As filed with the Securities and Exchange Commission on May 1, 1996.
Registration No. 33-76334
Registration No. 811-5343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 5 X
For Registration Under the Investment Company Act of 1940
Amendment No. 13 X
Life of Virginia Separate Account 4
(Exact Name of Registrant)
The Life Insurance Company of Virginia
(Name of Depositor)
6610 W. Broad Street
Richmond, Virginia 23230
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (804) 281-6000
John J. Palmer,
Senior Vice President
The Life Insurance Company of Virginia
6610 W. Broad Street
Richmond, Virginia 23230
(Name and address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
on pursuant to paragraph (a) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has registered an indefinite amount of securities. The Registrant filed the
24f-2 Notice for the fiscal year ended December 31, 1995 on February 28, 1996.
<PAGE>
Cross Reference Sheet
Pursuant to Rule 481
Showing Location in Part A (Prospectus) and Part B (Statement of Additional
Information) of Registration Statement of Information Required by Form N-4
<TABLE>
<CAPTION>
PART A
<S> <C>
Item of Form N-4........................................................................Prospectus Caption
1. Cover Page...............................................................................Cover Page
2. Definitions.............................................................................Definitions
3. Synopsis.........................................................................Summary, Fee Table
4. Condensed Financial Information.......................Financial Information; Total Return and Yield
5. General
(a) Depositor........................................The Life Insurance Company of Virginia
(b) Registrant....................................................................Account 4
(c) Portfolio Company.............................................................The Funds
(d) Fund Prospectus...............................................................The Funds
(e) Voting Rights.................................................Voting Rights and Reports
(f) Administrators......................................................................N/A
6. Deductions and Expenses
(a) General.................................................Charges and Deductions; Summary
(b) Sales Load %.....................................................Sales Charges; Summary
(c) Special Purchase Plan...............................................................N/A
(d) Commissions................................................Distribution of the Policies
(e) Expenses-Registrant..................................Charges Against Account 4; Summary
(f) Fund Expenses..................................................The Funds; Other Charges
(g) Organizational Expenses.............................................................N/A
7. Contracts
(a) Persons with Rights................Summary; The Policy; Distributions Under the Policy;
............................................Income Payments; Voting Rights and Reports
(b) (i) Allocation of Purchase Payments....................Allocation of Premium Payments
(ii) Transfers...............................................................Transfers
(iii) Exchanges.....................................................................N/A
(c) Changes...........................Additions, Deletions or Substitutions of Investments;
...................................................................Changes by the Owner
(d) Inquiries.....................................Cover page; Summary; (SAI) Written Notice
8. Annuity Period..........................Income Payments; Transfers; (SAI) Transfer of Annuity Units
9. Death Benefit..................................Death Provisions; Death Benefit; Payment of Benefits
10. Purchases and Contract Value
(a) Purchases.......................Purchasing the Policies; Accumulation of Account Value;
............................................................Value of Accumulation Units
(b) Valuation...................................................Value of Accumulation Units
(c) Daily Calculation...........................................Value of Accumulation Units
(d) Underwriter................................................Distribution of the Policies
11. Redemptions
(a) - By Owners..............................................Surrenders; Partial Surrenders
- By Annuitant...................................................Optional Payment Plans
(b) Texas ORP...........................Restrictions on Distributions From Certain Policies
(c) Check Delay..................................................Payment Under the Policies
(d) Lapse...............................................................................N/A
(e) Free Look......................................Examination of Policy (Refund Privilege)
<PAGE>
12. Taxes...........................................................................Federal Tax Matters
13. Legal Proceedings.................................................................Legal Proceedings
14. Table of Contents for the Statement of
Additional Information........................Statement of Additional Information Table of Contents
PART B
Item of Form N-4............................................................................Part B Caption
15. Cover Page...............................................................................Cover Page
16. Table of Contents.................................................................Table of Contents
17. General Information and History..............................The Life Insurance Company of Virginia
18. Services
(a) Fees and Expenses of Registrant.....................................................N/A
(b) Management Contracts................................................................N/A
(c) Custodian........................................Safekeeping of the Assets of Account 4
Independent Public Accountant...................................................Experts
(d) Assets of Registrant................................................................N/A
(e) Affiliated Persons..................................................................N/A
(f) Principal Underwriter........................................Transfer of Annuity Units;
..........................................................Distribution of the Policies
19. Purchase of Securities Being Offered......................(Prospectus) Distribution of the Policies
Offering Sales Load.............................................................................N/A
20. Underwriters..............................................(Prospectus) Distribution of the Policies
21. Calculation of Performance Data..............................Calculation of Total Return and Yield;
................................................................(Prospectus) Yield and Total Return
22. Annuity Payments.......................................................(Prospectus) Income Payments
23. Financial Statements...........................................................Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4............................................................................Part C Caption
24. Financial Statements and Exhibits.................................Financial Statements and Exhibits
(a) Financial Statements..........................................(a) Financial Statements
(b) Exhibits..................................................................(b) Exhibits
25. Directors and Officers of the Depositor...................................Directors and Officers of
...................................................................................Life of Virginia
26. Persons Controlled By or Under Common Control with the
Depositor or Registrant.........................Persons Controlled By or In Common Control with the
............................................................................Depositor or Registrant
27. Number of Contractowners.....................................................Number of Policyowners
28. Indemnification.....................................................................Indemnification
29. Principal Underwriters.......................................................Principal Underwriters
30. Location of Accounts and Records...................................Location of Accounts and Records
31. Management Services.............................................................Management Services
32. Undertakings...........................................................................Undertakings
Signature Page...........................................................................Signatures
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
PROSPECTUS FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1143 4/94
Offered by
THE LIFE INSURANCE COMPANY OF
VIRGINIA 6610 West Broad Street,
Richmond, Virginia 23230
(804) 281-6000
This Prospectus describes the above-named individual flexible premium variable
deferred annuity policy ("Policy") issued by The Life Insurance Company of
Virginia ("Life of Virginia"). The Policy is designed to aid individuals in
long-term financial planning and provides for the accumulation of capital on a
tax-deferred basis for retirement or other long-term purposes. The Policy may be
used in connection with retirement plans, some of which may qualify for
favorable federal income tax treatment under the Internal Revenue Code.
The Premium Payments are placed in Life of Virginia Separate Account 4
("Account 4"). Premium payments from other flexible premium variable deferred
annuity policies issued by Life of Virginia are also placed in Account 4. The
Owner allocates premiums among selected Investment Subdivision(s) of Account 4.
Each Investment Subdivision of Account 4 will invest solely in a designated
investment portfolio that is part of a series-type mutual fund. Currently, there
are seven such funds with 27 portfolios available under this Policy. The Funds
and their currently available portfolios are on the following page.
This Prospectus must be read along with the current prospectuses for the Funds.
This Prospectus sets forth the basic information that a prospective investor
should know before investing. A Statement of Additional Information containing
more detailed information about the Policies and Account 4 is available free by
writing Life of Virginia at the address above or by calling (800) 352-9910. The
Statement of Additional Information, which has the same date as this Prospectus,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
Please Read This Prospectus Carefully And Retain It For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES IN THE FUNDS AND INTERESTS IN THE POLICIES ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, A BANK, AND THE SHARES AND INTERESTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER AGENCY.
The Date of This Prospectus Is May 1, 1996.
1
<PAGE>
Fidelity Variable Insurance Products Fund:
Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio
Fidelity Variable Insurance Products Fund II:
Asset Manager Portfolio and Contrafund 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 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, Worldwide Growth Portfolio,
International Growth Portfolio*, Balanced Portfolio, and Flexible Income
Portfolio
Federated Insurance Series:
Federated Utility Fund II, Federated High Income Bond Fund II, Federated
American Leaders Fund II*
The Alger American Fund:
Alger American Growth Portfolio and Alger American Small Capitalization
Portfolio
*The International Growth Portfolio and the Federated American Leaders Fund II
are not currently available to California Policyowners.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Definitions................................................................................................................. 5
Fee Table................................................................................................................... 7
Summary.....................................................................................................................15
Financial Information.......................................................................................................17
The Life Insurance Company of Virginia and Life of Virginia Separate Account 4..............................................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
Life of Virginia Series Fund, Inc.........................................................................................21
Oppenheimer Variable Account Funds........................................................................................21
Janus Aspen Series........................................................................................................22
Federated Insurance Series................................................................................................22
The Alger American Fund...................................................................................................23
Resolving Material Conflicts................................................................................................23
Total Return and Yield......................................................................................................23
The Policy..................................................................................................................25
Purchasing the Policies...................................................................................................25
Allocation of Premium Payments............................................................................................25
Accumulation of Account Value.............................................................................................26
Value of Accumulation Units...............................................................................................26
Transfers.................................................................................................................26
Dollar-Cost Averaging.....................................................................................................27
Powers of Attorney........................................................................................................27
Examination of Policy (Refund Privilege)..................................................................................27
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.................................................................................................32
Annual Death Benefit Charge...............................................................................................32
Sales Charges.............................................................................................................32
Transfer Charges..........................................................................................................33
Premium Taxes.............................................................................................................34
Other 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
</TABLE>
3
<PAGE>
TABLE OF CONTENTS (Cont.)
<TABLE>
<CAPTION>
Page
<S> <C>
General Provisions..........................................................................................................44
The Owner.................................................................................................................44
The Annuitant.............................................................................................................44
The Beneficiary...........................................................................................................44
Changes by the Owner......................................................................................................44
Joint Policy..............................................................................................................44
Payment Under The Policies................................................................................................45
Distribution of the Policies................................................................................................45
Voting Rights and Reports...................................................................................................46
Legal Proceedings...........................................................................................................46
Statement of Additional Information Table of Contents.......................................................................47
</TABLE>
4
<PAGE>
DEFINITIONS
Account Value -- The value of the Policy equal to the Account Value allocated
to the Investment Subdivisions of Account 4.
Account 4 -- Life of Virginia Separate Account 4, a separate investment
account established by Life of Virginia to receive and invest premiums paid
under the Policies, and other variable annuity policies issued by Life of
Virginia.
Accumulation Unit -- An accounting unit of measure used in calculating the
Account Value prior to the Maturity Date.
Additional Premium Payment -- Any Premium Payment made after the initial
Premium Payment.
Annuitant -- The Annuitant is the person named in the Policy upon whose age
and sex Monthly Income Benefits are determined.
Annuity Unit -- An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Income Payment.
Business Day -- Any day that the New York Stock Exchange is open for business
and any other day in which there is a material change in the value of the assets
in Account 4.
Code -- The Internal Revenue Code of 1986, as amended.
Death Benefit -- The optional benefit provided under a Policy upon the death
of an Annuitant prior to the Maturity Date.
Designated Beneficiary(ies) -- The person(s) designated in the Policy who is
alive (or in existence for non-natural designations) on the date of an 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 mutual funds available under this Policy. Currently there are
seven: Variable Insurance Products Fund, Variable Insurance Products Fund II,
Life of Virginia Series Fund, Inc., Oppenheimer Variable Account Funds, Janus
Aspen Series, Federated Insurance Series, and The Alger American Fund.
General Account-- The assets of Life of Virginia that are not segregated in
any of the separate investment accounts of Life of Virginia.
Home Office -- The principal offices of The Life Insurance Company of Virginia
at 6610 West Broad Street, Richmond, Virginia 23230.
Income Payment -- One of a series of payments made under either a Monthly
Income Benefit or one of the optional payment plans.
Investment Subdivision -- A subdivision of Account 4 available to the
Policies. Premiums will be allocated, in accordance with the instructions of the
Owner, among no more than seven of the twenty-seven investment subdivisions of
Account 4 available to the Policies, each of which invests exclusively in shares
of a designated portfolio of one of the Funds. All twenty-seven investment
subdivisions may not be available in all states.
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.
5
<PAGE>
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 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.
Non-Qualified Policy-- Policies not sold or used in connection with retirement
plans receiving favorable federal income tax treatment under the Code.
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 Owner is named in the Policy.
Policy -- The variable annuity policy issued by Life of Virginia and described
in this Prospectus. The term "Policy" or "Policies" includes the Policy
described in this Prospectus, a policy application, any supplemental
applications, and any endorsements.
Policy Date -- Generally, the first date on which the application, if attached
to the Policy, was signed or the initial premium was received and accepted by
Life of Virginia at its Home Office.
Premium Payment(s) -- An amount paid to Life of Virginia by the Owner or on
the Owner's behalf as consideration for the benefits provided by the Policy.
Qualified Policies -- Policies used in connection with retirement plans which
receive favorable federal income tax treatment under the Code.
Surrender Value -- The Account Value less any applicable surrender charge.
Valuation Period -- The period between the close of business on a Business Day
and the close of business on the next succeeding Business Day.
Variable Income Payments -- Payments made pursuant to a payment plan and which
fluctuate based on the investment performance of Investment Subdivisions
selected by the Owner.
6
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
<S> <C>
Owner Transaction Expenses:
Sales Charge on Premium Payments none
Maximum Contingent Deferred Sales Charge (as a percentage of premium payments) 6.00%
Other surrender fees none
Transfer charge
First transfer each month none
Subsequent transfers $10.00
Annual Expenses:
(as a percentage of account value)
Mortality and expense risk charge 1.25%
Administrative Expense Charge .15%
Total Annual Expenses 1.40%
=====
Other Annual Expenses:
Annual Policy Maintenance Charge $25.00
Maximum Annual Death Benefit Charge (as a percentage of average benefit amount) .35%*
</TABLE>
* If elective death benefit applies.
Variable Insurance Products Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Equity
Income Growth Overseas
Portfolio Portfolio Portfolio
<S> <C> <C> <C>
Management Fees 0.51% 0.61% 0.76%
Other Expenses (after any expense reimbursement) 0.10% 0.09% 0.15%
----- ----- -----
Total Fund Annual Expenses 0.61% 0.70% 0.91%
===== ===== =====
</TABLE>
Variable Insurance Products Fund II Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Asset
Manager Contrafund
Portfolio Portfolio
<S> <C> <C>
Management Fees 0.71% 0.61%
Other Expenses (after any expense reimbursement) 0.08% 0.11%
----- -----
Total Fund Annual Expenses 0.79% 0.72%
===== =====
</TABLE>
Life of Virginia Series Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Common Real
Money Government Stock Total International Estate
Market Securities Index Return Equity Securities
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waiver) .10% .50% .35% .50% 1.00% .85%
Other Expenses (after any expense reimbursements) .13% .24% .31% .15% .50% .40%
---- ---- ---- ---- ---- ----
Total Fund Annual Expenses .23% .74% .66% .65% 1.50% 1.25%
==== ==== ==== ==== ===== =====
</TABLE>
7
<PAGE>
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
Money Market Portfolio, Real Estate Securities Portfolio and International
Equity Portfolio shown in the table on page 8 of the prospectus reflect such
reimbursements.
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, 1997,
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, 1997, it currently has no intention of doing so. For
additional information, see the prospectus for the Fund.
Oppenheimer Variable Account Funds Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Opp. Opp. Opp.
High Opp. Capital Multiple Opp.
Income Bond Appreciation Strategies Growth
Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Management Fees .75% .75% .74% .74% .75%
Other Expenses .06% .05% .04% .03% .04%
---- ---- ---- ---- ----
Total Fund Annual Expenses .81% .80% .78% .77% .79%
==== ==== ==== ==== ====
</TABLE>
Janus Aspen Series Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Aggressive Worldwide International Flexible
Growth Growth Growth Growth Balanced Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C>
Management Fees .65% .75% .68% .84% .82% .65%
Other Expenses (after any expense reimbursements) .13% .11% .22% 1.85% .55% .42%
---- ---- ---- ----- ---- ----
Total Fund Annual Expenses .78% .86% .90% 2.69% 1.37% 1.07%
==== ==== ==== ===== ===== =====
</TABLE>
Federated Insurance Series Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Federated
Federated Federated American
Utility High Income Leaders
Fund II Bond Fund II Fund II
<S> <C> <C> <C>
Management Fees (after fee waiver) 0.00% 0.00% 0.00%
Other Expenses (after any expense reimbursement) 0.85% 0.80% 0.85%
----- ----- -----
Total Fund Annual Expenses 0.85% 0.80% 0.85%
===== ===== =====
</TABLE>
8
<PAGE>
The Alger American Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
AA Growth AA Small Capitalization
Portfolio Portfolio
<S> <C> <C>
Management Fees 0.75% 0.85%
Other Expenses 0.10% 0.07%
----- -----
Total Expenses 0.85% 0.92%
===== =====
</TABLE>
The purpose of this table is to assist the Owner in understanding the various
costs and expenses that an Owner will bear, directly and indirectly. Except as
noted below, the 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 31 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.
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.
The management fees and other expenses during 1995 for the portfolios of the
Variable Insurance Products Fund were 0.61% for Equity-Income Portfolio, 0.70%
for Growth Portfolio and 0.91% for Overseas Portfolio.
Absent reimbursements, the total annual expenses during 1995 for the
portfolios of the Variable Insurance Products Fund II were 0.81% for Asset
Manager Portfolio and 0.73% for Contrafund Portfolio.
Absent reimbursements, the management fees and other expenses during 1995 for
the portfolios of Life of Virginia Series Fund would have been 0.66% for Common
Stock Index Portfolio, 0.74% for Government Securities Portfolio, 0.63% for
Money Market Portfolio, 0.65% for Total Return Portfolio, 1.61% for Real Estate
Securities Portfolio, and 2.17% for International Equity Portfolio.
The management fees and other expenses during 1995 for the portfolios of the
Oppenheimer Variable Account Funds were .81% for Oppenheimer High Income Fund,
.80% for Oppenheimer Bond Fund, .78% for Oppenheimer Capital Appreciation Fund,
.77% for Oppenheimer Multiple Strategies Fund; and .79% for Oppenheimer Growth
Fund.
Absent certain fee waivers or reductions, the total annual expenses of the
portfolios of the Janus Aspen Series for the fiscal year ended December 31, 1995
would have been .98% for Growth Portfolio, .93% for Aggressive Growth Portfolio,
1.09% for Worldwide Growth Portfolio, 3.57% for International Growth Portfolio,
and 1.55% for Balanced Portfolio.
The total annual expenses for Federated Utility Fund II, Federated High Income
Bond Fund II, and Federated American Leaders Fund II are 0.85%, 0.80% and 0.85%,
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 Federated Utility Fund II, 0.80% of average net
assets for Federated High Income Bond Fund II, and 0.85% of average net assets
for Federated American Leaders Fund II. The adviser can terminate this voluntary
waiver at any time at its sole discretion. Without this waiver and other
voluntary reimbursement of certain other operating expenses, the total operating
expenses were 3.09% for Federated Utility Fund II, 4.20% for Federated High
Income Bond Fund II, and 2.21% for Federated American Leaders Fund II.
The total annual expenses for the portfolios of The Alger American Fund for
the period ended December 31, 1995 were 0.92% for Alger American Small
Capitalization Portfolio and 0.85% for Alger American Growth Portfolio.
9
<PAGE>
EXAMPLES
A Policyowner would pay the following expense on a $1,000 investment, assuming a
5% annual return on assets and the charges and expenses reflected in the Fee
Table above (including the elective death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio $80.05 $134.53 $171.14 $283.72
Growth Portfolio 81.09 137.66 176.68 294.81
Overseas Portfolio 83.27 144.17 188.16 317.57
Variable Insurance Products Fund II
Asset Manager Portfolio 82.13 140.78 182.19 305.76
Contrafund Portfolio 82.98 143.32 186.67 314.63
Life of Virginia Series Fund, Inc.
Money Market Portfolio 78.49 129.53 161.70 261.34
Government Securities Portfolio 82.23 141.06 182.69 306.75
Common Stock Index Portfolio 81.66 139.36 179.69 300.80
Total Return Portfolio 81.85 139.93 180.69 302.79
International Equity Portfolio 91.08 167.26 226.99 395.10
Real Estate Securities Portfolio 88.74 160.37 215.51 372.49
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 82.23 141.06 182.69 306.75
Oppenheimer Bond Fund 82.23 141.06 182.69 306.75
Oppenheimer Capital Appreciation Fund 82.13 140.78 182.19 305.76
Oppenheimer Multiple Strategies Fund 82.04 140.49 181.69 304.77
Oppenheimer Growth Fund 82.23 141.06 182.69 306.75
Janus Aspen Series
Growth Portfolio 82.89 143.04 186.18 313.65
Aggressive Growth Portfolio 84.50 147.82 194.46 330.18
Worldwide Growth Portfolio 85.73 151.47 200.59 342.62
International Growth Portfolio 85.73 151.47 200.59 342.62
Balanced Portfolio 84.50 147.82 194.46 330.18
Flexible Income Portfolio 85.73 151.47 200.59 342.62
Federated Insurance Series
Federated Utility Fund II 83.31 125.34 158.45 263.57
Federated High Income Bond Fund II 82.81 123.82 155.91 258.49
Federated American Leaders Fund II 82.81 123.82 155.91 258.49
The Alger American Fund
Alger American Growth Portfolio 82.61 132.56 194.68 310.70
Alger American Small Capitalization Portfolio 82.13 131.13 192.19 305.76
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
10
<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
Equity-Income Portfolio $24.67 $76.30 $131.14 $283.72
Growth Portfolio 25.77 79.62 136.68 294.81
Overseas Portfolio 28.07 86.52 148.16 317.57
Variable Insurance Products Fund II
Asset Manager Portfolio 26.87 82.92 142.19 305.76
Contrafund Portfolio 27.77 85.62 146.67 314.63
Life of Virginia Series Fund, Inc.
Money Market Portfolio 23.02 71.00 121.70 261.34
Government Securities Portfolio 26.97 83.22 142.69 306.75
Common Stock Index Portfolio 26.37 81.42 139.69 300.80
Total Return Portfolio 26.57 82.02 140.69 302.79
International Equity Portfolio 36.33 111.01 188.48 395.10
Real Estate Securities Portfolio 33.85 103.70 176.52 372.49
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 26.97 83.22 142.69 306.75
Oppenheimer Bond Fund 26.97 83.22 142.69 306.75
Oppenheimer Capital Appreciation Fund 26.87 82.92 142.19 305.76
Oppenheimer Multiple Strategies Fund 26.77 82.62 141.69 304.77
Oppenheimer Growth Fund 26.97 83.22 142.69 306.75
Janus Aspen Series
Growth Portfolio 27.67 85.32 146.18 313.65
Aggressive Growth Portfolio 29.37 90.39 154.59 330.18
Worldwide Growth Portfolio 30.67 94.26 160.98 342.62
International Growth Portfolio 85.73 151.47 200.59 342.62
Balanced Portfolio 84.50 138.25 204.42 330.18
Flexible Income Portfolio 85.73 141.94 210.49 342.62
Federated Insurance Series
Federated Utility Fund II 83.31 125.34 158.45 263.57
Federated High Income Bond Fund II 82.81 123.82 155.91 258.49
Federated American Leaders Fund II 82.81 123.82 155.91 258.49
The Alger American Fund
Alger American Growth Portfolio 82.61 132.56 194.68 310.70
Alger American Small Capitalization Portfolio 82.13 131.13 192.19 305.76
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
11
<PAGE>
EXAMPLES
A Policyowner would pay the following expense on a $1,000 investment, assuming a
5% annual return on assets and the charges and expenses reflected in the Fee
Table above (excluding the elective death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Variable Insurance Products Fund
Equity-Income Portfolio $76.68 $124.05 $151.86 $241.04
Growth Portfolio 77.73 127.19 157.46 252.37
Overseas Portfolio 79.90 133.74 169.05 275.63
Variable Insurance Products Fund II
Asset Manager Portfolio 78.77 130.33 163.02 263.57
Contrafund Portfolio 79.62 132.89 167.55 272.63
Life of Virginia Series Fund, Inc.
Money Market Portfolio 75.16 119.46 143.67 224.32
Government Securities Portfolio 78.86 130.62 163.52 264.58
Common Stock Index Portfolio 78.30 128.91 160.49 258.49
Total Return Portfolio 78.48 129.47 161.50 260.53
International Equity Portfolio 87.73 156.96 209.02 354.90
Real Estate Securities Portfolio 85.38 150.04 197.43 331.78
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 78.86 130.62 163.52 264.58
Oppenheimer Bond Fund 78.86 130.62 163.52 264.58
Oppenheimer Capital Appreciation Fund 78.77 130.33 163.02 263.57
Oppenheimer Multiple Strategies Fund 78.67 130.04 162.51 262.55
Oppenheimer Growth Fund 78.86 130.62 163.52 264.58
Janus Aspen Series
Growth Portfolio 79.52 132.61 167.04 271.63
Aggressive Growth Portfolio 81.13 137.42 175.54 288.52
Worldwide Growth Portfolio 82.36 141.08 181.99 301.24
International Growth Portfolio 85.73 151.47 200.59 342.62
Balanced Portfolio 84.50 138.25 204.42 330.18
Flexible Income Portfolio 85.73 141.94 210.49 342.62
Federated Insurance Series
Federated Utility Fund II 83.31 125.34 158.45 263.57
Federated High Income Bond Fund II 82.81 123.82 155.91 258.49
Federated American Leaders Fund II 82.81 123.82 155.91 258.49
The Alger American Fund
Alger American Growth Portfolio 82.61 132.56 194.68 310.70
Alger American Small Capitalization Portfolio 82.13 131.13 192.19 305.76
</TABLE>
*Surrender includes annuitization over a period of less than 5 years.
12
<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
Equity-Income Portfolio $21.10 $65.18 $111.86 $241.04
Growth Portfolio 22.21 68.51 117.46 252.37
Overseas Portfolio 24.51 75.45 129.05 275.63
Variable Insurance Products Fund II
Asset Manager Portfolio 23.31 71.84 123.02 263.57
Contrafund Portfolio 24.21 74.55 127.55 272.63
Life of Virginia Series Fund, Inc.
Money Market Portfolio 19.50 60.31 103.67 224.32
Government Securities Portfolio 23.41 72.14 123.52 264.58
Common Stock Index Portfolio 22.81 70.33 120.49 258.49
Total Return Portfolio 23.01 70.93 121.50 260.53
International Equity Portfolio 32.78 100.08 169.76 354.90
Real Estate Securities Portfolio 30.30 92.73 157.68 331.78
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 23.41 72.14 123.52 264.58
Oppenheimer Bond Fund 23.41 72.14 123.52 264.58
Oppenheimer Capital Appreciation Fund 23.31 71.84 123.02 263.57
Oppenheimer Multiple Strategies Fund 23.21 71.53 122.51 262.55
Oppenheimer Growth Fund 23.41 72.14 123.52 264.58
Janus Aspen Series
Growth Portfolio 24.11 74.25 127.04 271.63
Aggressive Growth Portfolio 25.81 79.35 135.54 288.52
Worldwide Growth Portfolio 27.11 83.23 141.99 301.24
International Growth Portfolio 85.73 151.47 200.59 342.62
Balanced Portfolio 84.50 138.25 204.42 330.18
Flexible Income Portfolio 85.73 141.94 210.49 342.62
Federated Insurance Series
Federated Utility Fund II 83.31 125.34 158.45 263.57
Federated High Income Bond Fund II 82.81 123.82 155.91 258.49
Federated American Leaders Fund II 82.81 123.82 155.91 258.49
The Alger American Fund
Alger American Growth Portfolio 82.61 132.56 194.68 310.70
Alger American Small Capitalization Portfolio 82.13 131.13 192.19 305.76
</TABLE>
For purposes of these examples, the $25 Annual Policy Maintenance Charge has
been translated into an assumed charge at an annual rate of 0.10% of Account
Value. The actual amount of the policy maintenance charge attributable to a
$1,000 investment will depend on the amount of the total investment in the
Policy.
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES AND ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL; PAST OR FUTURE ANNUAL RETURNS MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT.
*Surrender includes annuitization over a period of less than 5 years.
13
<PAGE>
The expense information regarding the Funds was provided by those Funds. The
Variable Insurance Products Fund, Variable Insurance Products Fund II,
Oppenheimer Variable Account Funds, Janus Aspen Series, Federated Insurance
Series, The Alger American Fund 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 has not independently verified such information.
14
<PAGE>
SUMMARY
The following Summary Of Prospectus Information Should Be Read In Conjunction
With the Detailed Information Appearing Elsewhere In This Prospectus.
The Policy
The Policy allows the Owner to accumulate funds on a tax-deferred basis based
on the investment experience of the assets underlying the Policy. After the
Maturity Date, this Policy also permits Variable Income Payments to be made
based upon either the investment performance of the selected Investment
Subdivisions of Account 4 or Fixed Income Payments based upon the guarantees of
Life of Virginia. The Policy may be purchased on a non-tax qualified basis
(i.e., a Non-Qualified Policy) or it can be purchased with the proceeds from
certain retirement or savings plans qualifying for favorable federal income tax
treatment (i.e., a Qualified Policy).
The Owner can allocate premiums among up to seven Investment Subdivisions,
each of which invests solely in a designated investment portfolio which is part
of a series-type of 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 Owner
bears the entire investment risk under this Policy. The payee will bear the
investment risk after Income Payments begin with respect to Variable Income
Payments.
In addition, under Policies sold through certain distribution systems, Owners
can allocate premiums or transfer amounts from the Investment Subdivisions to a
Guarantee Account. Contributions and/or transfers to the Guarantee Account
become part of the General Account of Life of Virginia.
Premium Payments
Except for certain group sales, an initial Premium Payment of at least $5,000
is required. Additional Premium Payments of at least $500 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.)
Except as stated under Refund Privilege, Premium Payments are allocated among
the Investment Subdivisions (or, if applicable, a guarantee account) in
accordance with the Owner's written instructions. Premium payments may be
allocated among up to seven Investment Subdivisions at any one time (however, at
any point in time, Account Value may not be invested in more than seven
subdivisions). The minimum allocation permitted is 1% of each Premium Payment.
The Owner may, by written request, change the allocation of subsequent Premium
Payments. In states that require a return of Premium Payments as a refund
privilege, initial Premium Payments will be placed in the Investment Subdivision
that invests in the Money Market Portfolio of the Life of Virginia Series Fund,
Inc. (See Allocation of Premium Payments, p. 25.)
Transfers
Before Income Payments begin the Owner may transfer amounts among the
Investment Subdivisions that are available at the time the transfer is
requested. Currently, there is no limit on the number of transfers that may be
made; however, Life of Virginia reserves the right to impose such a limit in the
future. The first transfer in each calendar month will be made without a
transfer charge. Thereafter, each time amounts are transferred, a transfer
charge of $10 will be imposed. (See Transfers, p. 26.) Life of Virginia may not
honor transfers made by third parties holding multiple powers of attorney. (See
Powers of Attorney, p. 27.)
After Variable Income Payments begin, the payee may transfer Annuity Units
among the available Investment Subdivisions once each calendar year. No transfer
charge will be imposed on such transfers.
Full and Partial Surrenders
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.)
Charges and Deductions
To cover the costs of administering the Policies, Life of Virginia deducts a
daily charge at an effective annual rate of .15% of the average daily net assets
in Account 4 attributable to the policies, and an annual policy maintenance
charge of $25 from the Account Value attributable to each Policy. The annual
charge is made at the earlier of 1) next policy anniversary, or 2) surrender.
15
<PAGE>
Life of Virginia does not deduct any sales charge from Premium Payments;
however, it may deduct a surrender charge (also referred to as a contingent
deferred sales charge). (See Sales Charges -- Surrender Charge, p. 32.) A
surrender charge is deducted from full surrenders and certain partial surrenders
that occur within 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 the amount surrendered 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 charge is calculated by multiplying (1) the
surrender charge percentage, described above and (2) the lesser of (a) the
amount surrendered attributable to the premium payment and (b) the premium paid,
less the total of all surrender amounts previously deemed to reduce that premium
payment. The first partial surrender in a policy year is not subject to the
charge if the amount of that surrender is 10% of the Account Value, or less.
A daily charge at an effective annual rate of 1.25% of the average daily net
assets in Account 4 attributable to the policies is imposed against those assets
to compensate Life of Virginia for mortality and expense risks assumed by it. Of
this amount, approximately .90% is allocated to cover the mortality risks, and
approximately .35% is allocated to cover the expense risks. (See Charges Against
Account 4, p. 31.)
Life of Virginia may deduct a charge for any 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.)
In the event that the Owner elects to purchase a Guaranteed Minimum Death
Benefit Rider (See Elective Guaranteed Minimum Death Benefit Rider, p. 30.), a
charge will be made each year for expenses related to the Death Benefit under
the Rider, not exceeding .35% of the average Guaranteed Minimum Death Benefit
during the prior year. (See Annual Death Benefit Charge, p. 32.)
Income Payments
Beginning on the Maturity Date, and if the Annuitant is living on that date,
the Owner 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 Owner may select from a number of
optional payment plans including Income Payments for the life of an Annuitant
(or a different or additional person, depending upon the benefit payable) with a
guaranteed number of Income Payments. (See Optional Payment Plans, p. 35.)
Death Provisions
Subject to a number of distribution rules, certain benefits and other policy
options are available to certain persons on the death of an 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.) Owners may also elect
to purchase a Guaranteed Minimum Death Benefit Rider. (See Elective Guaranteed
Minimum Death Benefit Rider, p. 30.)
Refund Privilege
The Owner has 10 days after the Policy is received to examine the Policy and
return it for a refund. Unless state law requires that Premium Payments be
returned as the refund, the amount of the refund will equal the Account Value
(without reduction of 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 by any surrender charges) plus any amount
deducted from the Premium Payments prior to allocation to Account 4 and (2) the
Premium Payments made. In certain states the Owner may have more than 10 days to
return the policy for a refund. (See Examination of Policy (Refund Privilege),
p. 27.)
Questions
Any questions about the Policy or the Fund portfolios in which the
subdivisions invest will be answered by Life of Virginia's Home Office. All
inquiries can be addressed to Life of Virginia, Variable Products Department,
6610 W. Broad Street, Richmond, VA 23230; if by phone, call (800) 352-9910.
16
<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
Unit Values Unit Values Units
as of as of as of
FUNDS 1/3/95 12/31/95 12/31/95
<S> <C> <C> <C>
VIP Fund
Equity-Income 19.56 25.62 3,119,975
Growth 21.27 27.93 1,525,015
Overseas 15.82 16.82 829,371
LOV Series Fund
Money Market 13.01 13.35 1,508,360
Government Securities 14.61 16.60 153,756
Common Stock Index 18.58 24.52 400,009
Total Return 17.94 22.27 252,584
International Equity@@ - 10.61 47,044
Real Estate Securities@@ - 11.59 34,477
Oppenheimer Variable Account Funds
High Income 20.83 24.31 561,144
Bond 16.17 18.35 275,480
Capital Appreciation 21.25 27.31 582,579
Growth 17.97 23.81 423,764
Multiple Strategies 17.66 19.60 256,681
VIPF II
Asset Manager 15.70 17.87 1,469,667
Contrafund@@ - 13.88 2,007,948
Janus Aspen Series
Growth 10.48 13.41 1,875,640
Aggressive Growth 13.53 16.95 1,251,004
Worldwide Growth 11.91 14.91 1,227,070
International Growth++ - - -
Balanced@@ - 10.62 73,538
Flexible Income@@ - 10.48 36,272
Federated Insurance Series
Federated Utility II@@ - 12.20 463,476
Federated High Income Bond II@@ - 11.86 123,152
Federated American Leaders II++ - - -
The Alger American Fund
AA Growth@@ - 9.63 312,011
AA Small Capitalization@@ - 9.38 401,258
</TABLE>
See page 18 for footnotes.
17
<PAGE>
<TABLE>
<CAPTION>
Accumulation Accumulation No. of
Unit Values Unit Values Units
as of as of as of
FUNDS 7/21/94 12/31/94 12/31/94
<S> <C> <C> <C>
VIP Fund
Equity-Income 18.71 19.23 276,392
Growth 19.45 20.92 141,845
Overseas 16.18 15.55 197,672
LOV Series Fund
Money Market 12.61 12.79 75,600
Government Securities 14.47 14.38 889
Common Stock Index 17.96 18.27 10,408
Total Return 17.15 17.65 12,498
Oppenheimer Variable Account Funds
High Income 20.99 20.49 77,818
Bond 16.08 15.90 11,655
Capital Appreciation 19.39 20.90 68,052
Growth 16.88 17.67 12,276
Multiple Strategies 16.27 16.38 26,302
VIPF II
Asset Manager 15.80 15.50 450,885
Janus Aspen Series
Growth 10.30 10.44 159,068
Aggressive Growth 11.51 13.48 169,799
Worldwide Growth 11.63 11.87 117,700
</TABLE>
++ Unit Values are not shown for the subdivisions investing in the International
Growth Portfolio of Janus Aspen Series, or Federated American Leaders Fund II of
Federated Insurance Series as these portfolios were not available to Separate
Account Owners during the periods shown.
@@ Accumulation Unit Values as of 1/1/95 are not shown for these subdivisions as
they were not available to Separate Account Owners at that time.
18
<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. Effective April 1, 1996, Life of Virginia is an indirectly, wholly-owned
subsidiary of GNA Corporation. Previously, Life of Virginia was an indirectly,
wholly-owned subsidiary of Aon Corporation, an affiliate of Aon Advisors. GNA
Corporation is a wholly-owned subsidiary of General Electric Capital Corporation
("GE Capital"). GE Capital, a New York corporation, is a diversified financial
services company. GE Capital subsidiaries consist of commercial and industrial
specialized, mid- market and indirect consumer financing businesses. GE
Capital's parent, General Electric Company, founded more than one hundred years
ago by Thomas Edison, is the world's largest manufacturer of jet engines,
engineering plastics, medical diagnostic equipment and large-sized electric
power generation equipment.
Life of Virginia is principally engaged in the offering of life insurance
policies and ranks among the twenty-five (25) largest stock life insurance
companies in the United States in terms of business in force. Life of Virginia
is admitted to do business in forty-nine (49) states and the District of
Columbia. The principal offices of Life of Virginia are at 6610 W. Broad Street,
Richmond, Virginia 23230.
Account 4
Life of Virginia Separate Account 4 was established by Life of Virginia as a
separate investment account on August 19, 1987. Account 4 currently has
sixty-six investment subdivisions, twenty-seven of which are available under the
Policy. Premiums are allocated in accordance with the instructions of the Owner
among up to seven of the twenty-seven investment subdivisions available under
this Policy. Each of these investment subdivision invests exclusively in an
investment portfolio of one of the seven Funds described below.
Under the Code of Virginia, the assets of Account 4 are the property of Life
of Virginia. Income and both realized and unrealized gains or losses from the
assets of Account 4 are credited to or charged against the Account without
regard to the income, gains, or losses arising out of any other business Life of
Virginia may conduct. Although the assets in Account 4 attributable to the
Policies are not chargeable with liabilities arising out of any other business
which Life of Virginia may conduct, all obligations arising under the policies,
including the promise to make Income Payments, are general corporate obligations
of Life of Virginia. Furthermore, the assets of Account 4 are available to cover
the liabilities of Life of Virginia's General Account to the extent that the
assets of Account 4 exceed its liabilities arising under the Policies supported
by it.
Account 4 is registered with the Securities and Exchange Commission (the
"Commission") as a unit investment trust under the Investment Company Act of
1940 (the "1940 Act") and meets the definition of a Separate Account under the
Federal Securities Laws. Registration with the Commission, however, does not
involve supervision of the management or investment practices or policies of
Account 4 by the Commission.
Additions, Deletions, or Substitutions of Investments
Life of Virginia reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for the shares of
the Fund portfolios that are held by Account 4 or that Account 4 may purchase.
Life of Virginia also reserves the right to establish additional Investment
Subdivisions of Account 4, each of which would invest in a separate portfolio of
a Fund, or in shares of another investment company, with a specified investment
objective. One or more Investment Subdivisions may also be eliminated if, in the
sole discretion of Life of Virginia, marketing, tax, or investment conditions
warrant.
If deemed by Life of Virginia to be in the best interests of persons having
voting rights under the Policies, and, if permitted by law, Life of Virginia may
deregister Account 4 under the 1940 Act in the event such registration is no
longer required; manage Account 4 under the direction of a committee; or combine
Account 4 with other Life of Virginia separate accounts. To the extent permitted
by applicable law, Life of Virginia may also transfer the assets of Account 4
associated with the Policies to another separate account. In addition, Life of
Virginia may, when permitted by law, restrict or eliminate any voting rights of
Owners or other persons who have voting rights as to Account 4.
19
<PAGE>
THE FUNDS
Account 4 currently invests in seven series-type mutual funds. All of the
Funds currently available under the Policy are registered with the Commission as
open-end, diversified investment companies. The Commission, however, does not
supervise the management or the investment practices and policies of the Funds.
Each Investment Subdivision invests exclusively in a designated investment
portfolio of one of the Funds. The assets of each such portfolio are separate
from other portfolios of that Fund and each portfolio has separate investment
objectives and policies. As a result, each portfolio operates as a separate
investment portfolio and the investment performance of one portfolio has no
effect on the investment performance of any other portfolio. Some of the Funds
may, in the future, create additional portfolios.
Each of the Funds sells its shares to Account 4 in accordance with the terms
of a participation agreement between the Fund and Life of Virginia. The
termination provisions of those agreements vary. A summary of these termination
provisions may be found in the Statement of Additional Information. Should an
agreement between Life of Virginia and a Fund terminate, the Account may not be
able to purchase additional shares of that Fund. In that event, Owners will no
longer be able to allocate Account Values or premium payments to Investment
Subdivisions investing in portfolios of that Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Account 4 despite the fact
that the participation agreement between the Fund and Life of Virginia has not
been terminated. Should a Fund or a portfolio of a Fund decide not to sell its
shares to Life of Virginia, Life of Virginia will be unable to honor Owner
requests to allocate their account values or premium payments to Investment
Subdivisions investing in shares of that Fund or portfolio.
Certain Investment Subdivisions invest in portfolios that have similar
investment objectives and/or policies; therefore, before choosing Investment
Subdivisions, carefully read the individual prospectuses for the Funds, along
with this prospectus.
Variable Insurance Products Fund
Variable Insurance Products Fund ("VIPF") has three portfolios that are
currently available under this Policy: Equity-Income Portfolio, Growth
Portfolio, and Overseas Portfolio.
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") has two portfolios that are
currently available under this Policy: Asset Manager Portfolio and Contrafund
Portfolio.
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.
Contrafund Portfolio seeks capital appreciation by investing mainly in equity
securities of companies believed to be undervalued or out-of-favor.
FMR serves as investment advisor to VIPF II.
20
<PAGE>
Life of Virginia Series Fund, Inc.
Life of Virginia Series Fund, Inc. ("Life of Virginia Series Fund") has six
portfolios that are currently available under this Policy: Common Stock Index
Portfolio, Government Securities Portfolio, Money Market Portfolio, Total Return
Portfolio, International Equity Portfolio, and Real Estate Securities Portfolio.
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 Life of Virginia Series
Fund.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds ("OVAF") has five portfolios that are
currently available under this Policy: Oppenheimer High Income Fund, Oppenheimer
Bond Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Growth Fund, and
Oppenheimer Multiple Strategies Fund.
Oppenheimer High Income Fund seeks a high level of current income from
investment in high yield fixed income securities, including unrated securities
or high risk securities in the lower rating categories. These securities may be
considered to be speculative. This Fund may have substantial holdings of
lower-rated debt securities or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for the OVAF, which should be read
carefully before investing.
Oppenheimer Bond Fund primarily seeks a high level of current income from
investment in high yield fixed income securities rated "Baa" or better by
Moody's or "BBB" or better by Standard & Poor's. Secondarily, it seeks capital
growth when consistent with its primary objective.
Oppenheimer Capital Appreciation Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to OVAF.
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Janus Aspen Series
The Janus Aspen Series ("JAS") currently has six portfolios that are currently
available under this Policy: Growth Portfolio, Aggressive Growth Portfolio,
Worldwide Growth Portfolio, International Growth Portfolio, Balanced Portfolio
and Flexible Income Portfolio. THE INTERNATIONAL GROWTH PORTFOLIO IS NOT
AVAILABLE IN CONNECTION WITH POLICIES ISSUED TO CALIFORNIA POLICYOWNERS.
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 companies of any size. Generally, this Portfolio emphasizes larger, more
established issuers.
Aggressive Growth Portfolio has the investment objective of long-term growth
of capital. The Aggressive Growth Portfolio is a non-diversified portfolio that
will seek to achieve its objective by normally investing at least 50% of its
equity assets in securities issued by medium-sized companies.
Worldwide Growth Portfolio has the investment objective of long-term growth of
capital in a manner consistent with the preservation of capital. The Worldwide
Growth Portfolio will seek to achieve its objective by investing in a
diversified portfolio of common stocks of foreign and domestic issuers of all
sizes. The Portfolio normally invests in issuers from at least five different
countries including the United States.
International Growth Portfolio has the investment objective of long-term
growth of capital. The International Growth Portfolio will seek to achieve its
objective primarily through investments in common stocks of issuers located
outside the United States. The Portfolio normally invests at least 65% of its
total assets in securities of issuers from at least five different countries,
excluding the United States.
Balanced Portfolio has the investment objective of seeking long-term growth of
capital, consistent with the preservation of capital and balanced by current
income. The Portfolio normally invests 40-60% of its assets in securities
selected primarily for their growth potential and 40-60% of its assets in
securities selected primarily for their income potential.
Flexible Income Portfolio has the investment objective of seeking to obtain
maximum total return, consistent with preservation of capital. Total return is
expected to result from a combination of income and capital appreciation. The
Portfolio pursues its objective primarily by investing in any type of
income-producing securities. This Portfolio may have substantial holdings of
lower-rated debt securities or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for JAS, which should be read carefully
before investing.
Janus Capital Corporation serves as investment adviser to JAS.
Federated Insurance Series
The Federated Insurance Series ("FIS") has three portfolios that are currently
available under this Policy: Federated Utility Fund II, Federated High Income
Bond Fund II and Federated American Leaders Fund II. THE FEDERATED AMERICAN
LEADERS FUND II IS NOT AVAILABLE IN CONNECTION WITH POLICIES ISSUED TO
CALIFORNIA POLICYOWNERS.
Federated Utility Fund II has the investment objective of high current income
and moderate capital appreciation. The Federated Utility Fund II will seek to
achieve its objective by investing primarily in equity and debt securities of
utility companies.
Federated High Income Bond Fund II has the investment objective of high
current income. The Federated High Income Bond Fund II will seek to achieve its
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 FIS, which should be read carefully before investing.
Federated American Leaders Fund II has the primary investment objective of
long-term growth of capital, and a secondary objective of providing income. The
Federated American Leaders Fund II will seek to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue chip" companies.
Federated Advisers serves as investment adviser to FIS.
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The Alger American Fund
The Alger American Fund ("AAF") has two portfolios that are currently
available under this Policy: Alger American Small Capitalization Portfolio and
Alger American Growth Portfolio.
Alger American Small Capitalization Portfolio has the investment objective of
long-term capital appreciation. Except during temporary defensive periods, this
Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase, have a total market capitalization
within the range of companies included in the Russell 2000 Growth Index, updated
quarterly. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside the range of companies included in the Russell 2000
Growth Index and in excess of that amount (up to 100% of its assets) during
temporary defensive periods.
Alger American Growth Portfolio has the investment objective of long-term
capital appreciation. Except during temporary defensive periods, this Portfolio
invests at least 65% of its total assets in equity securities of companies that,
at the time of purchase, have a total market capitalization of $1 billion or
greater.
Fred Alger Management, Inc. serves as the investment manager to AAF.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES
AND POLICIES OF ANY OF THE FUNDS WILL BE ACHIEVED.
Life of Virginia currently is compensated by an affiliate(s) of each of the
Funds based upon an annual percentage of the average assets held in the Fund by
Life of Virginia. These percentage amounts, which vary by Fund, are intended to
reflect administrative and other services provided by Life of Virginia to the
Fund and/or affiliate(s).
More detailed information concerning the investment objectives and policies of
the Funds and their investment advisory services and charges can be found in the
current prospectuses for the Funds which accompany or precede this Prospectus
and the Funds' current statements of additional information. A current
prospectus for each Fund can be obtained by writing or calling Life of Virginia
at its Home Office. The prospectus for each Fund should be read carefully before
any decision is made concerning the allocation of Premium Payments or transfers
among the Investment Subdivisions.
Resolving Material Conflicts
The Funds are used as investment vehicles for both variable life insurance and
variable annuity policies issued by Life of Virginia. In addition, all of the
Funds, other than Life of Virginia Series Fund, are also available to registered
separate accounts of insurance companies other than Life of Virginia offering
variable annuity and variable life policies. As a result, there is a possibility
that an irreconcilable material conflict may arise between the interests of
Owners owning Policies whose account values are allocated to Account 4 and of
Owners owning policies whose Account Values are allocated to one or more other
separate accounts investing in any one of the Funds.
In addition, Janus Aspen Series, Life of Virginia Series Fund, and The Alger
American Fund may sell shares to certain retirement plans. As a result, there is
a possibility that a material conflict may arise between the interests of Owners
generally or certain classes of Owners, and such retirement plans or
participants in such retirement plans.
In the event of a material conflict, Life of Virginia will take any necessary
steps, including removing Account 4 from the Fund, to resolve the matter. See
the individual Fund Prospectus for additional details.
TOTAL RETURN AND YIELDS
From time to time, Life of Virginia may advertise total return and/or yield
for the Investment Subdivisions. These figures are based on historical earnings
and do not indicate or project future performance. Each Investment Subdivision
may, from time to time, advertise performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance information appears in the
Statement of Additional Information.
Total returns and yields for the Investment Subdivision are based on the
investment performance of the corresponding investment portfolios of the Funds.
Each portfolio's performance in part reflects its expenses. See the Prospectuses
for the Funds.
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Total return for an Investment Subdivision refers to quotations made assuming
that an investment under a Policy has been held in that Investment Subdivision
for various periods of time including, but not limited to, a period measured
from the date the Investment Subdivision commenced operations. When an
Investment Subdivision has been in operation for one, five, and ten years,
respectively, the total return for these periods will be provided.
An average annual total return quotation represents the average annual
compounded rate of return that would equate a hypothetical initial investment of
$1,000 (as of the first day of the period for which the total return quotation
is provided) to the redemption value of that investment (as of the last day of
the period). Such quotations show the average annual percentage change in the
value of a hypothetical investment during the periods specified. The
standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the
Investment Subdivision (including any surrender charge that would apply if an
Owner terminated the Policy at the end of each period indicated, but excluding,
charges for the Guaranteed Minimum Death Benefit Rider, and any deductions for
premium taxes).
In addition to the standardized version described above, total return
performance quotations computed on non-standard bases may be used in
advertisements. For example, average annual total return information may be
presented, computed on the same basis as described above, except deductions will
not include sales or administrative charges. Average annual total returns that
exclude sales or administrative expenses, or both, will be greater than
standardized average annual total returns for comparable periods. Life of
Virginia may from time to time disclose average annual and/or cumulative total
return in other non-standard formats.
The yield of a "money market" Investment Subdivision refers to the income
generated by an investment in that Investment Subdivision over a specified
seven-day period, which is then annualized. Yield is calculated by assuming that
the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The effective yield is calculated similarly but
the income earned by an investment in that money market Subdivision is assumed
to be reinvested each period. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The yield of an Investment Subdivision (other than a "money market"
Subdivision) refers to the income generated by an investment in that Investment
Subdivision over a specified 30-day (or one-month) period. The income generated
over the period is assumed to be generated and reinvested each month for six
months. The resulting semi-annual yield is then doubled.
Life of Virginia may from time to time also disclose yield, standard total
returns, and non-standard total returns for periods prior to the date of
inception of the Investment Subdivisions.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of performance data, please refer to the
Statement of Additional Information.
In advertising and sales literature, the performance of each Investment
Subdivision may be compared to the performance of other variable annuity issuers
in general or to the performance of particular types of variable annuities
investing in mutual funds, or investment portfolios of mutual funds with
investment objectives similar to each of the Investment Subdivisions. Lipper
Analytical Services, Inc. ("Lipper") and the Variable Annuity Research Data
Service ("VARDS") are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as variable
annuity issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS each rank such issuers on the
basis of total return, assuming reinvestment of distributions, but do not take
sales charges, redemption fees, or certain expense deductions at the separate
account level into consideration. In addition, VARDS prepares risk adjusted
rankings, which consider the effects of market risk on total return performance.
This type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives.
Advertising and sales literature may also compare the performance of each
Investment Subdivision to various widely recognized indices. One such index is
the Standard & Poor's 500 Composite Stock Price Index, a measure of stock market
performance. This unmanaged index does not consider tax consequences or the
expense of operating or managing an investment portfolio, and may not consider
reinvestment of income dividends.
Life of Virginia may also report other information including the effect of
tax-deferred compounding on an Investment Subdivision's investment returns, or
returns in general, which may be illustrated by tables, graphs, or charts. All
income and capital gains derived from the Investment Subdivisions' investments
in the Funds are reinvested on a tax-deferred basis.
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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 apply through an authorized
registered agent. The minimum initial Premium Payment required under the Policy
is $5,000. However, in certain cases where policies are being offered to members
of a group of individuals, Life of Virginia may agree to waive the $5,000
initial premium requirement. Acceptance of a request for a policy and acceptance
of premium payments are subject to Life of Virginia's rules, and Life of
Virginia reserves the right to reject any request for a policy and any 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 we are unable to issue a policy due to incomplete information regarding the
applicant, the initial Premium Payment will be credited to the policy within two
Valuation Periods after the later of receipt of the information needed to issue
the policy or receipt of the initial Premium Payment by Life of Virginia at its
Home Office. If the initial Premium Payment cannot be credited within five
Business Days after receipt by Life of Virginia, 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 required information is
made complete. If Life of Virginia retains the initial Premium Payment, it will
be credited within two Valuation Periods after the necessary requirements are
fulfilled.
The Owner may make Additional Premium Payments before the earliest of (1) the
date which is ten years preceding the maturity date, (2) the date the Annuitant
attains age 86 and (3) the date Income Payments begin. Subject to applicable
state requirements, Additional Premium Payments must be for $500 or more if the
policy is a Non-Qualified policy, $50 or more if the policy is an IRA Policy,
and $100 or more if the policy is a Qualified Policy other than an IRA Policy.
Additional Premium Payments made under Qualified Policies are limited to
proceeds from certain qualified plans. Additional Premium Payments are credited
as of the next close of business (on a Business Day) following receipt of the
payment at the Home Office.
The Policy Date is generally the first date on which the application was
signed or the initial Premium Payment was received and accepted by Life of
Virginia at its Home Office and is set forth in the Policy.
"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 date of receipt of the
Additional Premium Payment by Life of Virginia at its Home Office. (See Sales
Charges, p. 32.)
Allocation of Premium Payments
The Owner, by written instructions, allocates Premium Payments among the
Investment Subdivisions. The Owner may allocate Premium Payments totally to one
Investment Subdivision of Account 4, or partially to any one of the available
Investment Subdivisions; however, at any one point in time, the Account Value
may not be invested in more than seven Investment Subdivisions. Allocations of
less than 1% of any Premium Payment to any one Investment Subdivision are not
permitted.
In those states which require that Premium Payments be returned during the
right to examine Policy period (see Examination of Policy (Refund Privilege), p.
27.), during an initial period commencing on the date the initial Premium
Payment is credited to the Policy, Premium Payments will be placed in the
Investment Subdivision that invests exclusively in the Money Market Portfolio of
the Life of Virginia Series Fund The Premium Payments will remain in that
subdivision until the earlier of 15 calendar days from the date the initial
Premium Payment is credited to the Policy or, if the Policy is not accepted by
the Owner, when all amounts due are refunded. At the end of the 15-day period,
the Account Value at that time, and all subsequent Premium Payments, will be
allocated among the Investment Subdivisions in accordance with the Owner's
instructions.
The Owner may change the allocation of subsequent Premium Payments at any
time, without charge, by sending acceptable written notice to Life of Virginia
at its Home Office. The allocation will apply to any Premium Payments received
after Life of Virginia records the change. The Account Value will vary with the
investment performance of the Investment Subdivisions the Owner selects, and the
Owner bears the entire investment risk for the Account Value in any particular
Investment Subdivision. The allocation of Premium Payments will affect not only
the Account Value prior to the Maturity Date, but it may also affect the Death
Benefit payable upon the Annuitant's death. The Owner should periodically review
his allocation of Account Value in light of market conditions and overall
financial planning requirements.
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Accumulation of Account Value
The Policy provides for an accumulation of Account Value prior to the Maturity
Date. The Account Value equals the sum of the values of the amounts allocated
under the Policy to each Investment Subdivision. Account Value will be
determined on a daily basis and will reflect a number of factors, including
Premium Payments, partial surrenders, transfers, charges assessed in connection
with the Policy, and the investment performance of the shares purchased by the
Investment Subdivisions to which the Account Value is allocated. There is no
guaranteed minimum Account Value.
On the date the initial Premium Payment is received and accepted by Life of
Virginia, the Account Value equals the initial Premium Payment. Thereafter,
prior to the Maturity Date, the Account Value in each Investment Subdivision is
determined by multiplying the number of Accumulation Units in that Investment
Subdivision credited to the Policy by the current value of an Accumulation Unit
for that Investment Subdivision. The number of Accumulation Units is increased
by any Additional Premium Payments and any transfers into that Investment
Subdivision and decreased by the policy maintenance charge, the Annual Death
Benefit Charge any transfers out of that Investment Subdivision, and any full or
partial surrenders.
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued separately.
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the shares purchased by each Investment
Subdivision and the deduction of certain charges from Account 4.
For each Investment Subdivision, the value of an Accumulation Unit for the
first Valuation Period was $10. The value of an Accumulation Unit in an
Investment Subdivision for each subsequent Valuation Period equals the value of
the Accumulation Unit as of the immediately preceding Valuation Period,
multiplied by the Net Investment Factor for that Investment Subdivision for the
Valuation Period for which the Accumulation Unit Value is being calculated. The
Net Investment Factor is a number representing the change in the value of
Investment Subdivision assets on successive Business Days due to investment
income, realized or unrealized capital gains or losses, deductions for taxes, if
any, and deductions for the mortality and expense risk charge and administrative
expense charge.
The value of an Accumulation Unit for a Valuation Period is the same for each
day in the period.
Transfers
Before Income Payments begin, the Owner may transfer amounts among the
Investment Subdivisions that are available at the time of the request by sending
a written request to the Home Office. Telephone transfers are subject to Life of
Virginia's administrative requirements. All transfers will be effective as of
the end of the Valuation Period during which the written or telephone request is
received at the Home Office.
Currently, there is no limit to the number of transfers that may be made;
however, Life of Virginia reserves the right to limit, upon written notice, the
number of transfers to twelve each calendar year or, if it is necessary in order
that the Policy will continue to receive annuity treatment by the Internal
Revenue Service, a lower number.
The first transfer in each calendar month will be made without charge.
Thereafter, each time a transfer is made, a transfer charge of $10 will be
deducted from the amount transferred. The transfer charge is Life of Virginia's
estimate of the average actual cost of present and future typical transfers;
Life of Virginia does not expect to make a profit from the process of executing
transfers. Once a Policy is issued, the amount of the transfer charge is
guaranteed for the life of the Policy.
After Income Payments begin, if Variable Income Payments are being made,
Annuity Units may be transferred among the Investment Subdivisions at the
payee's request once each calendar year. No transfer charge will be imposed on
such transfers. The transfer will be effective as of the end of the Valuation
Period during which Life of Virginia receives written request at its Home
Office. The Income Payment amount on the date of the transfer will not be
affected by the transfer, although subsequent Variable Income Payments will
reflect the investment experience of the selected Investment Subdivisions.
If the number of Annuity Units remaining in an Investment Subdivision after a
transfer is less than 1, then this amount will also be transferred. In addition,
transfers are only permitted into an Investment Subdivision if, after the
transfer, the number of Annuity Units of that Investment Subdivision is at least
1.
Where permitted by state law, Life of Virginia reserves the right to refuse to
execute any transfer, whether requested before or after income payments begin,
if any of the Investment Subdivisions that would be affected by the transfer are
unable to purchase or redeem shares of the mutual funds in which they invest.
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Telephone Transfers
Life of Virginia permits telephone transfers and may be liable for losses
resulting from unauthorized or fraudulent telephone transfers if it fails to
employ reasonable procedures to confirm that the telephone instructions that it
receives are genuine. Therefore, Life of Virginia will employ means to prevent
unauthorized or fraudulent telephone requests, such as sending written
confirmation, recording telephone requests, and/or requesting other identifying
information. In addition, Life of Virginia may require written authorization
before allowing Owners to make telephone transfers.
To request a telephone transfer, Owners should call Life of Virginia's
Telephone Transfer Line at 800-772-3844. Life of Virginia will record all
telephone transfer requests. Transfer requests received at least one hour prior
to the close of the New York Stock Exchange will be executed that business day
at that day's prices. Requests received after that time will be executed on the
next business day at that day's prices.
Dollar-Cost Averaging
Owners may elect to have Life of Virginia automatically transfer specified
amounts from one of certain designated Investment Subdivisions of Account 4 to
any other available Investment Subdivision(s) on a monthly or quarterly basis.
This privilege is intended to permit Owners to utilize "Dollar-Cost Averaging,"
a long-term investment method that provides for regular level investments over a
period of time. Life of Virginia makes no representations or guarantees that
Dollar-Cost Averaging will result in a profit or protect against loss.
Owners must complete the Dollar-Cost Averaging section of the application or a
Dollar-Cost Averaging Agreement in order to participate in the Dollar-Cost
Averaging program. Currently, the Investment Subdivision available to allocate
money for the purpose of Dollar-Cost Averaging is the Money Market Investment
Subdivision. Money may be allocated to this subdivision as initial premium,
additional premium or in the form of a transfer from other Investment
Subdivisions within Account 4. Any amount allocated must conform to the minimum
amount and percentage requirements, (see Purchasing the Policies, and Allocation
of Premium Payments, p. 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 Owner may discontinue Dollar-Cost Averaging by sending Life of
Virginia a written cancellation notice. Owners may make changes to their
Dollar-Cost Averaging program by calling Life of Virginia's Telephone Transfer
Line at 800-772-3844. Also, Life of Virginia reserves the right to discontinue
Dollar-Cost Averaging upon 30 days written notice to the Owner.
Powers of Attorney
As a general rule and as a convenience to Owners, Life of Virginia allows the
use of powers of attorney whereby Owners give third parties the right to effect
account value transfers on behalf of the Owners. However, when the same third
party possesses powers of attorney executed by many Owners, the result can be
simultaneous transfers involving large amounts of Account Value. Such transfers
can disrupt the orderly management of the Funds, can result in higher costs to
Owners, and are generally not compatible with the long-range goals of purchasers
of the Policies. Life of Virginia believes that such simultaneous transfers
effected by such third parties are not in the best interests of all shareholders
of the Funds and this position is shared by the managements of those Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, Life of Virginia may not honor such powers of attorney and has
instituted or will institute procedures to assure that the transfer requests
that it receives have, in fact, been made by the Owners in whose names they are
submitted. However, these procedures will not prevent Owners from making their
own Account Value transfer requests.
Examination of Policy (Refund Privilege)
The Owner may examine the Policy and return it for refund within 10 days after
it is received. Unless state law requires that Premium Payments be returned as
the refund, the amount of the refund will equal the Account Value with any
adjustments required by applicable law or regulation on the date Life of
Virginia receives the Policy. If state law requires that Premium Payments be
returned, the amount of the refund will equal the greater of (1) the Account
Value (without reduction by any surrender charges) plus any amount deducted from
the Premium Payments prior to allocation to Account 4 or (2) the Premium
Payments made. In certain states the Owner may have more than 10 days to return
the policy for a refund. An Owner wanting a refund should return the Policy to
Life of Virginia at its Home Office.
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DISTRIBUTIONS UNDER THE POLICY
Surrender
The Owner may make a full or partial surrender of the Policy at any time
before Income Payments begin by sending a written request to Life of Virginia at
its Home Office. The Policy must be submitted with a request for a full
surrender.
Life of Virginia will not permit a partial surrender that is less than $500 or
that reduces the Account Value of the Policy to less than $5,000. In the event
that a partial surrender request would reduce the Account Value to less than
$5,000, Life of Virginia will surrender only that amount of Account Value that
would reduce the remaining Account Value to $5,000 and deduct any surrender
charge from the amount surrendered.
The amount payable on full surrender of the Policy is the Surrender Value
at the end of the Valuation Period during which the request is received. The
Surrender Value equals the Account Value on the date Life of Virginia receives a
request for surrender less any applicable surrender charge. (See Surrender
Charge, p. 32.) Any premium tax paid by Life of Virginia which has not been
previously deducted may also be deducted from the Surrender Value, as will any
applicable Annual Death Benefit Charge and the Policy Maintenance Charge. (See
Annual Death Benefit Charge, p. 32 and Policy Maintenance Charge, p. 32.) 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 Owner may indicate, in writing, from which
Investment Subdivisions the Account Value is to be transferred. If no such
written instruction is received with the partial surrender request, the Account
Value transferred out will be transferred from the Investment Subdivisions in
the same proportion that the Account Value in each Investment Subdivision bears
to the total Account Value on the date Life of Virginia receives the written
request. A portion of the Policy's surrender charge may be assessed at the time
a partial surrender is made. Any applicable surrender charge will be deducted
from the amount surrendered. (See Surrender Charge, p. 32.)
Full and partial surrenders may have federal tax consequences. (See Federal
Tax Matters, p. 38.)
Systematic Withdrawals.
The Owner may elect to make a series of partial surrenders in equal
installments, adding up, in a 12 month period beginning with the date of the
first payment, to an amount not to exceed 10% of the Account Value as of the
effective date of the partial surrender ("Systematic Withdrawals"). Systematic
Withdrawals will be available only if no partial surrender has occurred during
the policy year of the election of Systematic Withdrawals. If a Systematic
Withdrawal program is discontinued, a new program may not be instituted until
the next policy year. A surrender charge will not be imposed on Systematic
Withdrawals. A surrender charge will however be applied to any additional
surrender(s) made during the time Systematic Withdrawal payments are being made,
unless all surrender charges have expired, (see Surrender Charge, p. 32).
Systematic Withdrawal payments count as partial surrenders with reduced charges
(See Reduced Charges on Certain Surrenders, p. 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 Premium Payments, p. 25.).
After a series of Systematic Withdrawals has begun, the frequency and/or
amount of payments may be changed upon request by the Owner, subject to the
following rules:
1) only one such change may be requested in a calendar quarter;
2) if the maximum amount was not elected at the time the current series of
Systematic Withdrawals was initiated, the remaining payments may be
increased;
3) the total amount to be withdrawn during that 12-month period, including
amounts already paid, remains limited to 10% of the Account Value at the
time the current series of Systematic Withdrawals was initiated; and
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4) if the current series of Systematic Withdrawals is discontinued, any
remaining payments in the current 12-month period will be paid in a lump
sum on request.
Systematic Withdrawals may be discontinued at any time by the Owner by
notifying Life of Virginia in writing. Life of Virginia reserves the right to
discontinue Systematic Withdrawals upon 30 days written notice to Owners.
Otherwise, payments will continue until the earlier of (i) the date on which a
Systematic Withdrawal reduces the Account Value for the entire policy below
$5,000, or (ii) the date on which the total Account Value in all Investment
Subdivisions designated for Systematic Withdrawals is insufficient to provide
further payments on the mode in effect.
If any Systematic Withdrawal would be or becomes less than $50, Life of
Virginia reserves the right to reduce the frequency of payments to an interval
that would result in each payment being at least $50. Life of Virginia also
reserves the right to prohibit simultaneous Systematic Withdrawals and
Dollar-Cost Averaging, (see Dollar-Cost Averaging, p. 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 Taxation of Systematic Withdrawals
on p. 40.
Death Provisions
Prior to the Maturity Date, if an Owner, Joint Owner, or Annuitant dies while
the Policy is in force, the Designated Beneficiary will be treated as the sole
owner of the Policy, subject to the distribution rules set forth below. A death
benefit may be payable to the Designated Beneficiary upon receipt by Life of
Virginia of Due Proof of Death as described below. The Designated Beneficiary is
determined by identifying the first person named in the following list who is
alive or in existence on the date of death:
(1) Owner
(2) Joint Owner
(3) Beneficiary
(4) Contingent Beneficiary
(5) Owner's estate
If Joint Owners both survive, they become the Designated Beneficiary together.
In such cases, for purposes of the Distribution Rules discussed below, each
Designated Beneficiary will be treated separately with respect to each
Designated Beneficiary's portion of the Policy.
Even if the Designated Beneficiary is treated as the sole owner of this
Policy, the death of the Designated Beneficiary will not be treated as the death
of an Owner for purposes of the death benefit provisions below, nor will such
death increase the time during which any required distributions from the Policy
may be made.
After the Maturity Date (including after income payments begin), if an Owner,
Joint Owner, Annuitant, or Designated Beneficiary dies while the Policy is in
force, payments that are already being made under the Policy will be made at
least as rapidly as under the method of distribution in effect at the time of
such death, notwithstanding any other provision of the Policy.
Optional Death Benefit at Death of Annuitant. If the Annuitant was age 80 or
younger on the Policy Date, and dies prior to the Maturity Date while the Policy
is in force, the Designated Beneficiary may elect an optional Death Benefit
within 90 days of the date of such death. (For Policies issued in the State of
Washington, the Death Benefit available at the death of the Annuitant will
become payable unless the Designated Beneficiary elects to continue the Policy,
subject to these death benefit provisions. The Designated Beneficiary will have
a period of 90 days following the date of the Annuitant's death to make such an
election.)
During the first six Policy Years, the optional Death Benefit will be the
greater of: (1) the total of premiums paid, reduced by any applicable premium
tax and any partial surrenders plus their applicable surrender charge, and (2)
the Account Value on the date Life of Virginia receives Due Proof of Death.
During subsequent six year periods, 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, reduced by any applicable premium tax and any partial
surrenders plus their applicable surrender charges since then, and (2) the
Account Value on the date Due Proof of Death is received.
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If the request for payment of the Death Benefit occurs more than 90 days after
the Annuitant's death, and/or if the deceased Annuitant was age 81 or older on
the Policy Date, the Surrender Value will be payable instead of the Death
Benefit.
Under the terms of the Policy, if the optional Death Benefit is elected, the
benefit is paid and the Policy terminates. Beginning May 1, 1996, the optional
Death Benefit may be elected even if the Policy is continued after the death of
the Annuitant, subject to the following:
If the deceased Annuitant was an Owner, but the distribution rules
(described below) do not apply because the surviving spouse is continuing
the Policy as Owner and Annuitant, the Account Value on the date we receive
Due Proof of Death will be set equal to the greater of the Account Value
and the Death Benefit on that date. Any increase in Account Value will be
allocated to the subdivisions using the current premium allocation. The
optional Death Benefit will continue to apply as before if the surviving
spouse was age 80 or younger on the Policy Date. Otherwise, or if the
Policy is surrendered after the 90-day period that the optional Death
Benefit is available, the amount payable is the Surrender Value.
If the deceased Annuitant was not an Owner, and the distribution rules do
not apply because the Owner is a natural person and a new Annuitant was or
is named, the Account Value will be increased and the Surrender Value and
Death Benefit will be modified as described above.
If the deceased Annuitant was an Owner, and the distribution rules apply,
the Account Value and Surrender Value will be modified as above. Afterward,
the Death Benefit no longer applies.
Elective Guaranteed Minimum Death Benefit Rider. If an Annuitant dies prior to
the Maturity Date while the Guaranteed Minimum Death Benefit Rider is in effect,
the Designated Beneficiary may elect the Death Benefit described below within 90
days of the date of such death. If this Death Benefit is paid, the Policy will
terminate, and Life of Virginia will have no further obligation under the
Policy. THE GUARANTEED MINIMUM DEATH BENEFIT RIDER MAY NOT BE AVAILABLE IN ALL
STATES OR MARKETS.
The Death Benefit under the Guaranteed Minimum Death Benefit Rider will be the
greater of: (1) the optional Death Benefit described above under "Optional Death
Benefit at Death of Annuitant," and (2) the greater of (A) the Guaranteed
Minimum Death Benefit, and (B) the Account Value of the Policy on the date Life
of Virginia receives proof of the Annuitant's death, or, if later, the date of
the request. The Guaranteed Minimum Death Benefit is, on the Policy Date, equal
to the premium paid. At the end of each Valuation Period after such date, the
Guaranteed Minimum Death Benefit is the lesser of: (1) the total of all premiums
received, multiplied by two, less the amount of any partial surrenders made
prior to or during that Valuation Period; or (2) the Guaranteed Minimum Death
Benefit at the end of the preceding Valuation Period, increased as specified
below, plus any additional premium payments during the current Valuation Period
and less any partial surrenders plus their applicable surrender charges during
the current Valuation Period.
The amount of the increase for the Valuation Period will be calculated by
applying a factor to the Guaranteed Minimum Death Benefit at the end of the
preceding Valuation Period. Until the anniversary on which the Annuitant attains
age 80, the factor is determined for each Valuation Period at an effective
annual rate of 6%, except that with respect to amounts invested in certain
Investment Subdivisions shown in the Policy, the increase factor will be
calculated as the lesser of: (1) the Net Investment Factor for the Valuation
Period, minus one, and (2) a factor for the Valuation Period equivalent to an
effective annual rate of 6%. Currently, these subdivisions include only the
money market Investment Subdivisions. With respect to amounts invested in the
Guarantee Account, Item (1) above is replaced with a factor for the Valuation
Period equivalent to the credited rate(s) applicable to such amounts.
If the Guaranteed Minimum Death Benefit Rider has been elected, it is
effective on the Policy Date and will remain in effect while the Policy is in
force and before income payments begin, or until the Policy Anniversary
following the date of receipt of the Owner's request to terminate the rider.
There will be a charge made each year for expenses related to the Death Benefit
available under the terms of the Guaranteed Minimum Death Benefit Rider. (See
Annual Death Benefit Charge, p. 32). Amounts payable under the Guaranteed
Minimum Death Benefit Rider are subject to the distributions rules described
below.
Distribution Rules. The Code requires that if an 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. The following Distribution Rules are designed to comply with these Code
requirements, and are applicable upon the death of an Owner or Joint Owner,
including the death of an Annuitant who is also an Owner. These Distribution
Rules will not apply upon the death of an Annuitant, if the Annuitant was not
also an Owner of the Policy, all Owners of the Policy are natural persons, and a
Contingent Annuitant survives. Even if no Contingent Annuitant is alive on the
death of the Annuitant, if the Owner is a natural person, that Owner will be the
Contingent Annuitant. Therefore, on the death of the Annuitant, the Distribution
Rules apply only if (1) the Annuitant was an Owner, or (2) any Owner was not a
natural person.
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Prior to the Maturity Date, if the Designated Beneficiary is not the surviving
spouse of the deceased Owner, Joint Owner or Annuitant, then the Surrender Value
or the applicable Death Benefit will be paid in one lump sum to, or for the
benefit of, the Designated Beneficiary. Instead of receiving a lump sum
distribution, however, the Designated Beneficiary may elect: (1) to receive the
Surrender Value at any time during the five year period following the death of
the Owner, Joint Owner, or Annuitant by partially or totally surrendering the
Policy; or (2) to apply the entire Surrender Value (or applicable Death Benefit)
under optional payment plan 1 or 2 (described beginning on p. 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 with 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 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 (1) above, 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.
After this, there will be no remaining value in the Policy. If the Designated
Beneficiary dies before all required payments have been made, Life of Virginia
will make any remaining payments to any person named in writing by the
Designated Beneficiary. Otherwise, Life of Virginia will pay the Designated
Beneficiary's estate.
Rather than the Distribution Rules described above, special rules apply if the
Designated Beneficiary is the surviving spouse of the deceased Owner, Joint
Owner, or Annuitant. In these cases, 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 one of the Death Benefits described
above available upon the Annuitant's death. On the surviving spouse's death, the
entire interest in the Policy will be paid within five years of such spouse's
death to the Designated Beneficiary named by the surviving spouse (and if no
Designated Beneficiary has been named, such payment will be made to the
surviving spouse's estate).
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 .003446% for each day in a Valuation Period. The
effective annual rate of this charge, which is compounded daily, is 1.25% of the
average daily net assets of Account 4. Of this amount, approximately .90% is
allocated to cover the mortality risks, and approximately .35% is allocated to
cover the expense risks. Life of Virginia guarantees that this charge of 1.25%
will never increase. Nevertheless, the mortality and expense risk charge (as
well as the Annual Death Benefit Charge described below) may be a source of
profit for Life of Virginia if proven to be more than sufficient to meet
risk-related expenses over the long run.
The mortality risk assumed by Life of Virginia arises from its contractual
obligation to make Income Payments to each payee regardless of how long all
payees or any individual payee may live. Although Variable Income Payments will
vary in accordance with the investment performance of the shares purchased by
each Investment Subdivision, they will not be affected by the mortality
experience of persons receiving such payments or of the general population. This
assures each payee that neither the longevity of fellow payees nor an
improvement in life expectancy generally will have an adverse effect on the
Variable Income Payments received under the Policy. Mortality risk also arises
from the possibility that the Death Benefit will be greater than the Account
Value.
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The expense risk assumed is that expenses incurred in issuing and
administering the Policies will be greater than estimated and, therefore, will
exceed the expense charge limits set by the Policies.
Administrative Expense Charge. A charge will be deducted from each Investment
Subdivision to compensate Life of Virginia for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted daily and
equals .000411% for each day in a Valuation Period. The effective annual rate of
this charge, which is compounded daily, is .15% of the average daily net assets
of Account 4.
Policy Maintenance Charge
A charge of $25 will be deducted annually from the Account Value of each
Policy to compensate Life of Virginia for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted at each
anniversary and at surrender. Life of Virginia will waive this charge if the
Account Value exceeds $75,000 at the time the charge is due. The policy
maintenance charge will compensate Life of Virginia for issuance, processing,
start-up and on-going administration expenses. These expenses include the cost
of processing applications, establishing Policy records, premium collection,
recordkeeping, processing Death Benefit claims, full or partial surrenders,
transfers, and reporting and overhead costs. Life of Virginia has set this
charge at a level which is intended to recover no more than the actual cost
associated with administering the contract. Once a Policy is issued, the amount
of the Policy Maintenance Charge is guaranteed for the life of the Policy.
The annual Policy Maintenance Charge will be allocated among the Investment
Subdivisions in the same proportion that the Policy's Account Value in each
Investment Subdivision bears to the total Account Value in all Investment
Subdivisions at the time the charge is made. Other allocation methods may be
available upon request.
Annual Death Benefit Charge
There will be a charge made each year for expenses related to the Death
Benefit available under the terms of the Guaranteed Minimum Death Benefit rider.
Life of Virginia deducts this charge through the cancellation of accumulation
units at each anniversary and at surrender to compensate it for the increased
risks associated with providing the enhanced death benefit. The charge at full
surrender will be a pro-rata portion of the annual charge. Life of Virginia
guarantees that this charge will never exceed an annual rate of .35% of the
prior year's average Guaranteed Minimum Death Benefit.
Sales Charges
Life of Virginia incurs certain sales and other distribution expenses when the
Policies are issued. The majority of these expenses consist of commissions paid
for sales of these Policies; however, other distribution expenses are incurred
in connection with the printing of prospectuses, conducting seminars and other
marketing, sales, and promotional activities. To recover a portion of these
expenses, a surrender charge (also referred to as a contingent deferred sales
charge) is imposed on full and certain partial surrenders.
Life of Virginia expects to incur the majority of its distribution expenses in
the first policy year. Although the applicable percentage for surrender charges
is higher in the years immediately following the receipt of any given Premium
Payment, such a charge in any given year is not necessarily related to actual
distribution expenses incurred in that year. Life of Virginia expects to recover
any shortfall from surrender charge revenues over the life of the Policy from
Life of Virginia's General Account, including amounts derived from the mortality
and expense risk charge and from mortality gains.
Set forth below is a general discussion of the amount and nature of the
charge, followed by a more technical explanation of how the charge is
calculated.
Surrender Charge. Surrender charges (also referred to as a contingent deferred
sales charge) will be imposed on full and partial surrenders that occur within
six years of any Premium Payments. Surrender charges are made to cover certain
expenses relating to the sale of the Policy, including commissions to registered
representatives and other promotional expenses. Surrender charges also apply to
proceeds received upon maturity if the Maturity Date occurs within six years of
receipt of a Premium Payment.
Surrender charges are deducted from the amount surrendered. All or part of the
amount surrendered may be subject to charge. Any amount subject to charge is
considered a surrender of Premium Payments. Surrender charges are determined
using the assumption that Premium Payments are surrendered on a first-in
first-out basis, up to the amount surrendered. For each such Premium Payment,
the charge is a percentage of the Premium Payment (or portion thereof)
surrendered. The charge is calculated separately for each Premium Payment at the
time it is surrendered, as specified in the table below.
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Number of Full Years
Between the Date of Surrender Charge as a
Receipt of Premium Percentage of Premium
Payment and Date of Surrender Payment Surrendered
----------------------------- ----------------------
less than 1 6%
1 6%
2 6%
3 6%
4 4%
5 2%
6 or more 0%
After all Premium Payments have been surrendered, any remaining Account Value
may be surrendered. Surrender charges do not apply after all Premium Payments
have been surrendered.
Reduced Charges on Certain Surrenders. No surrender charge applies to the
first surrender of the policy year, if the amount surrendered is not more than
10% of the Account Value at the end of the Valuation Period during which the
surrender request is received. If the first surrender of the policy year is a
full surrender, or a partial surrender of more than 10% of the Account Value, no
surrender charge will apply to a portion of the amount surrendered equal to 10%
of the Account Value. Any remaining portion of the amount surrendered may be
subject to surrender charges, as described above. The amount subject to charge
will not exceed the amount surrendered.
Waived Surrender Charges for Certain Payment Plans. Surrender charges
otherwise applicable will be waived if and to the extent that proceeds are not
distributed in a lump sum and are applied to optional payment plans 1, 2 (for a
period of five or more years) or 5 (see p. 35.).
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement. Surrender charges arising from a full surrender or one or more
partial surrenders occurring before income payments begin will be waived if:
An Annuitant is, or has been confined to a state licensed or legally
operated hospital or inpatient nursing facility for at least 30 consecutive
days; and
Such confinement begins at least one year after the policy date; and
An Annuitant was age 80 or younger on the policy date; and
The request for the full or partial surrender, together with proof of such
confinement is received in the Home Office of Life of Virginia while the
Annuitant is confined or within 90 days after discharge from the facility.
For purposes of this provision, Annuitant means either the Annuitant, Joint
Annuitant or Final Annuitant, whichever is applicable.
The waiver of surrender charges in the event of hospital or nursing facility
confinement may not be available in all states or all markets.
Transfer Charges
The Owner may transfer amounts among the Investment Subdivisions. Currently,
there is no limit on the number of transfers that may be made; however, Life of
Virginia reserves the right to impose such a limit in the future before Income
Payments begin. Also, where permitted by state law, Life of Virginia reserves
the right to refuse to execute any transfer if any of the Investment
Subdivisions that would be affected by the transfer are unable to purchase or
redeem shares of the mutual funds in which they invest.
The first transfer in each calendar month will be made without charge.
Thereafter, each time amounts are transferred during that calendar month, a
transfer charge of $10 will be deducted from the amount transferred to
compensate Life of Virginia for the costs in making the transfer. Life of
Virginia does not expect to make a profit on the transfer charge. No transfer
charge is imposed on transfers occurring after Income Payments begin.
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Premium Taxes
Life of Virginia may deduct a charge for any premium taxes incurred. The
premium tax rates incurred by Life of Virginia currently range from 0 to 3.5%.
Any applicable premium tax charge may be deducted from either the premium paid
or from proceeds, (including benefits for surrender, maturity and death).
Other Taxes
Under present laws, Life of Virginia will incur state and local taxes (other
than premium or similar taxes) in several states. At present, Life of Virginia
is not making a charge for these taxes but it reserves the right to charge for
such taxes.
Because of its current status under the Code, Life of Virginia does not expect
to incur any federal income tax liability that would be chargeable to Account 4.
Based upon this expectation, no charge is being made currently to Account 4 for
federal income taxes. If, however, Life of Virginia determines that such taxes
may be incurred, it may assess a charge for those taxes from Account 4.
Other Charges
Because Account 4 purchases shares of the Funds, the net assets of each
Investment Subdivision will reflect the investment advisory fee and other
expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these charges,
read the individual Fund prospectuses.
Reduction of Charges for Group Sales
The surrender charge may be reduced for sales of the Policies to a trustee,
employer or similar entity representing a group or to members of the group where
such sales result in savings of expenses incurred by Life of Virginia in
connection with the sale of the Policies. The entitlement to such a reduction in
such charge will be determined by Life of Virginia based on the following
factors:
(1) The size of the group. Generally, the sales expenses for each individual
Owner for a larger group are less than for a smaller group because more
Policies can be implemented with fewer sales contacts and less administrative
cost.
(2) The total amount of Premium Payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on larger
purchase payments than on smaller ones.
(3) The purpose for which the Policies are purchased. Certain types of plans
are more likely to be stable than others. Such stability reduces the number
of sales contacts and administrative and other services required, reduces
sales administration and results in fewer Policy terminations. As a result,
sales and other expenses can be reduced.
(4) The nature of the group for which the Policies are being purchased.
Certain types of employee and professional groups are more likely to continue
Policy participation for longer periods than are other groups with more
mobile membership. If fewer Policies are terminated in a given group, Life of
Virginia's sales and other expenses are reduced.
(5) There may be other circumstances of which Life of Virginia is not
presently aware which could result in reduced sales expenses.
Reductions in this charge will not be unfairly discriminatory against any
person including the affected owners and all other owners of the Policies.
Additional information about charge reductions is available from Life of
Virginia at its Home Office.
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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 (automatic payment
plan), using the sex and settlement age of the Annuitant instead of the payee,
unless another election is made by the Owner.
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. If the remaining payments are Variable Income Payments, the amount of
each payment to be discounted will be assumed equal to the value of the payment
amount on the date we receive Due Proof of Death. This discounted amount will be
paid in one sum.
Unless a different date is requested, the Maturity Date is the Policy
anniversary that the Annuitant reaches age 90. The Owner may change the Maturity
Date to any date at least 10 years after the date of the most recent premium
payment by sending Life of Virginia written notice before the Maturity Date then
in effect.
During the lifetime of the Annuitant and prior to the Maturity Date, however,
the Owner, or the Designated Beneficiary upon the Owner'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.
Income payments will be made monthly unless the Owner 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) divided by (c) where: (a) is the monthly
payment per $1,000, shown under the optional payment plans for Life Income with
10 Years Certain, using the sex and settlement age of the Annuitant instead of
the payee, on the Maturity Date; (b) is the Maturity Value less any premium
taxes paid by Life of Virginia that were not recouped previously by a premium
tax charge; and (c) is $1,000. (see Optional Payment Plans for information about
subsequent variable income payments.)
If at the time Income Payments begin, the Owner has not provided Life of
Virginia with a written election not to have federal income taxes withheld, Life
of Virginia must by law withhold such taxes from the taxable portion of such
Income Payments and remit that amount to the federal government. Also, in some
other circumstances, Life of Virginia may withhold taxes. (See Direct Rollover
and Mandatory Withholding Requirements, p. 43, and Federal Income Tax
Withholding, p. 43.) In addition, any proceeds applied under an optional payment
plan are subject to the imposition of a premium tax charge in those states which
impose such a tax upon annuitization, or deduction of the deferred premium tax
in those states which impose such a tax on Life of Virginia for premiums
received. (See Premium Taxes, p. 34.)
Optional Payment Plans
Proceeds payable on the Maturity Date will be paid as described in the Monthly
Income Benefit section. Death and surrender proceeds will be paid in one sum.
Subject to the rules stated below, and to the death benefit and distribution
rules stated above, however, any part of death or surrender proceeds can be left
with us and paid under a payment plan. (For the tax treatment of surrender
proceeds and death benefits, see Taxation of Partial and Full Surrenders, p. 39,
and Taxation of Death Benefit Proceeds, p. 40.) Any proceeds left with us will
be applied to calculate the amount of the income. During the Annuitant's life,
the Owner may choose a payment plan. If a Beneficiary is changed, then the
payment plan selection is no longer in effect unless a request to continue it is
made. The Designated Beneficiary can choose a plan at the death of the Annuitant
if one has not been chosen.
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<PAGE>
Optional payment plans can provide either Fixed Income Payments or Variable
Income Payments as selected by the Owner or the payee. There are currently five
optional payment plans available. Optional payment plans 1 through 5 can be used
to provide Fixed Income Payments while only optional payment plans 1 and 5 are
available to provide Variable Income Payments. A plan and the form of the Income
Payments may be designated in the application or by notifying Life of Virginia
in writing at its Home Office. If the payee is not a natural person, consent of
Life of Virginia is required prior to selecting a plan.
The effect of choosing a Fixed Income Payment is that the minimum amount of
each Income Payment will be calculated on the date the first Income Payment is
made and will not change. If Fixed Income Payments are chosen, the proceeds will
be transferred to the General Account of Life of Virginia on the date the Income
Payments begin. Minimum Fixed Income Payments will be fixed in amount and
duration by the optional payment plan chosen and the age and sex of the
Annuitant on that date. For further information, the Owner should contact Life
of Virginia at its Home Office.
Fixed Income Payments are based on the current assumed rate of interest as
determined by Life of Virginia when Income Payments begin. The assumed interest
rate may be changed at the discretion of Life of Virginia; however, the minimum
guaranteed interest rate is 3.0%.
If the Owner, (or the Designated Beneficiary) elects to receive Variable
Income Payments under the applicable optional payment (Plan 1 or Plan 5), the
proceeds may be allocated among up to seven Investment Subdivisions. The first
Variable Income Payment is determined by the optional payment plan chosen and
the amount of proceeds applied to the plan. The dollar amount of subsequent
Income Payments will reflect the investment experience of the selected
Investment Subdivisions and is determined by means of Annuity Units.
The number of Annuity Units for an Investment Subdivision will be determined
when Income Payments begin and will remain fixed unless transferred. (See
Transfers p. 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 subsequent payments, the Income Payment amount for an Investment Subdivision
is the number of Annuity Units for that Investment Subdivision times the Annuity
Unit Value for that Investment Subdivision seven days before the payment is due.
For each Investment Subdivision, the Annuity Unit Value for the first
Valuation Period was $10. The Annuity Unit Value for each subsequent Valuation
Period is (a) times (b) times (c) where: (a) is the Net Investment Factor for
that period (see Statement of Additional Information -- Net Investment Factor,
p. 3.); (b) is the Annuity Unit Value for the immediately preceding Valuation
Period; and (c) is the investment result adjustment factor.
The investment result adjustment factor recognizes an assumed interest rate of
3% per year used in determining the amounts of the Income Payments. This means
that if the net investment experience of the Investment Subdivision to which the
Annuity Units apply for a given month exceeds the monthly equivalent of 3% per
year, the monthly payment will be greater than the previous payment. If the net
investment experience for such Subdivision is less than the monthly equivalent
of 3% per year, the monthly payment will be less than the previous monthly
payment.
Payments under Plans 1,2,3 or 5 will begin on the date we receive proof of
death, on surrender, or on the policy's Maturity Date. Payments under Plan 4
will begin at the end of the first interest period after the date Proceeds are
otherwise payable. Plan 4 is not available under Qualified Policies.
Under all of the optional payment plans, if any payment made more frequently
than annually would be or becomes less than $100, Life of Virginia reserves the
right to reduce the frequency of payments to an interval that would result in
each payment being at least $100. If the annual payment payable is less than
$20, Life of Virginia will pay the Surrender Value in a lump sum. Upon making
such a payment, Life of Virginia will have no future obligation under the
Policy.
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option.
Plan 1 -- Life Income with Period Certain. Equal monthly payments will be
made for a guaranteed minimum period. If the payee lives longer than the
minimum period, payments will continue for his or her life. The minimum
period can be 10, 15 or 20 years. Guaranteed amounts payable under this plan
will earn interest at 3% compounded yearly. Life of Virginia may increase the
interest rate and the amount of any payment. If the payee dies before the end
of the guaranteed period, the amount of remaining payments for the minimum
period will be discounted at the same rate used in calculating Income
Payments. "Discounted" means Life of Virginia will deduct the amount of
interest each remaining payment would have earned had it not been paid out
early. The discounted amounts will be paid in one sum to the payee's estate
unless otherwise provided.
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Plan-2 -- Income for a Fixed Period. Equal periodic payments will be made
for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly, or monthly. Guaranteed amounts payable under this
plan will earn interest at 3% compounded yearly. Life of Virginia may
increase the interest and the amount of any payment. If the payee dies, the
amount of the remaining guaranteed payments will be discounted to the date of
the payee's death at the same rate used in calculating Income Payments. The
discounted amount will be paid in one sum to the payee's estate unless
otherwise provided.
Plan 3 -- Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly,
or monthly. The amount paid each year must be at least $120 for each $1,000
of proceeds. Payments will continue until the Proceeds are exhausted. The
last payment will equal the amount of any unpaid proceeds. If Fixed Income
Payments are made under this plan, unpaid Proceeds will earn interest at 3%
compounded yearly. Life of Virginia may increase the interest rate; if the
interest rate is increased, the payment period will be extended. If the payee
dies, the amount of the remaining proceeds with earned interest will be paid
in one sum to his or her estate unless otherwise provided.
Plan 4 -- Interest Income. Periodic payments of interest earned from the
proceeds left with Life of Virginia will be paid. Payments can be annual,
semi-annual, quarterly, or monthly, and will begin at the end of the first
period chosen. Proceeds will earn interest at 3% compounded yearly. Life of
Virginia may increase the interest rate and the amount of any payment. If the
payee dies, the amount of remaining proceeds and any earned but unpaid
interest will be paid in one sum to his or her estate unless otherwise
provided. This plan is not available under Qualified Policies.
Plan 5 -- Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be
at least 35 years old when payments begin. Payments will continue as long as
either payee is living. If Fixed Income Payments are made under this Plan,
the guaranteed amount payable under this plan will earn interest at 3%
compounded yearly. Life of Virginia may increase the interest rate and the
amount of any payment. If both payees die before the end of the minimum
period, the amount of the remaining payments for the 10-year period will be
discounted at the same rate used in calculating Income Payments. The
discounted amount will be paid in one sum to the survivor's estate unless
otherwise provided.
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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 Department 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 Department 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 Department.
(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. The Internal
Revenue Service (the "Service") has stated in published rulings that a
variable contract owner will be considered the owner of separate account
assets if the owner possesses incidents of ownership in those assets, such as
the ability to exercise investment control over the assets. The Treasury
Department has announced, in connection with the issuance of regulations
concerning investment diversification, that those regulations "do not provide
guidance concerning the circumstances in which investor control of the
investments of a segregated asset [i.e. separate] account may cause the
investor, rather than the insurance company, to be treated as the owner of
the assets in the account." This announcement also stated that guidance would
be issued by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts [of a
separate account] without being treated as owners of the underlying assets."
As of the date of this prospectus, no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those addressed by the Service in rulings in which it
was determined that contract owners were not owners of separate account
assets. For example, the Owner of this Policy has the choice of more Funds to
which to allocate premiums and Account Values, and may be able to reallocate
more frequently than in such rulings. These differences could result in an
Owner being considered, under the standard of those rulings, the owner of the
assets of Account 4. To ascertain the tax treatment of its Owners, Life of
Virginia has requested, with regard to a policy similar to this Policy, a
ruling from the Internal Revenue Service that it, and not its Owners, is the
owner of the assets of Account 4 for federal income tax purposes. The Service
has informed Life of Virginia that it will not rule on the request until
issuance of the promised guidance referred to in the preceding paragraph.
Because Life of Virginia does not know what standards will be set forth in
regulations or revenue rulings which the Treasury Department has stated it
expects to be issued, Life of Virginia has reserved the right to modify its
practices to attempt to prevent the Owner from being considered the owner of
the assets of Account 4.
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Frequently, if the Service or the Treasury Department 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 Department were to issue
regulations or a ruling which treated an Owner as the owner of the assets of
Account 4, that treatment might apply only on a prospective basis. However, if
the ruling or regulations were not considered to set forth a new position, an
Owner might retroactively be determined to be the owner of the assets of Account
4.
An Owner who is not a natural person -- that is, an entity such as a
corporation or a trust -- generally is taxable currently on the annual increase
in the Account Value of a Non-Qualified Policy, unless an exception to this
general rule applies. Exceptions exist for, among other things, an Owner which
is not a natural person but which holds the Policy as an agent for a natural
person. The following discussion applies to Policies owned by natural persons.
In addition, if the Policy's Maturity Date occurs at a time when the Annuitant
is at an advanced age, such as over age 85, it is possible that the Owner will
be taxable currently on the annual increase in the Account Value.
Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon 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.
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 Department
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
Department regulations). However, payments which are received after the
investment in the contract has been fully recovered -- i.e., after the sum of
the excludable portions of the payments equal the investment in the contract --
will be fully includible in income. On the other hand, should the payments cease
because of the death of the Annuitant before the investment in the contract has
been fully recovered, the Annuitant (or, in certain cases, the Designated
Beneficiary) is allowed a deduction for the unrecovered amount.
If amounts have become payable under the Policy (such as where the Owner
elects to surrender an amount, or where the Designated Beneficiary elects to
receive amounts payable under the Optional Death Benefit or the Guaranteed
Minimum Death Benefit and if the Distribution Rules (described beginning on p.
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.
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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 page 28, the amount of each withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy,
as described above. However, there is some uncertainty regarding the tax
treatment of Systematic Withdrawals, and it is possible that additional amounts
may be includible in income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before the
Maturity Date from a Non-Qualified Policy because of the death of the 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. If systematic withdrawals
did qualify for this exception, any modification of the systematic withdrawals
could result in certain adverse tax consequences. 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 Owner may claim for such Premium Payments, are limited under an IRA
Policy.
In general, the Premium Payments that may be made for any IRA Policy for any
year are limited to the lesser of $2,000 or 100 percent of the Owner's earned
income for the year. Also, in the case of an individual who has a noncompensated
spouse, Premium Payments may be made into an IRA Policy for the benefit of the
spouse. In such a case, however, the Premium Payments that may be made for the
spouse's IRA Policy for any year are limited to the lesser of $2,000 or the
excess of (1) $2,250 (or, if less, 100 percent of the individual's earned
income) over (2) the individual's Premium Payments for his or her own IRA
Policy. An excise tax is imposed on IRA contributions that exceed the law's
limits.
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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. Life of Virginia plans to ask the Service to approve use of the Policy,
as to form, as an IRA Policy, but there is no assurance that such approval will
be granted.
Taxation of Distributions and Rollovers. If all Premium Payments made to an
IRA Policy were deductible, all amounts distributed from the Policy are included
in the recipient's income when distributed. However, if nondeductible Premium
Payments were made to an IRA Policy (within the limits allowed by the tax law),
a portion of each distribution from the Policy typically is included in income
when it is distributed. In such a case, any amount distributed as an annuity
payment or in a lump sum upon death or a full surrender is taxed as described
above in connection with such a distribution from a Non-Qualified Policy,
treating as the investment in the contract the sum of the nondeductible Premium
Payments at the end of the taxable year in which the distribution commences or
is made (less any amounts previously distributed that were excluded from
income). Also in such a case, any amount distributed upon a partial surrender is
partially includible in income. The includible amount is the excess of the
distribution over the exclusion amount which in turn equals the distribution
multiplied by the ratio of the investment in the contract to the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a qualified
retirement plan to an IRA Policy (or from one individual retirement annuity or
individual retirement account to an IRA policy) without incurring tax if certain
conditions are met. Only certain types of distributions from qualified
retirement plans or individual retirement annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also imposed on
distributions from an IRA Policy equal to 10 percent of the amount of the
distribution includible in income. (Amounts rolled over from an IRA Policy
generally are excludable from income.) The exceptions provide, however, that
this penalty tax does not apply to distributions made (1) on or after age
59-1/2, (2) on or after death or because of disability (as defined in the tax
law), or (3) as part of a series of substantially equal periodic payments over
the life (or life expectancy) of the recipient or the joint lives (or joint life
expectancies) of the recipient and his or her designated beneficiary (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 in which
the employee attains age 70-1/2 regardless of whether he or she has retired.
Simplified Employee Pension Plans
An employer may use a Policy to establish for an employee an individual
retirement annuity plan known as a "simplified employee pension plan" (or
"SEP"), if certain requirements set forth in the tax law are satisfied. Premium
Payments may be made into a Policy used in a SEP generally in accordance with
the rules applicable to individual retirement annuities, though with expanded
contribution limits. Such payments are deductible by the employer and are not
includible in the income of the employee. The taxation of distributed amounts
generally follows the rules applicable to individual retirement annuities. In
particular, employers should consider that IRA Policies generally may not
provide life insurance coverage, but they may provide a death benefit that
equals the greater of the premiums paid and the contract value. The Policy
provides a Death Benefit that in certain circumstances may exceed the greater of
the Premium Payments and the Account Value. Life of Virginia plans to ask the
Service to approve the use of the Policy, as to form, as an IRA Policy, but
there is no assurance that such approval will be granted.
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Section 403(b) Annuities
Premium Payments. Premiums paid for a Policy on behalf of an employee by a
public educational institution or certain other tax-exempt employers are not
included in the employee's income if the Policy meets certain requirements set
forth in the tax law. There are a number of limitations on contributions to a
"Section 403(b) Policy". For example, Premium Payments made as elective
deferrals through a salary reduction agreement with an employee generally are
limited to $9,500 per year (or, if greater, $7,000 per year as adjusted by the
Service for cost of living increases). (Note that contributions to certain other
qualified retirement plans, such as Section 401(k) plans or to SEP plans, by the
Owner may reduce these limits on elective deferrals.) Other limitations may be
more restrictive.
In applying these and other rules applicable to a Section 403(b) Policy, that
Policy and all similar contracts purchased by the same employer for the same
employee are treated as one contract.
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.
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.
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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 a Policy is used in connection with a pension, profit-sharing, or annuity
plan qualified under sections 401(a) or 403(a) of the Code, or is a Section
403(b) Policy, any "eligible rollover distribution" from the Policy will be
subject to the new direct rollover and mandatory withholding requirements
enacted by Congress in 1992. An eligible rollover distribution generally is any
taxable distribution from a qualified pension plan under section 401(a) of the
Code, qualified annuity plan under section 403(a) of the Code, or section 403(b)
annuity or custodial account, excluding certain amounts (such as minimum
distributions required under section 401(a)(9) of the Code and distributions
which are part of a "series of substantially equal periodic payments" made for
the life or a specified period of 10 years or more). Under these new
requirements, withholding at a rate of 20 percent will be imposed on any
eligible rollover distribution received from the Policy. Unlike withholding on
certain other amounts distributed from the Policy, discussed below, the
recipient cannot elect out of withholding with respect to an eligible rollover
distribution. However, this 20 percent withholding will not apply if, instead of
receiving the eligible rollover distribution, the plan participant elects to
have it directly transferred to certain qualified retirement plans. Prior to
receiving an eligible rollover distribution, the plan participant will receive
notice (from the plan administrator or Life of Virginia) explaining generally
the direct rollover and mandatory withholding requirements and how to avoid the
20 percent withholding by electing a direct transfer.
Federal Income Tax Withholding
Amounts distributed from a Policy, to the extent includible in income under
the federal tax laws, are subject to federal income tax withholding. Life of
Virginia will withhold and remit a portion of such amounts to the U.S.
Government unless properly notified by the Owner or other payee, at or before
the time of the distribution, that he or she chooses not to have any amounts
withheld. In some instances, however, Life of Virginia may be required to
withhold amounts. (See the discussion above regarding withholding requirements
applicable to distributions from various qualified retirement plans including
Section 403(b) policies.)
43
<PAGE>
GENERAL PROVISIONS
The Owner
The Owner or Joint Owners are designated in the policy. (Joint Owners own the
Policy equally with the right of survivorship.) The Owner or Joint Owners may
exercise all of the rights and privileges under the Policy, subject to the
rights of any beneficiary named irrevocably, and any assignee under an
assignment filed with Life of Virginia. Disposition of the Policy is subject to
the Policy's death provisions (see Death Provisions, p. 29). If the Owner 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 Owner 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 Owner's death, ownership will pass
to the Owner's estate. The Designated Beneficiary, for purposes of the required
distribution rules of Section 72(s) of the Code, will receive the required
distribution if the Owner dies prior to the Maturity Date. The required
distribution is more fully described in Death Provisions, p. 29.
The Annuitant
The Policy names the Owner or someone else as the Annuitant. A Contingent
Annuitant also may be named. If no Contingent Annuitant has been named, the
Owner shall be treated as the Contingent Annuitant at the death of the
Annuitant. 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
One or more Primary and Contingent Beneficiary(ies) may be designated by the
Owner in an application or in a written request. 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 Owner or Joint
Owner may be changed by written request to the Home Office if this right is
reserved. Such changes may give rise to taxable income and a 10% penalty tax.
(See Taxation of Partial and Full Surrenders, p. 39.) The Primary Beneficiary,
Contingent Beneficiary and Contingent Annuitant may also be changed if this
right is reserved.
To make a change, a written request must be sent to Life of Virginia at its
Home Office. The request and the change must be in a form satisfactory to Life
of Virginia and must actually be received by the Company. The change will take
effect as of the date the request is signed by the Owner. The change will be
subject to any payment made before the change is recorded by Life of Virginia.
Joint Policy
The Policy may be purchased as a Joint Policy. In making this selection, the
Owner must name an Annuitant and Contingent Annuitant. The Owner 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.
44
<PAGE>
Payment under the Policies
Life of Virginia will usually pay any amounts payable as a result of full or
partial surrender within seven days after it receives a written request at its
Home Office in a form satisfactory to it. Life of Virginia will usually pay any
Death Benefit within seven days after it receives Due Proof of Death. Amounts
payable as a result of full or partial surrender, death of the Annuitant or the
Maturity Date may be postponed whenever: (i) the New York Stock Exchange is
closed other than customary weekend and holiday closings, or trading on the New
York Stock Exchange is restricted as determined by the Commission; or (ii) the
Commission by order permits postponement for the protection of Owners; or (iii)
an emergency exists, as determined by the Commission, as the result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the net assets of Account 4.
Payments under a Policy which are derived from any amount paid to Life of
Virginia by check or draft may be postponed until such time as Life of Virginia
is satisfied that the check or draft has cleared the bank upon which it is
drawn.
If, at the time the Owner makes a full or partial surrender request, he or she
has not provided Life of Virginia with a written election not to have federal
income taxes withheld, Life of Virginia must by law withhold such taxes and
remit that amount to the federal government. Moreover, the Code provides that a
10% penalty will be imposed on certain early surrenders. (See Federal Tax
Matters, 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 is a wholly-owned subsidiary of Combined Insurance Company of
America as is Life of Virginia. Forth Financial Securities Corporation, an
affiliate of Life of Virginia, is a Virginia corporation located at 6610 W.
Broad St., Richmond, Virginia 23230. Forth Financial Securities Corporation is
registered with the Commission under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities Dealers,
Inc. Forth Financial Securities Corporation also serves as principal underwriter
for variable life insurance policies issued by Life of Virginia. However, no
amounts have been retained by Forth Financial Securities Corporation for acting
as principal underwriter of the Life of Virginia policies.
Writing agents of Life of Virginia will receive commissions based on a
commission schedule and rules. Commissions depend on the premiums paid. The
agent will receive a commission of 3% of the initial premium paid and any
Additional Premium Payments.
Agents may also be eligible to receive certain bonuses and allowances, as well
as retirement plan credits, based on commissions earned. Field management of
Life of Virginia receives compensation which may be based in part on the level
of agent commissions in their management units. Broker-dealers and their
registered agents will receive first-year and subsequent year commissions
equivalent to the total commissions and benefits received by the field
management and writing agents of Life of Virginia.
45
<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 Owner exercises the voting rights under the
Policy. After Income Payments begin, the person receiving the Income Payments
has the voting interests. Before Income Payments begin, the number of votes
which each Owner has the right to instruct will be determined for a portfolio by
dividing a Policy's Account Value in the subdivision investing in that portfolio
by the net asset value per share of the portfolio. Fractional shares will be
counted. After Income Payments begin, the number of votes after the first Income
Payment is received will be determined by dividing the reserve for such Policy
allocated to the Investment Subdivision by the net asset value per share of the
corresponding portfolio. After Income Payments begin, the reserves attributable
to a Policy decrease as the reserves allocated to the Investment Subdivision
decrease. Fractional shares will be counted.
The number of votes which the Owner has the right to instruct will be
determined as of the date coincident with the date established by a particular
Fund for determining shareholders eligible to vote at the meeting of that Fund.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by that Fund.
Life of Virginia Series Fund also serves as an investment vehicle for variable
life insurance policies sold by Life of Virginia. The Funds other than Life of
Virginia Series Fund also serve as investment vehicles for variable life
insurance policies sold by Life of Virginia as well as for other variable life
insurance and variable annuity policies sold by insurers other than Life of
Virginia and funded through other separate investment accounts. Persons owning
all such other policies as well as the persons receiving income payments under
all such other policies will enjoy similar voting rights. Life of Virginia will
vote Fund shares held in Account 4 as to which no timely instructions are
received, and Fund shares held in Account 4 that it owns as a consequence of
accrued charges under the Policies and other variable annuity policies supported
by Account 4, in proportion to the voting instructions which are received with
respect to all policies funded through Account 4. Each person having a voting
interest will receive proxy materials, reports and other materials relating to
the appropriate portfolio.
LEGAL PROCEEDINGS
There are no legal proceedings to which Account 4 is a party or to which the
assets of the Account are subject. Neither Life of Virginia nor Forth Financial
Securities Corporation is involved in any litigation that is of material
importance in relation to its total assets or that refers to Account 4.
46
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
The Life Insurance Company of Virginia...................................................................................... 3
The Policies................................................................................................................ 3
Transfer of Annuity Units................................................................................................. 3
Net Investment Factor..................................................................................................... 3
Termination of Participation Agreements..................................................................................... 4
Calculation of Performance Data............................................................................................. 4
Money Market Investment Subdivisions...................................................................................... 4
Other Investment Subdivisions............................................................................................. 5
Federal Tax Matters..........................................................................................................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
</TABLE>
47
<PAGE>
SUPPLEMENT TO PROSPECTUS
DATED MAY 1, 1996
FOR LIFE OF VIRGINIA SEPARATE ACCOUNT 4
General Information
Contributions and/or transfers to the Guarantee Account, as described below,
become part of the General Account of Life of Virginia. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "1933 Act"), and the General
Account is not registered as an investment company under the Investment Company
Act of 1940 (the "1940 Act"). Accordingly, neither the General Account nor any
interests therein are subject to the provisions of the 1933 Act or the 1940 Act,
and the information in this supplement has not been reviewed by the staff of the
Securities and Exchange Commission. Disclosure regarding the Guarantee Account
and the General Account, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
The Guarantee Account
The Owner may allocate premium payments to the Guarantee Account or transfer
amounts between the Guarantee Account and the Investment Subdivisions of
Separate Account 4. Upon maturity or surrender of the Policy, any amount in the
Guarantee Account is added to the Account Value in the Separate Account, and,
after deduction of any applicable surrender charge, is paid in a lump sum, or
applied under an optional payment plan (See Income Payments, p. 35.). Amounts
allocated or transferred to the Guarantee Account earn interest at the interest
rate in effect at the time of such allocation. Each period for which a
particular interest rate is guaranteed with respect to a particular allocation
is the interest rate guarantee period. 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. The rate for allocations for a one-year period is
guaranteed to be at least 4% per annum; however, a higher rate of interest may
be credited. Other interest rate guarantee periods may be available. The
guaranteed rate for interest rate guarantee periods longer than one year is 3%.
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. At the end of the interest rate
guarantee period, a new interest rate will become effective, and a new interest
rate guarantee period will commence with respect to that portion of the account
value in the Guarantee Account represented by that particular allocation.
Charges
The Mortality and Expense Risk and Distribution Expense charges are not
deducted from the Guarantee Account. Such charges are borne solely by the
Separate Account. The Annual Policy Maintenance Charge and the Annual Death
Benefit Charge, if applicable, will be deducted from the Guarantee Account if
there is no account value in the Separate Account. If there is insufficient
account value in the Separate Account at the time the charges are deducted, the
excess of these charges over the amount deducted from the Separate Account will
be deducted from the Guarantee Account. (See Policy Maintenance Charge, p. 32.).
Surrender charges apply to account values allocated to the Guarantee Account
in the same manner in which these charges apply to account values allocated to
the Separate Account.
Transfers
The Owner may transfer amounts between the Guarantee Account and the
Investment Subdivisions of Account 4. Transfers will be effective on the date
the Owner's transfer request is received by Life of Virginia. With respect to
transfers between the Guarantee Account and the Investment Subdivisions of
Account 4, the following restrictions may be imposed:
Transfers from any particular allocation to the Guarantee Account to
subdivisions of Account 4 may be made only during the 30 day period beginning
with the end of the preceding interest rate guarantee period applicable to
that particular allocation. Life of Virginia may limit the amount which may
be transferred, but that amount will not be limited to less than 25% of that
particular allocation of the Guarantee Account, plus any accrued interest on
that amount.
No transfers from any subdivision of Account 4 to the Guarantee Account may
be made during the six month period following the transfer of any amount from
the Guarantee Account to any subdivisions of the Separate Account.
In all other respects, the rules and charges applicable to transfers between
the various Investment Subdivisions of the Separate Account will apply to
transfers involving the Guarantee Account.
48
<PAGE>
Dollar-Cost Averaging
For policies issued on or after November 14, 1994, as an alternative to the
dollar-cost averaging program described on p. 27, Owners may elect to have Life
of Virginia automatically transfer specified amounts from the Guarantee Account
to any available Investment Subdivision on a monthly or quarterly basis. To make
the election, Owners must complete the Dollar-Cost Averaging section of the
application or a Dollar-Cost Averaging Agreement. Money may be allocated to the
Guarantee Account as an initial or subsequent premium or in the form of a
transfer of Account Value from one or more Investment Subdivisions. Such
allocations must comply with all applicable minimum amount and percentage
requirements (see Purchasing the Policies and Allocation of Premium Payments, p.
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.
Owners may designate the amount of value under the policy allocated to the
Guarantee Account that is subject to the dollar-cost averaging program. Life of
Virginia reserves the right to limit the amount of each automatic transfer to
10% per month of the amount so designated.
Automatic transfers from the Guarantee Account, as described above, will be
made on a first-in-first-out basis until the entire value of the designated
amount in the Guarantee Account is depleted. Prior to that time, an Owner may
discontinue such automatic transfers by sending Life of Virginia a written
notice. Life of Virginia reserves the right to discontinue or modify the
alternative Dollar-Cost Averaging program at any time for any reason on 30 days
written notice to the Owner.
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 Owner may specify the accounts from which the deduction should be
made. If no account is specified, the amount of the partial surrender will be
deducted first from the Investment Subdivisions of the Separate Account on a
pro-rata basis, in proportion to the Account Value in the Separate Account. Any
amount remaining will be deducted from the Guarantee Account. Deductions from
the Guarantee Account will be taken from the amounts (including interest
credited to such amounts) which have been in the Guarantee Account for the
longest period of time.
Deferral of Payment
Life of Virginia may defer payment of any amount from the Guarantee Account
for up to six months. Payment will not be deferred if applicable law requires
earlier payment, or if the amount payable is to be used to pay premiums on
policies in force with the company.
THE GUARANTEE ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS
Dated May 1, 1996
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
49
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
SEPARATE ACCOUNT 4
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1143 4/94
OFFERED BY
THE LIFE INSURANCE COMPANY OF VIRGINIA
(A Virginia Stock Corporation)
6610 W. Broad Street
Richmond, Virginia 23230
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the above-named Flexible Premium Variable Deferred
Annuity Policy ("Policy") offered by The Life Insurance Company of Virginia. You
may obtain a copy of the Prospectus dated May 1, 1996 by calling (800) 352-9910,
or writing to The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, Virginia 23230. Terms used in the current Prospectus for the Policy
are incorporated in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS AND SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS FOR THE POLICY.
Dated May 1, 1996
1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
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 Total Return and Yield....................................................................................... 4
Money Market Investment Subdivisions...................................................................................... 4
Other Investment Subdivisions............................................................................................. 5
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 of Investments.......................................................................11
State Regulation of Life of Virginia........................................................................................12
Legal Matters...............................................................................................................12
Experts.....................................................................................................................12
Financial Statements........................................................................................................12
</TABLE>
2
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
The Life Insurance Company of Virginia ("Life of Virginia") has operated as a
stock life insurance company since March 21, 1871 under a charter granted by the
Commonwealth of Virginia and has done business continuously since that time as
"The Life Insurance Company of Virginia."
Effective April 1, 1996, Life of Virginia is an indirectly, wholly-owned
subsidiary of GNA Corporation which is, in turn, a wholly-owned subsidiary of
General Electric Capital Corporation ("GE Capital"). Previously, Life of
Virginia was an indirectly, wholly-owned subsidiary of Aon Corporation, an
affiliate of Aon Advisors, Inc. GE Capital is a diversified financial services
company. GE Capital's subsidiaries consist of commercial and industrial
specialized, mid-market and indirect consumer financing businesses. GE Capital's
parent, General Electric Company, founded more than one hundred years ago by
Thomas Edison, is the world's largest manufacturer of jet engines, engineering
plastics, medical diagnostic equipment and large-sized electric power generation
equipment.
GNA Corporation indirectly owns the stock of Forth Financial Securities
Corporation (a broker/dealer registered with the Commission, which acts as
principal underwriter for the Policies).
THE POLICIES
Transfer of Annuity Units
Upon the Owner's request, Annuity Units may be transferred once per calendar
year from the Investment Subdivision in which they are currently held. However,
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 the Investment Subdivisions invest. The amount of the increase in
the number of Annuity Units for the Investment Subdivision to which the transfer
is made is (a) times (b) divided by (c) where: (a) is the number of Annuity
Units for the Investment Subdivision in which the Annuity Units are currently
held; (b) is the Annuity Unit Value for the Investment Subdivision in which the
Annuity Units are currently held; and (c) is the Annuity Unit Value for the
Investment Subdivision to which the transfer is made.
If the number of Annuity Units remaining in an Investment Subdivision after
the transfer is less than 1, Life of Virginia will transfer the amount remaining
in addition to the amount requested. Life of Virginia will not transfer into any
Investment Subdivision unless the number of Annuity Units of that Investment
Subdivision after the transfer is at least 1. The amount of the Income Payment
as of the date of the transfer will not be affected by the transfer.
Net Investment Factor
The Net Investment Factor measures investment performance of the Investment
Subdivisions of Account 4 during a Valuation Period. Each Investment Subdivision
has its own Net Investment Factor for a Valuation Period. The Net Investment
Factor of an Investment Subdivision available under the policies for a Valuation
Period is (a) divided by (b) minus (c) where:
(a) is (1) the value of the net assets of that Investment Subdivision at the
end of the preceding Valuation Period, plus (2) the investment income and
capital gains, realized or unrealized, credited to the net assets of that
Investment Subdivision during the Valuation Period for which the Net
Investment Factor is being determined, minus (3) the capital losses,
realized or unrealized, charged against those assets during the Valuation
Period, minus (4) any amount charged against that Investment Subdivision
for taxes, or any amount set aside during the Valuation Period by Life of
Virginia as a provision for taxes attributable to the operation or
maintenance of that Subdivision; and
(b) is the value of the net assets of that Investment Subdivision at the end
of the preceding Valuation Period; and
(c) is a charge no greater than .003857% for each day in the Valuation Period.
This corresponds to 1.25% and 0.15% per year of the net assets of that
Investment Subdivision for mortality and expense risks, and for
administrative expenses, respectively.
The value of the assets in Account 4 will be taken at their fair market value
in accordance with generally accepted accounting practices and applicable laws
and regulations.
3
<PAGE>
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
Account 4 contain varying provisions regarding termination. The following
summarizes those provisions:
Fidelity Variable Insurance Products Fund and Variable Insurance Products Fund
II. ("the Fund") These agreements provide for termination (1) on one year's
advance notice by either party, (2) at Life of Virginia's option if shares of
the Fund are not reasonably available to meet requirements of the policies,
(3) at the option of either party if certain enforcement proceedings are
instituted against the other, (4) upon vote of the policyowners to substitute
shares of another mutual fund, (5) at Life of Virginia's option if shares of
the Fund are not registered, issued, or sold in accordance with applicable
laws, if the Fund ceases to qualify as a regulated investment company under
the Code, (6) at the option of the Fund or its principal underwriter if it
determines that Life of Virginia has suffered material adverse changes in its
business or financial condition or is the subject of material adverse
publicity, (7) at the option of Life of Virginia if the Fund has suffered
material adverse changes in its business or financial condition or is the
subject of material adverse publicity, or (8) at the option of the Fund or its
principal underwriter if Life of Virginia decides to make another mutual fund
available as a funding vehicle for its policies.
Life of Virginia Series Fund, Inc. This agreement may be terminated by either
party on 360 days' written notice to the other.
Oppenheimer Variable Account Funds. This agreement may be terminated by the
parties on six months' advance written notice.
Janus Aspen Series. This agreement may be terminated by the parties on six
months' advance written notice.
Federated Insurance Series. This agreement may be terminated by any of the
parties on 180 days written notice to the other parties.
The Alger American Fund. This agreement may be terminated at the option of any
party upon six months' written notice to the other parties, unless a shorter
time is agreed to by the parties.
CALCULATION OF PERFORMANCE DATA
From time to time, Life of Virginia may disclose total return, yield, and
other performance data for the Investment Subdivisions pertaining to the
Policies. Such performance data will be computed, or accompanied by performance
data computed, in accordance with the standards defined by the Securities and
Exchange Commission.
The calculations of yield, total return, and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Policy. Premium taxes currently range from 0% to 3.5% of premium based on the
rules of the state in which the Policy is sold.
"Money Market" Investment Subdivisions
From time to time, advertisements and sales literature may quote the yield of
one or more of the "money market" Investment Subdivisions for a seven-day
period, in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the corresponding money market
investment portfolio or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of unrealized gains
and losses on the sale of securities and unrealized appreciation and
depreciation) at the end of the seven-day period in the value of a hypothetical
account under a Policy having a balance of one unit in that "money market"
Investment Subdivision at the beginning of the period, dividing such net change
in account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing the result on a 365-day basis.
The net change in account value reflects: 1) net income from the investment
portfolio attributable to the hypothetical account; and 2) charges and
deductions imposed under the Policy which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the policy
maintenance charge, administrative expense charge, annual death benefit charge
and the mortality and expense risk charge. For purposes of calculating current
yields for a Policy, an average per unit policy maintenance charge is used.
Current Yield will be calculated according to the following formula:
Current Yield = ((NCP - ES)/UV) X (365/7)
where:
NCP = the net change in the value of the investment portfolio (exclusive
of realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable
to a hypothetical account having a balance of one Investment
Subdivision unit.
4
<PAGE>
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value on the first day of the seven-day period.
The current yields for the "money market" Investment Subdivisions of Account 4
available under the policy, based on the seven-day period ending December 31,
1995 were:
Variable Insurance Products Fund* 4.03%
Oppenheimer Variable Account Funds* 3.02%
Life of Virginia Series Fund 4.99%
The effective yield of a "money market" Investment Subdivision determined on a
compounded basis for the same seven-day period may also be quoted. The effective
yield is calculated by compounding the base period return according to the
following formula:
Effective Yield = (1 + ((NCP - ES)/UV))365/7 - 1
where:
NCP = the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable to
a hypothetical account having a balance of one Investment Subdivision
unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The effective yields for the "money market" Investment Subdivisions of Account
4 available under the policy, based on the seven-day period ending December 31,
1995 were:
Variable Insurance Products Fund* 4.11%
Oppenheimer Variable Account Funds* 3.06%
Life of Virginia Series Fund 5.12%
The yield on amounts held in a "money market" Investment Subdivision normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. A "money market" Investment Subdivision's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Investment Subdivision's corresponding money market investment portfolio,
the types and quality of portfolio securities held by that investment portfolio,
and that investment portfolio's operating expenses. Because of the charges and
deductions imposed under the Policy, the yield for a "money market" Investment
Subdivision will be lower than the yield for its corresponding "money market"
investment portfolio.
Yield calculations do not take into account the Surrender Charge under the
Policy, a maximum of 6% of each Premium Payment made during the six years prior
to a full or partial surrender, or charges for GMDB rider.
Other Investment Subdivisions
Total Return. Sales literature or advertisements may quote total return,
including average annual total return for one or more of the Investment
Subdivisions for various periods of time including 1 year, 5 years and 10 years,
or from inception if any of those periods are not available.
Average annual total return for a period represents the average annual
compounded rate of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
the period. The ending date for each period for which total return quotations
are provided will be for the most recent practicable, considering the type and
media of the communication, and will be stated in the communication.
For periods that begin before the Policy was available, performance data will
be based on the performance of the underlying portfolios, with the level of
Account 4 and policy charges currently in effect.
* These Investment Subdivisions are closed to new investment.
5
<PAGE>
Average annual total return will be calculated using Investment Subdivision
unit values and deductions for the policy maintenance charge, annual death
benefit charge and the surrender charge as described below:
1. Life of Virginia calculates unit value for each Valuation Period based on
the performance of the Investment Subdivision's underlying investment
portfolio (after deductions for Fund expenses, the administrative expense
charge, and the mortality and expense risk charge).
2. The policy maintenance charge is $25 per year, deducted at the beginning of
each Policy Year after the first. For purposes of calculating average
annual total return, an average policy maintenance charge (currently 0.1%
of account value attributable to the hypothetical investment) is used.
3. The surrender charge will be determined by assuming a surrender of the
Policy at the end of the period. Average annual total return for periods of
six years or less will therefore reflect the deduction of a surrender
charge.
4. Total return does not consider GMDB charges.
5. Total return will then be calculated according to the following formula:
TR = (ERV/P)1/N - 1
where:
TR = the average annual total return for the period.
ERV = the ending redeemable value (reflecting deductions as described
above) of the hypothetical investment at the end of the period.
P = a hypothetical single investment of $1,000.
N = the duration of the period (in years).
6
<PAGE>
1. Total Return for the currently available Investment Subdivisions
is as follows:
<TABLE>
<CAPTION>
For the 1-year For the 5-year From the Date Date of
period ended period ended of Inception to Inception
<S> <C> <C> <C> <C>
Subdivision 12/31/95 12/31/95 12/31/95
VIPF
Equity-Income 27.08% 19.12% 12.94% 05/02/88
Overseas 2.21% 5.89% 6.91% 05/02/88
Growth 27.35% 18.57% 14.21% 05/02/88
VIPF II
Asset Manager 9.21% 10.54% 9.62% 10/01/89
Contrafund N/A N/A 32.67% 01/04/95
Janus Aspen Series
Balanced N/A N/A 0.38% 10/02/95
Flexible Income N/A N/A -0.86% 10/02/95
Growth 22.23% N/A 11.24% 09/13/93
Aggressive Growth 19.58% N/A 23.76% 09/13/93
Worldwide Growth 19.47% N/A 16.78% 09/13/93
Federated Insurance Series
High Income Bond II N/A N/A 12.47% 01/04/95
Utility II N/A N/A 15.83% 01/04/95
Oppenheimer Variable Account Funds
Multiple Strategies 13.55% 9.84% 9.06% 05/02/88
Capital Appreciation 24.55% 20.52% 13.88% 05/02/88
Growth 28.62% 14.08% 11.87% 05/02/88
High Income 12.57% 16.20% 12.17% 05/02/88
Bond 9.25% 7.96% 8.13% 05/02/88
The Alger American Fund
Alger American Growth N/A N/A -9.00% 10/02/95
Alger American Small Capitalization N/A N/A -11.39% 10/02/95
LOV Series Fund
Total Return 20.10% 13.19% 10.89% 05/02/88
Real Estate Securities N/A N/A 9.82% 05/01/95
International Equity N/A N/A 0.30% 05/01/95
Common Stock Index 28.08% 15.65% 12.29% 05/02/88
Government Securities 9.29% 6.62% 6.72% 05/02/88
2. Total Return for the closed Investment Subdivisions is as follows:
VIPF
High Income 12.80% 16.75% 10.03% 05/02/88
Advisers Management Trust
Balanced 15.91% 8.82% 7.06% 10/01/89
Limited Maturity Bond 3.38% N/A 2.94% 05/01/92
Growth 23.76% N/A 8.38% 05/01/92
</TABLE>
The Funds have provided the price information for the Portfolios, including the
Portfolio price information used to calculate the total returns of the
Investment Subdivisions for periods prior to the inception of the Investment
Subdivisions. Variable Insurance Products Fund, Variable Insurance Products Fund
II, Oppenheimer Variable Account Funds, Janus Aspen Series, Federated Insurance
Series, The Alger American Fund, and Advisers Management Trust are not
affiliated with Life of Virginia. While Life of Virginia has no reason to doubt
the accuracy of the figures provided by these nonaffiliated Funds, Life of
Virginia has not independently verified such information.
7
<PAGE>
Other Performance Data
Life of Virginia may disclose cumulative total return in conjunction with the
standard format described above. The cumulative total return will be calculated
using the following formula:
CTR = (ERV/P) - 1
where:
CTR = the cumulative total return for the period.
ERV = the ending redeemable
value (reflecting
deductions as described
above) of the hypothetical
investment at the end of
the period.
P = a hypothetical single investment of $1,000.
Sales literature may also quote cumulative and/or average annual total return
that does not reflect the surrender charge. This is calculated in exactly the
same way as average annual total return, except that the ending redeemable value
of the hypothetical investment is replaced with an ending value for the period
that does not take into account any charges on withdrawn amounts.
Other non-standard quotations of Investment Subdivision performance may also
be used in sales literature. Such quotations will be accompanied by a
description of how they were calculated.
Life of Virginia may also disclose yield, standard total return, and
non-standard total return for the Investment Subdivisions, including such
disclosure for periods prior to the date of inception of Account 4. For such
periods, performance data for the Investment Subdivisions will be calculated
based on the performance of the corresponding investment portfolios of the Funds
and the assumption that the Investment Subdivisions were in existence for the
same periods as those indicated for the investment portfolios, with the level of
Account 4 and Policy charges that are currently in effect.
8
<PAGE>
FEDERAL TAX MATTERS
Taxation of Life of Virginia
Life of Virginia does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See Federal Tax Matters, p. 38.) Based upon these
expectations, no charge is being made currently to Account 4 for federal income
taxes which may be attributable to the Account. Life of Virginia will
periodically review the question of a charge to Account 4 for federal income
taxes related to the Account. Such a charge may be made in future years if Life
of Virginia believes that it may incur federal income taxes. This might become
necessary if the tax treatment of Life of Virginia is ultimately determined to
be other than what Life of Virginia currently believes it to be, if there are
changes made in the federal income tax treatment of annuities at the corporate
level, or if there is a change in Life of Virginia's tax status. In the event
that Life of Virginia should incur federal income taxes attributable to
investment income or capital gains retained as part of the reserves under the
Policies, the Account Value would be correspondingly adjusted by any provision
or charge for such taxes.
Life of Virginia may also incur state and local taxes (in addition to premium
taxes) in several states. At present, these taxes, with the exception of premium
taxes, are not significant. If there is a material change in applicable state or
local tax laws causing an increase in taxes other than premium taxes (for which
Life of Virginia currently imposes a charge), charges for such taxes
attributable to Account 4 may be made.
IRS Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any Non-Qualified Policy to provide that (a)
if any Owner dies on or after the Maturity Date but prior to the time the entire
interest in the Policy has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Owner's death; and (b) if any
Owner dies prior to the Maturity Date, the entire interest in the Policy will be
distributed (1) within five years after the date of that Owner's death, or (2)
as Income Payments which will begin within one year of that Owner's death and
which will be made over the life of the Owner's "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary. The
"designated beneficiary" generally is the person who will be treated as the sole
owner of the Policy following the death of the Owner, Joint Owner or, in certain
circumstances, the Annuitant. However, if the "designated beneficiary" is the
surviving spouse of the decedent, these distribution rules will not apply until
the surviving spouse's death (and this spousal exception will not again be
available). If any Owner is not an individual, the death of the Annuitant will
be treated as the death of an Owner for purposes of these rules.
The Non-Qualified Policies contain provisions which are intended to comply
with the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. Life of Virginia intends
to review such provisions and modify them if necessary to assure that they
comply with the requirements of Code section 72(s) when clarified by regulation
or otherwise.
Other rules may apply to Qualified Policies.
9
<PAGE>
GENERAL PROVISIONS
Using the Policies as Collateral
A Non-Qualified Policy can be assigned as collateral security. Life of
Virginia must be notified in writing if a Policy is assigned. Any payment made
before the assignment is recorded at Life of Virginia's Home Office will not be
affected. Life of Virginia is not responsible for the validity of an assignment.
An Owner's rights and the rights of a Beneficiary may be affected by an
assignment.
A Qualified Policy may not be sold, assigned, transferred, discounted, pledged
or otherwise transferred except under such conditions as may be allowed under
applicable law.
Non-Participating
The Policy is non-participating. No dividends are payable.
Evidence of Death, Age, Sex or Survival
Life of Virginia will require proof of death before it acts on policy
provisions relating to the death of the Owner or other person(s). Life of
Virginia may also require proof of the age, sex or survival of any person or
persons before acting on any applicable policy provision.
Misstatement of Age or Sex
If an Annuitant's age or sex was misstated on the policy data page, any policy
benefits or proceeds, or availability thereof, will be determined using the
correct age and sex.
Incontestability
Life of Virginia will not contest the Policy.
Annual Statement
Within 30 days after each policy anniversary, Life of Virginia will send the
Owner an annual statement. The statement will show the Account Value and
Surrender Value as of the Policy anniversary. The statement will also show
Premium Payments made and charges made during the policy year.
Written Notice
Any written notice should be sent to Life of Virginia at its Home Office at
6610 West Broad Street, Richmond, Virginia 23230. The policy number and the
Annuitant's full name must be included.
Life of Virginia will send all notices to the Owner at the last known address
on file with the company.
10
<PAGE>
DISTRIBUTION OF THE POLICIES
Forth Financial Securities Corporation, the principal underwriter of the
Policies, is registered with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is member of the National
Association of Securities Dealers, Inc.
The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws that have entered into
agreements with Forth Financial Securities Corporation. The offering is
continuous and Forth Financial Securities Corporation does not anticipate
discontinuing the offering of the Policies. However, Life of Virginia does
reserve the right to discontinue the offering of the Policies.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
On July 6, 1983, the Supreme Court held in Arizona Governing Committee for Tax
Deferred Annuity v. Norris, 463 U.S. 1073 (1983), that optional annuity benefits
provided under an employee's deferred compensation plan could not, under Title
VII of the Civil Rights Act of 1964, vary between men and women on the basis of
sex. The Policy contains guaranteed annuity purchase rates for certain optional
payment plans that distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, on any employment-related insurance
or benefit program for which a Policy may be purchased.
SAFEKEEPING OF THE ASSETS OF ACCOUNT 4
Life of Virginia holds the assets of Account 4. The assets are kept segregated
and held separate and apart from the General Account and any other separate
investment account of Life of Virginia. Life of Virginia maintains records of
all Account 4 purchases and redemptions of the shares of each portfolio of the
Funds.
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.
If the shares of a portfolio are no longer available for investment or if in its
judgment further investment in any portfolio should become inappropriate in view
of the purposes of Account 4, Life of Virginia reserves the right to eliminate
the shares of any of the portfolios of the Funds and to substitute shares of
another portfolio or of another open-end, registered investment company. Life of
Virginia will not substitute any shares attributable to an Owner's Account Value
in Account 4 without notice and prior approval of the Commission, to the extent
required by the 1940 Act or other applicable law. Nothing contained herein shall
prevent Account 4 from purchasing other securities for other series or classes
of policies or from permitting a conversion between portfolios or classes of
policies on the basis of requests made by Owners.
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. New Investment Subdivisions may be established when, in the sole
discretion of Life of Virginia, marketing, tax or investment conditions warrant,
and any new Investment Subdivisions may be made available to existing Owners on
a basis to be determined by Life of Virginia. One or more Investment
Subdivisions may also be eliminated if, in the sole discretion of Life of
Virginia, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, Life of Virginia may, by
appropriate endorsement, make such changes in these and other policies as may be
necessary or appropriate to reflect such substitution or change. If deemed by
Life of Virginia to be in the best interests of persons having voting rights
under the Policies, and, if permitted by law, Life of Virginia may deregister
Account 4 under the 1940 Act in the event such registration is no longer
required; manage Account 4 under the direction of a committee; or combine
Account 4 with other Life of Virginia separate accounts. To the extent permitted
by applicable law, Life of Virginia may also transfer the assets of Account 4
associated with the Policies to another separate account. In addition, Life of
Virginia may, when permitted by law, restrict or eliminate any voting rights of
Owners or other persons who have voting rights as to Account 4.
11
<PAGE>
*
STATE REGULATION OF LIFE OF VIRGINIA
Life of Virginia, a stock life insurance company organized under the laws of
Virginia, is subject to regulation by the State Corporation Commission of the
Commonwealth of Virginia. An annual statement is filed with the Virginia
Commissioner of Insurance on or before March 1 of each year covering the
operations and reporting on the financial condition of Life of Virginia as of
December 31 of the preceding year. Periodically, the Commissioner of Insurance
examines the liabilities and reserves of Life of Virginia and Account 4 and
certifies their adequacy, and a full examination of Life of Virginia's
operations is conducted by the State Corporation Commission, Bureau of Insurance
of the Commonwealth of Virginia at least once every five years.
In addition, Life of Virginia is subject to the insurance laws and regulations
of other states within which it is licensed to operate. Generally, the Insurance
Department of any other state applies the laws of the state of domicile in
determining permissible investments. Presently, Life of Virginia is licensed to
do business in the District of Columbia and all states, except New York.
LEGAL MATTERS
Sutherland, Asbill & Brennan of Washington, D.C. has provided advice on
certain legal matters relating to federal securities laws applicable to the
issue and sale of the Policies described in this Prospectus. All matters of
Virginia law pertaining to the Policy, including the validity of the Policy and
Life of Virginia's right to issue the Policies under Virginia insurance law,
have been passed upon by William E. Daner, Jr., Counsel of Life of Virginia.
EXPERTS
The consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries, the financial statements of Life of Virginia Separate
Account 4, and the related financial statement schedules appearing in this
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing in the Registration
Statement and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements for
Life of Virginia Separate Account 4 as of December 31, 1995.
The consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries included herein should be distinguished from the
financial statements of Account 4 and should be considered only as bearing on
the ability of Life of Virginia to meet its obligations under the Policy.
Such consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries should not be considered as bearing on the investment
performance of the assets held in Account 4.
12
<PAGE>
AUDITED FINANCIAL STATEMENTS
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
YEAR ENDED DECEMBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
Life of Virginia Separate Account 4
Audited Financial Statements
Year ended December 31, 1995
TABLE OF CONTENTS
Report of Independent Auditors..........................................1
Statements of Assets and Liabilities....................................3
Statements of Operations................................................9
Statements of Changes in Net Assets.....................................9
Notes to Financial Statements..........................................27
<PAGE>
1
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Policyholders
Life of Virginia Separate Account 4
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 4 (comprising, the Life of Virginia Series Fund,
Inc.--Common Stock Index, Government Securities, Money Market, Total Return,
International Equity and Real Estate Securities portfolios; the Oppenheimer
Variable Account Funds--Money, Bond, Capital Appreciation, Growth, High Income
and Multiple Strategies portfolios, Variable Insurance Products Fund--Money
Market, High Income, Equity-Income, Growth and Overseas portfolios; the Variable
Insurance Products Fund II--Asset Manager and Contrafund portfolios; the
Advisers Management Trust--Balanced, Bond and Growth portfolios; the Insurance
Management Series--Corporate Bond and Utility portfolios; Janus
Aspen--Aggressive Growth, Growth, Worldwide Growth, Balanced and Flexible Income
portfolios; and Alger American--Small Cap and Growth portfolios) as of December
31, 1995, and the related statements of operations and changes in net assets for
each of the three years in the period then ended for the Life of Virginia Series
Fund, Inc. Common Stock Index, Government Securities, Money Market and Total
Return portfolios, the Oppenheimer Variable Account Funds portfolios, the
Variable Insurance Products Fund portfolios, the Variable Insurance Products
Fund II Asset Manager portfolio, the Advisers Management Trust portfolios, and
for the period from May 23, 1995 (date of inception) to December 31, 1995 for
the Life of Virginia Series Fund, Inc. International Equity portfolio, for the
period from May 2, 1995 (date of inception) to December 31, 1995 for the Life of
Virginia Series Fund, Inc. Real Estate Securities portfolio, for the period from
January 5, 1995 (date of inception) to December 31, 1995 for the Variable
Insurance Products Fund II Contrafund portfolio, for the period from February 3,
1995 (date of inception) to December 31, 1995 for the Insurance Management
Series Corporate Bond portfolio, for the period from January 27, 1995 (date of
inception) to December 31, 1995 for the Insurance Management Series Utility
portfolio, for the years ended December 31, 1995 and 1994 and for the period
from September 13, 1993 (date of inception) to December 31, 1993 for the Janus
Aspen Aggressive Growth, Growth, and Worldwide Growth portfolios, for the period
from October 11, 1995 (date of inception) to December 31, 1995 for the Janus
Aspen Balanced portfolio, for the period from October 13, 1995 (date of
inception) to December 31, 1995
<PAGE>
2
for the Janus Aspen Flexible Income portfolio, for the period from October 3,
1995 (date of inception) to December 31, 1995 for the Alger American Small Cap
portfolio and for the period from October 4, 1995 (date of inception) to
December 31, 1995 for the Alger American Growth portfolio. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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, 1995, by correspondence with
the custodians. 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 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 4 at December 31,
1995, and the results of their operations and changes in their net assets for
the periods described in the first paragraph, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Ernst & Young LLP
Richmond, Virginia
February 8, 1996
<PAGE>
3
Life of Virginia Separate Account 4
Statements of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
LIFE OF VIRGINIA SERIES FUND, INC.
------------------------------------------------------------------------------------------
COMMON GOVERNMENT MONEY TOTAL INTERNATIONAL REAL ESTATE
STOCK INDEX SECURITIES MARKET RETURN EQUITY SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Life of Virginia
Series Fund, Inc., at fair
value (Note 2):
Common Stock Index Portfolio
(1,034,009 shares;
cost - $19,447,135) $21,703,852
Government Securities Portfolio
(936,638 shares;
cost - $9,807,526) $9,815,970
Money Market Portfolio
(2,988,020 shares;
cost - $31,809,913) $30,955,892
Total Return Portfolio (1,405,373
shares; cost - $20,430,974) $22,387,584
International Equity Portfolio
(163,039 shares;
cost - $1,681,141) $1,707,022
Real Estate Securities Portfolio
(1,119,538 shares;
cost - $11,321,149) $12,370,893
Receivable from affiliate (Note 3) 12,296 - 84,115 34,321 1,617 1,237
Deposits in process 69,117 - 1,265,793 134,960 13,256 2,000
-------------------------------------------------------------------------------------------
21,785,265 9,815,970 32,305,800 22,556,865 1,721,895 12,374,130
LIABILITIES
Accrued expenses payable to affiliate
(Note 3) 1,509 8,001 2,209 1,494 115 48
Withdrawal in process - 2,080 - - - -
-------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,509 10,081 2,209 1,494 115 48
-------------------------------------------------------------------------------------------
NET ASSETS $21,783,756 $9,805,889 $32,303,591 $22,555,371 $1,721,780 $12,374,082
===========================================================================================
ANALYSIS OF NET ASSETS:
For Variable Deferred Annuity
Policies $21,783,756 $9,805,889 $32,303,591 $22,555,371 $1,721,780 $ 674,082
Attributable to The Life
Insurance Company of Virginia - - - - - 11,700,000
-------------------------------------------------------------------------------------------
NET ASSETS $21,783,756 $9,805,889 $32,303,591 $22,555,371 $1,721,780 $12,374,082
===========================================================================================
Outstanding units: Type I (Note 2): 479,021 428,950 893,974 745,501 115,562 23,643
===========================================================================================
Net asset value per unit: Type I $25.00 $16.91 $13.61 $22.71 $10.58 $11.61
===========================================================================================
Outstanding units: Type II (Note 2): 400,009 153,756 1,508,360 252,584 47,044 34,477
===========================================================================================
Net asset value per unit: Type II $24.52 $16.60 $13.35 $22.27 $10.61 $11.59
===========================================================================================
</TABLE>
See accompanying notes.
<PAGE>
4
Life of Virginia Separate Account 4
Statements of Assets and Liabilities (continued)
December 31, 1995
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------------------------------
CAPITAL MULTIPLE
MONEY BOND APPRECIATION GROWTH HIGH INCOME STRATEGIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Oppenheimer Variable Account
Funds, at fair value (Note 2):
Money Portfolio (4,793,663 shares;
cost-$4,793,663) $4,793,663
Bond Portfolio (1,932,019 shares;
cost-$21,987,687) $22,875,107
Capital Appreciation Portfolio
(2,626,932 shares;
cost-$72,276,135) $89,867,340
Growth Portfolio (1,442,161 shares;
cost-$27,857,915) $33,962,901
High Income Portfolio (4,217,801
shares; cost-$44,247,860) $44,835,229
Multiple Strategies Portfolio
(2,769,630 shares;
cost-$36,767,805) $40,298,117
Receivable from affiliate (Note 3) 41,508 - - - 66,032 -
Deposits in process - 17,861 40,133 119,908 72,686 14,893
------------------------------------------------------------------------------------
4,835,171 22,892,968 89,907,473 34,082,809 44,973,947 40,313,010
LIABILITIES
Accrued expenses payable to affiliate
(Note 3) 318 11,046 259,593 36,273 3,028 44,680
Withdrawal in process 51 1,843 17,535 - 2,089 17,401
------------------------------------------------------------------------------------
TOTAL LIABILITIES 369 12,889 277,128 36,273 5,117 62,081
------------------------------------------------------------------------------------
NET ASSETS $4,834,802 $22,880,079 $89,630,345 $34,046,536 $44,968,830 $40,250,929
====================================================================================
Outstanding units: Type I (Note 2) 282,462 952,700 2,647,993 986,685 1,263,712 1,762,762
====================================================================================
Net asset value per unit: Type I $14.24 $18.71 $27.84 $24.28 $24.79 $19.98
====================================================================================
Outstanding units: Type II (Note 2) 58,163 275,480 582,579 423,764 561,144 256,681
====================================================================================
Net asset value per unit: Type II $13.97 $18.35 $27.31 $23.81 $24.31 $19.60
====================================================================================
</TABLE>
See accompanying notes.
<PAGE>
5
Life of Virginia Separate Account 4
Statements of Assets and Liabilities (continued)
December 31, 1995
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
---------------------------------------------------------------------------------
MONEY HIGH EQUITY- INCOME
MARKET PORTFOLIO INCOME PORTFOLIO GROWTH PORTFOLIO OVERSEAS
PORTFOLIO PORTFOLIO
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Variable Insurance
Products Fund, at fair value (Note 2):
Money Market Portfolio (48,281,588
shares; cost-$48,281,588) $48,281,588
High Income Portfolio (2,568,501
shares; cost-$28,444,513) $30,950,434
Equity-Income Portfolio (13,540,914
shares; cost-$217,979,364) $260,933,420
Growth Portfolio (6,503,387 shares;
cost-$154,982,972) $189,898,900
Overseas Portfolio (5,353,585 shares;
cost-$83,780,043) $91,278,620
Receivable from affiliate - - 57,013 89,808 -
Deposits in process - - 293,488 401,030 70,348
---------------------------------------------------------------------------------
48,281,588 30,950,434 261,283,921 190,389,738 91,348,968
LIABILITIES
Accrued expenses payable to
affiliate (Note 3) 57,851 54,510 17,607 12,610 34,601
Withdrawal in process 67,722 1,097 4,709 104,286 39,360
---------------------------------------------------------------------------------
TOTAL LIABILITIES 125,573 55,607 22,316 116,896 73,961
---------------------------------------------------------------------------------
NET ASSETS $48,156,015 $30,894,827 $261,261,605 $190,272,842 $91,275,007
=================================================================================
Outstanding units: Type I (Note 2) 2,423,065 958,295 6,942,107 5,187,186 4,508,746
=================================================================================
Net asset value per unit: Type I $14.23 $21.39 $26.12 $28.47 $17.15
=================================================================================
Outstanding units: Type II (Note 2) 980,344 495,562 3,119,975 1,525,015 829,371
=================================================================================
Net asset value per unit: Type II $13.95 $20.98 $25.62 $27.93 $16.82
=================================================================================
</TABLE>
See accompanying notes.
<PAGE>
6
Life of Virginia Separate Account 4
Statements of Assets and Liabilities (continued)
December 31, 1995
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND II ADVISERS MANAGEMENT TRUST
------------------------------ ----------------------------------------
ASSET MANAGER CONTRAFUND BALANCED BOND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------------------------ ----------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in Variable Insurance Products Fund
II, at fair value (Note 2):
Asset Manager Portfolio (27,002,311 shares;
cost-$382,281,760) $426,366,485
Contrafund Portfolio (4,480,738 shares;
cost-$57,525,703) $61,744,568
Investment in Advisers Management Trust, at
fair value (Note 2):
Balanced Portfolio (2,009,182 shares;
cost-$29,197,834) $35,200,870
Bond Portfolio (1,081,848 shares;
cost-$15,243,784) $15,913,982
Growth Portfolio (530,769 shares;
cost-$12,482,115) $13,725,677
Receivable from affiliate (Note 3) - 3,287 14,837 - -
Deposit in process 41,902 68,062 - - -
------------------------------ ----------------------------------------
426,408,387 61,815,917 35,215,707 15,913,982 13,725,677
LIABILITIES
Accrued expenses payable to affiliate (Note 3) 503,800 4,289 2,241 60,327 9,768
Withdrawal in process 242,176 47,705 6,554 7,734 846
------------------------------ ----------------------------------------
TOTAL LIABILITIES 745,976 51,994 8,795 68,061 10,614
------------------------------ ----------------------------------------
NET ASSETS $425,662,411 $61,763,923 $35,206,912 $15,845,921 $13,715,063
============================== ========================================
ANALYSIS OF NET ASSETS:
For Variable Deferred Annuity Policies $34,700,302
Attributable to The Life Insurance
Company of Virginia 506,610
------------
NET ASSETS $35,206,912
============
============
Outstanding units: Type I (Note 2) 21,993,362 2,434,885 2,025,936 939,243 756,501
============================== ========================================
Net asset value per unit: Type I $18.16 $13.92 $15.67 $11.88 $14.22
============================== ========================================
Outstanding units: Type II (Note 2) 1,469,667 2,007,948 191,438 398,276 209,909
============================== ========================================
Net asset value per unit: Type II $17.87 $13.88 $15.43 $11.77 $14.09
============================== ========================================
</TABLE>
See accompanying notes.
<PAGE>
7
Life of Virginia Separate Account 4
Statements of Assets and Liabilities (continued)
December 31, 1995
<TABLE>
<CAPTION>
INSURANCE
MANAGEMENT
SERIES JANUS ASPEN
--------------------------- --------------------------------------------------------------------
CORPORATE AGGRESSIVE WORLDWIDE FLEXIBLE
BOND UTILITY GROWTH GROWTH GROWTH BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment in Insurance
Management
Series, at fair value
(Note 2):
Corporate Bond
Portfolio
(197,344 shares;
cost - $1,905,607 $1,931,995
Utility Portfolio
(1,108,558 shares
cost - $11,313,092) $12,227,399
Investment in Janus Aspen,
at fair value (Note 2):
Aggressive Growth
Portfolio
(3,195,059 shares;
cost-$44,859,487) $54,571,602
Growth Portfolio
(6,299,756 shares;
cost-$72,731,261) $84,731,724
Worldwide Growth
Portfolio
(3,891,779 shares;
cost-$51,039,306) $59,583,142
Balanced Portfolio
(149,201 shares;
cost-$1,906,177) $1,944,086
Flexible Income
Portfolio
(69,007 shares;
cost-$768,907) $766,668
Receivable from affiliate
(Note 3) 3,280 997 65,663 - - - 191
Deposit in process 10,733 26,506 86,813 235,977 92,081 27,406 23,659
--------------------------- --------------------------------------------------------------------
1,946,008 12,254,902 54,724,078 84,967,701 59,675,223 1,971,492 790,518
LIABILITIES
Accrued expenses payable
to affiliate (Note 3) 141 850 3,744 62,217 21,362 261 53
--------------------------- --------------------------------------------------------------------
TOTAL LIABILITIES 141 850 3,744 62,217 21,362 261 53
--------------------------- --------------------------------------------------------------------
NET ASSETS $1,945,867 $12,254,052 $54,720,334 $84,905,484 $59,653,861 $1,971,231 $790,465
=========================== ====================================================================
Outstanding units: Type I
(Note 2): 40,814 539,628 1,965,737 4,432,726 2,757,216 111,972 39,079
=========================== ====================================================================
Net asset value per unit:
Type I $11.89 $12.23 $17.05 $13.48 $15.00 $10.63 $10.50
=========================== ====================================================================
Outstanding units:
Type II (Note 2): 123,152 463,476 1,251,004 1,875,640 1,227,070 73,538 36,272
=========================== ====================================================================
Net asset value per unit:
Type II $11.86 $12.20 $16.95 $13.41 $14.91 $10.62 $10.48
=========================== ====================================================================
</TABLE>
See accompanying notes.
<PAGE>
8
Life of Virginia Separate Account 4
Statements of Assets and Liabilities (continued)
December 31, 1995
<TABLE>
<CAPTION>
ALGER AMERICAN
--------------------------------
SMALL
CAP GROWTH
PORTFOLIO PORTFOLIO
--------------------------------
<S> <C> <C>
ASSETS
Investment in Alger American, at fair value (Note 2):
Small Cap Portfolio (189,004 shares; cost - $7,473,696) $7,448,649
Growth Portfolio (174,960 shares; cost-$5,424,513) $5,451,754
Receivable from affiliate (Note 3) 7,466 1,973
Deposits in process 114,529 69,531
--------------------------------
7,570,644 5,523,258
LIABILITIES
Accrued expenses payable to affiliate (Note 3) - 384
Withdrawal in process 528 -
--------------------------------
TOTAL LIABILITIES 528 384
--------------------------------
Net assets $7,570,116 $5,522,874
================================
Outstanding units: Type I (Note 2) 405,791 261,225
================================
Net asset value per unit: Type I $9.38 $9.64
================================
Outstanding units: Type II (Note 2) 401,258 312,011
================================
Net asset value per unit: Type II $9.38 $9.63
================================
</TABLE>
See accompanying notes.
<PAGE>
9
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
COMMON
STOCK INDEX
PORTFOLIO
------------------------------------------
YEAR ENDED DECEMBER 31,
STATEMENTS OF OPERATIONS 1995 1994 1993
------------------------------------------
<s) <C> <C> <C>
INVESTMENT INCOME
Income--Dividends $ 411,769 $ 91,337 $ 697,795
Expenses--Mortality and expense risk charges (Note 3) 139,329 58,672 33,168
------------------------------------------
Net investment income 272,440 32,665 664,627
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 345,068 (65,078) 36,398
Unrealized appreciation (depreciation) on investments 2,539,788 (8,702) (368,422)
------------------------------------------
Net realized and unrealized gain (loss) on investments 2,884,856 (73,780) (332,024)
------------------------------------------
Increase (decrease) in net assets from operations $ 3,157,296 $ (41,115) $ 332,603
==========================================
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 272,440 $ 32,665 $ 664,627
Net realized gain (loss) 345,068 (65,078) 36,398
Unrealized appreciation (depreciation) on investments 2,539,788 (8,702) (368,422)
------------------------------------------
Increase (decrease) in net assets from operations 3,157,296 (41,115) 332,603
From Capital Transactions:
Net premiums 7,357,078 1,724,390 1,629,848
Transfers (to) from the general account of Life of Virginia:
Death benefits (143,652) (10,380) (2,925)
Surrenders (306,506) (177,818) (66,451)
Cost of insurance and administrative expense (Note 3) (22,813) (14,229) (9,084)
Transfer gain (loss) and transfer fees (Note 3) (8,822) (1,218) (3,154)
Transfers (to) from the Guarantee Account (Note 1) 695,771 (20,371) 4,387
Interfund transfers 5,341,899 396,185 137,403
------------------------------------------
Increase in net assets from capital transactions 12,912,955 1,896,559 1,690,024
------------------------------------------
INCREASE IN NET ASSETS 16,070,251 1,855,444 2,022,627
NET ASSETS AT BEGINNING OF YEAR 5,713,505 3,858,061 1,835,434
------------------------------------------
NET ASSETS AT END OF YEAR $21,783,756 $5,713,505 $3,858,061
==========================================
</TABLE>
See accompanying notes.
<PAGE>
10
<TABLE>
<CAPTION>
LIFE OF VIRGINIA SERIES FUND, INC.
GOVERNMENT
SECURITIES MONEY MARKET
PORTFOLIO PORTFOLIO
------------------------------------- --------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income--Dividends $ 565,524 $ 238,661 $ 424,284 $ 1,098,198 $ 222,610 $ 77,773
Expenses--Mortality and expense risk charges
(Note 3) 83,929 67,780 22,719 144,841 72,014 36,149
------------------------------------- --------------------------------------
Net investment income 481,595 170,881 401,565 953,357 150,596 41,624
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) (20,275) (401,286) 13,116 312,501 56,347 (82,932)
Unrealized appreciation (depreciation) on
investments 567,616 (216,822) (345,790) (757,472) (36,981) (16,275)
------------------------------------- --------------------------------------
Net realized and unrealized gain (loss) on
investments 547,341 (618,108) (332,674) (444,971) 19,366 (99,207)
------------------------------------- --------------------------------------
Increase (decrease) in net assets from
operations $1,028,936 $ (447,227) $ 68,891 $ 508,386 $ 169,962 $ (57,583)
===================================== ======================================
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 481,595 $ 170,881 $ 401,565 $ 953,357 $ 150,596 $ 41,624
Net realized gain (loss) (20,275) (401,286) 13,116 312,501 56,347 (82,932)
Unrealized appreciation (depreciation) on
investments 567,616 (216,822) (345,790) (757,472) (36,981) (16,275)
------------------------------------- --------------------------------------
Increase (decrease) in net assets from
operations 1,028,936 (447,227) 68,891 508,386 169,962 (57,583)
From Capital Transactions:
Net premiums 1,619,783 2,890,849 4,107,731 52,511,585 26,435,513 8,371,284
Transfers (to) from the general account of
Life of Virginia:
Death benefits (44,216) (14,693) (2,832) (4,954) (19,063) -
Surrenders (500,706) (213,354) (26,529) (2,099,100) (2,204,998) (244,392)
Cost of insurance and administrative expense
(Note 3) (17,040) (17,841) (8,301) (17,072) (30,941) (13,819)
Transfer gain (loss) and transfer fees
(Note 3) (9,439) 1,433 4,184 52,426 11,405 59,703
Transfers (to) from the Guarantee Account
(Note 1) 60,927 (424,053) 2,825 4,957,966 (2,851,523) (129,353)
Interfund transfers 2,038,922 (797,830) (103,313) (30,878,764) (17,423,556) (7,100,755)
------------------------------------- --------------------------------------
Increase in net assets from capital
transactions 3,148,231 1,424,511 3,973,765 24,522,087 3,916,837 942,668
------------------------------------- --------------------------------------
INCREASE IN NET ASSETS 4,177,167 977,284 4,042,656 25,030,473 4,086,799 885,085
NET ASSETS AT BEGINNING OF YEAR 5,628,722 4,651,438 608,782 7,273,118 3,186,319 2,301,234
------------------------------------- --------------------------------------
NET ASSETS AT END OF YEAR $9,805,889 $5,628,722 $4,651,438 $ 32,303,591 $ 7,273,118 $ 3,186,319
===================================== ======================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURN
PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
----------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income--Dividends $ 1,576,466 $ 461,727 $ 702,805
Expenses--Mortality and expense risk charges (Note 3) 187,419 162,211 70,867
----------------------------------------
Net investment income 1,389,047 299,516 631,938
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 308,073 52,519 130,193
Unrealized appreciation (depreciation) on investments 1,987,241 (190,731) (117,570)
----------------------------------------
Net realized and unrealized gain (loss) on investments 2,295,314 (138,212) 12,623
----------------------------------------
Increase (decrease) in net assets from operations $ 3,684,361 $ 161,304 $ 644,561
========================================
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 1,389,047 $ 299,516 $ 631,938
Net realized gain (loss) 308,073 52,519 130,193
Unrealized appreciation (depreciation) on investments 1,987,241 (190,731) (117,570)
----------------------------------------
Increase (decrease) in net assets from operations 3,684,361 161,304 644,561
From Capital Transactions:
Net premiums 4,777,568 4,226,681 3,686,129
Transfers (to) from the general account of Life of Virginia:
Death benefits (184,615) (42,532) (8,267)
Surrenders (685,070) (477,463) (207,134)
Cost of insurance and administrative expense (Note 3) (40,610) (34,693) (21,065)
Transfer gain (loss) and transfer fees (Note 3) 5,627 25,934 (1,175)
Transfers (to) from the Guarantee Account (Note 1) 401,449 (436,022) 33,351
Interfund transfers 2,419,115 92,268 538,004
----------------------------------------
Increase in net assets from capital transactions 6,693,464 3,354,173 4,019,843
----------------------------------------
INCREASE IN NET ASSETS 10,377,825 3,515,477 4,664,404
NET ASSETS AT BEGINNING OF YEAR 12,177,546 8,662,069 3,997,665
----------------------------------------
NET ASSETS AT END OF YEAR $22,555,371 $12,177,546 $8,662,069
========================================
</TABLE>
<PAGE>
11
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
LIFE OF VIRGINIA SERIES FUND, INC.
(CONTINUED)
----------------------------------
INTERNATIONAL REAL ESTATE
EQUITY SECURITIES
PORTFOLIO PORTFOLIO
---------------- ------------
PERIOD FROM PERIOD FROM
MAY 23, 1995 TO MAY 2, 1995 TO
DECEMBER 31, DECEMBER 31,
1995 1995
---------------- ----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
Income--Dividends $ 31,010 $ 670,339
Expenses--Mortality and expense risk charges (Note 3) 4,298 2,663
---------- -----------
Net investment income 26,712 667,676
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 646 24,928
Unrealized appreciation on investments 25,880 1,049,744
---------- -----------
Net realized and unrealized gain on investments 26,526 1,074,672
---------- -----------
Increase in net assets from operations $ 53,238 $ 1,742,348
========== ===========
STATEMENTS OF CHANGES IN NET ASSETS
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 26,712 $ 667,676
Net realized gain 646 24,928
Unrealized appreciation on investments 25,880 1,049,744
---------- -----------
Increase in net assets from operations 53,238 1,742,348
From Capital Transactions:
Net premiums 332,761 301,414
Transfers (to) from the general account of Life of Virginia:
Death benefits (2,053) (1,392)
Surrenders (1,796) (1,136)
Cost of insurance and administrative expense (Note 3) (661) (286)
Transfer gain and transfer fees (Note 3) 1,565 1,212
Capital contribution - 10,000,000
Transfers from the Guarantee Account (Note 1) 101,612 70,614
Interfund transfers 1,237,114 261,308
---------- -----------
Increase in net assets from capital transactions 1,668,542 10,631,734
---------- -----------
INCREASE IN NET ASSETS 1,721,780 12,374,082
NET ASSETS AT BEGINNING OF PERIOD - -
---------- -----------
NET ASSETS AT END OF PERIOD $1,721,780 $12,374,082
========== ===========
</TABLE>
<PAGE>
12
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
-------------------------------------------- ------------------------------------------
MONEY BOND
PORTFOLIO PORTFOLIO
-------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
-------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 303,556 $ 246,677 $ 72,251 $ 1,222,079 $ 858,801 $ 616,922
Expenses--Mortality and expense risk
charges (Note 3) 64,415 70,775 27,478 220,766 160,466 102,936
-------------------------------------------- -----------------------------------------
Net investment income (expense) 239,141 175,902 44,773 1,001,313 698,335 513,986
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) - - - 53,120 (47,152) 76,616
Unrealized appreciation (depreciation)
on investments - - - 1,654,610 (1,076,673) 297,228
-------------------------------------------- -----------------------------------------
Net realized and unrealized gain (loss) - - - 1,707,730 (1,123,825) 373,844
on investments -------------------------------------------- -----------------------------------------
Increase (decrease) in net assets from
operations $ 239,141 $ 175,902 $ 44,773 $ 2,709,043 $ (425,490) $ 887,830
============================================ =========================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (expense) $ 239,141 $ 175,902 $ 44,773 $ 1,001,313 $ 698,335 $ 513,986
Net realized gain (loss) - - -
Unrealized appreciation (depreciation) 53,120 (47,152) 76,616
on investments - - - 1,654,610 (1,076,673) 297,228
-------------------------------------------- -----------------------------------------
Increase (decrease) in net assets from
operations 239,141 175,902 44,773 2,709,043 (425,490) 887,830
-------------------------------------------- -----------------------------------------
From Capital Transactions:
Net premiums 1,236,189 7,678,267 1,262,217 3,897,393 5,611,237 4,250,931
Transfers (to) from the general account
of Life of Virginia:
Death benefits - - - (103,070) (186,474) (58,681)
Surrenders (534,163) (546,418) (19,071) (1,044,752) (413,064) (228,431)
Cost of insurance and administrative
expense (Note 3) (12,911) (18,965) (6,880) (43,224) (37,823) (25,366)
Transfer gain (loss) and transfer fees
(Note 3) (10,807) 17,648 1,305 (70,035) (16,223) 17,760
Transfers (to) from the Guarantee
Account (Note 1) (522,980) (386,202) (48,002) 277,812 (532,602) 285,571
Interfund transfers (3,724,005) (1,087,392) (1,598,881) 1,434,738 385,204 573,690
-------------------------------------------- -----------------------------------------
Increase (decrease) in net assets from
capital transactions (3,568,677) 5,656,938 (409,312) 4,348,862 4,810,255 4,815,474
-------------------------------------------- -----------------------------------------
INCREASE (DECREASE) IN NET ASSETS (3,329,536) 5,832,840 (364,539) 7,057,905 4,384,765 5,703,304
NET ASSETS AT BEGINNING OF YEAR 8,164,338 2,331,498 2,696,037 15,822,174 11,437,409 5,734,105
-------------------------------------------- -----------------------------------------
NET ASSETS AT END OF YEAR $ 4,834,802 $ 8,164,338 $ 2,331,498 $22,880,079 $15,822,174 $11,437,409
============================================ =========================================
</TABLE>
See accompanying notes.
<PAGE>
13
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
---------------------------------------------------------------------------------
CAPITAL APPRECIATION GROWTH
PORTFOLIO PORTFOLIO
---------------------------------------- ---------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
---------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 331,803 $ 4,077,084 $ 479,523 $ 393,011 $ 110,209 $ 175,640
Expenses--Mortality and expense risk
charges (Note 3) 868,053 517,863 173,621 265,718 130,807 87,622
---------------------------------------- ---------------------------------------
Net investment income (expense) (536,250) 3,559,221 305,902 127,293 (20,598) 88,018
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) 1,666,666 (295,786) 509,440 739,151 156,193 229,427
Unrealized appreciation (depreciation)
on investments 18,977,772 (5,974,329) 3,153,749 5,287,316 (131,358) 185,199
---------------------------------------- ---------------------------------------
Net realized and unrealized gain (loss)
on investments 20,644,438 (6,270,115) 3,663,189 6,026,467 24,835 414,626
---------------------------------------- ---------------------------------------
Increase (decrease) in net assets from
operations $20,108,188 $(2,710,894) $3,969,091 $ 6,153,760 $ 4,237 $ 502,644
======================================== =======================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (expense) $ (536,250) $ 3,559,221 $ 305,902 $ 127,293 $ (20,598) $ 88,018
Net realized gain (loss) 1,666,666 (295,786) 509,440 739,151 156,193 229,427
Unrealized appreciation (depreciation)
on investments 18,977,772 (5,974,329) 3,153,749 5,287,316 (131,358) 185,199
---------------------------------------- ---------------------------------------
Increase (decrease) in net assets from
operations 20,108,188 (2,710,894) 3,969,091 6,153,760 4,237 502,644
From Capital Transactions:
Net premiums 13,056,769 33,580,537 10,894,579 8,623,363 3,884,748 3,905,743
Transfers (to) from the general account
of Life of Virginia:
Death benefits (315,870) (93,328) - (11,683) (9,773) -
Surrenders (3,725,572) (995,422) (347,575) (531,276) (515,377) (99,302)
Cost of insurance and administrative
expense (Note 3) (179,980) (140,228) (48,222) (49,718) (33,196) (23,206)
Transfer gain (loss) and transfer fees
(Note 3) (110,449) (217,849) 19,211 (2,381) (9,445) (17,017)
Transfers (to) from the Guarantee
Account (Note 1) 910,511 (361,814) 81,866 807,793 (99,892) 56,805
Interfund transfers 899,125 5,252,436 1,473,966 5,644,624 703,654 (119,621)
---------------------------------------- ---------------------------------------
Increase (decrease) in net assets from
capital transactions 10,534,534 37,024,332 12,073,825 14,480,722 3,920,719 3,703,402
---------------------------------------- ---------------------------------------
INCREASE (DECREASE) IN NET ASSETS 30,642,722 34,313,438 16,042,916 20,634,482 3,924,956 4,206,046
NET ASSETS AT BEGINNING OF YEAR 58,987,623 24,674,185 8,631,269 13,412,054 9,487,098 5,281,052
---------------------------------------- ---------------------------------------
NET ASSETS AT END OF YEAR $89,630,345 $58,987,623 $24,674,185 $34,046,536 $13,412,054 $9,487,098
======================================== =======================================
</TABLE>
<PAGE>
14
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
-------------------------------------------- -------------------------------------------
HIGH INCOME MULTIPLE STRATEGIES
PORTFOLIO PORTFOLIO
------------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
------------------------------------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
Income--Dividends $3,582,283 $ 1,862,474 $ 802,302 $ 2,521,297 $ 1,498,286 $ 693,943
Expenses--Mortality and expense risk
charges (Note 3) 471,932 239,523 73,864 410,701 315,765 183,480
------------------------------------------ -------------------------------------------
Net investment income 3,110,351 1,622,951 728,438 2,110,596 1,182,521 510,463
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) (105,319) (231,920) 30,944 353,442 173,683 102,312
Unrealized appreciation (depreciation)
on investments 2,497,291 (2,323,932) 420,793 3,750,075 (2,203,089) 1,481,627
------------------------------------------ --------------------------------------------
Net realized and unrealized gain (loss)
on investments 2,391,972 (2,555,852) 451,737 4,103,517 (2,029,406) 1,583,939
------------------------------------------ --------------------------------------------
Increase (decrease) in net assets from
operations $5,502,323 $ (932,901) $ 1,180,175 $ 6,214,113 $ (846,885) $ 2,094,402
========================================== ============================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income $3,110,351 $ 1,622,951 $ 728,438 $ 2,110,596 $ 1,182,521 $ 510,463
Net realized gain (loss) (105,319) (231,920) 30,944 353,442 173,683 102,312
Unrealized appreciation (depreciation)
on investments 2,497,291 (2,323,932) 420,793 3,750,075 (2,203,089) 1,481,627
------------------------------------------ ---------------------------------------------
Increase (decrease) in net assets from
operations 5,502,323 (932,901) 1,180,175 6,214,113 (846,885) 2,094,402
From Capital Transactions:
Net premiums 11,530,804 16,369,336 9,240,041 4,566,130 10,981,087 7,382,228
Transfers (to) from the general account
of Life of Virginia:
Death benefits (69,961) (55,784) - (183,215) (122,743) (66,798)
Surrenders (1,461,891) (757,957) (93,810) (1,641,635) (903,275) (406,028)
Cost of insurance and administrative
expense (Note 3) (73,580) (62,628) (22,693) (93,990) (83,415) (51,985)
Transfer gain (loss) and transfer
fees (Note 3) 144,255 (34,514) 20,097 (65,699) (24,108) (25,101)
Transfers (to) from the Guarantee
Account (Note 1) 1,497,477 (523,877) 66,040 282,847 (564,250) 104,633
Interfund transfers 2,860,809 (1,888,148) 668,803 787,704 1,327,916 527,021
------------------------------------------ ---------------------------------------------
Increase in net assets from capital
transactions 14,427,913 13,046,428 9,878,478 3,652,142 10,611,212 7,463,970
------------------------------------------ ---------------------------------------------
INCREASE IN NET ASSETS 19,930,236 12,113,527 11,058,653 9,866,255 9,764,327 9,558,372
NET ASSETS AT BEGINNING OF YEAR 25,038,594 12,925,067 1,866,414 30,384,674 20,620,347 11,061,975
------------------------------------------ ---------------------------------------------
NET ASSETS AT END OF YEAR $44,968,830 $25,038,594 $12,925,067 $40,250,929 $30,384,674 $20,620,347
========================================== =============================================
</TABLE>
See accompanying notes.
<PAGE>
16
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
--------------------------------------------- ---------------------------------------
MONEY MARKET HIGH INCOME
PORTFOLIO PORTFOLIO
--------------------------------------------- ---------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
--------------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 3,320,468 $ 2,051,133 $ 559,853 $ 1,144,671 $ 798,967 $ 236,236
Expenses--Mortality and expense risk
charges (Note 3) 699,880 540,987 203,854 297,241 135,458 60,707
--------------------------------------------- ----------------------------------------
Net investment income (expense) 2,620,588 1,510,146 355,999 847,430 663,509 175,529
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) - - - 425,760 (100,779) 82,978
Unrealized appreciation (depreciation)
on investments - - - 2,702,738 (890,395) 568,518
--------------------------------------------- ----------------------------------------
Net realized and unrealized gain (loss)
on investments - - - 3,128,498 (991,174) 651,496
--------------------------------------------- ----------------------------------------
Increase (decrease) in net assets from
operations $ 2,620,588 $ 1,510,146 $ 355,999 $ 3,975,928 $ (327,665) $ 827,025
============================================= =======================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (expense) $ 2,620,588 $ 1,510,146 $ 355,999 $ 847,430 $ 663,509 $ 175,529
Net realized gain (loss) - - - 425,760 (100,779) 82,978
Unrealized appreciation (depreciation)
on investments - - - 2,702,738 (890,395) 568,518
--------------------------------------------- ---------------------------------------
Increase (decrease) in net assets from
operations 2,620,588 1,510,146 355,999 3,975,928 (327,665) 827,025
From Capital Transactions:
Net premiums 36,176,530 79,067,408 24,443,988 7,262,170 8,930,853 4,672,467
Transfers (to) from the general account
of Life of Virginia:
Death benefits 103,982 (1,460,159) (15,579) (117,911) (23,586) -
Surrenders (4,660,173) (3,367,219) (628,296) (953,927) (317,616) (55,962)
Cost of insurance and administrative
expense (Note 3) (121,073) (146,671) (58,897) (51,018) (36,445) (17,831)
Transfer gain (loss) and transfer
fees (Note 3) 49,754 (20,591) (9,730) (10,918) (47,417) (2,073)
Transfers (to) from the Guarantee
Account (Note 1) (141,309) (6,872,564) (346,660) 860,461 (281,733) 13,824
Interfund transfers (47,938,008) (25,417,768) (19,174,714) 4,509,566 (116,753) (143,628)
--------------------------------------------- ----------------------------------------
Increase (decrease) in net assets
from capital transactions (16,530,297) 41,782,436 4,210,112 11,498,423 8,107,303 4,466,797
--------------------------------------------- ----------------------------------------
INCREASE (DECREASE) IN NET ASSETS (13,909,709) 43,292,582 4,566,111 15,474,351 7,779,638 5,293,822
NET ASSETS AT BEGINNING OF YEAR 62,065,724 18,773,142 14,207,031 15,420,476 7,640,838 2,347,016
--------------------------------------------- ----------------------------------------
NET ASSETS AT END OF YEAR $48,156,015 $62,065,724 $18,773,142 $30,894,827 $15,420,476 $7,640,838
============================================= ========================================
</TABLE>
See accompanying notes.
<PAGE>
17
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
---------------------------------------------------------------------------------------
EQUITY-INCOME GROWTH
PORTFOLIO PORTFOLIO
------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995 1994 1993
------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 10,037,638 $ 4,675,559 $ 913,970 $ 567,790 $ 4,043,602 $ 667,881
Expenses--Mortality and expense risk
charges (Note 3) 2,138,272 902,437 379,403 1,696,933 943,085 484,214
------------------------------------------- -----------------------------------------
Net investment income (expense) 7,899,366 3,773,122 534,567 (1,129,143) 3,100,517 183,667
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) 4,284,587 284,694 698,403 7,510,176 424,903 960,186
Unrealized appreciation (depreciation)
on investments 37,953,951 (106,600) 3,206,793 29,804,134 (3,300,969) 5,289,373
------------------------------------------ -----------------------------------------
Net realized and unrealized gain (loss)
on investments 42,238,538 178,094 3,905,196 37,314,310 (2,876,066) 6,249,559
------------------------------------------- -----------------------------------------
Increase (decrease) in net assets from
operations $ 50,137,904 $ 3,951,216 $ 4,439,763 $36,185,167 $ 224,451 $ 6,433,226
=========================================== =========================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE (DECREASE) IN NET ASSETS
From Operations:
Net investment income (expense) $ 7,899,366 $ 3,773,122 $ 534,567 $(1,129,143) $ 3,100,517 $ 183,667
Net realized gain (loss) 4,284,587 284,694 698,403 7,510,176 424,903 960,186
Unrealized appreciation (depreciation)
on investments 37,953,951 (106,600) 3,206,793 29,804,134 (3,300,969) 5,289,373
------------------------------------------- -----------------------------------------
Increase (decrease) in net assets from
operations 50,137,904 3,951,216 4,439,763 36,185,167 224,451 6,433,226
From Capital Transactions:
Net premiums 63,044,040 43,319,748 22,952,200 35,842,400 38,436,463 23,699,261
Transfers (to) from the general account
of Life of Virginia:
Death benefits (623,306) (890,708) (60,153) (338,418) (266,922) (93,308)
Surrenders (7,390,359) (1,798,386) (501,314) (5,531,711) (2,014,772) (732,122)
Cost of insurance and administrative
expense (Note 3) (384,060) (224,723) (101,963) (345,393) (244,798) (136,196)
Transfer gain (loss) and transfer
fees (Note 3) (128,097) 45,914 44,706 13,309 (94,035) 183,530
Transfers (to) from the Guarantee
Account (Note 1) 8,592,478 (707,930) 415,124 3,842,828 (241,053) 305,137
Interfund transfers 43,164,815 13,086,320 2,900,240 18,922,427 6,890,505 1,083,794
------------------------------------------- -----------------------------------------
Increase (decrease) in net assets
from capital transactions 106,275,511 52,830,235 25,648,840 52,405,442 42,465,388 24,310,096
------------------------------------------- -----------------------------------------
INCREASE (DECREASE) IN NET ASSETS 156,413,415 56,781,451 30,088,603 88,590,609 42,689,839 30,743,322
NET ASSETS AT BEGINNING OF YEAR 104,848,190 48,066,739 17,978,136 101,682,233 58,992,394 28,249,072
------------------------------------------- -----------------------------------------
NET ASSETS AT END OF YEAR $261,261,605 $104,848,190 $48,066,739 $190,272,842 $101,682,233 $58,992,394
=========================================== =========================================
</TABLE>
<PAGE>
18
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUNDS
(CONTINUED)
------------------------------------------
STATEMENTS OF OPERATIONS (CONTINUED) OVERSEAS
PORTFOLIO
YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 644,375 $ 196,613 $ 124,534
Expenses--Mortality and expense risk charges (Note 3) 999,548 750,229 155,812
------------------------------------------
Net investment income (expense) (355,173) (553,616) (31,278)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain 734,798 810,922 181,613
Unrealized appreciation (depreciation) on investments 6,428,977 (1,667,636) 3,255,418
------------------------------------------
Net realized and unrealized gain (loss) on investments 7,163,775 (856,714) 3,437,031
------------------------------------------
Increase (decrease) in net assets from operations $6,808,602 $(1,410,330) $3,405,753
==========================================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income (expense) $ (355,173) $(553,616) $(31,278)
Net realized gain 734,798 810,922 181,613
Unrealized appreciation (depreciation) on investments 6,428,977 (1,667,636) 3,255,418
------------------------------------------
Increase (decrease) in net assets from operations 6,808,602 (1,410,330) 3,405,753
From Capital Transactions:
Net premiums 10,634,049 47,044,690 14,298,937
Transfers (to) from the general account of Life of Virginia:
Death benefits (556,976) (171,446) (21,868)
Surrenders (3,063,268) (1,164,675) (170,249)
Cost of insurance and administrative expense (Note 3) (208,318) (185,276) (43,221)
Transfer gain (loss) and transfer fees (Note 3) (53,050) 2,802 (8,689)
Transfers (to) from the Guarantee Account (Note 1) 590,771 (114,884) 325,509
Interfund transfers (7,084,976) 12,111,215 5,050,803
------------------------------------------
Increase in net assets from capital transactions 258,232 57,522,426 19,431,222
------------------------------------------
INCREASE IN NET ASSETS 7,066,834 56,112,096 22,836,975
NET ASSETS AT BEGINNING OF YEAR 84,208,173 28,096,077 5,259,102
------------------------------------------
NET ASSETS AT END OF YEAR $91,275,007 $84,208,173 $28,096,077
==========================================
</TABLE>
See accompanying notes.
<PAGE>
19
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
-------------------------------------------------------------
ASSET MANAGER CONTRAFUND
PORTFOLIO PORTFOLIO
------------------------------------------- ----------------
PERIOD FROM
JANUARY 5,
1995 TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995
------------------------------------------- ----------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
Income--Dividends $ 9,085,957 $ 15,691,643 $ 3,115,612 $ 784,088
Expenses--Mortality and expense risk charges (Note 3) 4,926,810 4,653,566 1,726,811 323,922
------------------------------------------- ----------------
Net investment income 4,159,147 11,038,077 1,388,801 460,166
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain 1,958,733 275,628 540,930 905,255
Unrealized appreciation (depreciation) on investments 55,306,129 (40,761,110) 26,346,500 4,218,866
------------------------------------------- ----------------
Net realized and unrealized gain (loss) on investments 57,264,862 (40,485,482) 26,887,430 5,124,121
------------------------------------------- ----------------
Increase (decrease) in net assets from operations $ 61,424,009 $(29,447,405) $ 28,276,231 $5,584,287
=========================================== ================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE (DECREASE) IN NET ASSETS From Operations:
Net investment income $ 4,159,147 $ 11,038,077 $ 1,388,801 $ 460,166
Net realized gain 1,958,733 275,628 540,930 905,255
Unrealized appreciation (depreciation) on investments 55,306,129 (40,761,110) 26,346,500 4,218,866
------------------------------------------- ----------------
Increase (decrease) in net assets from operations 61,424,009 (29,447,405) 28,276,231 5,584,287
From Capital Transactions:
Net premiums 21,217,331 210,283,774 173,812,478 26,666,752
Transfers (to) from the general account of Life of
Virginia:
Death benefits (2,849,779) (1,132,025) (314,509) (17,699)
Surrenders (23,760,769) (13,957,293) (2,979,832) (676,614)
Cost of insurance and administrative expense
(Note 3) (1,245,010) (1,320,021) (597,977) (42,327)
Transfer gain (loss) and transfer fees (Note 3) (305,606) (598,560) 141,773 (28,134)
Transfers (to) from the Guarantee Account (Note 1) (7,015,144) (6,414,358) 1,501,219 4,851,438
Interfund transfers (58,702,053) 7,913,872 14,820,588 25,426,220
------------------------------------------- ----------------
Increase (decrease) in net assets from capital
transactions (72,661,030) 194,775,389 186,383,740 56,179,636
------------------------------------------- ----------------
INCREASE (DECREASE) IN NET ASSETS (11,237,021) 165,327,984 214,659,971 61,763,923
NET ASSETS AT BEGINNING OF PERIOD 436,899,432 271,571,448 56,911,477 -
------------------------------------------- ----------------
NET ASSETS AT END OF PERIOD $425,662,411 $436,899,432 $271,571,448 $61,763,923
=========================================== ================
</TABLE>
See accompanying notes.
<PAGE>
20
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
------------------------------------------
BALANCED
PORTFOLIO
------------------------------------------
YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------------------------------
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 748,770 $ 1,202,168 $ 429,209
Expenses--Mortality and expense risk charges (Note 3) 385,789 345,231 335,845
------------------------------------------
Net investment income (expense) 362,981 856,937 93,364
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 895,552 369,206 653,522
Unrealized appreciation (depreciation) on investments 5,264,633 (2,580,253) 832,339
------------------------------------------
Net realized and unrealized gain (loss) on investments 6,160,185 (2,211,047) 1,485,861
------------------------------------------
Increase (decrease) in net assets from operations $ 6,523,166 $(1,354,110) $ 1,579,225
==========================================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE (DECREASE) IN NET ASSETS From Operations:
Net investment income (expense) $ 362,981 $ 856,937 $ 93,364
Net realized gain (loss) 895,552 369,206 653,522
Unrealized appreciation (depreciation) on investments 5,264,633 (2,580,253) 832,339
------------------------------------------
Increase (decrease) in net assets from operations 6,523,166 (1,354,110) 1,579,225
From Capital Transactions:
Net premiums 2,535,815 4,905,972 6,003,871
Transfers (to) from the general account of Life of Virginia:
Death benefits (153,937) (222,647) (243,128)
Surrenders (1,503,514) (850,409) (1,397,488)
Cost of insurance and administrative expense (Note 3) (88,114) (87,021) (86,968)
Transfer gain (loss) and transfer fees (Note 3) 7,049 (6,823) 2,601
Transfers (to) from the Guarantee Account (Note 1) (134,229) (303,659) 61,411
Interfund transfers (2,179,193) (1,980,780) (2,117,036)
------------------------------------------
Increase (decrease) in net assets from capital transactions (1,516,123) 1,454,633 2,223,263
------------------------------------------
INCREASE (DECREASE) IN NET ASSETS 5,007,043 100,523 3,802,488
NET ASSETS AT BEGINNING OF YEAR 30,199,869 30,099,346 26,296,858
------------------------------------------
NET ASSETS AT END OF YEAR $35,206,912 $30,199,869 $30,099,346
==========================================
</TABLE>
See accompanying notes.
<PAGE>
21
<TABLE>
<CAPTION>
ADVISERS MANAGEMENT TRUST
----------------------------------------------------------------
BOND GROWTH
PORTFOLIO PORTFOLIO
----------------------------------------------- ---------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1995 1994 1993 1995
----------------------------------------------- ---------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 958,338 $ 708,775 $ 48,334 $ 246,676
Expenses--Mortality and expense risk charges (Note 3) 210,707 234,710 48,457 127,144
----------------------------------------------- --------------
Net investment income (expense) 747,631 474,065 (123) 119,532
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) 45,793 (487,357) (11,710) 242,067
Unrealized appreciation (depreciation) on investments 816,276 (236,796) 85,378 1,957,190
----------------------------------------------- ---------------
Net realized and unrealized gain (loss) on investments 862,069 (724,153) 73,668 2,199,257
----------------------------------------------- ---------------
Increase (decrease) in net assets from operations $ 1,609,700 $ (250,088) $ 73,545 $ 2,318,789
=============================================== ===============
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE (DECREASE) IN NET ASSETS From Operations:
Net investment income (expense) $ 747,631 $ 474,065 $ (123) $ 119,532
Net realized gain (loss) 45,793 (487,357) (11,710) 242,067
Unrealized appreciation (depreciation) on investments 816,276 (236,796) 85,378 1,957,190
----------------------------------------------- ---------------
Increase (decrease) in net assets from operations 1,609,700 (250,088) 73,545 2,318,789
From Capital Transactions:
Net premiums 4,761,820 26,294,787 10,262,864 2,833,430
Transfers (to) from the general account of Life of Virginia:
Death benefits (7,505) (95,897) - (78,819)
Surrenders (522,591) (440,989) (14,046) (251,354)
Cost of insurance and administrative expense (Note 3) (37,167) (59,746) (14,869) (23,723)
Transfer gain (loss) and transfer fees (Note 3) (23,158) (26,596) 32,504 (697)
Transfers (to) from the Guarantee Account (Note 1) 798,511 (1,028,597) 48,834 36,976
Interfund transfers (9,447,152) (16,482,327) (341,016) 1,961,133
---------------------------------------------- ----------------
Increase in net assets from capital transactions (4,477,242) 8,160,635 9,974,271 4,476,946
---------------------------------------------- ----------------
INCREASE IN NET ASSETS (2,867,542) 7,910,547 10,047,816 6,795,735
NET ASSETS AT BEGINNING OF YEAR 18,713,463 10,802,916 755,100 6,919,328
----------------------------------------------- ----------------
NET ASSETS AT END OF YEAR $15,845,921 $ 18,713,463 $10,802,916 $13,715,063
=============================================== ================
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1993
-------------------------------
<S> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 813,202 $ 34,457
Expenses--Mortality and expense risk charges (Note 3) 73,324 42,071
--------------------------------
Net investment income (expense) 739,878 (7,614)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) (88,698) (1,902)
Unrealized appreciation (depreciation) on investments (1,043,018) 300,878
-------------------------------
Net realized and unrealized gain (loss) on investments (1,131,716) 298,976
-------------------------------
Increase (decrease) in net assets from operations $ (391,838) $291,362
===============================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE (DECREASE) IN NET ASSETS From Operations:
Net investment income (expense) $ 739,878 $ (7,614)
Net realized gain (loss) (88,698) (1,902)
Unrealized appreciation (depreciation) on investments (1,043,018) 300,878
-------------------------------
Increase (decrease) in net assets from operations (391,838) 291,362
From Capital Transactions:
Net premiums 2,626,919 4,738,404
Transfers (to) from the general account of Life of Virginia:
Death benefits (9,898) -
Surrenders (120,880) (48,862)
Cost of insurance and administrative expense (Note 3) (17,468) (10,581)
Transfer gain (loss) and transfer fees (Note 3) 4,278 11,773
Transfers (to) from the Guarantee Account (Note 1) (65,829) 64,054
Interfund transfers (1,243,094) 310,071
-------------------------------
Increase in net assets from capital transactions 1,174,028 5,064,859
-------------------------------
INCREASE IN NET ASSETS 782,190 5,356,221
NET ASSETS AT BEGINNING OF YEAR 6,137,138 780,917
------------------------------
NET ASSETS AT END OF YEAR $ 6,919,328 $6,137,138
==============================
</TABLE>
<PAGE>
22
<TABLE>
<CAPTION>
Life of Virginia Separate Account 4
INSURANCE MANAGEMENT SERIES
---------------------------------
CORPORATE
BOND UTILITY
PORTFOLIO PORTFOLIO
--------------- ----------------
PERIOD FROM PERIOD FROM
FEBRUARY 3, JANUARY 27,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995 1995
--------------- ----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
Income--Dividends $ 45,272 $ 223,744
Expenses--Mortality and expense risk charges (Note 3) 6,392 61,497
--------------- ----------------
Net investment income 38,880 162,247
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain 3,368 90,613
Unrealized appreciation on investments 26,388 914,307
--------------- ----------------
Net realized and unrealized gain on investments 29,756 1,004,920
--------------- ----------------
Increase in net assets from operations $ 68,636 $1,167,167
=============== ================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 38,880 $ 162,247
Net realized gain 3,368 90,613
Unrealized appreciation on investments 26,388 914,307
--------------- ----------------
Increase in net assets from operations 68,636 1,167,167
From Capital Transactions:
Net premiums 1,448,946 4,723,697
Transfers (to) from the general account of Life of Virginia:
Surrenders (12,805) (150,715)
Cost of insurance and administrative expense (Note 3) (601) (7,470)
Transfer gain (loss) and transfer fees (Note 3) 5,535 (650)
Transfers from the Guarantee Account (Note 1) 200,240 982,260
Interfund transfers 235,916 5,539,763
--------------- ----------------
Increase in net assets from capital transactions 1,877,231 11,086,885
--------------- ----------------
INCREASE IN NET ASSETS 1,945,867 12,254,052
NET ASSETS AT BEGINNING OF THE PERIOD - -
--------------- ----------------
NET ASSETS AT END OF THE PERIOD $1,945,867 $12,254,052
=============== ================
</TABLE>
See accompanying notes.
23
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
JANUS ASPEN
------------------------------------------------ ------------------------------
AGGRESSIVE GROWTH
GROWTH PORTFOLIO PORTFOLIO
------------------------------------------------ ------------------------------
PERIOD FROM
SEPTEMBER 13,
YEAR ENDED 1993 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993 1995 1994
------------------------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 701,550 $ 143,307 $ 801 $ 1,774,926 $ 109,722
Expenses--Mortality and expense risk
charges (Note 3) 464,496 102,376 2,373 686,203 258,877
------------------------------------------------ -------------------------------
Net investment income (expense) 237,054 40,931 (1,572) 1,088,723 (149,155)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) 1,735,504 117,926 (44,076) 1,220,855 141,619
Unrealized appreciation (depreciation)
on investments 7,840,280 1,778,397 93,438 11,886,046 75,874
------------------------------------------------ -------------------------------
Net realized and unrealized gain (loss)
on investments 9,575,784 1,896,323 49,362 13,106,901 217,493
------------------------------------------------ -------------------------------
Increase (decrease) in net assets from
operations $ 9,812,838 $ 1,937,254 $ 47,790 $14,195,624 $ 68,338
================================================ ===============================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income (expense) $ 237,054 $ 40,931 $ (1,572) $ 1,088,723 $ (149,155)
Net realized gain (loss) 1,735,504 117,926 (44,076) 1,220,855 141,619
Unrealized appreciation (depreciation)
on investments 7,840,280 1,778,397 93,438 11,886,046 75,874
------------------------------------------------ -------------------------------
Increase (decrease) in net assets from
operations 9,812,838 1,937,254 47,790 14,195,624 68,338
From Capital Transactions:
Net premiums 16,756,982 11,040,719 1,096,612 20,907,687 23,804,072
Transfers (to) from the general account
of Life of Virginia:
Death benefits (86,506) (46,281) - (292,563) (88,205)
Surrenders (1,216,524) (143,136) - (1,304,563) (335,606)
Cost of insurance and administrative
expense (Note 3) (73,928) (27,618) (1,390) (125,440) (70,249)
Transfer gain (loss) and transfer fees
(Note 3) 38,529 16,650 (1,825) (42,445) (30,507)
Transfers (to) from the Guarantee Account
(Note 1) 2,434,875 (194,133) 16,036 2,397,459 (64,235)
Interfund transfers 7,553,096 5,460,535 299,759 14,146,981 5,733,375
------------------------------------------------ -------------------------------
Increase in net assets from capital
transactions 25,406,524 16,106,736 1,409,192 35,687,116 28,948,645
------------------------------------------------ -------------------------------
INCREASE IN NET ASSETS 35,219,362 18,043,990 1,456,982 49,882,740 29,016,983
NET ASSETS AT BEGINNING OF THE PERIOD 19,500,972 1,456,982 - 35,022,744 6,005,761
------------------------------------------------ -------------------------------
NET ASSETS AT END OF THE PERIOD
$54,720,334 $19,500,972 $1,456,982 $84,905,484 $35,022,744
================================================ ==============================
</TABLE>
<PAGE>
24
<TABLE>
<CAPTION>
JANUS ASPEN
---------------------------------------------------------------------
GROWTH WORLDWIDE GROWTH
PORTFOLIO PORTFOLIO
-------------------- -----------------------------------------------
PERIOD FROM PERIOD FROM
SEPTEMBER 13, SEPTEMBER 13,
1993 TO YEAR ENDED 1993 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1993 1995 1994 1993
-------------------- -----------------------------------------------
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ 21,397 $ 225,282 $ 3,147 $ 7,922
Expenses--Mortality and expense risk
charges (Note 3) 10,072 477,320 204,215 6,437
------------------- -----------------------------------------------
Net investment income (expense) 11,325 (252,038) (201,068) 1,485
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) (57,047) 439,501 1,394,128 (52,569)
Unrealized appreciation (depreciation)
on investments 38,543 9,549,318 (1,349,019) 343,537
------------------- -----------------------------------------------
Net realized and unrealized gain (loss)
on investments (18,504) 9,988,819 45,109 290,968
------------------- -----------------------------------------------
Increase (decrease) in net assets from
operations $ (7,179) $ 9,736,781 $ (155,959) $ 292,453
=================== ===============================================
STATEMENTS OF CHANGES IN NET ASSETS
(CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income (expense) $ 11,325 $ (252,038) $ (201,068) $ 1,485
Net realized gain (loss) (57,047) 439,501 1,394,128 (52,569)
Unrealized appreciation (depreciation)
on investments 38,543 9,549,318 (1,349,019) 343,537
------------------- -----------------------------------------------
Increase (decrease) in net assets from
operations (7,179) 9,736,781 (155,959) 292,453
From Capital Transactions:
Net premiums 4,717,671 14,202,159 17,754,295 2,463,491
Transfers (to) from the general account
of Life of Virginia:
Death benefits - (146,748) (74,067) -
Surrenders - (1,173,774) (321,790) -
Cost of insurance and administrative
expense (Note 3) (4,984) (87,512) (53,600) (2,467)
Transfer gain (loss) and transfer fees
(Note 3) (2,570) (23,608) (34,313) 23,965
Transfers (to) from the Guarantee Account
(Note 1) 89,992 1,874,804 40,818 42,557
Interfund transfers 1,212,831 7,110,222 7,084,163 1,101,991
------------------- -----------------------------------------------
Increase in net assets from capital
transactions 6,012,940 21,755,543 24,395,506 3,629,537
------------------- -----------------------------------------------
INCREASE IN NET ASSETS 6,005,761 31,492,324 24,239,547 3,921,990
NET ASSETS AT BEGINNING OF THE PERIOD - 28,161,537 3,921,990 -
------------------- -----------------------------------------------
NET ASSETS AT END OF THE PERIOD $6,005,761 $59,653,861 $28,161,537 $3,921,990
=================== ===============================================
</TABLE>
<PAGE>
25
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
JANUS ASPEN (CONTINUED)
----------------------------------
FLEXIBLE
BALANCED INCOME
PORTFOLIO PORTFOLIO
---------------- ----------------
PERIOD FROM PERIOD FROM
OCTOBER 11, OCTOBER 13,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995 1995
---------------- ----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME
Income--Dividends $ 12,299 $ 20,133
Expenses--Mortality and expense risk charges (Note 3) 2,009 980
---------------- ----------------
Net investment income 10,290 19,153
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain 9,364 29
Unrealized appreciation (depreciation) on investments 37,909 (2,240)
---------------- ----------------
Net realized and unrealized gain (loss) on investments 47,273 (2,211)
---------------- ----------------
Increase in net assets from operations $ 57,563 $ 16,942
================ ================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income $ 10,290 $ 19,153
Net realized gain 9,364 29
Unrealized appreciation (depreciation) on investments 37,909 (2,240)
---------------- ----------------
Increase in net assets from operations 57,563 16,942
From Capital Transactions:
Net premiums 619,039 312,671
Transfers (to) from the general account of Life of Virginia:
Surrenders (61,992) (451)
Cost of insurance (Note 3) (379) (111)
Transfer gain (loss) and transfer fees (Note 3) (240) 179
Transfer from the Guarantee Account (Note 1) 210,233 41,646
Interfund transfers 1,147,007 419,589
---------------- ----------------
Increase in net assets from capital transactions 1,913,668 773,523
---------------- ----------------
INCREASE IN NET ASSETS 1,971,231 790,465
NET ASSETS AT BEGINNING OF PERIOD - -
---------------- ----------------
NET ASSETS AT END OF PERIOD $ 1,971,231 $790,465
================ ================
</TABLE>
See accompanying notes.
<PAGE>
26
Life of Virginia Separate Account 4
<TABLE>
<CAPTION>
ALGER AMERICAN
----------------------------------
SMALL
CAP GROWTH
PORTFOLIO PORTFOLIO
--------------- -----------------
PERIOD FROM PERIOD FROM
OCTOBER 3, OCTOBER 4,
1995 TO 1995 TO
DECEMBER 31, DECEMBER 31,
1995 1995
--------------- -----------------
<S> <C> <C>
STATEMENTS OF OPERATIONS (CONTINUED)
INVESTMENT INCOME (EXPENSE)
Income--Dividends $ - $ -
Expenses--Mortality and expense risk charges (Note 3) 9,745 6,776
--------------- -----------------
Net investment income (expense) (9,745) (6,776)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) (20,417) (2,380)
Unrealized appreciation (depreciation) on investments (25,048) 27,240
--------------- -----------------
Net realized and unrealized gain (loss) on investments (45,465) 24,860
--------------- -----------------
Increase (decrease) in net assets from operations $ (55,210) $ 18,084
=============== =================
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
INCREASE IN NET ASSETS
From Operations:
Net investment income (expense) $ (9,745) $ (6,776)
Net realized gain (loss) (20,417) (2,380)
Unrealized appreciation (depreciation) on investments (25,048) 27,240
--------------- -----------------
Increase (decrease) in net assets from operations (55,210) 18,084
From Capital Transactions:
Net premiums 3,369,922 2,632,716
Transfers (to) from the general account of Life of Virginia:
Surrenders (18,166) (4,789)
Cost of insurance (Note 3) (1,420) (895)
Transfer gain and transfer fees (Note 3) 7,625 1,883
Transfers (to) from the Guarantee Account (Note 1) 298,188 (47,006)
Interfund transfers 3,969,177 2,922,881
--------------- -----------------
Increase in net assets from capital transactions 7,625,326 5,504,790
--------------- -----------------
INCREASE IN NET ASSETS 7,570,116 5,522,874
NET ASSETS AT BEGINNING OF PERIOD - -
--------------- -----------------
NET ASSETS AT END OF PERIOD $7,570,116 $5,522,874
=============== =================
</TABLE>
See accompanying notes.
<PAGE>
27
Life of Virginia Separate Account 4
Notes to Financial Statements
December 31, 1995
1. DESCRIPTION OF ENTITY
Life of Virginia Separate Account 4 (the Account) is a separate investment
account established in 1987 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 deferred annuity
policies issued by Life of Virginia. Life of Virginia is an indirect
wholly-owned subsidiary of Aon Corporation (Aon). In December 1995, Aon signed a
definitive agreement with General Electric Capital Corporation for the sale of
Life of Virginia. Management does not expect the sale of Life of Virginia to
have a significant impact on the Account.
During 1995, nine new investment subdivisions were added to the Account, for
both Type I and Type II policies. The Utility and Corporate Bond each invests
solely in a designated portfolio of the Insurance Management Series (IMS), a
series type mutual fund. The Contrafund invests solely in a designated portfolio
of the Variable Insurance Product Fund II (VIP II), a series type mutual fund.
The International Equity and the Real Estate Securities each invests solely in a
designated portfolio of Life of Virginia Series Fund, Inc., a series type mutual
fund. The Balanced and Flexible Income each invests solely in a designated
portfolio of Janus Aspen, a series type mutual fund. The Growth and Small
Capitalization each invests solely in a designated portfolio of the Alger
American Fund, a series type mutual fund.
In November 1995, six subdivisions were closed to new money for both Type I and
Type II policies. For each policy type, three of these subdivisions, the
Balanced, Bond, and Growth, each invests solely in a designated portfolio of the
Advisers Management Trust, a series type mutual fund. The fourth and fifth
closed subdivisions, the Money Market and High Income, each invests solely in a
designated portfolio of the Variable Insurance Products Fund, a series type
mutual fund. The sixth closed subdivision, the Money, invests solely in a
designated portfolio of the Oppenheimer Variable Account Funds, a series type
mutual fund.
Policyowners may transfer cash values between the Account's portfolios and the
Guarantee Account that is part of the general account of Life of Virginia.
Amounts transferred to the Guarantee Account earn interest at the interest rate
in effect at the time of such transfer and remain in effect for one year, after
which a new rate may be declared.
<PAGE>
28
Life of Virginia Separate Account 4
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNIT CLASSES
There are two unit classes included in the Account. Type I units are sold under
policy form P1140 and P1141. Type II units are sold under policy forms P1142,
P1142N and P1143. Type II unit sales began in the third quarter of 1994.
INVESTMENTS
Investments are stated at fair value which is based on the percentage owned by
the Account of the net asset value of the respective portfolios or funds.
Purchases and sales of investments are recorded on the trade 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, 1995 were:
<TABLE>
<CAPTION>
COST OF SHARES PROCEEDS FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Life of Virginia Series Fund, Inc.:
Common Stock $ 16,658,404 $ 3,459,337
Bond 6,131,474 2,493,941
Money Market 113,944,069 90,110,782
Total Return 11,838,986 3,892,291
International Equity 1,805,486 124,991
Real Estate Securities 11,738,164 441,943
Oppenheimer Variable Account Funds:
Money 7,225,740 10,579,183
Bond 12,825,566 7,479,991
Capital Appreciation 30,642,433 21,229,805
Growth 20,001,513 5,483,336
High Income 30,589,813 13,289,800
Multiple Strategies 13,069,586 7,270,470
Variable Insurance Products Fund:
Money Market 96,314,344 109,833,511
High Income 24,365,610 12,018,242
Equity-Income 156,948,165 42,868,760
Growth 91,654,556 40,732,023
Overseas 30,218,235 30,196,870
</TABLE>
<PAGE>
29
Life of Virginia Separate Account 4
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
COST OF SHARES PROCEEDS FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Variable Insurance Products Fund II:
Asset Manager $ 63,232,943 $131,398,873
Contrafund 66,682,430 10,061,983
Advisers Management Trust:
Balanced 6,999,428 8,141,388
Bond 14,836,894 18,519,011
Growth 8,170,816 3,570,846
Insurance Management Series:
Corporate Bond 2,086,532 184,293
Utility 13,405,962 2,183,483
Janus Aspen:
Aggressive Growth 43,931,629 18,214,908
Growth 50,705,060 14,024,409
Worldwide Growth 34,850,749 13,371,314
Balanced 2,391,450 494,637
Flexible Income 770,581 1,702
Alger American:
Small Cap 8,660,894 1,166,781
Growth 5,762,387 335,494
</TABLE>
NET ASSET VALUE PER UNIT
The net asset value per unit may not compute due to rounding.
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 Aon life- nonlife 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.
<PAGE>
30
Life of Virginia Separate Account 4
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. 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 deferred
annuity products, less deductions retained as compensation for premium taxes.
For policies issued on or after May 1, 1993, the deduction for premium taxes
will be deferred until surrender. For Type I policies, during the first ten
years following a premium payment, a .20% charge is deducted monthly from the
policy Account values to reimburse Life of Virginia for certain distribution
expenses. In addition, a charge is imposed on full and certain partial
surrenders that occur within six years of any premium payment for all Type I
policies and seven years for certain Type II policies to cover certain expenses
relating to the sale of a policy. Subject to certain limitations, the charge
equals 6% (or less) of the premium surrendered, depending on the time between
premium payment and surrender.
Life of Virginia will deduct a charge of $30 per year and $25 plus .15% per year
from the policy account values for certain administrative expenses incurred for
policy Type I and Type II, respectively. For Type II policies, the $25 charge
may be waived if the account value is greater than $75,000. In addition, Life of
Virginia charges the Account 1.15% and 1.25% on policy Type I and Type II,
respectively, for the mortality and expense risk that Life of Virginia assumes.
Administrative expenses as well as mortality and risk charges are deducted daily
and reflect the effective annual rates.
Gains or losses resulting from the processing time between the receipt of an
initial premium and the investment of that premium are charged to Life of
Virginia. In addition, any such gain or loss resulting from the processing time
between a request for policy surrender and the payment is also charged to Life
of Virginia.
<PAGE>
31
Life of Virginia Separate Account 4
Notes to Financial Statements (continued)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
Life of Virginia Series Fund, Inc. (the Fund) is an open-end diversified
management investment company whose shares are sold to Life of Virginia's
Separate Accounts.
Forth Financial Securities Corporation (FFSC), an indirect wholly-owned
subsidiary of Aon, acts as principal underwriter (as defined in The Investment
Company Act of 1940) of the Account's policies pursuant to an agreement with
Life of Virginia.
Aon Advisors, Inc. (Investment Advisor), a wholly-owned subsidiary of Aon,
serves as investment advisor to the Fund and provides portfolio management,
investment advice, and related administrative services for the Fund. 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 Common Stock Index portfolio, .50% for the
Government Securities, Money Market and Total Return portfolios, 1.00% for the
International Equity portfolio and .85% for the Real Estate Securities
portfolio. Effective July 1, 1994, the investment advisor agreed to waive a
portion of the advisory fee for the Money Market portfolio such that the
effective annual rate is .10%. Prior to May 1, 1993, the effective annual rate
for the Common Stock Index portfolio was .50%.
Certain officers and directors of Life of Virginia are also officers and
directors of FFSC, the Fund, Investment Advisor or Aon.
<PAGE>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
THE LIFE INSURANCE COMPANY OF VIRGINIA
AND SUBSIDIARIES
YEAR ENDED DECEMBER 31, 1995
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Financial Statements
Consolidated Statements of Financial Position
as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Income for the years
ended December 31, 1995, 1994, and 1993. . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994, and 1993. . . . . . . . . . . . . . . . . 5
Consolidated Statements of Stockholder's Equity for the years
ended December 31, 1995, 1994, and 1993. . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 7
- ----------------------------------------------------------------------------
<PAGE>
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated statements of financial position
of The Life Insurance Company of Virginia (an indirect wholly-owned subsidiary
of Aon Corporation) and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholder's equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Life Insurance
Company of Virginia and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 1 and 2, the Company changed its method of accounting for
certain investments in 1994.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
- 1 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(millions) December 31
1995 1994
ASSETS
INVESTMENTS
Fixed maturities
Available for sale - at fair value;
(amortized cost: 1995 - $4,267.2;
1994- $2,065.4) $4,411.0 $1,910.5
Held to maturity - at amortized cost
(fair value: 1994 - $2,790.0) - 3,023.7
Equity securities - at fair value
Common stocks (cost: 1995 - $31.5;
1994 - $10.9) 35.4 13.4
Preferred stocks (cost: 1995 - $102.2;
1994 - $117.2) 121.5 111.8
Mortgage loans on real estate (net of reserve
for losses: 1995 - $23.6; 1994 - $27.3) 592.5 527.6
Real estate (net of accumulated depreciation:
1995 - $5.6; 1994 - $6.5) 36.6 35.4
Policy loans 151.7 165.3
Other long-term investments - 9.3
Short-term investments 81.7 106.9
-------- --------
Total investments 5,430.4 5,903.9
CASH 1.6 23.0
RECEIVABLES
Premiums and other 13.5 68.3
Accrued investment income 72.3 75.6
Receivable from affiliates 558.4 347.2
-------- --------
Total receivables 644.2 491.1
DEFERRED POLICY ACQUISITION COSTS 363.9 388.1
COST OF INSURANCE PURCHASED
(net of accumulated amortization: 1995 - $32.5;
1994 - $70.1) 32.6 48.6
PROPERTY AND EQUIPMENT AT COST
(net of accumulated depreciation: 1995 - $18.4;
1994 - $23.5) 3.7 7.5
ASSETS HELD UNDER SPECIAL CONTRACTS 2,019.6 1,429.7
OTHER ASSETS 65.9 57.9
-------- --------
TOTAL ASSETS $8,561.9 $8,349.8
======== ========
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
- 2 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION -- Continued
(millions)
December 31
1995 1994
LIABILITIES AND STOCKHOLDER'S EQUITY
POLICY LIABILITIES
Future policy benefits $ 472.4 $ 589.9
Policy and contract claims 31.7 83.8
Unearned and advance premiums .3 229.7
Other policyholder funds 5,013.9 5,019.8
-------- --------
Total policy liabilities 5,518.3 5,923.2
GENERAL LIABILITIES
Commissions and general expenses 12.8 46.9
Current income taxes 9.5 14.5
Deferred income taxes 75.5 21.0
Liabilities held under special contracts 2,019.6 1,429.7
Other liabilities 104.3 147.1
-------- --------
TOTAL LIABILITIES 7,740.0 7,582.4
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDER'S EQUITY
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0 4.0
Paid-in additional capital 749.1 704.1
Net unrealized investment gains (losses) 103.1 (97.5)
Net foreign exchange losses - (3.0)
Retained earnings (deficit) (34.3) 159.8
--------- --------
TOTAL STOCKHOLDER'S EQUITY 821.9 767.4
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $8,561.9 $8,349.8
======== ========
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
- 3 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(millions)
Years ended December 31
1995 1994 1993
REVENUE
Premiums and policy fees $197.0 $230.1 $256.5
Net investment income (Note 2) 402.1 490.6 513.5
Realized investment losses (76.5) (25.8) (1.6)
Other income 2.8 8.5 14.5
------ ------ ------
Total revenue earned 525.4 703.4 782.9
BENEFITS AND EXPENSES
Benefits to policyholders 372.9 477.1 491.0
Commissions and general expenses 43.7 75.7 92.4
Amortization of deferred policy acquisition costs 39.3 57.1 65.7
Amortization of cost of insurance purchased 3.2 5.1 5.4
------ ------ ------
Total benefits and expenses 459.1 615.0 654.5
INCOME BEFORE INCOME TAX 66.3 88.4 128.4
Provision for income tax (Note 3)
Current 37.9 21.0 52.9
Deferred - credit (10.8) (5.7) (6.7)
------ ------ ------
27.1 15.3 46.2
NET INCOME $ 39.2 $ 73.1 $ 82.2
====== ====== ======
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions) Years ended December 31
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39.2 $ 73.1 $ 82.2
Adjustments to reconcile net income to
cash provided by (used by) operating
activities:
Policy liabilities 114.2 331.4 334.9
Accrued investment income (2.1) 1.8 (2.3)
Deferred policy acquisition costs (76.1) (91.8) (105.4)
Amortization of deferred policy
acquisition costs 39.3 57.1 65.7
Amortization of cost of insurance purchased 3.2 5.1 5.4
Other amortization and depreciation (1.2) 2.3 2.1
Premiums and operating receivables,
commissions and general expenses, income
taxes, other assets and other liabilities (65.7) (139.7) (161.1)
Realized investment losses 76.5 25.8 1.6
------- ------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 127.3 265.1 223.1
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments-net (18.8) (.3) (17.3)
Sale or maturity of investments
Fixed maturities - Held to maturity
Maturities 3.9 50.8 64.6
Calls and Prepayments 60.9 727.5 1,962.5
Sales - - 28.0
Fixed maturities - Available for sale
Maturities 35.0 50.4 -
Calls and Prepayments 58.6 269.1 480.9
Sales 1,700.3 444.7 209.0
All other investments 124.6 231.1 184.3
Purchase of investments
Fixed maturities - Held to maturity - (734.0)(2,142.7)
Fixed maturities - Available for sale (1,950.7)(1,018.5) (967.1)
All other investments (183.5) (357.1) (260.6)
Sale (purchase) of property and equipment (.8) (1.8) 22.7
-------- -------- --------
CASH USED BY INVESTING ACTIVITIES (170.5) (338.1) (435.7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends to stockholder (6.0) (20.0) (59.0)
Interest sensitive life, annuity and
investment contract deposits 1,059.5 1,455.5 1,376.0
Interest sensitive life, annuity and
investment contract withdrawals (1,031.7)(1,362.6)(1,089.9)
CASH PROVIDED BY FINANCING ACTIVITIES 21.8 72.9 227.1
INCREASE (DECREASE) IN CASH (21.4) (.1) 14.5
CASH AT BEGINNING OF YEAR 23.0 23.1 8.6
-------- -------- --------
CASH AT END OF YEAR $ 1.6 $ 23.0 $ 23.1
======== ======== ========
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(millions)
Years ended December 31
1995 1994 1993
COMMON STOCK
Balance at January 1 and December 31 $ 4.0 $ 4.0 $ 4.0
PAID-IN ADDITIONAL CAPITAL
Balance at January 1 704.1 704.1 704.1
Capital contribution from parent (Note 8) 45.0 - -
------ ------ ------
Balance at December 31 749.1 704.1 704.1
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at January 1 (97.5) 23.6 17.0
Effect of change in accounting principles
at January 1 - 25.1 -
Net unrealized investment gains (losses) 200.6 (146.2) 6.6
------ ------ ------
Balance at December 31 103.1 (97.5) 23.6
NET FOREIGN EXCHANGE GAINS (LOSSES)
Balance at January 1 (3.0) (2.3) (2.4)
Net foreign exchange gains (losses) 3.0 (.7) .1
------ ------ ------
Balance at December 31 - (3.0) (2.3)
RETAINED EARNINGS (DEFICIT)
Balance at January 1 159.8 126.7 110.6
Net income 39.2 73.1 82.2
Dividends to stockholder (40.0) (40.0) (59.0)
Stock dividend to affiliate (Note 8) (193.3) - (7.1)
------ ------ ------
Balance at December 31 (34.3) 159.8 126.7
------ ------ ------
STOCKHOLDER'S EQUITY AT DECEMBER 31 $821.9 $767.4 $856.1
====== ====== ======
- ----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES
Principles of Consolidation
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles and include
the accounts of The Life Insurance Company of Virginia and its
subsidiaries ("Life of Virginia"). Life of Virginia is an indirect
wholly owned subsidiary of Aon Corporation ("Aon"). These statements
include informed estimates and assumptions that affect the amounts
reported. Actual results could differ from the amounts reported. All
material intercompany accounts and transactions have been eliminated.
Recognition of Premium Revenue and Related Expenses
For universal life-type and investment products, generally there is no
requirement for payment of premium other than to maintain account
values at a level sufficient to pay mortality and expense charges.
Consequently, premiums for universal life-type policies and investment
products are not reported as revenue, but as deposits. Policy fee
revenue for universal life-type policies and investment products
consists of charges for the cost of insurance, policy administration,
and surrenders assessed during the period. Expenses include interest
credited to policy account balances and benefit claims incurred in
excess of policy account balances.
In general, for accident and health products, premiums collected are
reported as earned proportionately over the period covered by the
policies. For all other life products, premiums are recognized as
revenue when due. Benefits and related expenses associated with the
premium revenues are charged to expense proportionately over the lives
of the policies through a provision for future policy benefit
liabilities and through deferral and amortization of deferred policy
acquisition costs.
Reinsurance
Reinsurance premiums, commissions, and expense reimbursements on
reinsured business are accounted for on a basis consistent with those
used in accounting for the original policies issued and the terms of
the reinsurance contracts. Premiums and benefits ceded to other
companies have been reported as a reduction of premium revenue and
benefits. Expense reimbursements received in connection with
reinsurance ceded have been accounted for as a reduction of the related
policy acquisition costs or, to the extent such reimbursements exceed
the related acquisition costs, as other revenue. All reinsurance
receivables and prepaid reinsurance premium amounts are reported as
assets.
Income Tax
Deferred income taxes have been provided for the effects of temporary
differences between financial reporting and tax bases of assets and
liabilities and have been measured using the enacted marginal tax rates
and laws that are currently in effect.
Investments
Fixed maturities, where the intent is to hold to maturity, are carried
generally at amortized cost. Fixed maturities that are available for
sale are carried at fair value. The amortized cost of fixed maturities
is adjusted for amortization of premiums and accretion of discounts to
maturity that are included in net investment income. Included in fixed
- 7 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
AND PRACTICES -- Continued
maturities are investments in collateralized mortgage obligations
("CMOs"). Premiums and discounts arising from the purchase of CMOs are
treated as yield adjustments and included in net investment income.
Prepayment assumptions are obtained from dealer surveys. The
retrospective adjustment method is used to adjust for prepayment
activity. Equity securities are valued at fair value. Unrealized gains
and temporary unrealized losses on fixed maturities available for sale
and equity securities are excluded from income and are recorded
directly to stockholder's equity, net of related deferred income taxes
and adjustments to amortization of deferred policy acquisition costs.
Mortgage loans are carried at amortized cost, net of reserves. Real
estate is carried generally at cost less accumulated depreciation.
Policy loans are carried at unpaid principal balance. Other long-term
investments are carried generally at cost. Realized investment gains or
losses are computed using specific costs of securities sold.
Investments that have declines in fair value below cost, that are
judged to be other than temporary, are written down to estimated fair
values and reported as realized investment losses. Additionally,
reserves for mortgage loans and certain other long-term investments are
established based on an evaluation of the respective investment
portfolio, past credit loss experience, and current economic
conditions. Writedowns and the change in reserves are included in
realized investment gains and losses in the statements of income. In
general, Life of Virginia ceases to accrue investment income where
interest or dividend payments are in arrears.
Accounting policies relating to derivative financial instruments are
discussed in Note 11.
Deferred Policy Acquisition Costs
Costs of acquiring new business, principally the excess of new
commissions over renewal commissions, underwriting and sales expenses
that vary with and are primarily related to the production of new
business, are deferred. For non-universal life-type products,
amortization of deferred acquisition costs and the cost of insurance
purchased is related to and based on the expected premium revenues on
the policies. In general, such amortization is adjusted to reflect
current withdrawal experience. Expected premium revenues are estimated
by using the same assumptions used in estimating future policy
benefits.
In general, deferred policy acquisition costs and cost of insurance
purchased related to universal life-type policies and investment
products are amortized in relation to the present value of expected
gross profits on the policies. Such amortization is adjusted
periodically to reflect differences in actual and assumed gross
profits.
To the extent that unrealized gains or losses on available for sale
securities would result in an adjustment of deferred policy acquisition
costs, had those gains or losses actually been realized, the related
deferred policy acquisition cost adjustments are recorded along with
the unrealized gains or losses included in stockholder's equity with no
effect on net income.
- 8 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
AND PRACTICES -- Continued
Property and Equipment
Property and equipment are generally depreciated using the
straight-line method over their estimated useful lives.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate fair values
for financial instruments. The carrying amounts in the consolidated
statements of financial position for cash and short-term investments
approximate their fair values. Fair values for fixed maturity
securities and equity securities are based on quoted market prices or,
if they are not actively traded, on estimated values obtained from
independent pricing services. The fair values for mortgage loans and
policy loans are estimated using discounted cash flow analyses, using
interest rates currently being offered for similar loans to borrowers
with similar credit ratings. Fair values of derivatives are based on
quoted prices for exchange-traded instruments or the cost to terminate
or offset with other contracts.
In general, other long-term investments are comprised of real estate
joint ventures and limited partnerships. It was not practicable to
estimate the fair value of other long-term investments because of the
lack of quoted market prices and the inability to estimate fair value
without incurring excessive costs. In addition, the determination of
the fair value of investment commitments was deemed impracticable due
to the inability to estimate future cash flows.
Fair values for liabilities for investment-type contracts are estimated
using discounted cash flow calculations based on interest rates
currently being offered for similar contracts with maturities
consistent with those remaining for the contracts being valued.
Assets and Liabilities Held Under Special Contracts
Assets held under special contracts principally represent designated
funds of group pension, variable life and annuity policyholders. These
assets are offset by liabilities that represent such policyholders'
equity in those assets. The net investment income generated from these
assets is not included in the consolidated statements of income.
Future Policy Benefit Liabilities and Unearned Premiums and Policy and
Contract Claims
Future policy benefit liabilities on non-universal life-type and
accident and health products have been provided on the net level
premium method. The liabilities are calculated based on assumptions as
to investment yield, mortality, morbidity and withdrawal rates that
were determined at the date of issue or acquisition of Life of Virginia
by Aon, and provide for possible adverse deviations. Interest
assumptions are graded and range from 9.3% to 7.5%. Withdrawal
assumptions are based principally on experience and vary by plan, year
of issue, and duration.
Policyholder liabilities on universal life-type and investment products
are generally based on policy account values. Interest credit rates for
these products range from 6.8% to 5%.
Unearned premiums generally are calculated using the pro rata method
based on gross premiums. However, in the case of credit life and credit
accident and health, the unearned premiums are calculated such that the
- 9 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
AND PRACTICES -- Continued
premiums are earned over the period of risk in a reasonable
relationship to anticipated claims.
Policy and contract claim liabilities represent estimates for reported
claims, as well as provisions for losses incurred, but not yet
reported. These claim liabilities are based on historical experience
and are estimates of the ultimate amount to be paid when the claims are
settled. Changes in the estimated liability are reflected in income as
the estimates are revised.
Foreign Currency Translation
Foreign revenues and expenses are translated at average exchange rates.
Foreign assets and liabilities are translated at year-end exchange
rates. Unrealized foreign exchange gains or losses on translation are
generally reported in stockholder's equity. No tax effect was taken
into consideration for unrealized losses.
Accounting Changes
In 1995, Life of Virginia adopted Financial Accounting Standards Board
(FASB) Statement Nos. 114 and 118 which relate to accounting by
creditors for impairment of a loan. Implementation of these statements
did not have a material effect on Life of Virginia's consolidated
financial statements.
Life of Virginia adopted FASB Statement No. 115 in 1994 which requires
categorization of fixed maturities either as held to maturity,
available for sale or trading and equity securities as available for
sale or trading. In accordance with Statement No. 115, prior period
financial statements have not been restated to reflect the change in
accounting principle.
In late 1995, the FASB issued a special report entitled "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments
in Debt and Equity Securities." In accordance with the provisions in
that special report, Life of Virginia chose to reclassify all held to
maturity securities to available for sale (see Note 2).
In 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." Life of Virginia anticipates adopting this statement in
its 1996 financial statements as required. Implementation of this
statement is not expected to have a material effect on Life of
Virginia's financial statements.
- 10 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS
The components of net investment income are as follows:
(millions) Years ended December 31
1995 1994 1993
Fixed maturities $332.8 $404.1 $426.8
Equity securities 10.8 25.2 19.7
Mortgage loans on real estate 49.8 49.9 50.0
Short-term investments 3.5 3.8 1.5
Other investments 13.2 18.0 23.9
------ ------ ------
Gross investment income 410.1 501.0 521.9
Investment expenses 8.0 10.4 8.4
------ ------ ------
Net investment income $402.1 $490.6 $513.5
====== ====== ======
Realized gains (losses) on investments are as follows:
Years ended December 31
1995 1994 1993
Fixed maturities available for sale:
Gross gains $ 12.9 $ 8.6 $ -
Gross losses (90.2) (39.2) -
Fixed maturities held to maturity:
Gross gains 1.1 11.3 49.8
Gross losses (13.8) (9.8) (33.5)
Equity Securities 5.6 (1.9) 2.2
Mortgage loans on real estate 2.3 9.6 (15.8)
Other 5.6 (4.4) (4.3)
------ ------ ------
Total before tax (76.5) (25.8) (1.6)
Less applicable tax 26.8 9.0 .5
------ ------ ------
Total $(49.7) $(16.8) $ (1.1)
====== ====== ======
The components of net unrealized investment gains (losses) are as
follows:
(millions) Year ended December 31
1995 1994 1993
Gross unrealized investment gains (losses)
Fixed maturities available for sale $143.8 $(154.9) $ -
Equity securities 23.2 (2.9) 35.9
Deferred tax credit (charge) (58.7) 40.1 (12.3)
Deferred policy acquisition costs -
net of tax (5.2) 20.2 -
------ ------- -----
Net unrealized investment gains (losses) $103.1 $ (97.5) $ 23.6
====== ======= ======
- 11 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS -- Continued
The changes in net unrealized gains (losses) on fixed maturities and
equity security investments are as follows:
(millions) Years ended December 31
1995 1994 1993
Fixed maturities:
Available for sale $298.7 $(214.2) $ (.2)
Held to maturity 233.7 (351.0) 35.2
Equity securities 26.1 (38.8) 10.1
------ ------- -----
Total $558.5 $(604.0) $45.1
====== ======== =====
The cumulative effect on January 1, 1994 of adopting Statement No. 115
increased stockholder's equity by $25.1 million (net of adjustments to
deferred policy acquisition costs of $14.0 million and deferred income
taxes of $20.2 million) to reflect the net unrealized fixed maturities
holding gains on securities previously carried at amortized cost; there
was no effect on net income as a result of the adoption.
On November 30, 1995, Life of Virginia reclassified all held to
maturity securities to available for sale in accordance with the FASB
Statement 115 special report. The amortized cost and related unrealized
gains for the securities reclassified was $2,698.3 million and $50.9
million, respectively.
The amortized cost and fair values of investments in fixed maturities
are as follows:
(millions) December 31, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U. S. government
and agencies $ 60.7 $ 1.5 $ - $ 62.2
States and political
subdivisions 2.2 .2 - 2.4
Foreign
governments 18.6 .6 - 19.2
Corporate
securities 2,478.6 140.2 (9.9) 2,608.9
Mortgage-backed
securities 1,596.3 19.6 (16.9) 1,599.0
Other fixed
maturities 110.8 8.5 - 119.3
-------- ------ ----- --------
Total fixed
maturities 4,267.2 170.6 (26.8) 4,411.0
Total equity
securities 133.7 26.2 (3.0) 156.9
-------- ------ ----- --------
Total available
for sale $4,400.9 $196.8 $(29.8) $4,567.9
======== ====== ====== ========
- 12 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS -- Continued
(millions) December 31, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Held to maturity:
U. S. government
and agencies $ 3.2 $ .1 $ - $ 3.3
States and political
subdivisions 2.3 .1 - 2.4
Foreign
governments .1 - - .1
Corporate
securities 1,428.3 14.8 (96.5) 1,346.6
Mortgage-backed
securities 1,589.8 1.0 (153.2) 1,437.6
-------- ------ ------- --------
Total held to
maturity $3,023.7 $ 16.0 $(249.7) $2,790.0
======== ====== ======= ========
December 31, 1994
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale:
U. S. government
and agencies $ 26.2 $ .1 $ (.4) $ 25.9
States and political
subdivisions .4 - - .4
Foreign
governments 43.7 .8 (1.0) 43.5
Corporate
securities 869.9 6.3 (47.1) 829.1
Mortgage-backed
securities 1,118.3 .8 (113.7) 1,005.4
Other fixed
maturities 6.9 .1 (.8) 6.2
-------- ----- ------ --------
Total fixed
maturities 2,065.4 8.1 (163.0) 1,910.5
Total equity
securities 128.1 5.6 (8.5) 125.2
-------- ----- ------ --------
Total available
for sale $2,193.5 $13.7 $(171.5) $2,035.7
======== ===== ======= ========
- 13 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. INVESTMENTS -- Continued
The amortized cost and fair value of fixed maturities, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
(millions)
December 31, 1995
Amortized Fair
Cost Value
Due in one year or less $ 109.4 $ 110.8
Due after one year through five years 621.0 658.4
Due after five years through ten years 1,258.4 1,301.8
Due after ten years 682.1 741.0
Mortgage-backed securities 1,596.3 1,599.0
-------- -------
$ 4,267.2 $4,411.0
========= ========
Securities on deposit for regulatory authorities as required by law
amounted to $4.5 million and $31.1 million at December 31, 1995 and
1994, respectively.
At December 31, 1995 and 1994, respectively, Life of Virginia had $34.2
million and $5.9 million of non-income producing investments.
Commercial mortgage loans represent over 96% of total mortgage loans at
December 31, 1995 and 1994. Mortgage loans on real estate and real
estate in the South Atlantic region totaled $301.0 million and $24.1
million, respectively, at December 31, 1995 and $288.0 and $26.8
million, respectively, at December 31, 1994.
3. INCOME TAX
Beginning in 1992, Life of Virginia was included in the consolidated
life-nonlife federal income tax return of Aon Corporation and its
principal domestic subsidiaries. In accordance with intercompany
policy, Life of Virginia provides taxes on income based on a separate
company basis.
The Omnibus Budget Reconciliation Act of 1993 changed Life of
Virginia's prevailing federal income tax rate from 34% to 35% effective
January 1, 1993. The application of the 35% tax rate to the December
31, 1992 deferred income tax liability balance resulted in a $2.3
million increase in federal income tax expense for 1993. A
reconciliation of the income tax provisions based on the statutory
corporate tax rate to the provisions reflected in the consolidated
financial statements is as follows:
1995 1994 1993
------ ------ -----
Statutory tax rate 35.0% 35.0% 35.0%
Tax-exempt investment income deductions (0.1) (0.9) (0.6)
Increase in deferred taxes due to
enacted rate increase from 34% to 35% - - 1.8
Adjustment of prior year taxes 5.3 (13.3) -
Other - net .7 (3.5) (0.2)
---- ---- ----
Effective tax rate 40.9% 17.3% 36.0%
===== ===== =====
- 14 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INCOME TAX -- Continued
Significant components of Life of Virginia's deferred tax liabilities
and assets as of December 31 are as follows (in millions):
1995 1994
Deferred tax liabilities:
Policy acquisition costs $ 96.9 $116.2
Employee benefits 11.0 9.4
Unrealized investment gains 58.7 -
Other 35.2 38.4
------ ------
Total deferred tax liabilities 201.8 164.0
Deferred tax assets:
Insurance reserve amounts 78.2 66.2
Unrealized investment losses - 40.1
Other 48.1 36.7
------ ------
Total deferred tax assets 126.3 143.0
------ ------
Net deferred tax liabilities $ 75.5 $ 21.0
====== ======
As of December 31, 1994, the deferred tax asset relating to unrealized
investment losses is net of a $15.0 valuation allowance that was
provided directly in stockholder's equity in 1994. In 1995, this
valuation allowance was reversed.
The amount of income taxes paid for 1995, 1994 and 1993 was $44.9
million, $56.7 million and $65.6 million, respectively.
4. REINSURANCE AND CLAIM RESERVES
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. In 1995, Life of Virginia's
reinsurance consists primarily of long-duration contracts that are
entered into with financial institutions and related party reinsurance
as described in Note 8. In 1994 and 1993, Life of Virginia's
reinsurance consisted primarily of short-duration contracts that were
entered into with numerous automobile dealerships, financial
institutions, and related party reinsurance as described in Note 8.
Life of Virginia would remain liable to the extent that the reinsuring
companies are unable to meet their obligations.
A summary of reinsurance activity is as follows:
(millions) Years ended December 31
1995 1994 1993
Ceded premiums earned $86.5 $193.7 $204.3
Ceded premiums written 86.5 196.3 214.2
Assumed premiums earned 4.3 8.3 13.7
Assumed premiums written 4.3 8.7 12.5
Ceded benefits to policyholders 63.1 102.1 113.5
5. STOCKHOLDER'S EQUITY
Generally, the capital and surplus of Life of Virginia available for
transfer to Aon are limited to the amounts that the statutory capital
and surplus exceed minimum statutory capital requirements; however,
payments of the amounts as dividends may be subject to approval by
regulatory authorities.
Net income, as determined using statutory accounting practices,
amounted to $53.9 million, $58.2 million and $89.3 million for the
years ended December 31, 1995, 1994 and 1993, respectively. Statutory
stockholder's equity amounted to $364.2 million and $400.6 million at
December 31, 1995 and 1994, respectively.
- 15 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. EMPLOYEE BENEFITS
Savings Plan
Life of Virginia participates in Aon's contributory savings plan for
the benefit of salaried and commissioned employees. Provisions made for
the savings plan were $.8 million, $1.2 million and $1.1 million for
1995, 1994 and 1993, respectively.
Employee Stock Ownership Plan
Aon maintains a leveraged ESOP for the benefit of salaried and certain
commissioned employees. Shares are allocated to eligible employees over
a period of ten years through 1998. Contributions to the ESOP for 1995,
1994 and 1993 charged to Life of Virginia's operations amounted to $.5
million, $.6 million, and $.7 million, respectively.
Pension Plan
Life of Virginia participates in Aon's non-contributory defined benefit
pension plan providing retirement benefits for salaried employees and
certain commissioned employees based on years of service and salary.
Aon's funding policy is to contribute amounts to the plan sufficient to
meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional amounts as
Aon determines to be appropriate from time to time. The components of
net periodic pension cost and benefit obligations of the Aon defined
benefit plan are not separately available for Life of Virginia. In
connection with Life of Virginia's participation in the Aon defined
benefit plan, net pension credits of $3.8 million in 1995 and $3.1
million in both 1994 and 1993 were recorded.
During 1993, the Aon Pension Plan was amended to include certain
additional amounts of compensation in determining plan benefits and in
1994 to reduce the maximum amount of compensation that can be
considered under the plan as required by law. Further, the Pension Plan
was amended in 1994 to provide increases in benefits to current
pensioners.
Postretirement Benefits Other Than Pensions
Aon sponsors two defined benefit postretirement health and welfare
plans in which Life of Virginia participates that cover both salaried
and nonsalaried employees. One plan provides medical benefits, prior to
and subsequent to Medicare eligibility, and the other provides life
insurance benefits. The postretirement health care plan is
contributory, with retiree contributions adjusted annually; the life
insurance plan is noncontributory. Both plans are funded on a
pay-as-you-go basis.
7. LEASE COMMITMENTS
Life of Virginia has noncancelable operating leases for certain office
space, equipment and automobiles. Future minimum rental payments
required under operating leases that have initial or remaining
noncancelable lease terms in excess of one year at December 31, 1995
are as follows:
(millions) Minimum Lease Payments
1996 $ 2.6
1997 2.1
1998 1.9
1999 1.6
2000 1.4
Later years 3.5
Total minimum payments required $13.1
=====
- 16 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. LEASE COMMITMENTS -- Continued
Rental expenses for all operating leases for the years ended December
31, 1995, 1994, and 1993 amounted to $3.6 million, $5.1 million, and
$4.5 million, respectively.
8. RELATED PARTY TRANSACTIONS
Life of Virginia pays investment advisory fees and other fees to
affiliates. Amounts incurred for these items aggregated $5.8 million,
$37.8 million and $33.5 million for 1995, 1994, and 1993, respectively.
Life of Virginia charges affiliates for certain services and for the
use of facilities and equipment which aggregated $10.0 million, $101.2
million and $88.8 million for 1995, 1994, and 1993, respectively.
At December 31, 1995 and 1994, Life of Virginia held investments in
securities of certain affiliates amounting to $12.6 million and $47.4
million, respectively. Amounts included in net investment income
related to these holdings totaled $1.0 million, $3.5 million and $4.0
million for 1995, 1994, and 1993, respectively.
In January 1995, Life of Virginia dividended 100% of its Globe Life
Insurance Company ("Globe") common stock to Combined Insurance Company
of America ("Combined"), a subsidiary of Aon. At December 31, 1994,
Globe had assets of $954.9 million, liabilities of $765.7 million and
stockholder's equity of $189.2 million.
In January 1995, Life of Virginia ceded to Combined $600 million of its
single premium deferred annuity liabilities. In conjunction with the
liability cession, Life of Virginia transferred to Combined available
for sale fixed maturities with a fair value of $436.1 million and cost
of $501.4 million and held to maturity fixed maturities with a fair
value of $81.4 million and a cost of $95.1 million. In addition, $5.5
million of accrued income related to the assets above was transferred
to Combined. This transaction resulted in a reinsurance gain of $77.0
million that will be recognized in income over the expected life of the
business (3 years). Additionally, Life of Virginia recognized a $79.0
million realized investment loss. See Note 12.
In 1995, Life of Virginia received from Combined, in the form of a
capital contribution, fixed maturities with a fair value of $45.0
million.
In January 1995, Life of Virginia transferred limited partnership
investments with a fair value of $8.0 million and cost of $7.5 million,
common stocks with a fair value of $5.6 million and cost of $3.4
million, and cash of $6.4 million to pay a $20.0 million dividend
declared but not paid in 1994. A $2.7 million realized investment gain
was recorded on this transfer.
In December 1994, Life of Virginia exchanged common stocks with a fair
value of $61.4 million and cost of $67.1 million for Combined's
available for sale fixed maturities and related accrued income with
fair values of $60.9 million and $.5 million, respectively. Life of
Virginia recorded the fixed maturity securities at Combined's fair
value of $60.9 million resulting in a $5.7 million realized loss that
is reflected in the statement of income.
In December 1994, Life of Virginia ceded to Combined $406.6 million of
its guaranteed investment contract liabilities. In conjunction with the
liability cession, Life of Virginia transferred to Combined available
for sale fixed maturities with a fair value of $278.1 million and a
cost of $287.2 million and preferred stock with a fair value of $110.5
million and a cost of $119.7 million. See Note 12.
- 17 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. RELATED PARTY TRANSACTIONS -- Continued
In July 1994, Life of Virginia ceded to Union Fidelity Life Insurance
Company ("UFLIC") $280.7 million of its credit life and health reserves
and associated acquisition costs of $107.0 million. In conjunction with
the liability cession, Life of Virginia transferred to UFLIC the
following invested assets in November 1994:
(millions) Amortized
Cost Fair Accrued
or Cost Value Interest
Fixed maturities:
Held to maturity $ 22.3 $ 19.6 $ .5
Available for sale 212.3 203.7 4.0
Preferred stock 66.9 66.0 -
Common stock 3.8 7.7 -
------ ------ ----
Totals $305.3 $297.0 $4.5
====== ====== ====
Included in receivable from affiliate is $107.0 million from UFLIC
related to the acquisition costs.
This transaction resulted in a $29.1 million loss which is reflected as
a $20.8 million premium ceded and $8.3 million realized loss on
investments.
Premiums, benefits to policyholders, and commissions and general
expenses ceded to UFLIC during the second six months of 1994 amounted
to $35.0 million, $14.4 million, and $14.2 million, respectively. These
amounts have been classified as a receivable from affiliate.
In December 1993, Life of Virginia contributed 267,800 shares at cost
of Aon common stock to Combined. The fair value and cost of the Aon
shares were $12.6 million and $7.1 million, respectively.
In 1993, Life of Virginia formed and then purchased all 100 outstanding
shares of Newco for $100. Life of Virginia then transferred to Newco,
in the form of a capital contribution, certain properties, including
all company-occupied properties, which had a book value of $24.5
million. The Newco common stock was then sold to Combined for $21.5
million. A realized investment loss of $3.0 million has been included
in the consolidated statement of income.
9. LITIGATION
Life of Virginia is subject to numerous claims and lawsuits that arise
in the ordinary course of business. In some of these cases the remedies
that may be sought or damages claimed are substantial, including cases
that seek punitive or extraordinary damages. Accruals for these
lawsuits have been provided to the extent that losses are deemed
probable and are estimable. Although the ultimate outcome of these
suits cannot be ascertained and liabilities in indeterminate amounts
may be imposed on Life of Virginia, on the basis of present
information, availability of insurance coverage, and advice received
from counsel, it is the opinion of management that the disposition or
ultimate determination of such claims and lawsuits will not have a
material adverse effect on the consolidated financial position or
results of operations of Life of Virginia.
- 18 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. SEGMENT INFORMATION
Life of Virginia primarily sells variable annuities and universal life
insurance to customers throughout most of the United States. Life of
Virginia distributes variable annuities primarily through stockbrokers
and universal life insurance primarily through career agents and
independent brokers. Life of Virginia is also engaged in the sale of
traditional individual and group life products and guaranteed
investment contracts. Approximately 43% of premium and annuity
consideration collected in 1995 came from customers residing in the
South Atlantic region of the United States.
Significant data concerning Life of Virginia's product segments are as
follows:
(millions) Years ended December 31
1995 1994 1993
-------- -------- ------
Revenues
Life and Annuity $ 550.0 $ 655.6 $ 666.8
Accident and Health 3.4 14.9 53.9
Corporate and Other (28.0) 32.9 62.2
-------- -------- --------
$ 525.4 $ 703.4 $ 782.9
======== ======== ========
Income (loss) Before Income Tax
Life and Annuity $ 98.4 $ 76.7 $ 73.1
Accident and Health .7 (11.5) 6.0
Corporate and Other (32.8) 23.2 49.3
-------- -------- --------
$ 66.3 $ 88.4 $ 128.4
======== ======== ========
Identifiable Assets
Life and Annuity $7,694.8 $7,182.7 $6,943.1
Accident and Health 4.8 241.1 251.3
Corporate and Other 862.3 926.0 1,035.0
-------- -------- --------
$8,561.9 $8,349.8 $8,229.4
======== ======== ========
The above results include allocations of investment income and certain
expense elements considered reasonable under the circumstances. Other
acceptable methods of allocation might produce different results.
11. FINANCIAL INSTRUMENTS
Financial Risk Management
Life of Virginia is exposed to market risk from changes in interest
rates. To manage the volatility related to this exposure, Life of
Virginia enters into derivative transactions that have the effect of
minimizing this risk by creating offsetting market exposures. If Life
of Virginia did not use the derivative contracts, its exposure and
market risk would be higher. The derivative financial instruments held
by Life of Virginia are held for purposes other than trading.
Derivative transactions are governed by a uniform set of policies and
procedures covering areas such as authorization, counterparty exposure
and hedging practices. Positions are monitored using techniques such as
market value and sensitivity analyses.
In addition to creating market risks that offset the underlying
business exposures, derivative instruments also give rise to credit
risks due to possible non-performance by counterparties. The credit
risk is generally
- 19 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. FINANCIAL INSTRUMENTS -- Continued
Financial Risk Management -- Continued
limited to the fair value of those contracts that are favorable to Life
of Virginia. Life of Virginia has limited its credit risk by restricting
investments in derivative contracts to a diverse group of highly rated
major financial institutions. Life of Virginia closely monitors the
credit worthiness of, and exposure to, its counterparties and considers
its credit risk to be minimal.
Interest Rate Risk Management
Life of Virginia uses interest rate swap agreements to manage asset and
liability durations relating to its capital accumulation annuity
business. As of December 31, 1995 and 1994, these swap agreements had
the net effect of lengthening liability durations. Variable rates
received on interest rate swap agreements correlate with crediting
rates paid on outstanding liabilities. The net effect of swap payments
is settled periodically and reported in income. There is no settlement
of underlying notional amounts.
Life of Virginia performs frequent analyses to measure the degree of
correlation associated with its derivative program. Life of Virginia
assesses the adequacy of the correlation analyses results in
determining whether the derivatives qualify for hedge accounting.
Realized gains and losses on derivatives that qualify as hedges are
deferred and reported as an adjustment of the cost basis of the hedged
item. Deferred gains and losses are amortized into income over the life
of the hedged item. The fair value of swap agreements hedging
liabilities are not recognized in the consolidated statements of
financial position.
Notional and Other Data
Life of Virginia had $250.0 million and $750.0 million notional amount
of interest rate swaps outstanding at December 31, 1995 and 1994,
respectively.
During 1995 Life of Virginia amortized $1.4 million of net deferred
losses relating to interest rate swaps into income.
The interest rates on Life of Virginia's principal outstanding swaps at
December 31, are presented below:
Pay Receive
Fixed Variable
1995 7.9 - 8.3% 5.4%
1994 7.7 - 8.3% 7.8%
As of December 31, 1995, the principal swaps have maturities ranging
from September 1999 to October 2000 and variable rates based on five
year treasury rates.
Other Financial Instruments
Life of Virginia has certain investment commitments to provide capital
and fixed-rate loans as well as certain forward contract purchase
commitments. The investment commitments, which would be collateralized
by related properties of the underlying investments, involve varying
elements of credit and market risk. Investment commitments outstanding
at December 31, 1995 and 1994, totaled $21.7 million and $32.1 million,
respectively.
- 20 -
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. FINANCIAL INSTRUMENTS -- Continued
Fair Value of Financial Instruments
Accounting standards require the disclosure of fair values for certain
financial instruments. The fair value disclosures are not intended to
encompass the majority of policy liabilities, various other
non-financial instruments, or other intangible items related to Life of
Virginia's business. Accordingly, care should be exercised in deriving
conclusions about Life of Virginia's business or financial condition
based on the fair value disclosures.
The carrying amount and fair value of certain of Life of Virginia's
financial instruments are as follows:
As of December 31
(millions) 1995 1994
---------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets:
Fixed maturities and equity
securities (Note 2) $4,567.9 $4,567.9 $5,059.4 $4,825.7
Mortgage loans on real estate 592.5 638.2 527.6 530.8
Policy loans 151.7 150.2 165.3 162.0
Cash, short-term investments
and receivables 727.5 727.5 621.0 621.0
Liabilities:
Investment type insurance
contracts 2,769.7 2,796.9 3,380.3 3,295.5
Commissions and general
expenses 12.8 12.8 46.9 46.9
Derivatives - 24.1 - 3.7
See Note 1 regarding the method used to estimate fair values.
12. SUBSEQUENT EVENT
In the fourth quarter of 1995, Aon reached a definitive agreement to
sell Life of Virginia to General Electric Capital Corporation. Pending
the receipt of required regulatory consents, the sale is expected to
close during the first half of 1996. In connection with the sale, Life
of Virginia will recapture the guaranteed investment contract and the
single premium deferred annuity assets and liabilities ceded to
Combined in December 1994 and January 1995, respectively.
13. SUBSEQUENT EVENT (UNAUDITED)
The sale mentioned in footnote 12 closed on April 1, 1996.
- 21 -
<PAGE>
[ERNST & YOUNG LETTERHEAD]
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULES
Board of Directors
The Life Insurance Company of Virginia
We have audited the consolidated financial statements of The Life Insurance
Company of Virginia and Subsidiaries as of December 31, 1995 and 1994,
and for each of the three years in the period ended December 31, 1995, and have
issued our report thereon dated February 9, 1996 (included elsewhere in
this Registration Statement). Our audits also included the financial
statement schedules included in this Registration Statement. These schedules
are the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information
set forth therein.
ERNST & YOUNG LLP
Richmond, Virginia
February 9, 1996
<PAGE>
SCHEDULE I
LIFE OF VIRGINIA, SUBS AND AFFILIATES
CONSOLIDATED SUMMARY OF INVESTMENTS
AS OF DECEMBER 31, 1995
Amount Shown
in Statement
(MILLIONS) Amortized of Financial
Cost Value Position
----------------------------------
Fixed maturities available for sale:
Bonds:
United States Treasury securities and
obligations of other US government
agencies and corporations 60.7 62.2 62.2
Obligations of US states and
political subdivisions 2.2 2.4 2.4
Debt securities of foreign governments
not classified as loans 18.6 19.2 19.2
Corporate securities 2,100.2 2,215.5 2,215.5
Public utilities 378.4 393.4 393.4
Mortgage backed 1,596.3 1,599.0 1,599.0
Other fixed maturities 110.8 119.3 119.3
------- ------- -------
TOTAL FIXED MATURITIES TO BE HELD
FOR SALE 4,267.2 4,411.0 4,411.0
------- ======= -------
Equity securities:
Common stocks:
Banks, trusts, insurance companies 18.1 20.5 20.5
Industrial, miscellaneous, and all
other 13.4 14.9 14.9
Non-redeemable preferred stocks 102.2 121.5 121.5
------- ------- -------
TOTAL EQUITY SECURITIES 133.7 156.9 156.9
------- ======= -------
Mortgage loans on real estate 616.1* 592.5*
Real estate-net of depreciation 36.6 36.6
Policy loans 151.7 151.7
Short-term investments 81.7 81.7
------- -------
TOTAL INVESTMENTS 5,287.0 5,430.4
======= =======
*Differences between cost and carrying values result from certain
valuation allowances.
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION SCHEDULE III
<TABLE>
<CAPTION>
Future
policy Amortization
benefits, Benefits, of
Deferred losses, claims, deferred
policy claims, Net Commissions, losses and policy Other
acquisition and loss Unearned Premium investment fees settlement acquisition operating Premiums
costs expenses premiums revenue income and other expenses costs expenses written
(1) (2) (3) (1) (4)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(millions)
Year Ended
December 31, 1995:
Life Insurance $396.5 $500.4 $5,014.2 $194.0 $355.5 $ 0.5 $370.5 $42.5 $38.6 $ -
A&H Insurance - 3.7 - 3.0 0.4 - 2.4 - 0.3 2.8
Corporate and other - - - - 46.2 2.3 - - 4.8 -
-------------------------------------------------------------------------------------------------------------
$396.5 $504.1 $5,014.2 $197.0 $402.1 $ 2.8 $372.9 $42.5 $43.7 $ 2.8
=============================================================================================================
Year ended
December 31, 1994:
Life insurance $434.9 $618.9 $5,063.2 $225.7 $425.2 $ 4.7 $466.1 $51.3 $61.5 $ -
A&H insurance - 54.8 186.3 4.4 6.5 4.0 11.0 10.9 4.5 17.1
Corporate and other 1.8 - - - 58.9 -0.2 - - 9.7 -
-------------------------------------------------------------------------------------------------------------
$436.7 $673.7 $5,249.5 $230.1 $490.6 $ 8.5 $477.1 $62.2 $75.7 $17.1
=============================================================================================================
Year ended
December 31, 1993:
Life insurance $376.9 $644.3 $5,308.1 $222.3 $437.8 $ 6.7 $474.0 $52.1 $67.5 $ -
A&H insurance 88.1 60.2 173.6 34.2 12.2 7.5 17.0 19.0 12.0 61.7
Corporate and other 1.9 - - - 63.5 0.3 - - 12.9 -
-------------------------------------------------------------------------------------------------------------
$466.9 $704.5 $5,481.7 $256.5 $513.5 $14.5 $491.0 $71.1 $92.4 $61.7
=============================================================================================================
</TABLE>
- --------------
(1) Includes cost of insurance purchased.
(2) Includes other policyholders' funds
(3) The above results reflect allocations of investment income and certain
expense elements considered reasonable under the circumstances.
(4) Net of reinsurance ceded.
THE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES SCHEDULE IV
REINSURANCE
Year ended December 31, 1995
-------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies Amount net
(millions) ------------------------------------------------
Life insurance inforce $53,775.3 $18,792.9 $842.3 $35,823.7 2.3%
=================================================
Premiums and Policy Fees
Life insurance $ 273.8 $ 84.1 $ 4.3 $ 194.0 2.2%
A&H insurance 5.4 2.4 -- 3.0 0.0%
-------------------------------------------------
Total $ 279.2 $ 86.5 $ 4.3 $ 197.0 2.2%
=================================================
Year ended December 31, 1994
-------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies Amount net
(millions) -------------------------------------------------
Life insurance inforce $55,516.0 $17,370.0 $901.0 $39,047.0 2.3%
=================================================
Premiums and Policy Fees
Life insurance $ 337.2 $ 117.0 $ 5.5 $ 225.7 2.4%
A&H insurance 78.3 76.7 2.8 4.4 63.6%
-------------------------------------------------
Total $415.5 $ 193.7 $ 8.3 $ 230.1 3.6%
=================================================
Year ended December 31, 1993
-------------------------------------------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed to
amount companies companies Amount net
(millions) -------------------------------------------------
Life insurance inforce $57,207.4 $20,639.3 $1,180.9 $37,749.0 3.1%
=================================================
Premiums and Policy Fees
Life insurance $ 342.2 $ 127.4 $ 7.5 $ 223.3 3.4%
A&H insurance 104.9 76.9 6.2 34.2 18.1%
-------------------------------------------------
Total $ 447.1 $ 204.3 $ 13.7 $ 256.5 5.3%
=================================================
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1)(a) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of Separate Account 4. 1/
(1)(b) Resolution of Board of Directors of Life of Virginia authorizing
the elimination of investment subdivisions of Separate Accounts
II, III and 4 which invest in shares of the American
Life/Annuity Series. 1/
(1)(c) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of additional investment subdivisions of
Separate Account 4, investing in shares of the Asset Manager
Portfolio of the Fidelity Variable Insurance Products Fund II
and the Balanced Portfolio of the Advisers Management Trust. 1/
(1)(d) Resolution of Board of Directors of Life of Virginia authorizing
the investment of $300,000 in the N&B Balanced Portfolio of
Neuberger & Berman's Advisers Management Trust. 1/
(1)(e) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of additional investment subdivisions of
Separate Account 4, investing in shares of the Growth Portfolio
and the Limited Maturity Bond Portfolio of the Neuberger &
Berman Advisers Management Trust.1/
(1)(f) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of additional investment subdivisions of
Separate Account 4, investing in shares of the Growth Portfolio,
the Aggressive Growth Portfolio, and the Worldwide Growth
Portfolio of the Janus Aspen Series. 4/
(1)(g) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twenty-two (22) additional subdivisions of
Separate Account 4, investing in shares of Money Market
Portfolio, High Income Portfolio, Equity- Income Portfolio,
Growth Portfolio and Overseas Portfolio of the Fidelity Variable
Insurance Products Fund; Asset Manager Portfolio of the Fidelity
Variable Insurance Products Fund II; Money Market Portfolio,
Government Securities Portfolio, Common Stock Index Portfolio,
Total Return Portfolio of the Life of Virginia Series Fund,
Inc.; Limited Maturity Bond Portfolio, Growth Portfolio and
Balanced Portfolio of the Neuberger & Berman Advisers Management
Trust; Growth Portfolio, Aggressive Growth Portfolio, and
Worldwide Growth Portfolio of the Janus Aspen Series; Money
Fund, High Income Fund, Bond Fund, Capital Appreciation Fund,
Growth Fund, Multiple Strategies Fund of the Oppenheimer
Variable Account Funds. 4/
(1)(h) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of three additional investment subdivisions of
Separate Account 4, investing in shares of the Utility Fund and
Corporate Bond Fund of the Insurance Management Series, and the
Contrafund Portfolio of the Variable Insurance Products Fund II.
6/
(1)(i) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of two additional investment subdivisions of
Separate Account 4, investing in shares of the International
Equity Portfolio and the Real Estate Securities Portfolio of
Life of Virginia Series Fund. 7/
(1)(j) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of four additional investment subdivisions of
Separate Account 4, investing in shares of the American Growth
Portfolio and the American Small Capitalization Portfolio of The
Alger American Fund, and the Growth Portfolio and Flexible
Income Portfolio of the Janus Aspen Series. 8/
(1)(k) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of two additional investment subdivisions of
Separate Account 4, investing in shares of the Federated
American Leaders Fund II of the Federated Insurance Series, and
the International Growth Portfolio of the Janus Aspen Series. 9/
(2) Not Applicable.
1
<PAGE>
(3)(a) Underwriting Agreement between The Life Insurance Company of
Virginia and Forth Financial Securities Corporation 1/
(i) Underwriting Agreement dated April 2, 1996 between The Life
Insurance Company of Virginia and Forth Financial Securities
Corporation. 9/
(b) Dealer Sales Agreement.1/
(4)(a) Form of Policy.
(i) Original Form of Policy. 4/
(b) Endorsements to Policy.
(i) IRA Endorsement 1/
(ii) Pension Endorsement 1/
(iii) Section 403(b) Endorsement 1/
(iv) Guaranteed Minimum Death Benefit Rider 5/
(5)(a) Form of Application. 1/
(6)(a) Certificate of Incorporation of The Life Insurance Company of
Virginia. 1/
(b) By-Laws of The Life Insurance Company of Virginia. 1/
(7) Not Applicable.
(8)(a) Stock Sale Agreement between The Life Insurance Company of
Virginia and The Life of Virginia Series Fund, Inc. 1/
(b) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance
Company of Virginia. 1/
(b)(i) Amendment to Participation Agreement Referencing Policy Form
Numbers. 1/
(b)(ii) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation, and The
Life Insurance Company of Virginia. 9/
(b)(iii) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
(c) Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia. 1/
(c)(i) Amendment to Agreement between Oppenheimer Variable Account
Funds, Oppenheimer Management Corporation, and The Life
Insurance Company of Virginia. 1/
(d) Sales Agreement between Advisers Management Trust and The Life
Insurance Company of Virginia. 1/
(d)(i) Addendum to Sales Agreement between Advisers Management Trust
and The Life Insurance Company of Virginia. 1/
(d)(ii) Assignment and Modification Agreement between Neuberger and
Berman Advisers Management Trust and The Life Insurance Company
of Virginia. 9/
(e) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Life Insurance
Company of Virginia. 1/
(f) Participation Agreement between Janus Capital Corporation and
The Life Insurance Company of Virginia. 4/
(g) Participation Agreement between Insurance Management Series,
Federated Securities Corp., and The Life Insurance Company of
Virginia. 6/
2
<PAGE>
(h) Participation Agreement between The Alger American Fund, Fred
Alger and Company, Inc., and The Life Insurance Company of
Virginia. 8/
(9) Opinion and Consent of Counsel.
(10)(a) Consent of Counsel.
(b) Consent of Independent Auditors.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule showing computation for Performance Data 5/
(14) Power of Attorney 3/
(a) Power of Attorney dated April 2, 1996 9/
--------------------------
1/ Incorporated herein by reference to post-effective amendment number 8 to
the Registrant's registration statement on Form N-4, File No. 33-17428,
filed with the Securities and Exchange Commission on April 24, 1992.
2/ Incorporated herein by reference to post-effective amendment number 9 to
the Registrant's registration statement on Form N-4, File No. 33-17428,
filed with the Securities and Exchange Commission on March 2, 1993.
3/ Incorporated herein by reference to post-effective amendment number 10 to
the Registrant's registration statement on Form N-4, File No. 33-17428,
filed with the Securities and Exchange Commission on April 29, 1993.
4/ Incorporated herein by reference to initial Registration Statement on Form
N-4, File No. 33-76334, filed with the Securities and Exchange Commission
on March 11, 1994.
5/ Incorporated herein by reference to pre-effective amendment number 1 to the
Registrant's registration statement on Form N-4, File No. 33-76334, filed
with the Securities and Exchange Commission on April 14, 1994.
6/ Incorporated herein by reference to post-effective amendment number 1 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on January 3, 1995.
7/ Incorporated herein by reference to post-effective amendment number 2 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on April 28, 1995.
8/ Incorporated herein by reference to post-effective amendment number 3 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on September 28, 1995.
9/ Incorporated herein by reference to post-effective amendment number 4 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on April 30, 1996.
3
<PAGE>
Item 25. Directors and Officers of Life of Virginia
Name and Principal Positions and Offices
Business Address* with Depositor
Patrick E. Welch*** Chairman
Paul E. Rutledge III** President, Chief
Operating Officer and Director
John J. Palmer** Senior Vice President and
Director
H. Gaylord Hodges, Jr.** Senior Vice President and
Director
William D. Baldwin** Senior Vice President and
Director
Selwyn L. Flournoy, Jr.** Senior Vice President and
Director
Robert A. Bowen** Senior Vice President and
Director
Linda L. Lanam** Vice President, Senior
Counsel, Secretary and
Director
Robert D. Chinn Senior Vice President - Agency
Thomas A. Barefield Senior Vice President -
Special Markets
Hans L. Carstensen*** Director
Victor C. Moses*** Director
Geoffrey S. Stiff*** Director
- --------------------------------------------------------------------------------
* The principal business address of each person listed, unless otherwise
indicated, is The Life Insurance Company of Virginia, 6610 W. Broad Street,
Richmond, VA 23230.
** Messrs. Baldwin, Bowen, Hodges, Palmer, Rutledge, Flournoy and Ms. Lanam are
members of the Executive Committee of the Board of Directors of Life of
Virginia.
***The principal business address of these individuals is GNA Corporation, Two
Union Square, 601 Union Street, Seattle, WA 98101.
- --------------------------------------------------------------------------------
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The Depositor, The Life Insurance Company of Virginia, is an indirectly,
wholly-owned subsidiary of GNA Corporation. GNA Corporation is a wholly-owned
subsidiary of General Electric Capital Corporation. The Registrant, Life of
Virginia Separate Account 4, is a segregated asset account of Life of Virginia.
Previously, Life of Virginia was an indirectly, wholly-owned subsidiary of Aon
Corporation, an affiliate of Aon Advisors.
Item 27. Number of Policyowners
For the period ended April 1, 1996 there were 11,277 Policyowners.
4
<PAGE>
Item 28. Indemnification
Section 13.1-698 and 13.1-702 of the Code of Virginia, in brief, allow a
corporation to indemnify any person made party to a proceeding because such
person is or was a director, officer, employee, or agent of the corporation,
against liability incurred in the proceeding if: (1) he conducted himself in
good faith; and (2) he believed that (a) in the case of conduct in his official
capacity with the corporation, his conduct was in its best interests; and (b) in
all other cases, his conduct was at least not opposed to the corporation's best
interests and (3) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. The termination of a proceeding by
judgment, order, settlement or conviction is not, of itself, determinative that
the director, officer, employee, or agent of the corporation did not meet the
standard of conduct described. A corporation may not indemnify a director,
officer, employee, or agent of the corporation in connection with a proceeding
by or in the right of the corporation, in which such person was adjudged liable
to the corporation, or in connection with any other proceeding charging improper
personal benefit to such person, whether or not involving action in his official
capacity, in which such person was adjudged liable on the basis that personal
benefit was improperly received by him. Indemnification permitted under these
sections of the Code of Virginia in connection with a proceeding by or in the
right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 5 of the By-Laws of Life of Virginia further provides that:
(a) The Corporation shall indemnify each director, officer and employee of
this Company who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative, arbitrative, or investigative (other than
an action by or in the right of the Corporation) by reason of the fact
that he is or was a director, officer or employee of the Corporation, or
is or was serving at the request of the Corporation as a director, officer
or employee of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgements
[sic], fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in the
best interests of the Corporation, and with respect to any criminal
action, had no cause to believe his conduct unlawful. The termination of
any action, suit or proceeding by judgement [sic], order, settlement,
conviction, or upon a plea of nolo contendere, shall not of itself create
a presumption that the person did not act in good faith, or in a manner
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, believed his conduct unlawful.
(b) The Corporation shall indemnify each director, officer or employee of the
Corporation who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgement [sic] in its favor by reason of the
fact that he is or was a director, officer or employee of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer or employee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent
that the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper.
(c) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer or
employee is proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by the Board of Directors of the
Corporation by a majority vote of a quorum consisting of the directors who
were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion,
or (3) by the stockholders of the Corporation.
(d) Expenses (including attorneys' fees) incurred in defending an action, suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in subsection (c) upon receipt of an undertaking by or on behalf
of the director, officer or employee to repay such amount to the
Corporation unless it shall ultimately be determined that he is entitled
to be indemnified by the Corporation as authorized in this Article.
5
<PAGE>
(e) The Corporation shall have the power to make any other or further
indemnity to any person referred to in this section except an indemnity
against gross negligence or willful misconduct.
(f) Every reference herein to director, officer or employee shall include
every director, officer or employee, or former director, officer or
employee of the Corporation and its subsidiaries and shall enure to the
benefit of the heirs, executors and administrators of such person.
(g) The foregoing rights and indemnification shall not be exclusive of any
other rights and indemnification to which the directors, officers and
employees of the Corporation may be entitled according to law.
* * *
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
depositor pursuant to the foregoing provisions, or otherwise, the depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the depositor of expenses incurred
or paid by a director, officer or controlling person of the depositor in
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 29. Principal Underwriters
(a) Forth Financial Securities Corporation is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940, and is also the
principal underwriter for flexible premium variable life insurance
policies issued through Life of Virginia Separate Accounts I, II and III.
(b) Name and Principal Positions and Offices
Business Address* with Underwriter
John J. Palmer President and Director
Robert Z. Peranski Director
William D. Baldwin Director
Scott R. Reeks Vice President / Manager
of Operations, Treasurer
and Compliance Officer
Linda L. Lanam Secretary
William E. Daner, Jr. General Counsel & Director
Robert D. Chinn Director
John L. Knowles Director
Thomas A. Barefield Director
Marianne O'Doherty Assistant Secretary
* The principal business address of all listed above is 6610 West Broad Street,
Richmond, Virginia 23261.
6
<PAGE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules under it are maintained by Life of
Virginia at its executive offices.
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
Registration Statement.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to this
Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information,
or (2) a post card or similar written communication affixed to or included
in the Prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to Life of Virginia at the address
or phone number listed in the Prospectus.
STATEMENT PURSUANT TO RULE 6c-7
Life of Virginia offers and will offer Policies to participants in the Texas
Optional Retirement Program. In connection therewith, Life of Virginia and
Account 4 rely on 17 C.F.R. Section 270.6c-7 and represent that the provisions
of paragraphs (a)-(d) of the Rule have been or will be complied with.
SECTION 403(b) REPRESENTATIONS
Life of Virginia represents that in connection with its offering of Policies
as funding vehicles for retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code of 1986, it is relying on a no-action letter
dated November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company
Act of 1940, and that paragraphs numbered (1) through (4) of that letter will be
complied with.
7
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, Life of Virginia Separate Account 4, has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, in the County
of Henrico in the Commonwealth of Virginia, on the 23rd day of April, 1996.
Life of Virginia Separate Account 4
(Registrant)
By:__________________________________________
John J. Palmer
Senior Vice President
The Life Insurance Company of Virginia
The Life Insurance Company of Virginia
(Depositor)
By:__________________________________________
John J. Palmer
Senior Vice President
8
<PAGE>
As required by the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
PATRICK E. WELCH*** Director 4/23/96
- -------------------
Patrick E. Welch
PAUL E. RUTLEDGE III* Director, President and Chief Operating Officer 4/23/96
- ----------------------
Paul E. Rutledge III
Senior Vice President and Director 4/23/96
- ----------------------
John J. Palmer
H. GAYLORD HODGES, JR.* Senior Vice President and Director 4/23/96
- -----------------------
H. Gaylord Hodges, Jr.
WILLIAM D. BALDWIN* Senior Vice President and Director 4/23/96
- -----------------------
William D.Baldwin
SELWYN L. FLOURNOY, JR.* Senior Vice President, Director (Principal 4/23/96
- ------------------------ Financial and Accounting Officer)
Selwyn L. Flournoy, Jr.
ROBERT A. BOWEN** Director 4/23/96
- ------------------------
Robert A. Bowen
LINDA L. LANAM** Director 4/23/96
- ------------------------
Linda L. Lanam
HANS L. CARSTENSEN*** Director 4/23/96
- ------------------------
Hans L. Carstensen
VICTOR C. MOSES*** Director 4/23/96
- ------------------------
Victor C. Moses
GEOFFREY S. STIFF*** Director 4/23/96
- ------------------------
Geoffrey S. Stiff
By _______________________________, pursuant to Power of Attorney executed on *
February 10, 1992, ** February 23, 1993, and ***April 2, 1996.
</TABLE>
9
<PAGE>
Exhibit List
Page
(9) Opinion and Consent of Counsel
(10)(a) Consent of Counsel
(10)(b) Consent of Independent Auditors
10
EXHIBIT (9)
Opinion and Consent of Counsel
May 1, 1996
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Post-Effective Amendment No. 5 on Form N-4 for policy form
P1143 4/94 (File Number 33-76334), filed by The Life Insurance Company of
Virginia and Life of Virginia Separate Account 4 with the Securities and
Exchange Commission covering flexible premium variable deferred annuity
policies, I have examined such documents and such law as I considered necessary
and appropriate, and on the basis of such examination, it is my opinion that:
1. The Life Insurance Company of Virginia is duly organized and validly
existing under the laws of the Commonwealth of Virginia and has been duly
authorized to issue individual flexible premium variable deferred annuity
policies by the Bureau of Insurance of the State Corporation Commission
of the Commonwealth of Virginia.
2. Life of Virginia Separate Account 4 is a duly authorized and existing
separate account established pursuant to the provisions of Section
38.2-3113 of the Code of Virginia.
3. The flexible premium variable deferred annuity policies, when issued as
contemplated by said Form N-4 Registration Statement, will constitute
legal, validly issued and binding obligations of The Life Insurance
Company of Virginia.
I hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 5 to the Registration Statement (File Number 33-76334) on Form N-4
for policy form P1143 4/94.
Sincerely,
William E. Daner, Jr.
Counsel
Law Department
19
<PAGE>
May 1, 1996
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
I hereby consent to the use of my name under the caption "Legal Matters" in the
Statement of Additional Information contained in Post-Effective Amendment 5 to
the Registration Statement (File Number 33-76334) on Form N-4 for policy form
P1143 4/94, filed by The Life Insurance Company of Virginia and Life of Virginia
Separate Account 4 with the Securities and Exchange Commission.
Sincerely,
William E. Daner, Jr.
Counsel
Law Department
20
EXHIBIT (10)(a)
Consent of Counsel
21
<PAGE>
May 1, 1996
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal Matters"
in the Statement of Additional Information filed as part of Post-Effective
Amendment No. 5 to the Registration Statement on Form N-4 (File No. 33-76334)
filed by Life of Virginia Separate Account 4 for certain variable annuity
contracts. In giving this consent, we do not admit that we are in the category
of persons whose consent is required under Section 7 of the Securities Act of
1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ STEPHEN E. ROTH
Stephen E. Roth
22
EXHIBIT 10(b)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 8, 1996, with respect to the consolidated
financial statements and the related financial statement schedules of The Life
Insurance Company of Virginia and subsidiaries and the Life of Virginia Separate
Account 4, in Amendment No. 5 to the Registration Statement under the Securities
Act of 1933 (Form N-4 No. 33-76334) of the Life of Virginia Separate Account 4,
and in Amendment No. 13 to the Registration Statement under the Investment
Company Act of 1940 (Registration No. 811-5343), for the registration of an
indefinite amount of securities.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Richmond, Virginia
May 1, 1996
