financial planning requirements.
<PAGE>
Accumulation of Account Value
The Policy provides for an accumulation of Account Value prior to the Maturity
Date. The Account Value equals the sum of the values of the amounts allocated
under the Policy to each Investment Subdivision. Account Value will be
determined on a daily basis and will reflect a number of factors, including
Premium Payments, partial surrenders, transfers, charges assessed in connection
with the Policy, and the investment performance of the shares purchased by the
Investment Subdivisions to which the Account Value is allocated. There is no
guaranteed minimum Account Value.
On the date the initial Premium Payment is received and accepted by Life of
Virginia, the Account Value equals the initial Premium Payment. Thereafter,
prior to the Maturity Date, the Account Value in each Investment Subdivision is
determined by multiplying the number of Accumulation Units in that Investment
Subdivision credited to the Policy by the current value of an Accumulation Unit
for that Investment Subdivision. The number of Accumulation Units is increased
by any Additional Premium Payments and any transfers into that Investment
Subdivision and decreased by the policy maintenance charge, the Annual Death
Benefit Charge (if applicable), any transfers out of that Investment
Subdivision, and any full or partial surrenders.
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued separately.
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the shares purchased by each Investment
Subdivision and the deduction of certain charges from Account 4.
For each Investment Subdivision, the value of an Accumulation Unit for the
first Valuation Period was $10. The value of an Accumulation Unit in an
Investment Subdivision for each subsequent Valuation Period equals the value of
the Accumulation Unit as of the immediately preceding Valuation Period,
multiplied by the Net Investment Factor for that Investment Subdivision for the
Valuation Period for which the Accumulation Unit Value is being calculated. The
Net Investment Factor is a number representing the change in the value of
Investment Subdivision assets on successive Business Days due to investment
income, realized or unrealized capital gains or losses, deductions for taxes, if
any, and deductions for the mortality and expense risk charge and administrative
expense charge.
The value of an Accumulation Unit for a Valuation Period is the same for each
day in the period.
Transfers
Before Income Payments begin, the Owner may transfer amounts among the
Investment Subdivisions that are available at the time of the request by sending
a written request to the Home Office. Telephone transfers are subject to Life
of Virginia's administrative requirements. All transfers will be effective as
of the end of the Valuation Period during which the written or telephone request
is received at the Home Office.
Currently, there is no limit to the number of transfers that may be made;
however, Life of Virginia reserves the right to limit, upon written notice, the
number of transfers to twelve each calendar year or, if it is necessary in order
that the Policy will continue to receive annuity treatment by the Internal
Revenue Service, a lower number.
The first transfer in each calendar month will be made without charge.
Thereafter, each time a transfer is made, a transfer charge of $10 will be
deducted from the amount transferred. The transfer charge is Life of Virginia's
estimate of the average actual cost of present and future typical transfers;
Life of Virginia does not expect to make a profit from the process of executing
transfers. Once a Policy is issued, the amount of the transfer charge is
guaranteed for the life of the Policy.
After Income Payments begin, if Variable Income Payments are being made,
Annuity Units may be transferred among the Investment Subdivisions at the
payee's request once each calendar year. No transfer charge will be imposed on
such transfers. The transfer will be effective as of the end of the Valuation
Period during which Life of Virginia receives written request at its Home
Office. The Income Payment amount on the date of the transfer will not be
affected by the transfer, although subsequent Variable Income Payments will
reflect the investment experience of the selected Investment Subdivisions.
<PAGE>
If the number of Annuity Units remaining in an Investment Subdivision after a
transfer is less than 1, then this amount will also be transferred. In addition,
transfers are only permitted into an Investment Subdivision if, after the
transfer, the number of Annuity Units of that Investment Subdivision is at least
1.
Where permitted by state law, Life of Virginia reserves the right to refuse to
execute any transfer, whether requested before or after income payments begin,
if any of the Investment Subdivisions that would be affected by the transfer are
unable to purchase or redeem shares of the mutual funds in which they invest.
Telephone Transfers
Life of Virginia permits telephone transfers and may be liable for losses
resulting from unauthorized or fraudulent telephone transfers if it fails to
employ reasonable procedures to confirm that the telephone instructions that it
receives are genuine. Therefore, Life of Virginia will employ means to prevent
unauthorized or fraudulent telephone requests, such as sending written
confirmation, recording telephone requests, and/or requesting other identifying
information. In addition, Life of Virginia may require written authorization
before allowing Owners to make telephone transfers.
To request a telephone transfer, Owners should call Life of Virginia's
Telephone Transfer Line at 800-772-3844. Life of Virginia will record all
telephone transfer requests. Transfer requests received at least one hour prior
to the close of the New York Stock Exchange will be executed that business day
at that day's prices. Requests received after that time will be executed on the
next business day at that day's prices.
Dollar-Cost Averaging
Owners may elect to have Life of Virginia automatically transfer specified
amounts from one of certain designated Investment Subdivisions of Account 4 to
any other available Investment Subdivision(s) on a monthly or quarterly basis.
This privilege is intended to permit Owners to utilize "Dollar-Cost Averaging,"
a long-term investment method that provides for regular level investments over a
period of time. Life of Virginia makes no representations or guarantees that
Dollar-Cost Averaging will result in a profit or protect against loss.
Owners must complete the Dollar-Cost Averaging section of the application or a
Dollar-Cost Averaging Agreement in order to participate in the Dollar-Cost
Averaging program. Currently, the Investment Subdivisions available to allocate
money for the purpose of Dollar-Cost Averaging include each of the Money Market
Investment Subdivisions and the Investment Subdivision which invests in the
Limited Maturity Bond Portfolio of the Neuberger & Berman Advisers Management
Trust. Money may be allocated to one of these subdivisions as initial premium,
additional premium or in the form of a transfer from other Investment
Subdivisions within Account 4. Any amount allocated must conform to the minimum
amount and percentage requirements, (see Purchasing the Policies, and Allocation
of Premium Payments, p. 24.)
Dollar-Cost Averaging will continue until the entire Account Value in the
subdivision designated for Dollar-Cost Averaging is depleted. Prior to that
time, the Owner may discontinue Dollar-Cost Averaging by sending Life of
Virginia a written cancellation notice. Owners may make changes to their
Dollar-Cost Averaging program by calling Life of Virginia's Telephone Transfer
Line at 800-772-3844. Also, Life of Virginia reserves the right to discontinue
Dollar-Cost Averaging upon 30 days written notice to the Owner.
For policies issued on or after November 14, 1994, as an alternative to the
dollar-cost averaging program described above, Owners may elect to have Life of
Virginia automatically transfer specified amounts from the Guarantee Account to
any available Investment Subdivision on a monthly or quarterly basis. To make
the election, Owners must complete the Dollar-Cost Averaging section of the
application or a Dollar-Cost Averaging Agreement. Money may be allocated to the
Guarantee Account as an initial or subsequent premium or in the form of a
transfer of Account Value from one or more Investment Subdivisions. Such
allocations must comply with all applicable minimum amount and percentage
requirements (see Purchasing the Policies and Allocation of Premium Payments, p.
24) as well as rules applicable to transfers to the Guarantee Account. Apart
from automatic transfers under the Dollar-Cost Averaging Agreement, all rules
regarding transfers from the Guarantee Account will apply.
Owners may designate the amount of value under the policy allocated to the
Guarantee Account that is subject to the dollar-cost averaging program. Life of
Virginia reserves the right to limit the amount of each automatic transfer to
10% per month of the amount so designated.
Automatic transfers from the Guarantee Account, as described above, will be
made on a first-in-first-out basis until the entire value of the designated
amount in the Guarantee Account is depleted. Prior to that time, an Owner may
discontinue such automatic transfers by sending Life of Virginia a written
notice. Life of Virginia reserves the right to discontinue or modify the
alternative Dollar-Cost Averaging program at any time for any reason on 30 days
written notice to the Owner.
<PAGE>
Powers of Attorney
As a general rule and as a convenience to Owners, Life of Virginia allows the
use of powers of attorney whereby Owners give third parties the right to effect
account value transfers on behalf of the Owners. However, when the same third
party possesses powers of attorney executed by many Owners, the result can be
simultaneous transfers involving large amounts of Account Value. Such transfers
can disrupt the orderly management of the Funds, can result in higher costs to
Owners, and are generally not compatible with the long-range goals of purchasers
of the Policies. Life of Virginia believes that such simultaneous transfers
effected by such third parties are not in the best interests of all shareholders
of the Funds and this position is shared by the managements of those Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, Life of Virginia may not honor such powers of attorney and has
instituted or will institute procedures to assure that the transfer requests
that it receives have, in fact, been made by the Owners in whose names they are
submitted. However, these procedures will not prevent Owners from making their
own Account Value transfer requests.
Examination of Policy (Refund Privilege)
The Owner may examine the Policy and return it for refund within 10 days after
it is received. Unless state law requires that Premium Payments be returned as
the refund, the amount of the refund will equal the Account Value with any
adjustments required by applicable law or regulation on the date Life of
Virginia receives the Policy. If state law requires that Premium Payments be
returned, the amount of the refund will equal the greater of (1) the Account
Value (without reduction by any surrender charges) plus any amount deducted from
the Premium Payments prior to allocation to Account 4 or (2) the Premium
Payments made. In certain states the Owner may have more than 10 days to return
the policy for a refund. An Owner wanting a refund should return the Policy to
Life of Virginia at its Home Office.
DISTRIBUTIONS UNDER THE POLICY
Surrender (Withdrawal)
The Owner may make a full or partial surrender of the Policy at any time
before Income Payments begin by sending a written request to Life of Virginia at
its Home Office. The Policy must be submitted with a request for a full
surrender. In the Policy, a "surrender" is referred to as a "withdrawal."
Life of Virginia will not permit a partial surrender that is less than $500 or
that reduces the Account Value of the Policy to less than $5,000. In the event
that a partial surrender request would reduce the Account Value to less than
$5,000, Life of Virginia will surrender only that amount of Account Value that
would reduce the remaining Account Value to $5,000 and deduct any Surrender
Charge from the amount surrendered.
The amount payable on full surrender of the Policy is the Surrender Value at
the end of the Valuation Period during which the request is received. The
Surrender Value equals the Account Value on the date Life of Virginia receives a
request for surrender less any applicable surrender charge. (See Surrender
Charge, p. 32.) Any premium tax paid by Life of Virginia which has not been
previously deducted may also be deducted from the Surrender Value, as will any
applicable Annual Death Benefit Charge and the Policy Maintenance Charge. (See
Annual Death Benefit Charge, p. 31 and Policy Maintenance Charge, p. 31.) The
Surrender Value may be paid in a lump sum or under one of the optional payment
plans specified in the Policy. (See Optional Payment Plans, p. 35.) Proceeds
will generally be paid within seven days of receipt of a request for a
surrender. Postponement of payments may occur in certain circumstances. (See
Payment Under the Policies, p. 44.)
Upon partial surrender, the Owner may indicate, in writing, from which
Investment Subdivisions the Account Value is to be transferred. If no such
written instruction is received with the partial surrender request, the Account
Value transferred out will be transferred from the Investment Subdivisions in
the same proportion that the Account Value in each Investment Subdivision bears
to the total Account Value on the date Life of Virginia receives the written
request. A portion of the Policy's surrender charge may be assessed at the time
a partial surrender is made. Any applicable surrender charge will be deducted
from the amount surrendered. (See Surrender Charge, p. 32.)
Full and partial surrenders may have federal tax consequences. (See Federal
Tax Matters, p. 38)
<PAGE>
Systematic Withdrawals
The Owner may elect to make a series of partial surrenders in equal
installments, adding up, in a 12 month period beginning with the date of the
first payment, to an amount not to exceed 10% of the Account Value (as of the
effective date of the partial surrender), ("Systematic Withdrawals").
Systematic Withdrawals will be available only if no partial surrender has
occurred during the policy year of the election of Systematic Withdrawals. If a
Systematic Withdrawal program is discontinued, a new program may not be
instituted until the next policy year. A surrender charge will not be imposed
on Systematic Withdrawals. A surrender charge will however be applied to any
additional surrender(s) made during the time Systematic Withdrawal payments are
being made, unless all surrender charges have expired, (see Surrender Charge, p.
32.). Systematic Withdrawal payments count as partial surrenders with reduced
charges (See Reduced Charges on Certain Surrenders, p. 32.)
Systematic Withdrawals will be made from any Investment Subdivisions to
which Account Value is allocated. Withdrawals will be made from each of
the designated Investment Subdivisions in the same proportion that the
Account Value in each Investment Subdivision bears to the total Account
Value in all Investment Subdivisions from which the withdrawals are to be
made. At any time while Systematic Withdrawals are being made, each of the
designated Investment Subdivisions from which withdrawals are being made
must count as one of the seven Investment Subdivisions to which the Account
Value of the policy may be allocated at any one time (see Allocation of
Premiums, p. 24.).
After a series of Systematic Withdrawals has begun, the frequency and/or
amount of payments may be changed upon request by the Owner, subject to the
following rules:
1) only one such change may be requested in a calendar quarter;
2) if the maximum amount was not elected at the time the current series of
Systematic Withdrawals was initiated, the remaining payments may be
increased;
3) the total amount to be withdrawn during that 12-month period, including
amounts already paid, remains limited to 10% of the Account Value at the
time the current series of Systematic Withdrawals was initiated; and
4) if the current series of Systematic Withdrawals is discontinued, any
remaining payments in the current 12-month period will be paid in a
lump sum on request.
Systematic Withdrawals may be discontinued at any time by the Owner by
notifying Life of Virginia in writing. Life of Virginia reserves the right to
discontinue Systematic Withdrawals upon 30 days written notice to Owners.
Otherwise, payments will continue until the earlier of (i) the date on which a
Systematic Withdrawal reduces the Account Value for the entire policy below
$5,000, or (ii) the date on which the total Account Value in all Investment
Subdivisions designated for Systematic Withdrawals is insufficient to provide
further payments on the mode in effect.
If any Systematic Withdrawal would be or becomes less than $50, Life of
Virginia reserves the right to reduce the frequency of payments to an interval
that would result in each payment being at least $50. Life of Virginia also
reserves the right to prohibit simultaneous Systematic Withdrawals and
Dollar-Cost Averaging, (see Dollar-Cost Averaging, p. 26.). Additional rules
regarding Systematic Withdrawals, available payment modes, and instructions for
electing this option are available upon request.
The amount of each Systematic Withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy.
However, there is some uncertainty regarding the tax treatment of Systematic
Withdrawals, and it is possible that additional amounts may be includible in
income. In addition, a 10% penalty tax may, subject to certain exceptions, be
imposed on any amounts includible in income due to Systematic Withdrawals. It
is uncertain whether Systematic Withdrawals would qualify for an exception to
this penalty tax for a series of substantially equal periodic payments made over
the life (or life expectancy) of the recipient or the joint lives (or joint life
expectancies) of the recipient and his or her beneficiary. For more
information, see the "Federal Tax Matters" discussion of Systematic Withdrawals
on page 40.
Death Provisions
Designated Beneficiary. If an Annuitant dies while the Policy is in force and
prior to the Maturity Date, the Designated Beneficiary will be treated as the
sole owner of the Policy following such a death, subject to the distribution
rules set forth below. The Designated Beneficiary will be the first person
named as follows who is alive or in existence on the date of the death of an
Annuitant: Final Annuitant, Primary Beneficiary(ies), Contingent
Beneficiary(ies), and if no one else is alive, the estate of the sole Annuitant
(if no Joint Annuitant was named) or of the Final Annuitant.
<PAGE>
If there is more than one Designated Beneficiary, each Designated Beneficiary
will be treated separately according to each Designated Beneficiary's portion of
the Policy for purposes of the Policy's death provisions.
Distribution Rules. If the Annuitant dies before income payments begin and
the Designated Beneficiary is the surviving spouse of the deceased Annuitant,
the policy will continue in force with the surviving spouse as the new
Annuitant. On the surviving spouse's death, the entire interest in the Policy
will be paid within 5 years of such spouse's death to the Designated Beneficiary
named by the surviving spouse (and if no Designated Beneficiary is named, such
payment will be made to the surviving spouse's estate).
If the Annuitant dies before income payments begin and the Designated
Beneficiary is not the surviving spouse of the deceased Annuitant, then unless
the Optional Death Benefit is elected as described below, upon receipt of Due
Proof of Death, Life of Virginia will pay the Surrender Value in one lump sum
payment to, or for the benefit of, the Designated Beneficiary. Instead of
receiving a lump sum distribution, the Designated Beneficiary may elect: (1) to
continue the policy in force during the five year period following the date of
the Annuitant's death and receive the Surrender Value at any time during that
period by making a full or partial surrender. No premium payments will be
accepted during this period. If at the end of that five year period the entire
Surrender Value has not been paid, the policy will terminate and any remaining
Account Value will be paid to, or for the benefit of the Designated Beneficiary,
or (2) in writing within 60 days after the date of death, apply the Surrender
Value under optional payment plans 1 or 2 (described beginning on page 36.) with
the first payment to the Designated Beneficiary being made no later than one
year after the date of an Annuitant's death. Payments must be made over the
life of the Designated Beneficiary, or over a period not exceeding the life
expectancy of the Designated Beneficiary.
If the Designated Beneficiary dies before all required payments have been
made, Life of Virginia will make any remaining payments to any person named in
writing by the Designated Beneficiary; otherwise, Life of Virginia will pay the
Designated Beneficiary's estate.
These death provisions are designed to comply with the Code requirement that
if the Owner dies before the Maturity Date, the entire value of the Policy must
generally be distributed within five years of the date of the Owner's death. In
the case of Joint Owners, this requirement applies if either of the Joint Owners
dies before the Maturity Date.
If any Annuitant or Designated Beneficiary dies while this Policy is in force
and on or after Income Payments have begun, payments made under the Policy will
be made at least as rapidly as under the method of distribution in effect at the
time of such death, notwithstanding any other provision of the Policy.
Optional Death Benefit. If any Annuitant dies before Income Payments begin
and while this policy is in effect, the Designated Beneficiary may request
payment of the Death Benefit within 60 days after Life of Virginia receives due
proof of an Annuitant's death, and in no case later than one year after the date
of death. (For policies issued in the state of Washington, the death benefit
available at the death of the Annuitant will become payable unless the
Designated Beneficiary elects to continue the Policy, subject to the Death
Provisions. The Designated Beneficiary will have a period of 90 days following
the date of the Annuitant's death to make such an election.)
Upon receipt of request for payment of the Death Benefit, the Death Benefit
will be paid in one lump sum immediately unless the Designated Beneficiary
elects in writing within 60 days of the Annuitant's death to apply the entire
Death Benefit under optional payment plans 1 or 2 (described beginning on p.
36.) with the first payment to the Designated Beneficiary being made no later
than one year after the date of the Annuitant's death. Payments must be made
over the life of, or over a period not exceeding the life expectancy of, the
Designated Beneficiary.
During the first seven Policy Years, the Death Benefit will be the greater of:
(1) the total of premiums paid reduced by the total of any partial surrenders
plus their applicable surrender charges, or (2) the Account Value on the date
Life of Virginia receives Due Proof of Death. During subsequent seven year
periods, the Death Benefit will be the greater of: (1) the Death Benefit on the
last day of the previous seven year period, plus any premiums paid since then,
less any partial surrenders plus their applicable surrender charges since then,
or (2) the Account Value on the date Due Proof of Death is received.
In certain states, the Death Benefit available at the death of the Annuitant
will be the greater of: (1) the total of premiums paid reduced by the total of
any partial surrenders and their applicable surrender charges, or (2) the
Account Value on the date Life of Virginia receives Due Proof of Death. In
those states the benefit will not be recalculated every seven years.
If the request for payment of the Death Benefit occurs more than 60 days from
the date of receipt of due proof of an Annuitant's death, or more than one year
after the date of death, the Surrender Value will be payable instead of the
Optional Death Benefit. If the Surrender Value, rather than the Death Benefit,
is payable, the Policy will remain in force, but the death benefit rules
(described beginning on p. 30.) and the distribution rules (described beginning
on p. 28.) will apply. Thus the entire interest in the Policy generally must be
distributed within 5 years of the Annuitant's death, subject to certain
exceptions.
<PAGE>
Elective Guaranteed Minimum Death Benefit Rider
If this rider is attached to the Policy, the Death Benefit under the Policy
will be the greater of:
(bullet) The Death Benefit described under the "Optional Death Benefit"
section; or
(bullet) The Death Benefit set forth below.
If any Annuitant dies while the Guaranteed Minimum Death Benefit rider is in
effect and before income payments begin, the Designated Beneficiary may request
payment of the Death Benefit. Life of Virginia must receive the request for
payment within 60 days after it receives due proof of an Annuitant's death, and
in no case later than one year after the date of death. If the request is not
received by Life of Virginia within these time limits, the Surrender Value will
be payable instead of the Death Benefit. If the Death Benefit is paid, the
Policy will terminate, and we will have no further obligation under the Policy.
THE GUARANTEED MINIMUM DEATH BENEFIT RIDER MAY NOT BE AVAILABLE IN ALL STATES OR
MARKETS.
The Death Benefit will be the greater of the Guaranteed Minimum Death Benefit,
or the Account Value of the policy on the date Life of Virginia receives proof
of the Annuitant's death or, if later, the date of your request.
The Guaranteed Minimum Death Benefit is, on the policy date, equal to the
premium paid. At the end of each valuation period after such date, the
Guaranteed Minimum Death Benefit is the lesser of: (1) the total of all premiums
received, multiplied by two, less the amount of any partial surrenders, plus
their surrender charges, made prior to or during that valuation period; or (2)
the Guaranteed Minimum Death Benefit at the end of the preceding valuation
period, increased as specified below, plus any additional premium payments
during the current valuation period and less any partial surrenders plus their
applicable surrender charges during the current valuation period.
The amount of the increase for the valuation period will be calculated by
applying a factor to the Guaranteed Minimum Death Benefit at the end of the
preceding valuation period. Until the anniversary on which the Annuitant
attains age 80, the factor is determined for each valuation period at an
effective annual rate of 6%, except that with respect to amounts invested in
certain Investment Subdivisions shown in the Policy, the increase factor will be
calculated as the lesser of: (1) the Net Investment Factor of the Investment
Subdivision for the valuation period, minus one, or (2) a factor for the
valuation period equivalent to an effective annual rate of 6%. Currently, these
subdivisions include the Money Market Investment Subdivisions. With respect to
amounts invested in the Guarantee Account, item (1) above is replaced with a
factor for the valuation period equivalent to the credited rate(s) that applies
to such amount.
After the anniversary on which the Annuitant attains age 80, the increase
factor will be zero.
There will be a charge made for each year that the rider is in effect for
expenses related to the Death Benefit available under the terms of the
Guaranteed Minimum Death Benefit rider. (See Annual Death Benefit Charge, p.
31.) The rider will remain in effect while the policy is in force and before
income payments begin, or until the policy anniversary following the date of
receipt of a written request to terminate the rider.
If the Annuitant was an Owner or if any Owner was not a natural person, the
Distribution Rules described above will apply. Thus, for example, if the
Distribution Rules apply, the entire interest in the Policy generally must be
distributed within 5 years of the Annuitant's death.
Restrictions on Distributions from Certain Policies
Section 830.105 of the Texas Government Code permits participants in the Texas
Optional Retirement Program (ORP) to withdraw their interest in a variable
annuity contract issued under the ORP only upon (1) termination of employment in
the Texas public institutions of higher education, (2) retirement, (3) death, or
(4) the participant's attainment of age 70 1/2. Accordingly, before any amounts
may be distributed from the contract, proof must be furnished to Life of
Virginia that one of these four events has occurred.
Similar restrictions apply to variable annuity contracts used as funding
vehicles for Code Section 403(b) retirement plans. Section 403(b) of the Code
provides for tax-deferred retirement savings plans for employees of certain
non-profit and educational organizations. In accordance with the requirements
of section 403(b), any policy used for a 403(b) plan will prohibit distributions
of (i) elective contributions made in years beginning after December 31, 1988,
(ii) earnings on those distributions and (iii) earnings on amounts attributable
to elective contributions held as of the end of the last year beginning before
January 1, 1989. However, distributions of such amounts will be allowed upon
death of the employee, attainment of age 59-1/2, separation from service,
disability, or financial hardship, except that income attributable to elective
contributions may not be distributed in the case of hardship.
<PAGE>
CHARGES AND DEDUCTIONS
Charges Against Account 4
Mortality and Expense Risk Charge. A charge will be deducted from each
Investment Subdivision to compensate Life of Virginia for certain mortality and
expense risks assumed in connection with the Policies. The charge will be
deducted daily and equals .003446% for each day in a Valuation Period. The
effective annual rate of this charge, which is compounded daily, is 1.25% of the
average daily net assets of Account 4. Of this amount, approximately .90% is
allocated to cover the mortality risks, and approximately .35% is allocated to
cover the expense risks. Life of Virginia guarantees that this charge of 1.25%
will never increase. Nevertheless, the mortality and expense risk charge (as
well as the Annual Death Benefit Charge described below) may be a source of
profit for Life of Virginia if proven to be more than sufficient to meet
risk-related expenses over the long run.
The mortality risk assumed by Life of Virginia arises from its contractual
obligation to make Income Payments to each payee regardless of how long all
payees or any individual payee may live. Although Variable Income Payments will
vary in accordance with the investment performance of the shares purchased by
each Investment Subdivision, they will not be affected by the mortality
experience of persons receiving such payments or of the general population.
This assures each payee that neither the longevity of fellow payees nor an
improvement in life expectancy generally will have an adverse effect on the
Variable Income Payments received under the Policy. Mortality risk also arises
from the possibility that the Death Benefit will be greater than the Account
Value.
The expense risk assumed is that expenses incurred in issuing and
administering the Policies will be greater than estimated and, therefore, will
exceed the expense charge limits set by the Policies.
Administrative Expense Charge. A charge will be deducted from each Investment
Subdivision to compensate Life of Virginia for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted daily and
equals .000411% for each day in a Valuation Period. The effective annual rate
of this charge, which is compounded daily, is .15% of the average daily net
assets of Account 4.
Policy Maintenance Charge
A charge of $25 will be deducted annually from the Account Value of each
Policy to compensate Life of Virginia for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted at each
anniversary, and at surrender. Life of Virginia will waive this charge if the
Account Value exceeds $75,000 at the time the charge is due. The policy
maintenance charge will compensate Life of Virginia for issuance, processing,
start-up and on-going administration expenses. These expenses include the cost
of processing applications, establishing Policy records, premium collection,
recordkeeping, processing Death Benefit claims, full or partial surrenders,
transfers, and reporting and overhead costs. Life of Virginia has set this
charge at a level which is intended to recover no more than the actual cost
associated with administering the contract. Once a Policy is issued, the amount
of the Policy Maintenance Charge is guaranteed for the life of the Policy.
The annual Policy Maintenance Charge will be allocated among the Investment
Subdivisions in the same proportion that the Policy's Account Value in each
Investment Subdivision bears to the total Account Value in all Investment
Subdivisions at the time the charge is made. Other allocations methods may be
available upon request.
Annual Death Benefit Charge
There will be a charge made each year for expenses related to the Death
Benefit available under the terms of the Guaranteed Minimum Death Benefit rider.
Life of Virginia deducts this charge through the cancellation of accumulation
units at each anniversary and at surrender to compensate it for the increased
risks associated with providing the enhanced death benefit. The charge at full
surrender will be a pro-rata portion of the annual charge. Life of Virginia
guarantees that this charge will never exceed an annual rate of .35% of the
prior year's average Guaranteed Minimum Death Benefit.
Sales Charges
Life of Virginia incurs certain sales and other distribution expenses when the
Policies are issued. The majority of these expenses consist of commissions paid
for sales of these Policies; however, other distribution expenses are incurred
in connection with the printing of prospectuses, conducting seminars and other
marketing, sales, and promotional activities. To recover a portion of these
expenses, a surrender charge (also referred to as a contingent deferred sales
charge) is imposed on full and certain partial surrenders.
<PAGE>
Life of Virginia expects to incur the majority of its distribution expenses in
the first policy year. Although the applicable percentage for surrender charges
is higher in the years immediately following the receipt of any given Premium
Payment, such a charge in any given year is not necessarily related to actual
distribution expenses incurred in that year. Life of Virginia expects to recover
any shortfall from surrender charge revenues over the life of the Policy from
Life of Virginia's General Account, including amounts derived from the mortality
and expense risk charge and from mortality gains.
Set forth below is a general discussion of the amount and nature of the
charge, followed by a more technical explanation of how the charge is
calculated.
Surrender Charge (Withdrawal Charge). Surrender charges (also referred to as
a contingent deferred sales charge) will be imposed on full and partial
surrenders that occur within seven years of any Premium Payments. Surrender
charges are made to cover certain expenses relating to the sale of the Policy,
including commissions to registered representatives and other promotional
expenses. (In the Policy, the "surrender charge" is referred to as the
"withdrawal charge.") Surrender charges also apply to proceeds received upon
maturity if the Maturity Date occurs within seven years of receipt of a Premium
Payment.
Surrender charges are deducted from the amount surrendered. All or part of
the amount surrendered may be subject to charge. Any amount subject to charge
is considered a surrender of Premium Payments. Surrender charges are determined
using the assumption that Premium Payments are surrendered on a first-in
first-out basis, up to the amount surrendered. For each such Premium Payment,
the charge is a percentage of the Premium Payment (or portion thereof)
surrendered. The charge is calculated separately for each Premium Payment at
the time it is surrendered, as specified in the table below.
Number of Full Years
Between the Date of Surrender Charge as a
Receipt of Premium Percentage of Premium
Payment and Date of Surrender Payment Surrendered
less than 1 6%
1 6%
2 5%
3 5%
4 5%
5 4%
6 2%
7 or more 0%
After all Premium Payments have been surrendered, any remaining Account Value
may be surrendered. Surrender charges do not apply after all Premium Payments
have been surrendered.
Reduced Charges on Certain Surrenders. No surrender charge applies to the
first surrender of the policy year, if the amount surrendered is not more than
10% of the Account Value at the end of the Valuation Period during which the
surrender request is received. If the first surrender of the policy year is a
full surrender, or a partial surrender of more than 10% of the Account Value, no
surrender charge will apply to a portion of the amount surrendered equal to 10%
of the Account Value. Any remaining portion of the amount surrendered may be
subject to surrender charges, as described above. The amount subject to charge
will not exceed the amount surrendered.
Waived Surrender Charges for Certain Payment Plans. Surrender charges
otherwise applicable will be waived if and to the extent that proceeds are not
distributed in a lump sum and are applied to optional payment plans 1, 2 (for a
period of five or more years) or 5 (see page 36.).
<PAGE>
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement. Surrender charges arising from a full surrender or one or more
partial surrenders occurring before income payments begin will be waived if:
An Annuitant is, or has been confined to a state licensed or legally operated
hospital or inpatient nursing facility for at least 30 consecutive days; and
Such confinement begins at least one year after the policy date; and
An Annuitant was age 80 or younger on the policy date; and
The request for the full or partial surrender, together with proof of such
confinement is received in the Home Office of Life of Virginia while the
Annuitant is confined or within 90 days after discharge from the facility.
For purposes of this provision, Annuitant means either the Annuitant, Joint
Annuitant or Final Annuitant, whichever is applicable.
The waiver of surrender charges in the event of hospital or nursing facility
confinement may not be available in all states or all markets.
Transfer Charges
The Owner may transfer amounts among the Investment Subdivisions. Currently,
there is no limit on the number of transfers that may be made; however, Life of
Virginia reserves the right to impose such a limit in the future before Income
Payments begin. Also, where permitted by state law, Life of Virginia reserves
the right to refuse to execute any transfer if any of the Investment
Subdivisions that would be affected by the transfer are unable to purchase or
redeem shares of the mutual funds in which they invest.
The first transfer in each calendar month will be made without charge.
Thereafter, each time amounts are transferred during that calendar month, a
transfer charge of $10 will be deducted from the amount transferred to
compensate Life of Virginia for the costs in making the transfer. Life of
Virginia does not expect to make a profit on the transfer charge. No transfer
charge is imposed on transfers occurring after Income Payments begin.
Governmental Charges
Premium Taxes. Life of Virginia may deduct a charge for any premium taxes
incurred. The premium tax rates incurred by Life of Virginia currently range
from 0 to 3.5%. Any applicable premium tax charge may be deducted from either
the premium paid or from proceeds, (including benefits for surrender, maturity
and death).
Other Taxes. Under present laws, Life of Virginia will incur state and local
taxes (other than premium or similar taxes) in several states. At present, Life
of Virginia is not making a charge for these taxes but it reserves the right to
charge for such taxes.
Because of its current status under the Code, Life of Virginia does not expect
to incur any federal income tax liability that would be chargeable to Account 4.
Based upon this expectation, no charge is being made currently to Account 4 for
federal income taxes. If, however, Life of Virginia determines that such taxes
may be incurred, it may assess a charge for those taxes from Account 4.
Other Charges
Because Account 4 purchases shares of the Funds, the net assets of each
Investment Subdivision will reflect the investment advisory fee and other
expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these charges,
read the individual Fund prospectuses.
<PAGE>
Reduction of Charges for Group Sales
The surrender charge may be reduced for sales of the Policies to a trustee,
employer or similar entity representing a group or to members of the group where
such sales result in savings of expenses incurred by Life of Virginia in
connection with the sale of the Policies. The entitlement to such a reduction
in such charge will be determined by Life of Virginia based on the following
factors:
(1) The size of the group. Generally, the sales expenses for each individual
Owner for a larger group are less than for a smaller group because more
Policies can be implemented with fewer sales contacts and less administrative
cost.
(2) The total amount of Premium Payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on larger
purchase payments than on smaller ones.
(3) The purpose for which the Policies are purchased. Certain types of plans
are more likely to be stable than others. Such stability reduces the number of
sales contacts and administrative and other services required, reduces sales
administration and results in fewer Policy terminations. As a result, sales
and other expenses can be reduced.
(4) The nature of the group for which the Policies are being purchased. Certain
types of employee and professional groups are more likely to continue Policy
participation for longer periods than are other groups with more mobile
membership. If fewer Policies are terminated in a given group, Life of
Virginia's sales and other expenses are reduced.
(5) There may be other circumstances of which Life of Virginia is not presently
aware which could result in reduced sales expenses.
Reductions in this charge will not be unfairly discriminatory against any
person including the affected owners and all other owners of Policies.
Additional information about charge reductions is available from Life of
Virginia at its Home Office.
<PAGE>
INCOME PAYMENTS
Monthly Income Benefit
Life of Virginia will pay a Monthly Income Benefit to the Annuitant(s) for a
guaranteed minimum period beginning on the Maturity Date. The Monthly Income
Benefit will be paid in the form of Variable Income Payments similar to those
described in Optional Payment Plan 1, Life Income with 10 Years Certain
(automatic payment plan), using the sex and settlement age of the Annuitant(s),
unless another election is made by the Owner.
Under the Life Income with 10 Years Certain plan, income payments will
continue for the lifetimes of the Annuitant and any Joint Annuitant. If the
Annuitant and any Joint Annuitant die before the end of ten years, the remaining
payments for the ten year period will be discounted at the same rate used to
calculate the monthly income. This discounted amount will be paid in one sum.
Unless a different date is chosen on the application for the Policy, the
Maturity Date is the Policy anniversary that the Annuitant reaches age 90. The
Owner may change the Maturity Date to any date at least 10 years after the date
of the most recent premium payment by sending Life of Virginia written notice
before the Maturity Date then in effect.
Prior to the Maturity Date, you, the Owner, may elect, by written notice to
the Home Office, to change the payment plan. If you do choose a different plan,
the amount of the income payment will reflect the plan chosen. You may elect to
receive the Surrender Value in a lump sum instead of receiving income payments.
If the Surrender Value is paid, there will be no further obligation under this
policy.
Certain states prohibit the use of actuarial tables that distinguish between
men and women in determining benefits for annuity polices issued on the lives of
residents. Therefore, policies offered by this Prospectus on the lives of
residents of those states have annuity income payments which are based on
actuarial tables that do not differentiate on the basis of sex.
Determination of Monthly Income Benefits
The initial Monthly Income Benefit under the automatic payment plan will be
calculated by multiplying (a) times (b) divided by (c) where: (a) is the
monthly payment per $1,000, shown under the optional payment plans for Life
Income with 10 Years Certain (Joint Life and Survivor Income for Joint
Annuitants), using the sex(es) and settlement age(s) of the Annuitant(s), on the
Maturity Date; (b) is the Surrender Value on the Maturity Date less any premium
taxes paid by Life of Virginia that were not recouped previously by a premium
tax charge; and (c) is $1,000. (see Optional Payment Plans for information
about subsequent variable income payments.)
Income Payments will be made monthly unless the Owner elects quarterly,
semi-annual or annual payments by written request to Life of Virginia.
If at the time Income Payments begin, the Owner has not provided Life of
Virginia with a written election not to have federal income taxes withheld, Life
of Virginia must by law withhold such taxes from the taxable portion of such
Income Payments and remit that amount to the federal government. Also, in some
other circumstances, Life of Virginia may withhold taxes. (See Direct Rollover
and Mandatory Withholding Requirements, p. 43, and Federal Income Tax
Withholding, p. 43.) In addition, any proceeds applied under an optional
payment plan are subject to the imposition of a premium tax charge in those
states which impose such a tax upon annuitization, or deduction of the deferred
premium tax in those states which impose such a tax on Life of Virginia for
premiums received. (See Premium Taxes, p. 33.)
Optional Payment Plans
Proceeds payable on the Maturity Date will be paid as described in the Monthly
Income Benefit section. Death and surrender proceeds will be paid in one sum.
Subject to the rules stated below, and to the death benefit and distribution
rules stated above, however, any part of death or surrender proceeds can be left
with us and paid under a payment plan. (For the tax treatment of surrender
proceeds and death benefits, see Taxation of Partial and Full Surrenders, p. 39,
and Taxation of Death Benefit Proceeds, p. 40.) Any proceeds left with us will
be applied to calculate the amount of the income. During the Annuitant's life,
a payment plan may be chosen. If a Beneficiary is changed, then the payment plan
selection is no longer in effect unless a request to continue it is made. The
Designated Beneficiary can choose a plan at the death of the Annuitant if one
has not been chosen.
<PAGE>
Optional payment plans can provide either Fixed Income Payments or Variable
Income Payments as selected by the Owner or the payee. There are currently five
optional payment plans available. Optional payment plans 1 through 5 can be
used to provide Fixed Income Payments while only optional payment plans 1 and 5
are available to provide Variable Income Payments. A plan and the form of the
Income Payments may be designated in the application or by notifying Life of
Virginia in writing at its Home Office. If the payee is not a natural person,
consent of Life of Virginia is required prior to selecting a plan.
The effect of choosing a Fixed Income Payment is that the minimum amount of
each Income Payment will be calculated on the date the first Income Payment is
made and will not change. If Fixed Income Payments are chosen, the proceeds
will be transferred to the General Account of Life of Virginia on the date the
Income Payments begin. Minimum Fixed Income Payments will be fixed in amount
and duration by the optional payment plan chosen and the age and sex of the
Annuitant on that date. For further information, the Owner should contact Life
of Virginia at its Home Office.
Fixed Income Payments are based on the current assumed rate of interest as
determined by Life of Virginia when Income Payments begin. The assumed interest
rate may be changed at the discretion of Life of Virginia; however, the minimum
guaranteed interest rate is 3.0%.
If the Owner, (or the Designated Beneficiary) elects to receive Variable
Income Payments under the applicable optional payment (Plan 1 or Plan 5), the
proceeds may be allocated among up to seven Investment Subdivisions. The first
Variable Income Payment is determined by the optional payment plan chosen and
the amount of proceeds applied to the plan. The dollar amount of subsequent
Income Payments will reflect the investment experience of the selected
Investment Subdivisions and is determined by means of Annuity Units.
The number of Annuity Units for an Investment Subdivision will be determined
when Income Payments begin and will remain fixed unless transferred. (See
Transfers p. 25.) The number of Annuity Units for an Investment Subdivision is
(a) divided by (b) where: (a) is the portion of the first Income Payment
allocated to an Investment Subdivision; and (b) is the Annuity Unit Value for
that Investment Subdivision seven days before the first Income Payment is due.
For subsequent payments, the Income Payment amount for an Investment Subdivision
is the number of Annuity Units for that Investment Subdivision times the Annuity
Unit Value for that Investment Subdivision seven days before the payment is due.
For each Investment Subdivision, the Annuity Unit Value for the first
Valuation Period was $10. The Annuity Unit Value for each subsequent Valuation
Period is (a) times (b) times (c) where: (a) is the Net Investment Factor for
that period (see Statement of Additional Information -- Net Investment Factor,
p. 3.); (b) is the Annuity Unit Value for the immediately preceding Valuation
Period; and (c) is the investment result adjustment factor.
The investment result adjustment factor recognizes an assumed interest rate of
3% per year used in determining the amounts of the Income Payments. This means
that if the net investment experience of the Investment Subdivision to which the
Annuity Units apply for a given month exceeds the monthly equivalent of 3% per
year, the monthly payment will be greater than the previous payment. If the net
investment experience for such Subdivision is less than the monthly equivalent
of 3% per year, the monthly payment will be less than the previous monthly
payment.
Payments under Plans 1,2,3 or 5 will begin on the date we receive proof of
death, on surrender, or on the policy's Maturity Date. Payments under Plan 4
will begin at the end of the first interest period after the date Proceeds are
otherwise payable. Plan 4 is not available under Qualified Policies.
Under all of the optional payment plans, if any payment made more frequently
than annually would be or becomes less than $100, Life of Virginia reserves the
right to reduce the frequency of payments to an interval that would result in
each payment being at least $100. If the annual payment payable is less than
$20, Life of Virginia will pay the Surrender Value in a lump sum. Upon making
such a payment, Life of Virginia will have no future obligation under the
Policy.
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option.
Plan 1 -- Life Income with Period Certain. Equal monthly payments will be
made for a guaranteed minimum period. If the payee lives longer than the
minimum period, payments will continue for his or her life. The minimum
period can be 10, 15 or 20 years. Guaranteed amounts payable under this plan
will earn interest at 3% compounded yearly. Life of Virginia may increase
the interest rate and the amount of any payment. If the payee dies before the
end of the guaranteed period, the amount of remaining payments for the
minimum period will be discounted at the same rate used in calculating Income
Payments. "Discounted" means Life of Virginia will deduct the amount of
interest each remaining payment would have earned had it not been paid out
early. The discounted amounts will be paid in one sum to the payee's estate
unless otherwise provided.
<PAGE>
Plan 2 -- Income for a Fixed Period. Equal periodic payments will be made
for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly, or monthly. Guaranteed amounts payable under this
plan will earn interest at 3% compounded yearly. Life of Virginia may
increase the interest and the amount of any payment. If the payee dies, the
amount of the remaining guaranteed payments will be discounted to the date of
the payee's death at the same rate used in calculating Income Payments. The
discounted amount will be paid in one sum to the payee's estate unless
otherwise provided.
Plan 3 -- Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly,
or monthly. The amount paid each year must be at least $120 for each $1,000
of proceeds. Payments will continue until the Proceeds are exhausted. The
last payment will equal the amount of any unpaid proceeds. If Fixed Income
Payments are made under this plan, unpaid Proceeds will earn interest at 3%
compounded yearly. Life of Virginia may increase the interest rate; if the
interest rate is increased, the payment period will be extended. If the payee
dies, the amount of the remaining proceeds with earned interest will be paid
in one sum to his or her estate unless otherwise provided.
Plan 4 -- Interest Income. Periodic payments of interest earned from the
proceeds left with Life of Virginia will be paid. Payments can be annual,
semi-annual, quarterly, or monthly, and will begin at the end of the first
period chosen. Proceeds will earn interest at 3% compounded yearly. Life of
Virginia may increase the interest rate and the amount of any payment. If the
payee dies, the amount of remaining proceeds and any earned but unpaid
interest will be paid in one sum to his or her estate unless otherwise
provided. This plan is not available under Qualified Policies.
Plan 5 -- Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be
at least 35 years old when payments begin. Payments will continue as long as
either payee is living. If Fixed Income Payments are made under this Plan,
the guaranteed amount payable under this plan will earn interest at 3%
compounded yearly. Life of Virginia may increase the interest rate and the
amount of any payment. If both payees die before the end of the minimum
period, the amount of the remaining payments for the 10-year period will be
discounted at the same rate used in calculating Income Payments. The
discounted amount will be paid in one sum to the survivor's estate unless
otherwise provided.
<PAGE>
FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax
advice. The federal income tax consequences associated with the purchase of a
Policy are complex, and the application of the pertinent tax rules to a
particular person may vary according to facts peculiar to that person.
This discussion is based on the law, regulations, and interpretations existing
on the date of this prospectus. These authorities, however, are subject to
change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or other local tax consequences
associated with the purchase of a Policy. In addition, LIFE OF VIRGINIA MAKES
NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY
POLICY OR OF ANY TRANSACTION INVOLVING A POLICY.
Non-Qualified Policies
Premium Payments. A purchaser of a Policy that does not qualify for the
special tax treatment discussed below in connection with Policies used as
individual retirement annuities or used with other qualified retirement plans
may not deduct or exclude from gross income the amount of the premiums paid. In
this discussion, such a Policy is called a "Non- Qualified Policy".
Tax Deferral During Accumulation Period. In general, until distributions are
made or deemed to be made from a Non-Qualified Policy (as discussed below), an
Owner who is a natural person is not taxed on increases in the Account Value
resulting from the investment experience of Account 4. However, this rule
applies only if (1) the investments of Account 4 are "adequately diversified" in
accordance with Treasury Department regulations, and (2) Life of Virginia,
rather than the Owner, is considered the owner of the assets of Account 4 for
federal tax purposes.
(1) Diversification Requirements. Treasury regulations prescribe the manner
in which the investments of a separate account such as Account 4 are to be
"adequately diversified." Any failure of Account 4 to comply with the
requirements of these regulations would cause each Owner to be taxable
currently on the increase in the Account Value.
Account 4, through the Funds, intends to comply with the diversification
requirements prescribed by the Treasury regulations. Although Life of Virginia
does not control the investments of the Funds, (other than the Life of Virginia
Series Fund, Inc.) it has entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury.
(2) Ownership Treatment. In certain circumstances, variable contract owners
may be considered the owners, for federal tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owners' gross income annually as earned. Several years ago,
the Internal Revenue Service (the "Service") 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. More recently, the
Treasury announced, in connection with the issuance of regulations concerning
investment diversification, that those regulations "do not provide guidance
concerning the circumstances in which investor control of the investments of a
segregated asset [i.e. separate] account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets in the
account." This announcement also stated that guidance would be issued by way
of regulations or rulings on the "extent to which policyholders may direct
their investments to particular sub-accounts [of a separate account] without
being treated as owners of the underlying assets." As of the date of this
prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those addressed by the Service in rulings in which it
was determined that contract owners were not owners of separate account assets.
For example, the Owner of this Policy has the choice of more Funds to which to
allocate premiums and Account Values, and may be able to reallocate more
frequently than in such rulings. These differences could result in an Owner
being considered, under the standard of those rulings, the owner of the assets
of Account 4. To ascertain the tax treatment of its Owners, Life of Virginia
has requested, with regard to a policy similar to this Policy, a ruling from
the Internal Revenue Service that it, and not its Owners, is the owner of the
assets of Account 4 for federal income tax purposes. The Service has informed
Life of Virginia that it will not rule on the request until issuance of the
promised guidance referred to in the preceding paragraph. Because Life of
Virginia does not know what standards will be set forth in regulations or
revenue rulings which the Treasury has stated it expects to be issued, Life of
Virginia has reserved the right to modify its practices to attempt to prevent
the Owner from being considered the owner of the assets of Account 4.
<PAGE>
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 an Owner as the owner of the assets of Account 4, that treatment might
apply only on a prospective basis. However, if the ruling or regulations were
not considered to set forth a new position, an Owner might retroactively be
determined to be the owner of the assets of Account 4.
An Owner who is not a natural person -- that is, an entity such as a
corporation or a trust -- generally is taxable currently on the annual increase
in the Account Value of a Non-Qualified Policy, unless an exception to this
general rule applies. Exceptions exist for, among other things, an Owner which
is not a natural person but which holds the Policy as an agent for a natural
person. The following discussion applies to Policies owned by natural persons.
In addition, if the Policy's Maturity Date occurs at a time when the Annuitant
is at an advanced age, such as over age 85, it is possible that the Owner will
be taxable currently on the annual increase in the Account Value.
Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon a partial or full surrender. Any amount so
distributed upon a partial surrender is includible in income to the extent that
the Account Value immediately before the partial surrender exceeds the
"investment in the contract" at that time. The amount distributed upon a full
surrender is includible in income to the extent that the Policy's Surrender
Value exceeds the investment in the contract at the time of surrender. For
these purposes, the investment in the contract at any time equals the total of
the Premium Payments made for a Policy to that time, less any amounts previously
received from the Policy which were not included in income.
The Policy provides a Death Benefit that in certain circumstances may exceed
the greater of the Premium Payments and the Account Value. As described
elsewhere in this Prospectus, Life of Virginia imposes certain charges with
respect to the Death Benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial surrender of the Policy.
All non-qualified annuity contracts which are issued after October 21, 1988 by
Life of Virginia or any of its affiliates with the same person designated as the
Owner within the same calendar year will be aggregated and treated as one
contract for purposes of determining any tax on distributions.
The foregoing rules will apply to amounts distributed in connection with the
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement.
Taxation of Annuity Payments. Amounts may be distributed from a Non-Qualified
Policy as payments under one of the five optional payment plans. In the case of
optional payment plans other than Plan 4 (Interest Income), typically a portion
of each payment is includible in income when it is distributed. Normally, the
portion of a payment includible in income equals the excess of the payment over
the exclusion amount. The exclusion amount, in the case of Variable Income
Payments under Plans 1 and 5, is the amount determined by dividing the
"investment in the contract" for the Policy when the payments begin to be made
(as defined above) by the number of payments expected to be made (determined by
Treasury regulations). Also, in the case of Fixed Income Payments under Plans 1,
2, 3, and 5, the exclusion amount is the amount determined by multiplying the
payment by the ratio of such investment in the contract, adjusted for any
period-certain or refund feature, to the Policy's "expected return" (determined
under Treasury regulations). However, payments which are received after the
investment in the contract has been fully recovered -- i.e., after the sum of
the excludable portions of the payments equal the investment in the contract --
will be fully includible in income. On the other hand, should the payments
cease because of the death of the Annuitant before the investment in the
contract has been fully recovered, the Annuitant (or, in certain cases, the
Designated Beneficiary) is allowed a deduction for the unrecovered amount.
If amounts have become payable under the Policy (such as where the Owner
elects to surrender an amount, or where the Designated Beneficiary elects to
receive amounts payable under the Optional Death Benefit and if the Distribution
Rules (described beginning on page 28.) do not apply to such amount, the amount
will be treated as a partial or full surrender for federal income tax purposes
if applied under an optional payment plan later than 60 days after the time when
the amount became payable. Thus, if such an amount is applied under an optional
payment plan after the 60 day period, it will be treated as a partial or full
surrender, even though no amounts may have been distributed from the Policy.
In the case of Plan 4, the proceeds left with Life of Virginia are considered
distributed for tax purposes at the time Plan 4 takes effect, and are taxed in
the same manner as a full surrender of the Policy, as described above. The
periodic interest payments are includible in the recipient's income when they
are paid or made available. In addition, if amounts are applied under Plan 3
when the payee is at an advanced age, such as age 80 or older, it is possible
that such amounts would be treated in a manner similar to that under Plan 4.
<PAGE>
Taxation of Systematic Withdrawals. In the case of Systematic
Withdrawals, described on page 28, the amount of each withdrawal should be
considered as a distribution and taxed in the same manner as a partial
surrender of the Policy, as described above. However, there is some
uncertainty regarding the tax treatment of Systematic Withdrawals, and it
is possible that additional amounts may be includible in income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before
the maturity date from a Non-Qualified Policy because of the death of the
Annuitant. Such Death Benefit Proceeds are includible in the income of the
recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender of the Policy, as described above
(substituting the Death Benefit Proceeds for the Surrender Value), or (2)
if distributed under an optional payment plan, they are taxed in the same
manner as annuity payments, as described above.
Penalty Tax on Premature Distributions. Subject to certain exceptions, a
penalty tax is also imposed on the foregoing distributions from a
Non-Qualified Policy, equal to 10 percent of the amount of the distribution
that is includible in income. The exceptions provide, however, that this
penalty tax does not apply to distributions made (1) on or after the
recipient attains age 59-1/2, (2) because the recipient has become disabled
(as defined in the tax law), (3) on or after the death of the Owner, or if
such Owner is not a natural person, on or after the death of the primary
annuitant under the Policy (as defined in the tax law), or (4) as part of a
series of substantially equal periodic payments over the life (or life
expectancy) of the recipient or the joint lives (or life expectancies) of
the recipient and his or her designated beneficiary. In the case of
Systematic Withdrawals, it is uncertain whether such withdrawals will
qualify for exception (4) above. In addition, a transfer between
Investment Subdivisions may result in payments not qualifying for exception
(4) above.
Assignments and Loans. An assignment or pledge of (or an agreement to
assign or pledge) a Non-Qualified Policy is taxed in the same manner as a
partial surrender, as described above, to the extent of the value of the
Policy so assigned or pledged. The investment in the contract is increased
by the amount includible as income with respect to such assignment or
pledge, though it is not affected by any other amount in connection with
the assignment or pledge (including its release).
Qualified Policies
The following sections describe tax considerations of Policies used as
Individual Retirement Annuities or other qualified retirement plans
("Qualified Policies"). Life of Virginia does not currently offer all of
the types of Qualified Policies described, and may not offer them in the
future. Prospective purchasers of Qualified Policies should therefore
contact Life of Virginia's Home Office to ascertain the availability of
Qualified Policies at any given time.
IRA Policies
Premium Payments. A Policy that meets certain requirements set forth in
the tax law may be used as an individual retirement annuity (i.e., an "IRA
Policy"). Both the amount of the Premium Payments that may be paid, and
the tax deduction that the Owner may claim for such Premium Payments, are
limited under an IRA Policy.
In general, the Premium Payments that may be made for any IRA Policy for
any year are limited to the lesser of $2,000 or 100 percent of the Owner's
earned income for the year. Also, in the case of an individual who has a
noncompensated spouse, Premium Payments may be made into an IRA Policy for
the benefit of the spouse. In such a case, however, the Premium Payments
that may be made for the spouse's IRA Policy for any year are limited to
the lesser of $2,000 or the excess of (1) $2,250 (or, if less, 100 percent
of the individual's earned income) over (2) the individual's Premium
Payments for his or her own IRA Policy. An excise tax is imposed on IRA
contributions that exceed the law's limits.
The deductible amount of the Premium Payments made for an IRA Policy for
any taxable year (including a Policy for a noncompensated spouse) is
limited to the amount of the Premium Payments that may be paid for the
Policy for that year. Furthermore, a single person who is an active
participant in a qualified retirement plan (that is, a qualified pension,
profit-sharing, or annuity plan, a simplified employee pension plan, or a
"section 403(b)" annuity plan, as discussed below) and who has adjusted
gross income in excess of $35,000 may not deduct Premium Payments, and such
a person with adjusted gross income between $25,000 and $35,000 may deduct
only a portion of such payments. Also, married persons who file a joint
return, one of whom is an active participant in a qualified retirement
plan, and who have adjusted gross income in excess of $50,000 may not
deduct Premium Payments, and those with adjusted gross income between
$40,000 and $50,000 may deduct only a portion of such payments. Married
persons filing separately may not deduct Premium Payments if either the
taxpayer or the taxpayer's spouse is an active participant in a qualified
retirement plan.
In applying these and other rules applicable to an IRA Policy, all
individual retirement accounts and annuities owned by an individual are
treated as one contract, and all amounts distributed during any taxable
year are treated as one distribution.
<PAGE>
Tax Deferral During Accumulation Period. Until distributions are made
from an IRA Policy, increases in the Account Value of the Policy are not
taxed. IRA Policies generally may not provide life insurance coverage, but
they may provide a death benefit that equals the greater of the premiums
paid and the contract value. The Policy provides a Death Benefit that in
certain circumstances may exceed the greater of the Premium Payments and
the Account Value. Life of Virginia plans to ask the Service to approve
use of the Policy, as to form, as an IRA policy, but there is no assurance
that such approval will be granted.
Taxation of Distributions and Rollovers. If all Premium Payments made to
an IRA Policy were deductible, all amounts distributed from the Policy are
included in the recipient's income when distributed. However, if
nondeductible Premium Payments were made to an IRA Policy (within the
limits allowed by the tax law), a portion of each distribution from the
Policy typically is included in income when it is distributed. In such a
case, any amount distributed as an annuity payment or in a lump sum upon
death or a full surrender is taxed as described above in connection with
such a distribution from a Non-Qualified Policy, treating as the investment
in the contract the sum of the nondeductible Premium Payments at the end of
the taxable year in which the distribution commences or is made (less any
amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the
distribution over the exclusion amount which in turn equals the
distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a
qualified retirement plan to an IRA Policy (or from one individual
retirement annuity or individual retirement account to an IRA policy)
without incurring tax if certain conditions are met. Only certain types of
distributions from qualified retirement plans or individual retirement
annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from an IRA Policy equal to 10 percent of the
amount of the distribution includible in income. (Amounts rolled over from
an IRA Policy generally are excludable from income.) The exceptions
provide, however, that this penalty tax does not apply to distributions
made (1) on or after age 59-1/2, (2) on or after death or because of
disability (as defined in the tax law), or (3) as part of a series of
substantially equal periodic payments over the life (or life expectancy) of
the recipient or the joint lives (or joint life expectancies) of the
recipient and his or her designated beneficiary. In addition to the
foregoing, failure to comply with a minimum distribution requirement will
result in the imposition of a penalty tax of 50 percent of the amount by
which a minimum required distribution exceeds the actual distribution from
an IRA Policy. Under this requirement, distributions of minimum amounts
from an IRA Policy as specified in the tax law must commence by April 1 of
the calendar year following the calendar year in which the Annuitant
attains age 70-1/2, or when he retires, whichever is later. Further, after
1988, such distributions generally must begin by April 1 of the calendar
year in which the employee attains age 70-1/2 regardless of whether he or
she has retired.
Simplified Employee Pension Plans
An employer may use a Policy to establish for an employee an individual
retirement annuity plan known as a "simplified employee pension plan" (or
"SEP"), if certain requirements set forth in the tax law are satisfied.
Premium Payments may be made into a Policy used in a SEP generally in
accordance with the rules applicable to individual retirement annuities,
though with expanded contribution limits. Such payments are deductible by
the employer and are not includible in the income of the employee. The
taxation of distributed amounts generally follows the rules applicable to
individual retirement annuities.
In particular, employers should consider that IRA Policies generally may
not provide life insurance coverage, but they may provide a death benefit
that equals the greater of the premiums paid and the contract value. The
Policy provides a Death Benefit that in certain circumstances may exceed
the greater of the Premium Payments and the Account Value. Life of
Virginia plans to ask the Service to approve use of the Policy, as to form,
as an IRA Policy, but there is no assurance that such approval will be
granted.
Section 403(b) Annuities
Premium Payments. Premiums paid for a Policy on behalf of an employee by
a public educational institution or certain other tax-exempt employers are
not included in the employee's income if the Policy meets certain
requirements set forth in the tax law. There are a number of limitations
on contributions to a "Section 403(b) Policy". For example, Premium
Payments made as elective deferrals through a salary reduction agreement
with an employee generally are limited to $9,500 per year (or, if greater,
$7,000 per year as adjusted by the Service for cost of living increases).
(Note that contributions to certain other qualified retirement plans, such
as Section 401(k) plans or to SEP plans, by the Owner may reduce these
limits on elective deferrals.) Other limitations may be more restrictive.
In applying these and other rules applicable to a Section 403(b) Policy,
that Policy and all similar contracts purchased by the same employer for
the same employee are treated as one contract.
<PAGE>
Tax Deferral During Accumulation Period. Until distributions are made
from a Section 403(b) Policy, increases in the Account Value are not taxed.
Purchasers should consider that the Policy provides a Death Benefit that
in certain circumstances may exceed the greater of the Premium Payments and
the Account Value. It is possible that such Death Benefit could be
characterized as an incidental death benefit. If the Death Benefit were so
characterized, this could result in currently taxable income to purchasers.
In addition, there are limitations on the amount of incidental death
benefits that may be provided under a Section 403(b) Policy. Even if the
Death Benefit under the Policy were characterized as an incidental death
benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance policy as part of his or her Section 403(b)
Policy.
Taxation of Distributions and Rollovers. If no portion of the premiums
paid into a Section 403(b) Policy were includible in the employee's income,
all amounts distributed from the Policy are included in the recipient's
income when distributed. However, if Premium Payments were made to a
Section 403(b) Policy which were includible in the employee's income, a
portion of each distribution from the Policy typically is included in
income when it is distributed. In such a case, any amount distributed as
an annuity payment or in a lump sum upon death or a full surrender is taxed
as described above in connection with such a distribution from a
Non-Qualified Policy, treating as the investment in the contract the sum of
the Premium Payments made into the Policy which were not excluded from
income as of the time the distribution commences or is made (less any
amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the
distribution over the exclusion amount, which in turn equals the
distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be rolled over from a Section
403(b) Policy (or similarly qualifying contract) to another Section 403(b)
Policy (or similarly qualifying contract) or to an individual retirement
account or individual retirement annuity without incurring tax if certain
conditions are met. Only certain types of distributions may be rolled
over.
Beginning in 1989, a Section 403(b) Policy is required to prohibit
distributions of amounts attributable to elective deferrals and earnings
thereon (made under a salary reduction agreement) prior to age 59-1/2,
separation from service, death or disability. Distributions of elective
deferrals (but not any income earned thereon) may nonetheless be permitted
in the case of hardship.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from a Section 403(b) Policy equal to 10 percent
of the amount of the distribution includible in income. (Amounts rolled
over from a Section 403(b) Policy generally are excludable from income,
although various withholding requirements may nonetheless apply to such
amounts, as discussed below). The exceptions provide, however, that this
penalty tax does not apply to distributions made (1) on or after age
59-1/2, (2) on or after death or because of disability (as defined in the
tax law), (3) as part of a series of substantially equal periodic payments
beginning after the employee separates from service and made over the life
(or life expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and his or her designated beneficiary, or (4)
after separation from service after attainment of age 55.
In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of
50 percent of the amount by which a minimum required distribution exceeds
the actual distribution from a Section 403(b) Policy. Under this
requirement, in the case of benefits accrued after December 31, 1986,
distributions of minimum amounts specified by the tax law must commence by
April 1 of the calendar year following the calendar year in which the
employee attains age 70-1/2, or when he retires, whichever is later.
Further, after 1988, such distributions generally must begin by April 1 of
the calendar year following the calendar year in which the employee attains
age 70-1/2, regardless of whether he or she has retired.
Other Qualified Retirement Plans
Premium Payments. Premium Payments made by an employer for a Policy used
in connection with a pension, profit-sharing, or annuity plan qualified
under section 401 or 403(a) of the Code are deductible by the employer
within certain limits. Such payments are also excludable from the income
of the employee within certain limits.
Tax Deferral and Taxation of Distributions. The deferral of taxation on
Account Value increases and the tax treatment of distributed amounts
(including the penalty tax) described above in the case of IRA Policies and
Section 403(b) Policies generally applies with respect to amounts held
under or distributed from Policies used in connection with other qualified
retirement plans. For Policies and amounts distributed therefrom to be
eligible for such treatment, certain requirements specified in the tax law
must be satisfied.
<PAGE>
The Policy provides a Death Benefit that in certain circumstances may
exceed the greater of the Premium Payments and the Account Value. It is
possible that such Death Benefit could be characterized as an incidental
death benefit. There are limitations on the amount of incidental death
benefits that may be provided under pension and profit sharing plans. In
addition, the provision of such benefits may result in currently taxable
income to participants but only to the extent of the costs of such
benefits.
Legal and Tax Advice for Qualified Plans
The requirements of the tax law applicable to all qualified retirement
plans, and the tax treatment of amounts held and distributed under such
plans, are quite complex. Accordingly, a prospective purchaser of a Policy
to be used in connection with any such plan should seek competent legal and
tax advice regarding the suitability of the Policy for the situation
involved, the applicable requirements, and the treatment of the rights and
benefits under a Policy so used.
Direct Rollover and Mandatory Withholding Requirements
If a Policy is used in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Policy, any "eligible rollover distribution" from the Policy
will be subject to the new direct rollover and mandatory withholding
requirements enacted by Congress in 1992. An eligible rollover
distribution generally is any taxable distribution from a qualified pension
plan under section 401(a) of the Code, qualified annuity plan under section
403(a) of the Code, or section 403(b) annuity or custodial account,
excluding certain amounts (such as minimum distributions required under
section 401(a)(9) of the Code and distributions which are part of a "series
of substantially equal periodic payments" made for the life or a specified
period of 10 years or more). Under these new requirements, withholding at
a rate of 20 percent will be imposed on any eligible rollover distribution
received from the Policy. Unlike withholding on certain other amounts
distributed from the Policy, discussed below, the recipient cannot elect
out of withholding with respect to an eligible rollover distribution.
However, this 20 percent withholding will not apply if, instead of
receiving the eligible rollover distribution, the plan participant elects
to have it directly transferred to certain qualified retirement plans.
Prior to receiving an eligible rollover distribution, the plan participant
will receive notice (from the plan administrator or Life of Virginia)
explaining generally the direct rollover and mandatory withholding
requirements and how to avoid the 20 percent withholding by electing a
direct transfer.
Federal Income Tax Withholding
Amounts distributed from a Policy, to the extent includible in income
under the federal tax laws, are subject to federal income tax withholding.
Life of Virginia will withhold and remit a portion of such amounts to the
U.S. Government unless properly notified by the Owner or other payee, at or
before the time of the distribution, that he or she chooses not to have any
amounts withheld. In some instances, however, Life of Virginia may be
required to withhold amounts. (See the discussion above regarding
withholding requirements applicable to distributions from various qualified
retirement plans including Section 403(b) policies.)
<PAGE>
GENERAL PROVISIONS
The Owner
The Owner or Joint Owners are designated in the application. (Joint
Owners own the Policy equally with the right of survivorship.) The Owner
or Joint Owners may exercise all of the rights and privileges under the
Policy, subject to the rights of any beneficiary named irrevocably, and any
assignee under an assignment filed with Life of Virginia. Disposition of
the Policy is subject to the Policy's death provisions (see Death
Provisions, p. 28.). All Owners who are natural persons must be
Annuitants. If any Annuitant dies while this policy is in force and before
income payments begin, the Designated Beneficiary will become the sole
owner of the Policy following such a death, subject to the distribution
rules in the Policy's death provisions. The Designated Beneficiary will be
the first person named as follows who is alive or in existence on the date
of the death of an Annuitant: Final Annuitant, Primary Beneficiary(ies),
Contingent Beneficiary(ies), and if no one else is alive, the estate of the
sole Annuitant (if no Joint Annuitant was named) or of the Final Annuitant.
The Designated Beneficiary, for purposes of the required distribution
rules of Section 72(s) of the Code, will receive the required distribution
if the Owner dies prior to the Maturity Date. The required distribution is
more fully described in Death Provisions, p. 28.
The Annuitant
The Annuitant is the person designated to receive the Monthly Income
Benefit beginning on the Maturity Date. He/she is named in the
application. The Annuitant's age and sex are used to determine the amount
of the guaranteed monthly income payment.
The Beneficiary
One or more Primary and Contingent Beneficiary(ies) may be designated by
the Owner in the application. If changed, the Primary Beneficiary or
Contingent Beneficiary is as shown in the latest change filed with Life of
Virginia.
Changes By the Owner
If any Owner is a trust, such trust can be changed at any time until the
death of an Annuitant, if this right was reserved. The new Owner must also
be a trust for the benefit of the same Annuitant and the same Joint
Annuitant, if any. Also, until the death of an Annuitant, the Owner can
change the Beneficiary, if this right was reserved. Except as just
described, neither the Owner nor the Beneficiary can be changed. In
addition, no changes in the Annuitant or Joint Annuitant are permitted.
To make a change, a written request must be sent to Life of Virginia at
its Home Office. The request and the change must be in a form satisfactory
to Life of Virginia and must actually be received by the Company. The
change will take effect as of the date the request is signed by the Owner.
The change will be subject to any payment made before the change is
recorded by Life of Virginia.
Payment under the Policies
Life of Virginia will usually pay any amounts payable as a result of a
full or partial surrender within seven days after it receives a written
request at its Home Office in a form satisfactory to it. Life of Virginia
will usually pay any Death Benefit within seven days after it receives Due
Proof of Death. Amounts payable as a result of a full or partial
surrender, death of the Annuitant or the Maturity Date may be postponed
whenever: (i) the New York Stock Exchange is closed other than customary
weekend and holiday closings, or trading on the New York Stock Exchange is
restricted as determined by the Commission; or (ii) the Commission by order
permits postponement for the protection of Owners; or (iii) an emergency
exists, as determined by the Commission, as the result of which disposal of
securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the net assets of Account 4.
Payments under a Policy which are derived from any amount paid to Life of
Virginia by check or draft may be postponed until such time as Life of
Virginia is satisfied that the check or draft has cleared the bank upon
which it is drawn.
If, at the time the Owner makes a full or partial surrender request, he
or she has not provided Life of Virginia with a written election not to
have federal income taxes withheld, Life of Virginia must by law withhold
such taxes and remit that amount to the federal government. Moreover, the
Code provides that a 10% penalty will be imposed on certain early
surrenders. (See Federal Tax Matters)
Any Death Benefit proceeds that are paid in one lump sum will include
interest from the date of receipt of Due Proof of Death to the date of
payment. Interest will be paid at a rate set by Life of Virginia, or by
law if greater. The minimum interest rate which will be paid is 2.5%.
Interest will not be paid beyond one year or any longer time set by law.
<PAGE>
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being
licensed to sell variable annuity policies for Life of Virginia, are also
registered representatives of Forth Financial Securities Corporation, the
principal underwriter of the Policies, or of broker-dealers who have
entered into written sales agreements with the principal underwriter.
Forth Financial Securities Corporation is a wholly-owned subsidiary of
Combined Insurance Company of America as is Life of Virginia. Forth
Financial Securities Corporation, an affiliate of Life of Virginia, is a
Virginia corporation located at 6610 W. Broad St., Richmond, Virginia
23230. Forth Financial Securities Corporation is registered with the
Commission under the Securities Exchange Act of 1934 as a broker-dealer and
is a member of the National Association of Securities Dealers, Inc. Forth
Financial Securities Corporation also serves as principal underwriter for
variable life insurance policies issued by Life of Virginia. However, no
amounts have been retained by Forth Financial Securities Corporation for
acting as principal underwriter of the Life of Virginia policies.
Writing agents of Life of Virginia will receive commissions based on a
commission schedule and rules. Commissions depend on the premiums paid.
The agent will receive a commission of 3% of the initial premium paid and
any Additional Premium Payments.
Agents may also be eligible to receive certain bonuses and allowances, as
well as retirement plan credits, based on commissions earned. Field
management of Life of Virginia receives compensation which may be based in
part on the level of agent commissions in their management units.
Broker-dealers and their registered agents will receive first-year and
subsequent year commissions equivalent to the total commissions and
benefits received by the field management and writing agents of Life of
Virginia.
VOTING RIGHTS AND REPORTS
To the extent required by law, Life of Virginia will vote the Funds'
shares held in Account 4 at regular and special shareholder meetings of the
Funds, in accordance with instructions received from persons having voting
interests in Account 4. If, however, the 1940 Act or any regulation
thereunder should be amended or if the present interpretation thereof
should change, and as a result, Life of Virginia determines that it is
permitted to vote Fund shares in its own right, it may elect to do so.
Before Income Payments begin, the Owner exercises the voting rights under
the Policy. After Income Payments begin, the person receiving the Income
Payments has the voting interests. Before Income Payments begin, the
number of votes which each Owner has the right to instruct will be
determined for a portfolio by dividing a Policy's Account Value in the
subdivision investing in that portfolio by the net asset value per share of
the portfolio. Fractional shares will be counted. After Income Payments
begin, the number of votes after the first Income Payment is received will
be determined by dividing the reserve for such Policy allocated to the
Investment Subdivision by the net asset value per share of the
corresponding portfolio. After Income Payments begin, the reserves
attributable to a Policy decrease as the reserves allocated to the
Investment Subdivision decrease. Fractional shares will be counted.
The number of votes which the Owner has the right to instruct will be
determined as of the date coincident with the date established by a
particular Fund for determining shareholders eligible to vote at the
meeting of that Fund. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures
established by that Fund.
Life of Virginia Series Fund also serves as an investment vehicle for
variable life insurance policies sold by Life of Virginia. The Funds other
than Life of Virginia Series Fund also serve as investment vehicles for
variable life insurance policies sold by Life of Virginia as well as for
other variable life insurance and variable annuity policies sold by
insurers other than Life of Virginia and funded through other separate
investment accounts. Persons owning all such other policies as well as the
persons receiving income payments under all such other policies will enjoy
similar voting rights. Life of Virginia will vote Fund shares held in
Account 4 as to which no timely instructions are received, and Fund shares
held in Account 4 that it owns as a consequence of accrued charges under
the Policies and other variable annuity policies supported by Account 4, in
proportion to the voting instructions which are received with respect to
all policies funded through Account 4. Each person having a voting
interest will receive proxy materials, reports and other materials relating
to the appropriate portfolio.
LEGAL PROCEEDINGS
There are no legal proceedings to which Account 4 is a party or to which
the assets of the Account are subject. Neither Life of Virginia nor Forth
Financial Securities Corporation is involved in any litigation that is of
material importance in relation to its total assets or that refers to
Account 4.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
The Life Insurance Company of Virginia . . . . . . . . . . . . . . . 3
The Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Transfer of Annuity Units . . . . . . . . . . . . . . . . . . . . . 3
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . 3
Termination of Participation Agreements . . . . . . . . . . . . . . . 4
Calculation of Performance Data . . . . . . . . . . . . . . . . . . . 4
Money Market Investment Subdivisions . . . . . . . . . . . . . . . 4
Other Investment Subdivisions . . . . . . . . . . . . . . . . . . . 5
Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 7
Taxation of Life of Virginia . . . . . . . . . . . . . . . . . . . 7
IRS Required Distributions . . . . . . . . . . . . . . . . . . . . 7
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 8
Using the Policies as Collateral . . . . . . . . . . . . . . . . . 8
Non-Participating . . . . . . . . . . . . . . . . . . . . . . . . . 8
Evidence of Death, Age, Sex or Survival . . . . . . . . . . . . . . 8
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . . . . 8
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . 8
Annual Statement . . . . . . . . . . . . . . . . . . . . . . . . . 8
Written Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Distribution of the Policies . . . . . . . . . . . . . . . . . . . . 9
Legal Developments Regarding Employment-Related Benefit Plans . . . . 9
Safekeeping of the Assets of Separate Account 4 . . . . . . . . . . . 9
Additions, Deletions, or Substitutions . . . . . . . . . . . . . . . 9
State Regulation of Life of Virginia . . . . . . . . . . . . . . . . 10
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
SUPPLEMENT TO PROSPECTUS
DATED MAY 1, 1995
FOR LIFE OF VIRGINIA SEPARATE ACCOUNT 4
General Information
Contributions and/or transfers to the Guarantee Account, as described
below, become part of the General Account of Life of Virginia. Because of
exemptive and exclusionary provisions, interests in the General Account
have not been registered under the Securities Act of 1933, (the "1933
Act"), and the General Account is not registered as an investment company
under the Investment Company Act of 1940, (the "1940 Act"). Accordingly,
neither the General Account nor any interests therein are subject to the
provisions of the 1933 Act or the 1940 Act, and the information in this
supplement has not been reviewed by the staff of the Securities and
Exchange Commission. Disclosure regarding the Guarantee Account and the
General Account, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
The Guarantee Account
The Owner may allocate premium payments to the Guarantee Account or
transfer amounts between the Guarantee Account and the Investment
Subdivisions of Separate Account 4. Upon maturity or surrender of the
policy, any amount in the Guarantee Account is added to the Account Value
in the Separate Account, and, after deduction of any applicable surrender
charge, is paid in a lump sum, or applied under an optional payment plan,
(see Income Payments, p. 35.). Amounts allocated or transferred to the
Guarantee Account earn interest at the interest rate in effect at the time
of such allocation. This rate is guaranteed to be at least 4% per annum,
however a higher rate of interest may be credited. Any interest credited
in excess of the guaranteed interest rate of 4% per annum will be
determined at the sole discretion of Life of Virginia. Life of Virginia
has no obligation to credit excess interest. With respect to each amount
allocated, the interest rate in effect at the time of allocation will be
credited for one year from that date. Each year for which a particular
interest rate is guaranteed with respect to a particular allocation is the
interest rate guarantee period. At the end of the interest rate guarantee
period, a new interest rate will become effective, and a new interest rate
guarantee period will commence with respect to that portion of the account
value in the Guarantee Account represented by that particular allocation.
Charges
The Mortality and Expense Risk and Distribution Expense charges are not
deducted from the Guarantee Account. Such charges are borne solely by the
Separate Account. The Annual Policy Maintenance Charge and the Annual
Death Benefit Charge, if applicable, will be deducted from the Guarantee
Account if there is no account value in the Separate Account. If there is
insufficient account value in the Separate Account at the time the charges
are deducted, the excess of these charges over the amount deducted from the
Separate Account will be deducted from the Guarantee Account. (See Policy
Maintenance Charge, p. 31.).
Surrender charges apply to account values allocated to the Guarantee
Account in the same manner in which these charges apply to account values
allocated to the Separate Account.
Transfers
The Owner may transfer amounts between the Guarantee Account and the
Investment Subdivisions of Account 4. Transfers will be effective on the
date the Owner's transfer request is received by Life of Virginia. With
respect to transfers between the Guarantee Account and the Investment
Subdivisions of Account 4, the following restrictions may be imposed:
Transfers from any particular allocation to the Guarantee Account to
subdivisions of Account 4 may be made only during the 30 day period
beginning with the end of the preceding interest rate guarantee period
applicable to that particular allocation. Life of Virginia may limit the
amount which may be transferred, but that amount will not be limited to
less than 25% of that particular allocation of the Guarantee Account,
plus any accrued interest on that amount.
No transfers from any subdivision of Account 4 to the Guarantee Account
may be made during the six month period following the transfer of any
amount from the Guarantee Account to any subdivisions of the Separate
Account.
In all other respects, the rules and charges applicable to transfers
between the various Investment Subdivisions of the Separate Account will
apply to transfers involving the Guarantee Account.
<PAGE>
Surrenders
Surrenders may be made from the Guarantee Account in addition to the
Separate Account, (see Distributions Under the Policy, p. 27.). If a
partial surrender is requested, the Owner may specify the accounts from
which the deduction should be made. If no account is specified, the amount
of the partial surrender will be deducted first from the Investment
Subdivisions of the Separate Account on a pro-rata basis, in proportion to
the Account Value in the Separate Account. Any amount remaining will be
deducted from the Guarantee Account. Deductions from the Guarantee Account
will be taken from the amounts, (including interest credited to such
amounts), which have been in the Guarantee Account for the longest period
of time.
Deferral of Payment
Life of Virginia may defer payment of any amount from the Guarantee
Account for up to six months. Payment will not be deferred if applicable
law requires earlier payment, or if the amount payable is to be used to pay
premiums on policies in force with the company.
THE GUARANTEE ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS
Dated May 1, 1995
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
<PAGE>
SUPPLEMENT DATED MAY 30, 1995
TO PROSPECTUS DATED MAY 1, 1995
Life of Virginia Separate Account 4
As of the date of this supplement, Policyowners in the State of
California may invest in the three Investment Subdivisions of Separate
Account 4 that were previously unavailable to them. These are the ones
investing in shares of the Contrafund Portfolio of the Variable Insurance
Products Fund II, and the ones investing in shares of the Utility Fund and
the Corporate Bond Fund of the Insurance Management Series.
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
