SUPPLEMENT DATED JULY 11, 1995 TO PROSPECTUS DATED MAY 1, 1995
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
FORM P1140 10/90
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. 7-12) 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:
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 $89.80 $144.87 $190.82 $327.07
Real Estate Securities Portfolio 87.31 137.41 178.50 303.18
2. If you annuitize, or do not
surrender your Policy:
International Equity Portfolio $29.80 $91.25 $155.25 $327.07
Real Estate Securities Portfolio 27.31 83.83 142.98 303.18
For purposes of these examples, the $30 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 a
Policy's Account Value. 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 P1140 10/90
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 Policyowner allocates net 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Life Insurance Company of Virginia and Life of Virginia Separate Account 4 . . . . . . . . . . . . . . . . . . . 19
The Life Insurance Company of Virginia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Account 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Additions, Deletions, or Substitutions of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
The Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Variable Insurance Products Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Variable Insurance Products Fund II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Neuberger & Berman Advisers Management Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Life of Virginia Series Fund, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Oppenheimer Variable Account Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Janus Aspen Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Insurance Management Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Resolving Material Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Total Return and Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Purchasing the Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Allocation of Net Premium Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Accumulation of Account Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Value of Accumulation Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Dollar-Cost Averaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Examination of Policy (Refund Privilege) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Distributions Under the Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Death Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Restrictions on Distributions from Certain Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Charges and Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Charges Against Account 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Policy Maintenance Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Sales Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Transfer Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Premium Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Other Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Other Qualified Retirement Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Legal and Tax Advice for Qualified Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Federal Income Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
TABLE OF CONTENTS (Cont.)
Page
General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Annuitant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Changes by the Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Joint Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Payment Under The Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Distribution of the Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Voting Rights and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Appendix A
Matters Relating To Policies Offered In Certain States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Statement of Additional Information Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</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.
Additional Net Premium Payment -- An Additional Premium Payment
multiplied by the applicable premium tax factor contained in the policy
data pages.
Annuitant -- The Annuitant is the person named in the Policy upon whose
age and sex Monthly Income Benefits are determined.
Annuity Unit -- An accounting unit of measure used in the calculation of
the amount of the second and each subsequent Variable Income Payment.
Business Day -- Any day that the New York Stock Exchange is open for
business and any other day in which there is a change in the value of the
shares of a portfolio of any one of the Funds sufficient to materially
affect the value of the assets in the Investment Subdivision of Account 4
that invests exclusively in that portfolio.
Code -- The Internal Revenue Code of 1986, as amended.
Contingent Annuitant -- The person named in the Policy to become the new
Annuitant under the Policy in the event of the death of the Annuitant
before the Maturity Date.
Date of Issue -- The date the Policy is issued, as shown on the policy
data page.
Death Benefit -- The optional benefit provided under a Policy upon the
death of the Annuitant prior to the Maturity Date, if the Annuitant was age
75 or younger on the Policy Date.
Designated Beneficiary -- The person designated in the Policy who is
alive (or in existence for non-natural designations) on the date of the
Owner's, Joint Owner's, or Annuitant's death and who will be treated as the
sole owner of the Policy following such a death.
Due Proof of Death -- Proof of death that is satisfactory to Life of
Virginia. Such proof may consist of the following if acceptable to Life of
Virginia:
(a) A certified copy of the death certificate; or
(b) A certified copy of the decree of a court of competent jurisdiction
as to the finding of death.
Fixed Income Payments -- Payments made pursuant to an optional payment
plan the value of which are guaranteed by Life of Virginia.
Funds -- The funds available under this Policy. Currently there are
seven: the Variable Insurance Products Fund, the Variable Insurance
Products Fund II, the Neuberger & Berman Advisers Management Trust, Life of
Virginia Series Fund, Inc., the Oppenheimer Variable Account Funds, the
Janus Aspen Series, and the 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.
<PAGE>
Investment Subdivision -- A subdivision of Account 4. Premiums will be
allocated, in accordance with the instructions of the Policyowner, 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.
Joint Owner -- Joint Owners own the Policy equally. If one Joint Owner
dies, the surviving Joint Owner has a right of survivorship to the Policy.
IRA Policy -- An individual retirement annuity policy that receives
favorable federal income tax treatment under Section 408 of the Code.
Maturity Date -- The date stated in the Policy on which Income Payments
are scheduled to commence, if the Annuitant is living on that date.
Maturity Value -- The Surrender Value of the Policy immediately preceding
the Maturity Date.
Monthly Anniversary Day -- The same date in each month as the Policy
Date. Whenever the Monthly Anniversary Day falls on a date other than a
Business Day, the monthly anniversary will be deemed the next Business Day.
Monthly Income Benefit -- The monthly amounts payable to the Owner
beginning on the Maturity Date if the Annuitant is still living.
Net Investment Factor -- An index applied to measure the investment
performance of an Investment Subdivision from one Valuation Period to the
next.
Net Premium Payment(s) -- The Premium Payment multiplied by the
applicable premium tax factor contained in the policy data pages.
Non-Qualified Policy -- Policies not sold or used in connection with
retirement plans receiving favorable federal income tax treatment under the
Code.
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 and initial
Premium Payment are received and accepted by Life of Virginia.
Policy Month -- A one-month period beginning on a Monthly Anniversary Day
and ending on the day immediately preceding the next Monthly Anniversary
Day.
Policyowner (or "Owner") -- The person or persons (in the case of Joint
Owners) entitled to receive Income Payments after the Maturity Date. The
Owner is also entitled to the ownership rights stated in the Policy during
the lifetime of the Annuitant. The original Policyowner is named in the
application.
Premium Payment(s) -- An amount paid to Life of Virginia by the
Policyowner or on the Policyowner's behalf as consideration for the
benefits provided by the Policy.
Qualified Policies -- Policies used in connection with retirement plans
which receive favorable federal income tax treatment under the Code.
Surrender Value -- The Account Value less any applicable surrender
charge.
Valuation Period -- The period between the close of business on a
Business Day and the close of business on the next succeeding Business Day.
Variable Income Payments -- Payments made pursuant to a payment plan and
which fluctuate based on the investment performance of Investment
Subdivisions.
<PAGE>
<TABLE>
FEE TABLE
<S> <C>
Policyowner Transaction Expenses:
Sales Charge on Premium Payments none
Deferred Sales Charges
Maximum Distribution Expense Charge
(as an annual percentage of certain specified portions of average account value) 0.20%
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 policy maintenance charge $30.00
Annual Expenses
(as a percentage of account value)
Mortality and expense risk charge 1.15%
Other Account fees and expenses .00%
Total Annual Expenses 1.15%
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund Annual Expenses
(as a % of average net assets)
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>
<TABLE>
<CAPTION> Variable Insurance Products Fund II Annual Expenses
(as a % of average net assets)
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>
<TABLE>
<CAPTION>
Neuberger & Berman Advisers Management Trust Annual Expenses
(as a % of average net assets)
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>
Until May 1, 1995, the Portfolios of the Advisers Management Trust had a
Distribution 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.
<PAGE>
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.
<TABLE>
<CAPTION>
Life of Virginia Series Fund Annual Expenses
(as a % of average net assets)
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 reimbursements) .21% .31% .40% .27% .75% .60%
Total Fund Annual Expenses .42% .81% .75% .77% 1.75% 1.50%
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds Annual Expenses
(as a % of average net assets)
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>
<TABLE>
<CAPTION>
Janus Aspen Series Annual Expenses
(as a % of average net assets)
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 reimbursements) 0.22% 0.28% 0.49%
Total Fund Annual Expenses 0.88% 1.05% 1.18%
</TABLE>
<TABLE>
<CAPTION>
Federated Insurance Management Series Annual Expenses
(as a % of average net assets)
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>
The purpose of this table is to assist the Policyowner in understanding
the various costs and expenses that a Policyowner will bear, directly and
indirectly. Except as noted below, the Tables reflect charges and expenses
of the Separate Account as well as the underlying mutual funds for the most
recent fiscal year. For more information on the charges described in these
Tables see Charges and Deductions on page 30 and the Prospectuses for the
underlying mutual funds which accompany this Prospectus. In addition to
the expenses listed above, premium taxes varying from 0 to 3.5% may be
applicable.
<PAGE>
The annual expenses listed for all the funds are net of certain
reimbursements 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:
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $77.48 $107.58 $128.64 $203.02
High Income Portfolio 81.91 121.07 151.33 249.29
Equity-Income Portfolio 80.60 117.11 144.68 235.85
Growth Portfolio 81.71 120.47 150.31 247.24
Overseas Portfolio 84.01 127.46 161.99 270.62
Variable Insurance Products Fund II
Asset Manager Portfolio 82.81 123.82 155.91 258.49
Contrafund Portfolio 83.71 126.55 160.47 267.60
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 84.51 128.97 164.51 275.63
Growth Portfolio 83.91 127.16 161.48 269.62
Limited Maturity Bond Portfolio 82.11 121.69 152.35 251.35
Life of Virginia Series Fund, Inc.
Money Market Portfolio 78.99 112.20 136.43 219.04
Government Securities Portfolio 82.91 124.12 156.42 259.51
Common Stock Index Portfolio 82.31 122.30 153.37 253.39
Total Return Portfolio 82.51 122.91 154.39 255.44
International Equity Portfolio 92.29 152.29 202.99 350.33
Real Estate Securities Portfolio 89.80 144.87 190.82 327.07
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 79.80 114.65 140.56 227.48
Oppenheimer High Income Fund 82.91 124.12 156.42 259.51
Oppenheimer Bond Fund 82.91 124.12 156.42 259.51
Oppenheimer Capital Appreciation Fund 82.81 123.82 155.91 258.49
Oppenheimer Multiple Strategies Fund 82.71 123.51 155.41 257.48
Oppenheimer Growth Fund 82.91 124.12 156.42 259.51
Janus Aspen Series
Growth Portfolio 83.61 126.25 159.97 266.60
Aggressive Growth Portfolio 85.31 131.39 168.52 283.59
Worldwide Growth Portfolio 86.61 135.30 175.02 296.37
Federated Insurance Management Series
Utility Fund 83.31 125.34 158.45 263.57
Corporate Bond Fund 82.81 123.82 155.91 258.49
</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>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Money Market Portfolio $17.48 $54.19 $ 93.34 $203.02
High Income Portfolio 21.91 67.60 115.93 249.29
Equity-Income Portfolio 20.60 63.66 109.31 235.85
Growth Portfolio 21.71 67.00 114.92 247.24
Overseas Portfolio 24.01 73.95 126.54 270.62
Variable Insurance Products Fund II
Asset Manager Portfolio 22.81 70.33 120.49 258.49
Contrafund Portfolio 23.71 73.04 125.03 267.60
Neuberger & Berman Advisers Management Trust
Balanced Portfolio 24.51 75.45 129.05 275.63
Growth Portfolio 23.91 73.65 126.04 269.62
Limited Maturity Bond Portfolio 22.11 68.21 116.95 251.35
Life of Virginia Series Fund, Inc.
Money Market Portfolio 18.99 58.78 101.10 219.04
Government Securities Portfolio 22.91 70.63 121.00 259.51
Common Stock Index Portfolio 22.31 68.82 117.96 253.39
Total Return Portfolio 22.51 69.42 118.98 255.44
International Equity Portfolio 32.29 98.62 167.36 350.33
Real Estate Securities Portfolio 29.80 91.25 155.25 327.07
Oppenheimer Variable Account Funds
Oppenheimer Money Fund 19.80 61.22 105.21 227.48
Oppenheimer High Income Fund 22.91 70.63 121.00 259.51
Oppenheimer Bond Fund 22.91 70.63 121.00 259.51
Oppenheimer Capital Appreciation Fund 22.81 70.33 120.49 258.49
Oppenheimer Multiple Strategies Fund 22.71 70.02 119.99 257.48
Oppenheimer Growth Fund 22.91 70.63 121.00 259.51
Janus Aspen Series
Growth Portfolio 23.61 72.74 124.53 266.60
Aggressive Growth Portfolio 25.31 77.85 133.05 283.59
Worldwide Growth Portfolio 26.61 81.74 139.52 296.37
Federated Insurance Management Series
Utility Fund 23.31 71.84 123.02 263.57
Corporate Bond Fund 22.81 70.33 120.49 258.49
</TABLE>
For purposes of these examples, the $30 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 a Policy's
Account Value.
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 5 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 does not represent that
they are true and complete, and disclaims all responsibility for these
figures.
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.
POLICIES ISSUED PRIOR TO 1/28/91, AND, IN CERTAIN STATES, POLICIES ISSUED
OR OFFERED SUBSEQUENT TO THAT DATE CONTAIN CERTAIN POLICY PROVISIONS AND
FEATURES WHICH DIFFER FROM THOSE FOUND IN THE BODY OF THIS PROSPECTUS.
PLEASE REFER TO APPENDIX A FOR A DESCRIPTION OF THESE DIFFERENCES.
The Policy
The Policy allows the Policyowner 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 the Policyowner
to receive Variable Income Payments 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 Policyowner can allocate net 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.
20). Before the Maturity Date, the Account Value depends on the investment
experience of the selected Investment Subdivisions; therefore, before
Income Payments begin, the Policyowner 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,
policyowners can allocate net 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. 25.)
Subject to the refund privilege described on page 15, Net Premium
Payments are allocated among the Investment Subdivisions (or, if
applicable, a Guarantee Account) in accordance with the Policyowner's
written instructions. Net 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 Net Premium Payment. The
Policyowner may, by written request, change the allocation of subsequent
Net Premium Payments. (See Allocation of Net Premium Payments, p. 25.) In
states that require a return of Premium Payments as a refund privilege,
initial Net Premium Payments will be placed in the Investment Subdivision
that invests in the Money Market Portfolio of the Life of Virginia Series
Fund, Inc.
Transfers
Before Income Payments begin the Policyowner 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.
26.) Life of Virginia may not honor transfers made by third parties
holding multiple powers of attorney. (See Powers of Attorney, p. 28.)
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.
Surrenders and Partial Surrenders
Full or partial surrenders may be made any time before Income Payments
begin provided that the surrender is for at least $500 and that the
surrender will not reduce the Account Value to below $5,000. (See
Surrender, p. 28.) Amounts surrendered will generally be subject to a
surrender charge (also known as a contingent deferred sales charge). (See
Sales Charges, p. 32.)
<PAGE>
Charges and Deductions
To cover the costs of administering the Policies, Life of Virginia
deducts annually a policy maintenance charge of $30 from each Policy. This
charge is made at the beginning of each policy year against the Account
Value.
Two types of sales charges are deducted. The first is called a
distribution expense charge and is deducted monthly from the Account Value
during the first ten years following each Premium Payment. The
distribution expense charge is deducted at a monthly rate of .0166% (which
is equivalent to an annual rate of .20%) of that portion of the Account
Value attributable to each Premium Payment made within the last ten years.
(See Sales Charges -- Distribution Expense Charge, p. 32.)
The second sales charge is called 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 six years of any Premium
Payments. If there is a full surrender of the Policy during the first four
years following a Premium Payment, a maximum surrender charge equal to 6%
of each such Premium Payment will be imposed. Thereafter, the charge
decreases 2% per year, so that no surrender charge, or portion thereof, is
ever attributable to a Premium Payment made more than six years prior to
the date of a full surrender.
Similarly, a surrender charge may be imposed on certain partial
surrenders where the Account Value surrendered is attributable to a Premium
Payment made within the last six years. The amount of the charge is
calculated by multiplying the lesser of (a) that portion of the partial
surrender allocated to the particular Premium Payment and (b) the actual
Premium Payment less any previous partial surrenders allocated to it, by
the surrender charge percentage, as described above, applicable to the
particular Premium Payment. The surrender charge will be deducted from the
amount surrendered. A partial surrender occurring later than 12 months
after the preceding partial surrender and for not more than 10% of Account
Value is not subject to a charge.
LIFE OF VIRGINIA GUARANTEES THAT THE SUM OF THE AGGREGATE SURRENDER
CHARGES ATTRIBUTABLE TO A PARTICULAR PREMIUM PAYMENT TOGETHER WITH THE
AGGREGATE DISTRIBUTION EXPENSE CHARGES PREVIOUSLY DEDUCTED AND ATTRIBUTABLE
TO THAT PREMIUM PAYMENT WILL NEVER EXCEED 8.5% OF THAT PREMIUM PAYMENT.
A daily charge at an effective annual rate of 1.15% of the average daily
net assets in Account 4 is imposed against those assets to compensate Life
of Virginia for mortality and expense risks assumed by it. Of this amount,
approximately .80% 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 premium taxes incurred. Any
applicable premium tax may be deducted from either the premium paid or from
proceeds (including benefits for surrender, maturity and death). (See
Premium Taxes, p. 34.)
Income Payments
Beginning on the Maturity Date, and if the Annuitant is living on that
date, the Policyowner may receive Monthly Income Benefits based upon either
the investment performance of the selected Investment Subdivisions or the
guarantees of Life of Virginia. The amount of the Monthly Income Benefits
will depend on: (1) the Maturity Value; (2) the amount of any applicable
state and/or local premium tax; (3) the Annuitant's sex 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 Policyowner 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 Owner,
Joint Owner or Annuitant prior to the Maturity Date while the Policy is in
force. (See Distributions Under the Policy - Death Provisions, p. 29.)
<PAGE>
Refund Privilege
The Policyowner has 10 days after the Policy is received to examine the
Policy and return it for a refund. Unless state law requires that Premium
Payments be returned as the refund, the amount of the refund will equal the
Account Value (without reduction by any surrender charges). If state law
requires that Premium Payments be returned, the amount of the refund will
equal the greater of (1) the Account Value (without reduction of 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 Policyowner may have more than 10 days to return the policy for
a refund. (See Examination of Policy (Refund Privilege), p. 28.)
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:
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of as of
1/3/94 12/31/94 12/31/94 1/4/93 12/31/93 12/31/93
<S> <C> <C> <C> <C> <C> <C>
FUNDS
VIP Fund
Money Market $ 13.19 $ 13.59 4,123,571 $ 12.93 $ 13.19 1,561,156
High Income 18.46 17.94 804,420 15.49 18.43 432,261
Equity-Income 18.41 19.56 5,088,608 15.77 18.48 2,727,507
Growth 21.34 21.27 4,641,036 18.07 21.53 2,860,231
Overseas 15.79 15.82 5,128,595 11.55 15.73 1,958,688
LOV Series Fund
Money Market* 12.68 13.01 484,719 12.53 12.68 319,980
Government Securites 15.54 14.61 384,390 14.57 15.61 321,418
Common Stock Index 18.68 18.58 297,274 16.61 18.80 206,180
Total Return 17.64 17.94 666,497 15.78 17.69 499,779
International Equity Portfolio@ - - -
Real Estate Securities Portfolio@ - - -
Oppenheimer Variable Account Funds
Money 13.24 13.64 549,261 12.98 13.24 216,510
High Income 21.78 20.83 1,125,497 17.44 21.77 626,211
Bond 16.65 16.17 967,029 14.98 16.68 694,740
Capital Appreciation 22.89 21.25 2,708,957 18.28 23.26 1,133,120
Growth 17.87 17.97 734,287 16.86 18.00 542,964
Multiple Strategies 17.16 16.66 1,797,950 14.98 17.18 1,236,118
VIPF II
Asset Manager 16.88 15.70 27,382,848 14.15 16.92 16,848,769
Contrafund@ - - -
Neuberger & Berman Advisers
Management Trust
Balanced 13.35 12.81 2,303,795 12.71 13.41 2,250,637
Growth 11.57 10.92 619,834 10.94 11.62 536,509
Limited Maturity Bond 10.95 10.83 1,644,509 10.44 10.97 1,237,655
Janus Aspen Series
Growth 10.30 10.48 3,183,404 00.00 10.31 714,865
Aggressive Growth 11.58 13.53 1,272,142 00.00 11.76 159,753
Worldwide Growth 11.91 11.91 2,247,224 00.00 11.87 397,768
Insurance Management Series
Utility@ - - -
Corporate Bond@ - - -
</TABLE>
See page 18 for footnotes.
<PAGE>
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of as of
1/2/92 12/31/92 12/31/92 1/2/91 12/31/91 12/31/91
<S> <C> <C> <C> <C> <C> <C>
FUNDS
VIP Fund
Money Market $ 12.59 $ 12.93 1,098,765 $ 12.00 $ 12.59 652,470
High Income 12.73 15.47 151,714 9.53 12.72 38,371
Equity-Income 13.65 15.81 1,137,137 10.50 13.68 535,976
Growth 16.86 18.24 1,548,743 11.61 16.88 633,068
Overseas 13.11 11.59 453,762 12.25 13.14 285,089
LOV Series Fund
Money Market* 12.30 12.53 183,658 11.81 12.30 138,705
Government Securites 13.66 14.50 41,985 11.80 13.70 31,891
Common Stock Index 15.34 16.59 110,635 11.53 15.48 65,450
Total Return 14.72 15.75 253,820 11.71 14.81 91,807
Oppenheimer Variable Account Funds
Money 12.63 12.98 207,707 12.02 12.63 106,137
High Income 14.96 17.42 107,142 11.32 14.96 15,707
Bond 14.16 14.93 384,066 12.25 14.18 245,112
Capital Appreciation 16.19 18.48 467,060 10.50 16.20 114,996
Growth 15.05 16.98 311,016 12.00 15.00 193,160
Multiple Strategies 13.92 14.99 737,957 11.96 13.92 403,277
VIPF II
Asset Manager 12.78 14.14 4,024,857 10.54 12.78 866,423
Neuberger & Berman Advisers
Management Trust
Balanced 11.95 12.74 2,033,300 9.79 11.93 983,156
Growth - 11.01 70,928
Limited Maturity Bond - 10.41 72,536
</TABLE>
See page 18 for footnotes.
<PAGE>
<TABLE>
Accumulation Accumulation No.of Accumulation Accumulation No.of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of as of
1/1/90 12/31/90 12/31/90 1/1/89 12/31/89 12/31/89
<S> <C> <C> <C> <C> <C> <C>
FUNDS
VIP Fund
Money Market $ 11.24 $ 12.00 311,483 $ 10.41 $ 11.24 168,653
High Income 9.86 9.51 16,632 10.41 9.86 28,939
Equity-Income 12.72 10.53 273,772 10.84 12.57 115,043
Growth 13.60 11.74 215,941 10.36 13.45 50,043
Overseas 12.59 12.29 187,187 10.13 12.65 23,108
LOV Series Fund
Money Market* 11.14 11.81 94,296^ 10.37 11.13* 101,395*^
Government Securities 11.25 11.73 24,061 10.32 11.29 10,855
Common Stock Index 13.33 11.65 52,857 10.58 13.12 39,769
Total Return 12.46 11.76 47,767 10.48 12.37 24,283
Oppenheimer Variable Account Funds
Money 11.26 12.02 90,450 10.43 11.25 29,339
High Income 10.92 11.29 8,768 10.54 10.92 16,907
Bond 11.43 12.20 75,809 10.21 11.43 23,738
Capital Appreciation 12.93 10.59 75,242 10.21 12.88 30,138
Growth 13.49 12.09 88,779 10.91 13.32 47,553
Multiple Strategies 12.44 11.98 336,138 10.80 12.36 127,994
VIPF II
Asset Manager 10.05 10.55 175,769 10.00** 9.99 12,829
Neuberger & Berman Advisers
Management Trust +
Balanced 9.85 9.83 312,971# 10.00** 9.77 8,827#
</TABLE>
@ 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.
* For the period from 5/2/88, (the effective date of the Registration
Statement for Separate Account 4) through 12/31/88 the Money Market
subdivision investing in Life of Virginia Series Fund, Inc. Money Market
Portfolio was the only subdivision in which money was invested. On 5/2/88
the accumulation unit value for this portfolio was $10.00. The number of
units outstanding on 12/31/88 was 3,092, and the accumulation unit value on
12/31/88 was $10.36.
** Unit Values for the subdivisions investing in Variable Insurance
Products Fund II Asset Manager Portfolio and Neuberger & Berman Advisers
Management Trust Balanced Portfolio are shown as of 10/3/89, the date these
Portfolios were first offered to Separate Account Policyowners.
^ Amounts include cash with application money held pending policy
acceptance.
# Amounts exclude Life of Virginia's investment in the fund.
+ Unit Values are not shown for the subdivisions investing in Growth
Portfolio and the Limited Maturity Bond Portfolio of the Neuberger and
Berman Advisers Managment Trust 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
The 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, twenty-seven of which are
available under this Policy. Each Investment Subdivision invests
exclusively in an investment portfolio of one of the seven Funds described
below. Net premiums are allocated in accordance with the instructions of
the Policyowner 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 Policyowners
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 will not be able to purchase additional shares of
that Fund. In that event, Policyowners will no longer be able to allocate
Account Values or premium payments to Investment Subdivisions investing in
portfolios of that Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Account 4 despite the
fact that the participation agreement between the Fund and Life of Virginia
has not been terminated. Should a Fund or a portfolio of a Fund decide not
to sell its shares to Life of Virginia, Life of Virginia will be unable to
honor policyowner requests to allocate their account values or premium
payments to Investment Subdivisions investing in shares of that Fund or
portfolio.
Certain Investment Subdivisions invest in portfolios that have similar
investment objectives and/or policies; therefore, before choosing
Investment Subdivisions, carefully read the individual prospectuses for the
Funds, along with this prospectus.
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.
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 Policyowners through Separate 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 Policyowners 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.
The 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, the Total
Return Portfolio, and 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
and the American Stock Exchange, 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
The Oppenheimer Variable Account Funds ("OVAF") currently has nine
portfolios, six of which are currently available to Policyowners 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.
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
The Janus Aspen Series ("JAS") currently has seven portfolios, three of
which are currently available to Policyowners through Separate 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.
<PAGE>
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 Separate 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.
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 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 the 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 the 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
Policyowners owning Policies whose account values are allocated to Account
4 and of policyowners 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 policyowners generally or
certain classes of policyowners, and such retirement plans or participants
in such retirement plans.
In the event of a material conflict, Life of Virginia will take any
necessary steps, including removing Account 4 from the Fund, to resolve the
matter. See the individual Fund Prospectus for greater 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.
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.
<PAGE>
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 any deductions for premium
taxes).
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 administration 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.
Life of Virginia may also disclose standard and non-standard total return
for periods prior to the date Account 4 commenced operations. For such
periods, standard performance information for Policies funded by the
Investment Subdivisions will be calculated based on the performance of the
investment portfolios and the assumption that the Investment Subdivisions
were in existence for the same periods as those indicated for the
corresponding investment portfolios, with the level of Account 4 and Policy
charges that were in effect at the inception of the Investment
Subdivisions.
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.
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 a policy is 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 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 Net
Premium Payment will be credited within two Valuation Periods after the
later of receipt of the application or receipt of the initial Premium
Payment. 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 Policyowner may make Additional Premium Payments at any time before
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 Net 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 and
initial Premium Payment have been received and accepted by Life of Virginia
at its Home Office and is set forth in the Policy. If the Policy Date
would otherwise fall on the 29th, 30th, or 3lst day of a month, the Policy
Date will be the 28th.
"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 first
Monthly Anniversary Day coincident with or following receipt of the
Additional Premium Payment. (See Sales Charges, p. 32.)
Allocation of Net Premium Payments
The Policyowner, by written instructions, allocates Net Premium Payments
among the Investment Subdivisions. The Policyowner may allocate Net
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. No less than 10% of each Net Premium
Payment may be allocated to any one Investment Subdivision.
In those states which require that Premium Payments be returned during
the right to examine Policy period (see Examination of Policy (Refund
Privilege), p. 28), during an initial period commencing on the date the
initial Net Premium Payment is credited to the Policy, Net Premium Payments
will be placed in the Investment Subdivision that invests exclusively in
the Money Market Portfolio of the 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 Net Premium Payment is credited to
the Policy or, if the Policy is not accepted by the Policyowner, when all
amounts due are refunded. At the end of the 15-day period, the Account
Value at that time, and all subsequent Net Premium Payments, will be
allocated among the Investment Subdivisions in accordance with the
Policyowner's instructions.
The Policyowner may change the allocation of subsequent Net 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
Net Premium Payments received after Life of Virginia records the change.
The Account Value will vary with the investment performance of the
Investment Subdivisions the Policyowner selects, and the Policyowner bears
the entire investment risk for the Account Value in any particular
Investment Subdivision. The allocation of Net Premium Payments will affect
not only the Account Value prior to the Maturity Date, but it may also
affect the Death Benefit payable upon the Annuitant's death. The
Policyowner 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 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 Net Premium Payment is received and accepted by
Life of Virginia, the Account Value equals the initial Net 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 Net Premium
Payments and any transfers into that Investment Subdivision and decreased
by the distribution expense charge, the policy maintenance charge, any
transfers out of that Investment Subdivision, and any full or partial
surrenders.
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued
separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased by
each Investment Subdivision and the deduction of certain charges from
Account 4.
For each Investment Subdivision, the value of an Accumulation Unit for
the first Valuation Period was $10. The value of an Accumulation Unit in
an Investment Subdivision for each subsequent Valuation Period equals the
value of the Accumulation Unit as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor for that Investment
Subdivision for the Valuation Period for which the Accumulation Unit Value
is being calculated. The Net Investment Factor is a number representing
the change in the value of Investment Subdivision assets on successive
Business Days due to investment income, realized or unrealized capital
gains or losses, deductions for taxes, if any, and deductions for the
mortality and expense risk charge.
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 Policyowner 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. The transfer
will be effective as of the end of the Valuation Period during which the
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.
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.
<PAGE>
Telephone Transfers
Life of Virginia permits telephone transfers and may be liable for losses
resulting from unauthorized or fraudulent telephone transfers if it fails
to employ reasonable procedures to confirm that the telephone instructions
that it receives are genuine. Therefore, Life of Virginia will employ
means to prevent unauthorized or fraudulent telephone requests, such as
sending written confirmation, recording telephone requests, and/or
requesting other identifying information. In addition, Life of Virginia
may require written authorization before allowing Policyowners to make
telephone transfers.
To request a telephone transfer, Policyowners should call Life of
Virginia's Telephone Transfer Line at 800-772-3844. Life of Virginia will
record all telephone transfer requests. Transfer requests received 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
Policyowners 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 policyowners 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.
Policyowners must complete the Dollar-Cost Averaging section of the
application or a Dollar-Cost Averaging Agreement in order 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
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 Net Premium
Payments, p. 25.)
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 policyowner may discontinue Dollar-Cost Averaging by sending
Life of Virginia a written cancellation notice. Policyowners 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 policyowner.
For policies issued on or after November 14, 1994, as an alternative to
the dollar-cost averaging program described above, policyowners 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, policyowners 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 Net Premium Payments, p. 25) 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.
Policyowners 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, a policyowner 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 policyowner.
<PAGE>
Powers of Attorney
As a general rule and as a convenience to Policyowners, Life of Virginia
allows the use of powers of attorney whereby Policyowners give third
parties the right to effect account value transfers on behalf of the
Policyowners. However, when the same third party possesses powers of
attorney executed by many Policyowners, the result can be simultaneous
transfers involving large amounts of Account Value. Such transfers can
disrupt the orderly management of the Funds, can result in higher costs to
Policyowners, 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 Policyowners in
whose names they are submitted. However, these procedures will not prevent
Policyowners from making their own Account Value transfer requests.
Examination of Policy (Refund Privilege)
The Policyowner may examine the Policy and return it for a 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
(and without reduction by any surrender charges) 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 of 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 Policyowner may have more
than 10 days to return the policy for a refund. A Policyowner wanting a
refund should return the Policy to Life of Virginia at its Home Office.
<PAGE>
DISTRIBUTIONS UNDER THE POLICY
Surrender
The Policyowner may surrender the Policy at any time, in part or in full,
before Income Payments begin by sending a written request, along with the
Policy, to Life of Virginia at its Home Office. Life of Virginia will not
permit a partial surrender that is less than $500 or that reduces the
Account Value of the Policy to less than $5,000.
The amount payable on complete surrender of the Policy is the Surrender
Value at the end of the Valuation Period during which the request is
received. The Surrender Value 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. 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. 45.)
Upon partial surrender, the Policyowner 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.)
Surrenders and partial surrenders may have federal tax consequences.
(See Federal Tax Matters, p. 38.)
Systematic Withdrawals
The Policyowner 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,
("Systematic Withdrawals"). Systematic Withdrawals will be available only
if no partial surrender has occurred during the 12 months prior to the date
that Systematic Withdrawals are to commence. If a Systematic Withdrawal
program is discontinued, a new program may not be instituted until 12
months after the first payment that was made under the discontinued
program. 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
<PAGE>
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.33.).
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 Net
Premiums, p. 25.).
After a series of Systematic Withdrawals has begun, the frequency and/or
amount of payments may be changed upon request by the Policyowner, 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 Policyowner
by notifying Life of Virginia in writing. Life of Virginia reserves the
right to discontinue Systematic Withdrawals upon 30 days written notice to
Policyowners. 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. 27.).
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.
Systematic Withdrawals are currently available only to Policies issued on
or after March 1, 1992, and may not be available in all markets or through
all distribution systems, (See Distribution of the Policies, p. 45.).
Death Provisions
Designated Beneficiary. If the Owner, Joint Owner, or the 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 the Owner, Joint Owner or the
Annuitant: Owner, Joint Owner, Beneficiary, Contingent Beneficiary, and if
no one else is alive, the Owner's estate. If Joint Owners both survive,
they become the Designated Beneficiary together.
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.
<PAGE>
Distribution Rules. If the Designated Beneficiary is the surviving
spouse of the deceased Owner, Joint Owner or Annuitant, the surviving
spouse may continue the Policy as the Owner. In addition, that person will
also become the Annuitant if the deceased was the Annuitant, there is no
surviving Contingent Annuitant, and the Policy has not been surrendered for
the Death Benefit described below which is available at the Annuitant's
death.
If the Designated Beneficiary is not the surviving spouse of the deceased
Owner, Joint Owner or Annuitant, then, 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
receive the Surrender Value at any time during the five year period
following the date of death of the Owner, Joint Owner or Annuitant (by
partially or totally surrendering the Policy), or (2) to apply the
Surrender Value under optional payment plan 1 or 2 (described beginning on
page 35.) with the first payment to the Designated Beneficiary being made
within one year after the date of death of the Owner, Joint Owner or
Annuitant, and the remaining payments being made over the life of the
Designated Beneficiary or over a period not exceeding the Designated
Beneficiary's life expectancy.
If the entire Surrender Value has not been paid to the Designated
Beneficiary by the end of this five year period following the date of the
death of the Owner, Joint Owner or Annuitant and payments have not begun in
accordance with (2) above, then in accordance with Code requirements and
the earlier election, Life of Virginia will terminate the Policy at the end
of that five year period and will pay the Surrender Value to, or for the
benefit of, the Designated Beneficiary. If the Designated Beneficiary dies
before the required payments have been made, the Designated Beneficiary
will not be treated as an Owner of the Policy for purposes of these death
provisions, and 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 special distribution rules will not apply after the death of the
Annuitant if the Annuitant was not also an Owner of the Policy, all owners
of the Policy are natural persons, and a Contingent Annuitant was or is
named. If this occurs, the Designated Beneficiary may continue the Policy
as the Owner.
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. Special rules
apply to spouses of the deceased Owner. (See Statement of Additional
Information - Federal Tax Matters for a detailed description of these
rules.)
Death Benefit. If the Annuitant dies before Income Payments begin, and
he or she was age 75 or younger on the Policy Date, the Designated
Beneficiary may surrender the Policy for the Death Benefit within 90 days
of the date of such death.
During the first six Policy Years, the Death Benefit 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. During any
subsequent six year period, the Death Benefit will be the greater of: (1)
the Death Benefit on the last day of the previous six year period, plus any
premiums paid since then, less any partial surrenders and 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. This benefit will not be recalculated every six years.
If the surrender occurs more than 90 days after the Annuitant's death,
and/or if the deceased Annuitant was age 76 or older on the Policy Date,
the Surrender Value will be payable instead of the Death Benefit. If the
Policy is not surrendered, it will remain in force subject to the preceding
death provisions.
Payment of Benefits. Instead of receiving a lump sum payment, the
Designated Beneficiary may elect to receive proceeds under optional payment
plan 1 or 2 (See Income Payments, p. 35.) subject to the following: (1)
the first payment to the Designated Beneficiary must be made no later than
one year after the date of death of the Owner, Joint Owner or Annuitant,
and (2) payments must be made over the life of the Designated Beneficiary
or over a period not exceeding that person's life expectancy.
If any Owner or Joint Owner (or the Annuitant if the Owner of the Policy
is not a natural person) dies while this Policy is in force and after
Income Payments have begun, or if a Designated Beneficiary receiving Income
Payments dies after the date Income Payments have begun, payments made
under the Policy will be made at least as rapidly as under the method of
distribution in effect at the time of such death, notwithstanding any other
provision of the Policy.
<PAGE>
The above provisions are intended to be interpreted so that the Policy
will comply with the requirements of section 72(s) of the Internal Revenue
Code. For example, if the payee under an optional payment plan is
different from the Owner, such payee might be considered a "holder" of the
Policy, as this term is defined in the tax law, and, if this is the case,
the above rule (i.e. section 72(s)) prohibiting a slow-down in payments
will apply on the death of the payee. (See Federal Tax Matters, p. 38.)
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.
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 .0031690% for each day in a Valuation Period.
The effective annual rate of this charge, which is compounded daily, is
1.15% of the average daily net assets of Account 4. Of this amount,
approximately .80% 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 1.15% will never increase.
Nevertheless, the mortality and expense risk charge may be a source of
profit for Life of Virginia if it proves 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.
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.
Policy Maintenance Charge
A charge of $30 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
the beginning of each Policy Year. 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, surrenders, 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.
<PAGE>
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 distribution expense charge is
deducted monthly from the Account Value during the first ten years
following each Premium Payment. In addition, a charge (also referred to as
a contingent deferred sales charge) is imposed on full and certain partial
surrenders.
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 and
distribution expense 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 each
charge, followed by a more technical explanation of how the charges are
calculated.
Distribution Expense Charge. The distribution expense charge is
computed on each Monthly Anniversary Day and will equal .0166% of that
portion of the Policy's Account Value in each Investment Subdivision on
that date attributable to each Premium Payment made during the previous
ten years. This is equivalent to an annual rate of .20%. The
distribution expense charge for a Policy Month 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 beginning of the Policy
Month. Other allocation methods may be available upon request. In no
event, however, will the sum of the cumulative distribution expense
charges previously deducted, attributable to a particular Premium
Payment, exceed 8.5% of that Premium Payment. Depending on the
investment experience of the Investment Subdivisions selected by the
Policyowner, the maximum charge of 8.5% of a Premium Payment may be
collected before the ten-year period attributable to that Premium Payment
has run.
Surrender Charge. A surrender charge (also referred to as a contingent
deferred sales charge) will be imposed on full surrenders and certain
partial surrenders that occur within six years of any Premium Payments to
cover certain expenses relating to the sale of the Policy, including
commissions to registered representatives and other promotional expenses.
This charge will be deducted from the amount surrendered. The proceeds
received upon maturity are also subject to a surrender charge if the
Maturity Date under the Policy occurs within six years of receipt of a
Premium Payment.
The amount of the surrender charge depends on the number of years that
have elapsed since receipt of the Premium Payments to which the surrender
is allocated. The surrender is first allocated to the Account Value
attributable to each Premium Payment in the order each payment was received
until the entire surrender has been allocated. All or part of the amount
allocated to each Premium Payment may be subject to a surrender charge.
For each Premium Payment, the amount subject to a surrender charge is the
lesser of (a) that portion of the surrender allocated to a particular
Premium Payment and (b) the actual Premium Payment less any partial
surrenders previously allocated to it.
The surrender charge percentage applicable to each Premium Payment is as
follows:
Number of Full Years
Between the Date of
Receipt of Premium
Payment and Date of Surrender Applicable Surrender Charge
less than 1 6%
1 6%
2 6%
3 6%
4 4%
5 2%
6 or more 0%
Thus, if all or part of a surrender is allocated to a Premium Payment
during the first four years following that Premium Payment, the applicable
percentage charge is equal to 6%. Thereafter, the charge decreases 2% per
year, so that no surrender charge is ever attributable to a particular
Premium Payment made more than six years prior to the date of the
surrender. The surrender charge is deducted from the amount payable.
<PAGE>
Reduced Charges on Certain Surrenders. If a partial surrender occurs
later than twelve months after the preceding partial surrender and is 10%
or less of the Account Value at the close of the Valuation Period during
which the surrender request is received, no surrender charge is deducted.
If a full surrender or a partial surrender is made later than twelve months
after the preceding partial surrender and is more than 10% of the Account
Value at the end of the Valuation Period during which the partial surrender
request is received, the amount of each Premium Payment that is subject to
a surrender charge is reduced by an amount equal to 10% of the Account
Value. This reduction will be taken from amounts subject to a charge
beginning with the initial Premium Payment, up to the amount subject to a
surrender charge for that Premium Payment, and continuing in the order that
Premium Payments were received until the entire reduction has been taken.
Partial and full surrenders which qualify for reduced charges as
described above are available at any time where permitted. In certain
states, surrenders qualifying for reduced charges may not be available
until after the first policy year.
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:
The Annuitant is, or has been confined to a state licensed or legally
operated hospital or inpatient nursing facility for at least 30
consecutive days; and
Such confinement begins at least one year after the policy date; and
The Annuitant was age 75 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.
The waiver of surrender charges in the event of hospital or nursing
facility confinement may not be available in all states or all markets, and
is only available to policies issued on or after May 1, 1993.
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 p. 35.).
Limitation on Sales Charges. In no event will the cumulative surrender
charges attributable to a particular Premium Payment, when taken together
with the distribution expense charges previously deducted and attributable
to that Premium Payment, exceed 8.5% of that particular Premium Payment.
For example, in the event of a full or partial surrender, if the surrender
charge otherwise calculated will cause the sum of the sales charges to
exceed 8.5% of a particular Premium Payment, the surrender charge will be
limited so that it equals the difference between 8.5% of the Premium
Payment and the sum of the total monthly distribution expense charges and
any surrender charges previously deducted and attributable to that Premium
Payment.
Ratios Used to Calculate Sales Charges. In order to calculate the
applicable sales charges, Life of Virginia must determine that portion of
Account Value which is attributable to each Premium Payment. In order to
determine that portion of Account Value attributable to each Premium
Payment, Life of Virginia will multiply the Account Value by the ratio
associated with each particular Premium Payment. Life of Virginia
calculates and recalculates these ratios each time an Additional Premium
Payment or a partial surrender is made.
Prior to the first Additional Premium Payment or partial surrender, the
entire Account Value is attributable to the initial Premium Payment.
However, the Account Value attributable to the initial Premium Payment will
change every time an Additional Premium Payment is received or a partial
surrender is made.
The portion of the Account Value attributable to the first Additional
Premium Payment is calculated by dividing (a) by (b), where (a) is the
amount of the Additional Premium Payment and (b) is the Policy's total
Account Value immediately after receipt of the Additional Premium Payment.
Life of Virginia will use this ratio to determine the portion of Account
Value attributable to that payment until another Additional Premium Payment
or partial surrender is made.
Every time an Additional Premium Payment is made, Life of Virginia
recalculates the ratio for each Premium Payment, including the initial
Premium Payment. It does so by multiplying the last calculated ratio for
each prior Premium Payment by the difference between one and the ratio
calculated for the most recent Additional Premium Payment.
<PAGE>
Every time a partial surrender is made, Life of Virginia will redetermine
the ratio associated with each Premium Payment. The new ratio is (a) minus
(b), divided by (c), where:
(a) is the Account Value associated with the Premium Payment;
(b) is the amount of partial surrender allocated to the Premium Payment;
and
(c) is the Account Value immediately after the partial surrender.
The amount of a partial surrender allocated to a Premium Payment will
never exceed the Account Value associated with that Premium Payment.
Transfer Charges
The Policyowner 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, 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.
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 Charges
Because Account 4 purchases shares of the Funds, the net assets of each
Investment Subdivision will reflect the investment advisory fee and other
expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these
charges, read the individual Fund prospectuses.
Reduction of Charges for Group Sales
The distribution expense charge and/or 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 charges
will be determined by Life of Virginia based on the following factors:
(1) The size of the group. Generally, the sales expenses for each
individual Policyowner for a larger group are less than for a smaller
group because more Policies can be implemented with fewer sales contacts
and less administrative cost.
(2) The total amount of 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 these charges will not be unfairly discriminatory against
any person including the affected owners and all other owners of Policies
funded by Account 4. 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 Owner beginning
on the Maturity Date if the Annuitant is still living. The Monthly Income
Benefit will be paid in the form of Variable Income Payments similar to
those described in Optional Payment Plan 1, Life Income with 10 Years
Certain, using the sex and age nearest birthday of the Annuitant instead of
the payee, unless another election is made by the Policyowner. Under the
Life Income with 10 Years Certain plan, if the Annuitant lives longer than
ten years, payments will continue for his or her life. If the Annuitant
dies before the end of ten years, the remaining payments for the ten year
period will be discounted at the same rate used to calculate the monthly
income. This discounted amount will be paid in one sum. During the
lifetime of the Annuitant and prior to the Maturity Date, however, the
Policyowner, or the Designated Beneficiary upon the Policyowner's death,
may elect, by written notice to the Home Office, to receive proceeds in a
lump sum or under one of the optional payment plans described below. (If
the election is being made by the Designated Beneficiary, only available
plans may be chosen (See Payment of Benefits, p. 30.)
Income Payments will be made monthly unless the Policyowner elects
quarterly, semi-annual or annual payments by written request to Life of
Virginia.
Certain states prohibit the use of actuarial tables that distinguish
between men and women in determining benefits for annuity polices issued on
the lives of residents. Therefore, policies offered by this Prospectus on
the lives of residents of those states have annuity income payments which
are based on actuarial tables that do not differentiate on the basis of
sex.
Determination of Monthly Income Benefits
The Maturity Value will be equal to the Surrender Value on the date
immediately preceding the Maturity Date.
The initial Monthly Income Benefit under the automatic payment plan will
be calculated by multiplying (a) times (b) times (c), divided by (d) where:
(a) is the monthly payment per $1,000, shown under the optional payment
plans for Life Income with 10 Years Certain, using the sex and Settlement
age of the Annuitant instead of the payee, on the Maturity Date; (b) is the
Maturity Value; (c) is the monthly income tax factor, if applicable; and
(d) is $1,000. Any premium tax paid by Life of Virginia and not previously
recouped by a premium tax charge may be deducted from (b) above.
Subsequent payments will be determined by multiplying the proceeds payable
by the monthly income tax factor applicable to the Policy and contained in
the policy data pages.
If at the time Income Payments begin, the Policyowner 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. 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. 34.)
Optional Payment Plans
Death benefit proceeds payable because of the Annuitant's death, and
surrender value proceeds will be paid in one lump sum. Maturity proceeds
will be paid as described in the Monthly Income Benefit section. However,
under certain circumstances, Annuitant death benefit and surrender value
proceeds can be paid under an optional payment plan. In those
circumstances, the proceeds, multiplied by the monthly income tax factor
set forth in the Policy, will be applied to calculate an income payment.
The Owner may elect an optional payment plan with respect to surrender
proceeds. During the Annuitant's life, the Owner, (or the Designated
Beneficiary in the event that the Owner predeceased the Annuitant), may
elect an optional payment plan. If a plan has not been chosen at the
Annuitant's death, the Designated Beneficiary can choose one if the Death
Benefit is to be paid. In addition, a payment made under an optional
payment plan at the death of the Owner, Joint Owner or Annuitant must
conform with the death provision rules, including the rules with respect to
the payment of benefits. (See Death Provisions, p. 29.)
Optional payment plans can provide either Fixed Income Payments or
Variable Income Payments as selected by the Policyowner 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.
<PAGE>
The effect of choosing a Fixed Income Payment is that the amount of each
Income Payment will be calculated on the date the first Income Payment is
made and will not change. If Fixed Income Payments are chosen, the
proceeds will be transferred to the General Account of Life of Virginia on
the date the Income Payments begin. Fixed Income Payments will be fixed in
amount and duration by the optional payment plan chosen and the Age and sex
of the Annuitant on that date. For further information, the Policyowner
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 Policyowner, (or the Designated Beneficiary upon the Policyowner's
death) elects to receive Variable Income Payments under the applicable
optional payment, the proceeds may be allocated among up to seven
Investment Subdivisions. The first Variable Income Payment is determined
by the optional payment 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. 26.) 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 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
- -- Value of Accumulation Units, p. 26); (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 of death of the
Owner, Annuitant or Joint Owner as applicable, 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, the minimum Income Payment Life
of Virginia will make is $100. If any payment is less than $100, Life of
Virginia will reduce the frequency of payment to quarterly, semi-annually
or annually, until each Income Payment is not less than $100. If the
annual Income Payment is less than $20, Life of Virginia will pay the
Proceeds in a lump sum. Upon making such a payment, Life of Virginia will
have no future obligation under the Policy.
Plan 1 -- Life Income. Equal monthly payments will be made for a
guaranteed minimum period. If the payee lives longer than the minimum
period, payments will continue for his or her life. The minimum period
can be 10, 15 or 20 years. Guaranteed amounts payable under this plan
will earn interest at 3% compounded yearly. Life of Virginia may
increase the interest rate and the amount of any payment. If the payee
dies before the end of the guaranteed period, the amount of remaining
payments for the minimum period will be discounted at the same rate used
in calculating Income Payments. "Discounted" means Life of Virginia will
deduct the amount of interest each remaining payment would have earned
had it not been paid out early. The discounted amounts will be paid in
one sum to the payee's estate unless otherwise provided.
Plan-2 -- Income for a Fixed Period. Equal periodic payments will be
made for a fixed period not longer than 30 years. Payments can be
annual, semi-annual, quarterly, or monthly. Guaranteed amounts payable
under this plan will earn interest at 3% compounded yearly. Life of
Virginia may increase the interest and the amount of any payment. If the
payee dies, the amount of the remaining guaranteed payments will be
discounted to the date of the payee's death at the same rate used in
calculating Income Payments. The discounted amount will be paid in one
sum to the payee's estate unless otherwise provided.
<PAGE>
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 a Policyowner being considered, under the
standard of those rulings, the owner of the assets of Account 4. To
ascertain the tax treatment of its Policyowners, Life of Virginia has
requested, with regard to a policy similar to this Policy, a ruling from
the Internal Revenue Service that it, and not its Policyowners, 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
Policyowner 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 a Policyowner 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, a Policyowner might retroactively be determined to be the
owner of the assets of Account 4.
A Policyowner 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.
In addition to the foregoing, 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
Account Value. The following discussion assumes that the Policy will
constitute an annuity contract for federal tax purposes and that the Policy
will be issued to a natural person.
Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon the Policy's partial or full surrender. Any
amount so distributed upon a partial surrender is includible in income to
the extent that the Account Value immediately before the partial surrender
exceeds the "investment in the contract" at that time. The amount
distributed upon a full surrender is includible in income to the extent
that the Policy's Surrender Value exceeds the investment in the contract at
the time of surrender. For these purposes, the investment in the contract
at any time equals the total of the Premium Payments made for a Policy to
that time, less any amounts previously received from the Policy which were
not included in income. An Owner may be taxed in the same manner as if a
full surrender of the Policy had occurred if all of the Owners are natural
persons and a Contingent Annuitant is named at the death of an Annuitant
who was not also an Owner.
If an Owner transfers a Policy without adequate consideration to a person
other than the Owner's spouse (or to a former spouse incident to divorce),
the Owner will be taxed on the difference between his or her Account Value
and the investment in the contract at the time of transfer. In such case,
the transferee's investment in the contract will be increased to reflect
the increase in the transferor's income. In addition, the Policy provides
a Death Benefit that in certain circumstances may exceed the greater of the
Premium Payments and the Account Value. As described elsewhere in this
Prospectus, Life of Virginia imposes certain charges with respect to the
Death Benefit. It is possible that some portion of those charges could be
treated for federal tax purposes as a partial surrender of the Policy.
All non-qualified annuity contracts which are issued after October 21,
1988 by Life of Virginia or any of its affiliates with the same person
designated as the Owner within the same calendar year will be aggregated
and treated as one contract for purposes of determining any tax on
distributions.
The foregoing rules will apply to amounts distributed in connection with
the Waiver of Surrender Charges in the Event of Hospital or Nursing
Facility Confinement.
Taxation of Annuity Payments. Amounts may be distributed from a
Non-Qualified Policy as payments under one of the five optional payment
plans. In the case of optional payment plans other than Plan 4 (Interest
Income), typically a portion of each payment is includible in income when
it is distributed. Normally, the portion of a payment includible in income
equals the excess of the payment over the exclusion amount. The exclusion
amount, in the case of Variable Income Payments under Plans 1 and 5, is the
amount determined by dividing the "investment in the contract" for the
Policy when the payments begin to be made (as defined above), adjusted for
any period-certain or refund feature, by the number of payments expected to
be made (determined by Treasury 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 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.
<PAGE>
In the case of Plan 4, the proceeds left with Life of Virginia are
considered distributed for tax purposes at the time Plan 4 takes effect,
and are taxed in the same manner as a full surrender of the Policy, as
described above. The periodic interest payments are includible in the
recipient's income when they are paid or made available. In addition, if
amounts are applied under Plan 3 when the payee is at an advanced age, such
as age 80 or older, it is possible that such amounts would be treated in a
manner similar to that under Plan 4.
Taxation of Systematic Withdrawals. In the case of Systematic
Withdrawals, described on p. 28, the amount of each withdrawal should be
considered as a distribution and taxed in the same manner as a partial
surrender of the Policy, as described above. However, there is some
uncertainty regarding the tax treatment of Systematic Withdrawals, and it
is possible that additional amounts may be includible in income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before
the Maturity Date from a Non-Qualified Policy because of the death of the
Owner, a Joint Owner, or the Annuitant. Such Death Benefit Proceeds are
includible in the income of the recipient as follows: (1) if distributed in
a lump sum, they are taxed in the same manner as a full surrender of the
Policy, as described above (substituting the Death Benefit Proceeds for the
Surrender Value), or (2) if distributed under an optional payment plan,
they are taxed in the same manner as annuity payments, as described above.
Penalty Tax on Premature Distributions. Subject to certain exceptions, a
penalty tax is also imposed on the foregoing distributions from a
Non-Qualified Policy, equal to 10 percent of the amount of the distribution
that is includible in income. The exceptions provide, however, that this
penalty tax does not apply to distributions made (1) on or after the
recipient attains age 59-1/2, (2) because the recipient has become disabled
(as defined in the tax law), (3) on or after the death of the Owner, or if
such Owner is not a natural person, on or after the death of the primary
annuitant under the Policy (as defined in the tax law), or (4) as part of a
series of substantially equal periodic payments over the life (or life
expectancy) of the recipient or the joint lives (or life expectancies) of
the recipient and his or her designated beneficiary (as defined in the tax
law). In the case of Systematic Withdrawals, it is uncertain whether such
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. 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 Policyowner 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.
<PAGE>
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.
Tax Deferral During Accumulation Period. Until distributions are made
from an IRA Policy, increases in the Account Value of the Policy are not
taxed.
IRA Policies generally may not provide life insurance coverage, but they
may provide a death benefit that equals the greater of the premiums paid
and the contract value. The Policy provides a Death Benefit that in
certain circumstances may exceed the greater of the Premium Payments and
the Account Value. It is possible that the Death Benefit could be viewed
as violating the prohibition on investment in life insurance contracts with
the result that the Policy would not be viewed as satisfying the
requirements of an IRA Policy.
Taxation of Distributions and Rollovers. If all Premium Payments made to
an IRA Policy were deductible, all amounts distributed from the Policy are
included in the recipient's income when distributed. However, if
nondeductible Premium Payments were made to an IRA Policy (within the
limits allowed by the tax law), a portion of each distribution from the
Policy typically is included in income when it is distributed. In such a
case, any amount distributed as an annuity payment or in a lump sum upon
death or a full surrender is taxed as described above in connection with
such a distribution from a Non-Qualified Policy, treating as the investment
in the contract the sum of the nondeductible Premium Payments at the end of
the taxable year in which the distribution commences or is made (less any
amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the
distribution over the exclusion amount which in turn equals the
distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a
qualified retirement plan to an IRA Policy (or from one individual
retirement annuity or individual retirement account to an IRA policy)
without incurring tax if certain conditions are met. Only certain types of
distributions from qualified retirement plans or individual retirement
annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from an IRA Policy equal to 10 percent of the
amount of the distribution includible in income. (Amounts rolled over from
an IRA Policy generally are excludable from income.) The exceptions
provide, however, that this penalty tax does not apply to distributions
made (1) on or after age 59-1/2, (2) on or after death or because of
disability (as defined in the tax law), or (3) as part of a series of
substantially equal periodic payments over the life (or life expectancy) of
the recipient or the joint lives (or joint life expectancies) of the
recipient and his or her designated beneficiary (as defined in the tax
law). In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of
50 percent of the amount by which a minimum required distribution exceeds
the actual distribution from an IRA Policy. Under this requirement,
distributions of minimum amounts from an IRA Policy as specified in the tax
law must commence by April 1 of the calendar year following the calendar
year in which the Annuitant attains age 70-1/2, or when he 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.
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
<PAGE>
the premiums paid and the contract value. The Policy provides a Death
Benefit that in certain circumstances may exceed the greater of the Premium
Payments and the Account Value. It is possible that the Death Benefit
could be viewed as violating the prohibition on investment in life
insurance contracts with the result that the Policy would not be viewed as
satisfying the requirements of an IRA Policy.
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 Policyowner may reduce
these limits on elective deferrals.) Other limitations may be more
restrictive.
In applying these and other rules applicable to a Section 403(b) Policy,
that Policy and all similar contracts purchased by the same employer for
the same employee are treated as one contract.
Tax Deferral During Accumulation Period. Until distributions are made
from a Section 403(b) Policy, increases in the Account Value are not taxed.
Purchasers should consider that the Policy provides a Death Benefit that
in certain circumstances may exceed the greater of the Premium Payments and
the Account Value. It is possible that such Death Benefit could be
characterized as an incidental death benefit. If the Death Benefit were so
characterized, this could result in currently taxable income to purchasers.
In addition, there are limitations on the amount of incidental death
benefits that may be provided under a Section 403(b) Policy. Even if the
Death Benefit under the Policy were characterized as an incidental death
benefit, it is unlikely to violate those limits unless the purchaser also
purchases a life insurance contract as part of his or her Section 403(b)
Policy.
Taxation of Distributions and Rollovers. If no portion of the premiums
paid into a Section 403(b) Policy were includible in the employee's income,
all amounts distributed from the Policy are included in the recipient's
income when distributed. However, if Premium Payments were made to a
Section 403(b) Policy which were includible in the employee's income, a
portion of each distribution from the Policy typically is included in
income when it is distributed. In such a case, any amount distributed as
an annuity payment or in a lump sum upon death or a full surrender is taxed
as described above in connection with such a distribution from a
Non-Qualified Policy, treating as the investment in the contract the sum of
the Premium Payments made into the Policy which were not excluded from
income as of the time the distribution commences or is made (less any
amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the
distribution over the exclusion amount, which in turn equals the
distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be rolled over from a Section
403(b) Policy (or similarly qualifying contract) to another Section 403(b)
Policy (or similarly qualifying contract) or to an individual retirement
account or individual retirement annuity without incurring tax if certain
conditions are met. Only certain types of distributions may be rolled
over.
Beginning in 1989, a Section 403(b) Policy is required to prohibit
distributions of amounts attributable to elective deferrals and earnings
thereon (made under a salary reduction agreement) prior to age 59-1/2,
separation from service, death or disability. Distributions of elective
deferrals (but not any income earned thereon) may nonetheless be permitted
in the case of hardship.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from a Section 403(b) Policy equal to 10 percent
of the amount of the distribution includible in income. (Amounts rolled
over from a Section 403(b) Policy generally are excludable from income,
although various withholding requirements may nonetheless apply to such
amounts, as discussed below). The exceptions provide, however, that this
penalty tax does not apply to distributions made (1) on or after age
59-1/2, (2) on or after death or because of disability (as defined in the
tax law), (3) as part of a series of substantially equal periodic payments
beginning after the employee separates from service and made over the life
(or life expectancy) of the employee or the joint lives (or joint life
expectancies) of the employee and his or her designated beneficiary (as
defined in the tax law), or (4) after separation from service after
attainment of age 55.
<PAGE>
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.
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 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 your 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
that you receive from the Policy. Unlike withholding on certain other
amounts distributed from the Policy, discussed below, you can not 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, you elect to have it directly transferred
to certain qualified retirement plans. Prior to receiving an eligible
rollover distribution, you 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 Policyowner 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 Policyowner or Joint Owners are designated in the application.
(Joint Owners own the Policy equally with the right of survivorship.)
While the Annuitant is living, the Policyowner 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. 29.). During the
Annuitant's lifetime, the Policyowner or Joint Owners may be changed by
written request to the Home Office if this right has been reserved. If the
Policyowner dies before the Annuitant, the Designated Beneficiary will
become the sole owner of the Policy following such a death, subject to the
distribution rules in the Policy's death provisions. If the Policyowner
does not name a Joint Owner or a Primary Beneficiary or Contingent
Beneficiary, or if a Joint Owner or Primary Beneficiary or Contingent
Beneficiary is not living (or in existence for purposes of non-natural
designations) at the Policyowner's death, ownership will pass to the
Policyowner's estate. The Designated Beneficiary of the Policyowner, for
purposes of the required distribution rules of Section 72(s) of the Code,
will receive the required distribution if the Policyowner dies prior to the
Maturity Date. The required distribution is more fully described in Death
Provisions, p. 29.
The Annuitant
The Policy names the Policyowner or someone else as the Annuitant. A
Contingent Annuitant also may be named. If no Contingent Annuitant has
been named, one may be named at the death of the Annuitant. The election
of a Contingent Annuitant after the death of the Annuitant, however, may
have adverse tax consequences (See Federal Tax Matters, p. 38.). Life of
Virginia reserves the right to restrict the election of the Contingent
Annuitant to conform to its administrative procedures and within the
restrictions of federal and state law. At the death of the Annuitant prior
to the Maturity Date, the Contingent Annuitant, if any, may become the
Annuitant in certain circumstances (See Death Provisions, p. 29.).
The Beneficiary
The Primary and Contingent Beneficiary may be designated by the
Policyowner in the application. If changed, the Primary Beneficiary or
Contingent Beneficiary is as shown in the latest change filed with Life of
Virginia.
Changes By the Owner
Prior to the Maturity Date and during the Annuitant's life, the
Policyowner may be changed if this right is reserved. The Primary
Beneficiary and the Contingent Beneficiary may also be changed during the
Annuitant's life if this right is reserved; however no change may be made
after the Annuitant's death. Furthermore, if this right is reserved, the
Policyowner may also change the Contingent Annuitant.
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
Policyowner. The change will be subject to any payment made before the
change is recorded by Life of Virginia.
Joint Policy
The Policy may be purchased as a Joint Policy. In making this selection,
the Policyowner must name an Annuitant and Contingent Annuitant. The
Policyowner must also relinquish any right to change the Contingent
Annuitant. An additional Contingent Annuitant may not be named if the
Annuitant or Contingent Annuitant dies before the Maturity Date.
Under a Joint Policy, if both the Annuitant and Contingent Annuitant are
alive at the Maturity Date, proceeds will be paid in the form of Variable
Income Payments under Optional Payment Plan 5, Joint Life and Survivor
Income, using the sexes and ages nearest birthday of the Annuitant and
Contingent Annuitant. If only one is surviving at the Maturity Date, then
proceeds will be paid in the form of Variable Income Payments under
Optional Payment Plan 1, Life Income with 10 Years Certain, using the sex
and settlement age of such survivor.
<PAGE>
Payment under the Policies
Life of Virginia will usually pay any amounts payable as a result of
surrender 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 surrender,
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
Policyowners; 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 Policyowner makes a surrender 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, p. 38.)
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.
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, 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.
<PAGE>
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 Policyowner 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 Policyowner has the right to instruct will
be determined for a Fund 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 Policyowner 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, 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>
APPENDIX A
MATTERS RELATING TO POLICIES ISSUED PRIOR TO 1/28/91
AND ISSUED OR OFFERED LATER IN CERTAIN STATES
Policies issued prior to January 28, 1991, and, in certain states,
policies issued or offered after that date contain certain rights, benefits
and procedures which differ from those described elsewhere in this
Prospectus and the Statement of Additional Information. Such policies were
marketed as "Asset Allocation Annuity" and may be identified by the policy
form number of P1098A, B, C or U, 1/87. An individual who has purchased
one of these policies must refer to this section in conjunction with the
remainder of this Prospectus and/or Statement of Additional Information, in
order to determine his or her rights and benefits under the Policy. With
respect to the terms defined below, as well as the description of the
refund privilege, the death benefit, and contestability of the Policy,
these terms and descriptions should be substituted in their entirety for
the related terms and descriptions found elsewhere in this Prospectus or
the Statement of Additional Information. All other procedures described
herein, however, are meant to modify the procedures found elsewhere in the
Prospectus or the Statement of Additional Information, and must be read in
conjunction with the procedures found elsewhere in this Prospectus or in
the Statement of Additional information. The page references listed below
indicate where in the Prospectus and/or Statement of Additional Information
the substituted or modified terms and procedures are described.
Definitions
Annuitant -- The person named in the Policy during whose life Income
Payments involving life contingencies will continue and, subject to the
provision dealing with Contingent Annuitants, upon whose death prior to the
Maturity Date, a Death Benefit under the Policy is paid. (See p. 44.)
Beneficiary -- The person who has the right to receive the Death Benefit
set forth in the Policy. More than one Beneficiary may be named. (See p.
44.)
Cash Value -- The value of the Policy equal to the Cash Value allocated
to the Investment Subdivisions of Account 4. (As used elsewhere in this
Prospectus and Statement of Additional Information, the term "Account
Value" should be substituted for the term "Cash Value" -- see p. 5.)
Contingent Owner -- The person named in the Policy to become the new
Policyowner of the Policy in the event of the death of the Policyowner
before the Maturity Date. The Policyowner's spouse is the only person that
can be named as the Contingent Owner. (See p. 29.)
Initial Investment Period -- The period commencing on the date the
initial Net Premium Payment is credited to the Policy and ending either 15
calendar days later or, if the Policy is not accepted by the Policyowner,
when all amounts due are refunded. During the period, all Net Premium
Payments will be placed in the Investment Subdivision of Account 4 that
invests exclusively in the Money Market Portfolio of the Life of Virginia
Series Fund, Inc. (See p. 25.)
Policyowner (or "Owner") -- The Person or persons (in the case of Joint
Owners) entitled to receive Income Payments after the Maturity Date. The
Owner is also entitled to the ownership rights stated in the Policy during
the lifetime of the Annuitant. The original Policyowner is named in the
application. Contingent Owners may also be named. (See p. 44.)
The Policy
Allocation of Net Premium Payments -- During the Initial Investment
Period, all Net Premium Payments will be placed in the Investment
Subdivision of Account 4 which invests exclusively in the Money Market
Portfolio of the Life of Virginia Series Fund. The Initial Investment
Period commences on the date the initial Net Premium Payment is credited to
the Policy and ends either 15 calendar days later or, if the Policy is not
accepted by the Policyowner, when all amounts due are refunded, whichever
is earlier. At the end of the Initial Investment Period, the Cash Value
will be transferred from the Investment Subdivision investing in the Money
Market Portfolio of the Life of Virginia Series Fund to the Investment
Subdivisions of Account 4 in accordance with the Policyowner's written
instructions in the application. Additional Net Premium Payments will be
allocated to the Investment Subdivisions of Account 4 in accordance with
the written instructions of the Policyowner. (See p. 25.)
Examination of Policy (Refund Privilege) -- The Policyowner may examine
the Policy and return it for refund within 10 days after it is received.
Unless state law requires otherwise, the amount of the refund will equal
the greater of (1) the Cash Value of the Policy (without reduction of any
surrender charges) plus any amount deducted from the Premium Payments prior
to allocation to Account 4 or (2) the Premium Payments made. A Policyowner
wanting a refund should return the Policy to Life of Virginia at its Home
Office. (See p. 28.)
<PAGE>
Distributions Under The Policy
Death Benefit -- If the Annuitant dies prior to the Maturity Date, a
Death Benefit will become payable to the Beneficiary upon Due Proof of
Death of the Annuitant as long as there is no Contingent Annuitant. If a
Contingent Annuitant exists at the Annuitant's death prior to the Maturity
Date, then no Death Benefit is payable unless the new Annuitant dies prior
to the Maturity Date. The Death Benefit will be equal to the greater of
(a) the total of the Premium Payments made, reduced by the sum of partial
surrenders, including any applicable charges, or (b) the Cash Value of the
Policy as of the date Due Proof of Death is received by Life of Virginia.
Unless an optional payment plan is chosen on or before the date Due Proof
of Death is received by Life of Virginia, the Death Benefit Proceeds will
be paid in a lump sum. If the death of the Annuitant occurs on or after
the Maturity Date, no Death Benefit will be payable under the Policy except
as may be provided under the optional payment plan selected. (See p. 29.)
Income Payments
Election of Optional Payment Plans -- "Proceeds" means the amount payable
upon surrender, death of the Annuitant prior to the Maturity Date, or upon
the Maturity Date. Death Benefit and Surrender Value Proceeds will be paid
in one lump sum. During the lifetime of the Annuitant and prior to the
Maturity Date, by written notice to the Home Office the Policyowner may
elect to receive Proceeds in a lump sum or under an optional payment plan.
During the lifetime of the Annuitant, the Policyowner may elect that all
or any part of the Death Benefit be applied under any one of the optional
payment plans listed in the Policy or in any manner agreeable to Life of
Virginia. If no election as to the optional payment plan has been selected
by the Policyowner at the time of death of the Annuitant prior to the
Maturity Date, such an election may be made by the Beneficiary if made on
or before the date Life of Virginia receives Due Proof of Death. (See p.
29.)
Optional Payment Plans -- The payee under a plan cannot be a corporation,
association, or fiduciary. In addition, Life of Virginia does not reserve
the right to reduce the frequency of payments to an interval that would
result in each payment being at least $100, even if any payment provided
for would be or becomes less than $100. (See p. 35.)
General Provisions -- Statement of Additional Information
Limits on Contesting this Policy -- Life of Virginia has relied on
statements in the Policy application. In the absence of fraud, they are
considered representations and not warranties. Life of Virginia can
contest this Policy if any material misrepresentation of fact was made in
the application and a copy of the application was attached to the Policy
when issued. Absent fraud, Life of Virginia will not contest the policy
after it has been in effect during the Annuitant's life for two years from
the Policy Date.
<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
Federal Tax Matters . . . . . . . . . . . . . . . . . . . . . . 9
Taxation of Life of Virginia . . . . . . . . . . . . . . . . 9
IRS Required Distributions . . . . . . . . . . . . . . . . . 9
General Provisions . . . . . . . . . . . . . . . . . . . . . . 10
Using the Policies as Collateral . . . . . . . . . . . . . . 10
Non-Participating . . . . . . . . . . . . . . . . . . . . . . 10
Evidence of Death, Age, Sex or Survival . . . . . . . . . . . 10
Misstatement of Age or Sex . . . . . . . . . . . . . . . . . 10
Incontestability . . . . . . . . . . . . . . . . . . . . . . 10
Annual Statement . . . . . . . . . . . . . . . . . . . . . . 10
Written Notice . . . . . . . . . . . . . . . . . . . . . . . 10
Distribution of the Policies . . . . . . . . . . . . . . . . . 11
Legal Developments Regarding Employment-Related Benefit Plans . 11
Safekeeping of the Assets of Separate Account 4 . . . . . . . . 11
Additions, Deletions, or Substitutions . . . . . . . . . . . . 11
State Regulation of Life of Virginia . . . . . . . . . . . . . 12
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Financial Statements . . . . . . . . . . . . . . . . . . . . . 12
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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 Policyowner may allocate net premium payments to the Guarantee
Account or transfer amounts between the Guarantee Account and the
Investment Subdivisions of 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 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 charge is deducted, the excess of the policy maintenance
charge 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 General
Account in the same manner in which these charges apply to account values
allocated to the Separate Account.
Transfers
The policyowner may transfer amounts between the Guarantee Account and
the Investment Subdivisions of Account 4. Transfers will be effective on
the date the Policyowner's transfer request is received by the company.
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. The company may limit the
amount which may be transferred, but that amount will not be limited to
less than 25% of that portion of the Guarantee Account represented by
that particular allocation, 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.
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Surrenders
Surrenders may be made from the Guarantee Account in addition to the
Separate Account, (see Distributions Under the Policy, p. 28.). If a
partial surrender is requested, the Policyowner 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
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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
