<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
STATEMENTS OF ASSETS & LIABILITIES (AUDITED)
December 31, 1997
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Table of Contents
Year ended December 31, 1997
=========================================================================
Page
Independent Auditors' Report.......................................1
Financial Statements:
Statements of Assets and Liabilities.........................2
Statements of Operations.....................................3
Statements of Changes in Net Assets..........................4
Notes to Financial Statements......................................5
=========================================================================
<PAGE>
Report of Independent Auditors
Policyholders
Life of Virginia Separate Account I
and Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying statements of assets and liabilities of Life of
Virginia Separate Account I (the Account) (comprising the GE Investments Funds,
Inc.--S&P 500 Index, Money Market, Total Return and Income Funds) as of December
31, 1997 and the related statements of operations and changes in net assets for
the aforementioned funds and the GE Investments Funds, Inc.--Government
Securities Fund of Life of Virginia Separate Account I for each of the two years
or lesser periods then ended. These financial statements are the responsibility
of the Account's management. Our responsibility is to express an opinion on
these financial statements based on our audits. The accompanying statements of
operations and changes in net assets of Life of Virginia Separate Account I for
the year ended December 31, 1995, were audited by other auditors, whose report
thereon dated February 8, 1996 expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agent of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1997 and 1996 financial statements referred to above present
fairly, in all material respects, the financial position of each of the
respective portfolios constituting Life of Virginia Separate Account I as of
December 31, 1997 and the results of their operations and changes in their net
assets for each of the two years or periods then ended in conformity with
generally accepted accounting principles.
Richmond, Virginia
February 13, 1998
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Statements of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
--------------------------------------------------------------
S&P 500 Money Total
Index Market Return Income
Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets
Investments in GE Investments Funds, Inc., at
fair value (note 2):
S&P 500 Index Fund (149,223 shares;
cost - $2,345,470) $ 2,869,554
Money Market Fund (1,948,708 shares;
cost - $1,912,292) $ 1,948,708
Total Return Fund (37,202 shares;
cost - $480,711) $ 491,438
Income Fund (94,420 shares; cost-
$1,144,229) $ 1,143,429
Receivable from affiliate 8,750 16,213 - -
_______________________________________________________________________________________________________________________
Total assets $ 2,878,304 1,964,921 491,438 1,143,429
_______________________________________________________________________________________________________________________
Liabilities
_______________________________________________________________________________________________________________________
Accrued expenses payable to affiliate (note 3) 772 25 1,535 5,491
Payable for units withdrawn 10 - - -
_______________________________________________________________________________________________________________________
Total liabilities 782 25 1,535 5,491
______________________________________________________________________________________________________________________
Net assets $ 2,877,522 1,964,896 489,903 1,137,938
________________________________________________________________________________________________________________________
Analysis of Net Assets
________________________________________________________________________________________________________________________
Attribute to:
Flexible premium variable life insurance policyholders 2,877,522 90,280 489,903 58,212
The Life Insurance Company of Virginia - 1,874,616 - 1,079,726
________________________________________________________________________________________________________________________
Net assets $ 2,877,522 1,964,896 489,903 1,137,938
_________________________________________________________________________________________________________________________
Outstanding units 39,434 4,958 12,075 5,815
_________________________________________________________________________________________________________________________
Net asset value per unit $ 72.97 18.21 40.57 10.01
_________________________________________________________________________________________________________________________
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Statements of Operations
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
--------------------------------------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
----------------------------------- -------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends from
GE Investments Funds, Inc. $ 74,868 951,740 35,643 - 107,728 62,614
Expenses - Mortality and expense risk
charges (note 3) 13,073 10,184 8,201 275 322 308
- --------------------------------------------------------------------------------------------------------------------------
Net investment income 61,795 941,556 27,442 (275) 107,406 62,306
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 25,044 64,036 209,102 14,693 550 (51,013)
Unrealized appreciation (depreciation)
on investments 576,234 (567,960) 334,668 52,703 (93,943) 179,358
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 601,278 (503,924) 543,770 67,396 (93,393) 128,345
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 663,073 437,632 571,212 67,121 14,013 190,651
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
------------------------------------------------------------------------------------
Money Market Total Return Income
Fund Fund Fund
-------------------------------------- ---------------------------------------------
Period from
December 12,
1997 to
Year ended December 31, Year ended December 31, December 31,
1997 1996 1995 1997 1996 1995 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends from
GE Investments Funds, Inc. $ 93,738 90,233 66,095 67,322 125,517 31,014 2,969
Expenses - Mortality and expense risk
charges (note 3) 413 304 319 2,387 2,159 1,981 13
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 93,325 89,929 65,776 64,935 123,358 29,033 2,956
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 243 606 451 9,612 17,898 228,655 (144)
Unrealized appreciation (depreciation)
on investments 4,052 2,824 30,440 2,077 (99,638) (126,734) (800)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 4,295 3,430 30,891 11,689 (81,740) 101,921 (944)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 97,620 93,359 96,667 76,624 41,618 130,954 2,012
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
-------------------------------------------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
--------------------------------------- ---------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income 61,795 941,556 27,442 (275) 107,406 62,306
Net realized gain (loss) 25,044 64,036 209,102 14,693 550 (51,013)
Unrealized appreciation
(depreciation) on investments 576,234 (567,960) 334,668 52,703 (93,943) 179,358
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 663,073 437,632 571,212 67,121 14,013 190,651
- ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 135,730 138,008 147,174 5,808 7,582 9,270
Loan interest (4,224) (3,229) (2,540) (75) (49) (1)
Transfers (to) from the general
account of Life of Virginia:
Death benefits (1,896) (108) - - - -
Surrenders (28,932) (32,971) (98,666) (2,083) (4,713) (4,973)
Loans (803) (12,258) (1,794) 467 (2,224) (581)
Cost of insurance (note 3) (126,732) (118,130) (116,874) (4,109) (7,286) (7,386)
Transfer gain (loss) and
transfer fees (3,324) 2,021 (3,057) 1,728 (60) (5,159)
Capital contribution
(withdrawal) - - (1,368,036) (1,077,814) - (1,350,000)
Interfund transfers (25,477) (2,210) 10,364 (65,455) (180) (1,159)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions (55,658) (28,877) (1,433,429) (1,141,533) (6,930) (1,359,989)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 607,415 408,755 (862,217) (1,074,412) 7,083 (1,169,338)
Net assets at beginning of year 2,270,107 1,861,352 2,723,569 1,074,412 1,067,329 2,236,667
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of year 2,877,522 2,270,107 1,861,352 - 1,074,412 1,067,329
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------- ----------------------------------------------------
----------------------------------------- ----------------------------------------------------
Money Total
Market Return Income
Fund Fund Fund
--------------------------------------- ---------------------------------------- -----------
Period from
December 12,
1997 to
Year ended December 31, Year ended December 31, December 31,
1997 1996 1995 1997 1996 1995 1997
- ------------------------------------------------------------------------------- ----------------------------------------------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income 93,325 89,929 65,776 64,935 123,358 29,033 2,956
Net realized gain (loss) 243 606 451 9,612 17,898 228,655 (144)
Unrealized appreciation
(depreciation) on investments 4,052 2,824 30,440 2,077 (99,638) (126,734) (800)
- ------------------------------------------------------------------------------- ----------------------------------------------------
Increase (decrease) in net assets
from operations 97,620 93,359 96,667 76,624 41,618 130,954 2,012
- ------------------------------------------------------------------------------- ----------------------------------------------------
From capital transactions:
Net premiums 6,957 6,570 8,049 34,821 37,434 39,298 229
Loan interest (22) (1) 49 (1,356) (725) (705) 12
Transfers (to) from the general
account of Life of Virginia:
Death benefits - - - (1,883) - - -
Surrenders - (3,587) (117) (30,483) (15,541) (13,206) -
Loans (74) (2,071) (394) (6,398) (10,486) (4,958) -
Cost of insurance (note 3) (10,681) (9,090) (8,799) (35,165) (34,260) (34,298) (161)
Transfer gain (loss) and
transfer fees 17,954 (1,597) (530) (1,218) (19) (582) (39)
Capital contribution
(withdrawal) - - - - - (1,180,892) 1,077,814
Interfund transfers 30,083 3,403 (8,712) 2,778 (1,013) (493) 58,071
- ------------------------------------------------------------------------------- ----------------------------------------------------
Increase (decrease) in net assets
from capital transactions 44,217 (6,373) (10,454) (38,904) (24,610) (1,195,836) 1,135,926
- ------------------------------------------------------------------------------- ----------------------------------------------------
Increase (decrease) in net assets 141,837 86,986 86,213 37,720 17,008 (1,064,882) 1,137,938
Net assets at beginning of year 1,823,059 1,736,073 1,649,860 452,183 435,175 1,500,057 -
- ------------------------------------------------------------------------------- ----------------------------------------------------
Net assets at end of year 1,964,896 1,823,059 1,736,073 489,903 452,183 435,175 1,137,938
- ------------------------------------------------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Notes to Financial Statements
December 31, 1997
===============================================================================
(1) Description of Entity
Life of Virginia Separate Account I (the Account) is a separate
investment account established in 1984 by The Life Insurance Company of
Virginia (Life of Virginia) under the laws of the Commonwealth of
Virginia. The Account operates as a unit investment trust under the
Investment Company Act of 1940. The Account is used to fund certain
benefits for flexible premium variable life insurance policies issued
by Life of Virginia prior to December 31, 1988. The Life Insurance
Company of Virginia is a stock life insurance company operating under a
charter granted by the Commonwealth of Virginia on March 21, 1871.
Eighty percent of the capital stock of Life of Virginia is owned by
General Electric Capital Assurance Corporation. The remaining 20% is
owned by GE Financial Assurance Holdings, Inc. General Electric Capital
Assurance Corporation and GE Financial Assurance Holdings, Inc. are
indirectly, wholly-owned subsidiaries of General Electric Capital
Corporation ("GE Capital"). GE Capital, a diversified financial
services company, is a wholly-owned subsidiary of General Electric
Company (GE), a New York corporation. Prior to April 1, 1996, Life of
Virginia was an indirect wholly-owned subsidiary of Aon Corporation.
During 1997, the Life of Virginia Series Fund, Inc. changed its name to
the GE Investments Funds, Inc. As a result the Life of Virginia Series
Funds, Inc.--Common Stock Index, Government Securities, Money Market
and Total Return Portfolios were renamed the GE Investments Funds,
Inc.--S&P 500 Index, Government Securities, Money Market and Total
Return Funds, respectively. On December 12, 1997, the Account added the
GE Investments Funds, Inc.--Income Fund as a new investment subdivision
and made a substitution of shares of the GE Investments Funds,
Inc.--Government Securities for shares of the GE Investments Funds,
Inc.--Income Fund. The foregoing substitution was carried out pursuant
to an order of the Securities and Exchange Commission (Commission)
issued on December 11, 1997, with the approval of any necessary
department of insurance.
In 1995, Life of Virginia redeemed $1,368,036, $1,350,000 and
$1,180,892 from the Common Stock Index Portfolio, the Government
Securities Portfolio and the Total Return Portfolio, respectively,
resulting in withdrawals of 81,869 shares, 138,746 shares and 85,510
shares of the respective capital stock.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT I
Notes to Financial Statements
================================================================================
(2) Summary of Significant Accounting Policies
Investments
Investments are stated at fair value which is based on the underlying
net asset value per share of the respective funds. Purchases and sales
of investments are recorded on the trade date and income distributions
are recorded on the ex-dividend date. Realized gains and losses on
investments are determined on the average cost basis. The units and
unit values are disclosed as of the last business day in the applicable
year or period.
The aggregate cost of investments acquired and the aggregate proceeds
of investments sold, for the year ended December 31, 1997 were:
<TABLE>
<CAPTION>
Cost of Shares Proceeds From
Fund Acquired Shares Sold
- ------------------------------------------------------------------------------------------------------------
<S> <C>
GE Investments Funds, Inc.:
S&P 500 Index $ 1,182,705 224,966
Government Securities 172,640 1,211,618
Money Market 221,179 11,237
Total Return 244,145 91,284
Income 1,202,605 58,232
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Capital Transactions
The increase (decrease) in outstanding units from capital transactions
for the years or periods ended December 31, 1997, 1996 and 1995 are as
follows:
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
----------------------------------------------------------------------
Govern-
S&P 500 ment Money Total
Index Securities Market Return Income
Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 42,820 3,166 4,367 14,360 -
Net premiums 4,342 485 504 1,371 -
Loan interest (75) - 3 (25) -
Transfers (to) from the general
account of Life of Virginia:
Death benefits - - - - -
Surrenders (2,911) (260) (7) (461) -
Loans (53) (30) (25) (173) -
Cost of insurance (3,448) (387) (551) (1,196) -
Interfund transfers 306 (61) (545) (17) -
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (1,839) (253) (621) (501) -
- ----------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 40,981 2,913 3,746 13,859 -
Net premiums 2,880 328 390 1,180 -
Loan interest (67) (2) - (23) -
Transfers (to) from the general
account of Life of Virginia:
Death benefits (2) - - - -
Surrenders (688) (204) (213) (490) -
Loans (256) (96) (123) (330) -
Cost of insurance (2,466) (316) (539) (1,080) -
Interfund transfers (46) (8) 202 (32) -
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (645) (298) (283) (775) -
- ----------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 40,336 2,615 3,463 13,084 -
Net premiums 2,340 231 396 931 23
Loan interest (73) (3) (1) (36) 1
Transfers (to) from the general
account of Life of Virginia:
Death benefits (33) - - (50) -
Surrenders (499) (83) - (816) -
Loans (14) 19 (4) (171) -
Cost of insurance (2,184) (164) (608) (941) (16)
Interfund transfers (439) (2,615) 1,712 74 5,807
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (902) (2,615) 1,495 (1,009) 5,815
- ----------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 39,434 - 4,958 12,075 5,815
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
Federal Income Taxes
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life of
Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the General
Electric Capital Assurance Company consolidated federal income tax
return. The Account will not be taxed as a regulated investment company
under subchapter M of the Code. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains
of the Account.
Use of Estimates
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that affect amounts and disclosures reported therein.
Actual results could differ from those estimates.
(3) Related Party Transactions
Net premiums transferred from Life of Virginia to the Account represent
gross premiums recorded by Life of Virginia on its flexible premium
variable life insurance policies, less deductions retained as
compensation for certain distribution expenses and premium taxes. A
charge equal to the lesser of $25 or 2% of the amount paid on a partial
surrender will be made to compensate Life of Virginia for the costs
incurred in connection with accomplishing the surrender.
A charge based on the policy specified amount of insurance, death
benefit option, cash values, duration, the insured's sex, issue age and
risk class is deducted from the policy cash values each month to
compensate Life of Virginia for the cost of insurance and any benefits
added by rider. In addition, Life of Virginia charges the Account for
the mortality and expense risk that Life of Virginia assumes. This
charge is deducted daily at an effective annual rate of .50% of the net
assets of the Account.
GE Investments Funds, Inc. (the Fund) is an open-end diversified
management investment company.
Capital Brokerage Corporation, an affiliate of Life of Virginia, is a
Washington corporation registered with the Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. Capital Brokerage
Corporation also serves as principal underwriter for variable life
insurance policies issued by Life of Virginia.
<PAGE>
(3) Continued
GE Investment Management Incorporated (Investment Advisor), a
wholly-owned subsidiary of GE, currently serves as investment advisor
to GE Investments Funds, Inc. As compensation for its services, the
Investment Advisor is paid an investment advisory fee by the Fund based
on the average daily net assets at an effective annual rate of .35% for
the S&P 500 Index Fund, .10% for the Money Market Fund and .50% for the
Total Return and Income Funds. Prior to May 1, 1997, Aon Advisors, Inc.
served as investment advisor to the Fund and was subject to the same
compensation arrangement as GE Investment Management Incorporated.
Certain officers and directors of Life of Virginia are also officers
and directors of Capital Brokerage Corporation.
================================================================================
