As filed with the Securities and Exchange
Commission on June 30, 1997.
File No. 333-21031
File No. 811-5343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933 X
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
For Registration Under the Investment Company Act of 1940 X
Amendment No. 18
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
J. Neil McMurdie
Associate Counsel and Assistant 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, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has elected to register an indefinite amount of securities being offered.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), shall determine.
<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 ............................................................................... Fee Table
4. Condensed Financial Information...............................................Financial Information
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
(b) Sales Load %..............................................................Sales Charges
(c) Special Purchase Plan............................................Charges and Deductions
(d) Commissions................................................Distribution of the Policies
(e) Expenses-Registrant...........................................Charges Against Account 4
(f) Fund Expenses..................................................The Funds; Other Charges
(g) Organizational Expenses.............................................................N/A
7. Contracts
(a) Persons with Rights........................................The Policy; Income Payments;
...................................Policy Distributions Upon Death; General Provisions;
..............................................................Voting Rights and Reports
(b) (i)Allocation of Purchase Payments.................. Allocation of Net Premium Payments
(ii)Transfers.......................................................... The Policy
(iii)Exchanges................................................................. N/A
(c) Changes...........................Additions, Deletions or Substitutions of Investments;
..........................................................................Changes by the Owner
(d) Inquiries..............................................Cover page; (SAI) Written Notice
8. Annuity Period...........................................................Income Payments; Transfers
9. Death Benefit.............................Policy Distributions Upon Death; Payment Under the Policy
10. Purchases and Contract Value
(a) Purchases............Purchasing the Policies; Restrictions on Issuing Certain Policies;
.........................................................Variable Income Payments; Definitions
(b) Valuation.........................................Variable Income Payments; Definitions
(c) Daily Calculation.................................Variable Income Payments; Definitions
(d) Underwriter................................................Distribution of the Policies
11. Redemptions
(a) - By Owners.........................................................................N/A
- By Annuitant.............................................................................N/A
(b) Texas ORP...........................................................................N/A
(c) Check Delay........................................................ . . . . . . . . N/A
(d) Lapse...............................................................................N/A
(e) Free Look.............................Examination of Policy (Right to Cancel Provision)
<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...................................................................... . . N/A
Independent Public Accountant..........................................................Experts
(d) Assets of Registrant................................................................N/A
(e) Affiliated Persons..................................................................N/A
(f) Principal Underwriter...............................................................N/A
19. Purchase of Securities Being Offered.....................(Prospectus) Distribution of the Policies;
.............................................................. . . . .Distribution of the Policies
Offering Sales Load.......................................................(Prospectus) Sales Charge
20. Underwriters.............................................(Prospectus) Distribution of the Policies;
.......................................................................Distribution of the Policies
21. Calculation of Performance Data.................................................................N/A
22. Annuity Payments................................(Prospectus) Income Payments; (Prospectus) Appendix
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
SINGLE PREMIUM VARIABLE IMMEDIATE ANNUITY POLICY
FORM P1711 1/97
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 single premium variable
immediate annuity policy ("Policy") issued by The Life Insurance Company of
Virginia ("Life of Virginia"). The Policy provides for the payment of income 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 portion of the Net Premium Payment allocated to provide Variable Income
Payments is placed in Life of Virginia Separate Account 4 ("Account 4"). The
Owner allocates that portion of the Net Premium Payment among selected
Investment Subdivision(s) of Account 4. Each Investment Subdivision of Account 4
will invest solely in a designated investment portfolio ("Fund") that is part of
a series-type investment company. Currently, there are nine such Funds with 34
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 June 30, 1997.
1
<PAGE>
Variable Insurance Products Fund:
Equity-Income Portfolio, Growth Portfolio and Overseas Portfolio
Variable Insurance Products Fund II:
Asset Manager Portfolio and Contrafund Portfolio
Variable Insurance Products Fund III:
Growth & Income Portfolio* and Growth Opportunities Portfolio*
GE Investments Funds, Inc.:
Money Market Fund, Government Securities Fund, S&P 500 Index Fund, Total
Return Fund, International Equity Fund, Real Estate Securities Fund, Global
Income Fund* and Value Equity Fund*.
Oppenheimer Variable Account Funds:
Oppenheimer High Income Fund, Oppenheimer Bond Fund, Oppenheimer Capital
Appreciation Fund, Oppenheimer Multiple Strategies Fund and Oppenheimer Growth
Fund.
Janus Aspen Series:
Growth Portfolio, Aggressive Growth Portfolio, Worldwide Growth Portfolio,
International Growth Portfolio, Balanced Portfolio, Flexible Income Portfolio,
and Capital Appreciation Portfolio*
Federated Insurance Series:
Federated Utility Fund II, Federated High Income Bond Fund II, and Federated
American Leaders Fund II
The Alger American Fund:
Alger American Growth Portfolio and Alger American Small Capitalization
Portfolio
PBHG Insurance Series Fund, Inc.
Growth II Portfolio* and Large Cap Growth Portfolio*
* The Growth & Income Portfolio and Growth Opportunities Portfolio for Variable
Insurance Products Fund III, Global Income Fund and the Value Equity Fund for
GE Investments Funds, Inc., the Capital Appreciation Portfolio for Janus Aspen
Series, and Growth II Portfolio and Large Cap Growth Portfolio for PBHG
Insurance Series Fund, Inc. are not currently available to California
Policyowners.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Definitions..................................................................................................................4
Fee Table....................................................................................................................6
Summary.....................................................................................................................11
Financial Information.......................................................................................................12
The Life Insurance Company of Virginia and Life of Virginia Separate Account 4..............................................12
The Life Insurance Company of Virginia....................................................................................12
Account 4.................................................................................................................12
Additions, Deletions, or Substitutions of Investments.....................................................................13
The Funds...................................................................................................................13
Variable Insurance Products Fund..........................................................................................13
Variable Insurance Products Fund II.......................................................................................14
Variable Insurance Products Fund III......................................................................................14
GE Investments Funds, Inc.................................................................................................14
Oppenheimer Variable Account Funds........................................................................................15
Janus Aspen Series........................................................................................................16
Federated Insurance Series................................................................................................16
The Alger American Fund...................................................................................................17
PBHG Insurance Series Fund, Inc...........................................................................................17
Resolving Material Conflicts..............................................................................................17
The Policy..................................................................................................................18
Purchasing the Policies...................................................................................................18
Restriction on Issuing Certain Policies...................................................................................18
Allocation of Net Premium Payments........................................................................................18
Transfers.................................................................................................................19
Telephone Transfers.......................................................................................................19
Automatic Transfers.......................................................................................................19
Powers of Attorney....................................................................................................... 20
Examination of Policy (Right to Cancel Provision).........................................................................20
Income Payments............................................................................................................ 20
General...................................................................................................................20
Determination of Income Payments..........................................................................................21
Income Payment Plans......................................................................................................21
Income Payment Dates......................................................................................................22
Policy Distributions upon Death.............................................................................................23
Death Provisions..........................................................................................................23
Charges and Deductions......................................................................................................23
Charges Against Account 4.................................................................................................23
Policy Fee................................................................................................................23
Sales Charge..............................................................................................................23
Premium Taxes.............................................................................................................24
Other Taxes...............................................................................................................24
Other Charges.............................................................................................................24
Federal Tax Matters.........................................................................................................24
Introduction..............................................................................................................24
Non-Qualified Policies....................................................................................................24
Qualified Policies........................................................................................................26
Federal Income Tax Withholding............................................................................................26
General Provisions..........................................................................................................27
The Owner.................................................................................................................27
The Annuitant.............................................................................................................27
The Beneficiary...........................................................................................................27
Changes by the Owner......................................................................................................27
Evidence of Death, Age, Sex or Survival...................................................................................27
Payment Under The Policies................................................................................................27
Distribution of the Policies................................................................................................28
Voting Rights and Reports...................................................................................................28
Legal Proceedings...........................................................................................................28
Appendix....................................................................................................................29
Statement of Additional Information Table of Contents.......................................................................36
</TABLE>
3
<PAGE>
DEFINITIONS
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.
Age -- The Age of the Annuitant(s) as of the Policy Date.
Annuitant -- The person named in the Policy whose Age and, where appropriate,
sex are used in determining the amount of the Income Payments. The Annuitant
receives the Income Payments if no Joint Annuitant is named in the Policy. If a
Joint Annuitant is named in the Policy, then the Annuitant receives the Income
Payments in conjunction with the Joint Annuitant. The Annuitant cannot be
changed.
Annuitant(s) -- The Annuitant and Joint Annuitant.
Annuity -- Benefits in the form of a series of Income Payments.
Annuity Commencement Date -- The date that is one Payment Period prior to the
date of the initial Income Payment (generally the Policy Date). However, it may
be deferred up to 60 days from the Policy Date provided the Owner(s) and the
Annuitant(s) are the same person(s). In the case of Joint Owners, Life of
Virginia additionally requires that one Owner must be the spouse of the other
Owner to elect a deferral of the Annuity Commencement Date.
Annuity Unit -- An accounting unit of measure used to calculate Variable
Income Payments.
Assumed Interest Rate - The interest rate chosen by the Owner and stated in
the Policy that is used in the calculation of Annuity Units and Unit Value. The
Assumed Interest Rate choices are limited to those rates available at the time
of election.
Beneficiary -- The person(s) to whom any Death Benefit will be paid and to
whom any Income Payments due after the death of the Final Annuitant will be
paid.
Cancellation Payment -- The amount that will be paid to the Owner if the
Policy is returned for a refund as provided in the Right To Cancel provision
shown on the Policy cover.
Code -- The Internal Revenue Code of 1986, as amended.
The Company -- The Life Insurance Company of Virginia. Also referred to as
"Life of Virginia".
Death Benefit -- An amount paid to the Beneficiary if any Annuitant, any Joint
Annuitant, or any Owner dies prior to the Annuity Commencement Date. The Death
Benefit will equal the Single Premium paid for the Policy, less the dollar
amount of any Income Payments already made.
Due Date -- Date as of which Income Payments are scheduled to be paid based on
the date of the initial Income Payment and the Payment Period chosen by the
Owner.
Due Proof of Death -- Proof of death that is satisfactory to Life of Virginia.
Such proof may consist of the following if acceptable to Life of Virginia:
(a) A certified copy of the death certificate; or
(b) A certified copy of the decree of a court of competent jurisdiction as to
the finding of death.
Final Annuitant -- The Annuitant if no Joint Annuitant is named in the Policy.
The surviving Annuitant if an Annuitant and a Joint Annuitant are named in the
Policy and one dies.
Fixed Income Payment -- The portion of the Income Payment that is supported by
the General Account and which does not vary in amount based on the investment
experience of Account 4.
Fund -- Any open-end management investment company or investment portfolio
thereof, or unit investment trust or series thereof, in which an Investment
Subdivision invests.
General Account -- Assets of the Company other than those allocated to Account
4 or any other separate account of the Company.
Guaranteed Period -- The Company will make Income Payments to the Annuitant(s)
or the Beneficiary for any minimum period shown in the Policy. This minimum
period is the Guaranteed Period.
4
<PAGE>
Home Office -- Company's offices at 6610 West Broad Street, Richmond, Virginia
23230.
Income Payment -- One of a series of periodic payments made by the Company to
the Annuitant(s). The Income Payment is the sum of any Fixed Income Payment and
any Variable Income Payment.
Income Payment Plan -- The plan shown in the Policy which along with the Age
and, where appropriate, sex of the Annuitant(s) determines the amount and
duration of benefits available under the Policy. The Income Payment Plan cannot
be changed.
Investment Subdivision -- Subdivision of Account 4, the assets of which are
invested exclusively in a corresponding Fund. All Investment Subdivisions may
not be available in all states.
IRA Policy -- An individual retirement annuity policy that receives favorable
tax treatment under Section 408 of the Code.
Joint Annuitant -- A person named in the Policy who receives Income Payments
along with the Annuitant. The Age and, where appropriate, sex of the Joint
Annuitant are used in combination with the Annuitant's Age and, where
appropriate, sex in determining the amount of the Income Payments. A Joint
Annuitant cannot be changed.
Joint Owner -- Joint Owners own the Policy equally. If one Joint Owner dies,
the surviving Joint Owner becomes the sole Owner of the Policy.
Net Asset Value Per Share -- Value per share of any Fund at the end of any
Valuation Period. The method of computing the Net Asset Value Per Share is
described in the Prospectus for the Fund.
Net Premium Factor -- Factor shown in the Policy which reflects a deduction
from the Single Premium and which is used in calculating the Net Premium
Payment.
Net Premium Payment -- Single Premium times the Net Premium Factor, less any
premium tax and any policy fee. The premium tax rate and any policy fee
applicable for each Policy are shown in the Policy.
Non-Qualified Policy -- Policies not sold or used in connection with
retirement plans receiving favorable tax treatment under the Code.
Owner -- The Owner (or Owners in the case of Joint Owners) is entitled to the
ownership rights stated in the Policy during the lifetime of the Annuitant(s).
The original Owner is named in the Policy.
Payment Period -- Period that indicates the frequency of Income Payments. At
the time the Policy is purchased, the Owner may choose from frequencies of
monthly, quarterly, semi-annually, and annually. The Payment Period chosen is
shown 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, any application, and any riders and endorsements.
Policy Anniversary -- Same date in each Policy year as the Policy Date.
Policy Date -- The date as of which the Company issues the Policy and as of
which the Policy becomes effective. The Policy Date is used to determine Policy
years and Policy Anniversaries. Generally, the date the Single Premium was
received and accepted by Life of Virginia at its Home Office.
Qualified Policy -- Policies used in connection with retirement plans which
receive favorable tax treatment under the Code.
Single Premium -- The amount paid to Life of Virginia by the Owner or on the
Owner's behalf as consideration for Income Payments provided by the Policy.
Survivor Income Payments -- Income Payments made by the Company to the Final
Annuitant if a Joint Annuitant is named in the Policy and the Annuitant or Joint
Annuitant dies. The amount and duration of Survivor Income Payments are
specified in the Policy.
Unit Value -- Unit of measure which is used to calculate the value of Annuity
Units for each Investment Subdivision.
Valuation Day -- For each Investment Subdivision, each day on which the New
York Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
Valuation Period -- The period that starts at the close of regular trading on
the New York Stock Exchange on any Valuation Day
5
<PAGE>
and ends at the close of regular trading on the next succeeding Valuation Day.
Variable Income Payment -- The portion of the Income Payment that varies in
amount from one Income Payment to the next based on the investment experience of
one or more Investment Subdivisions.
Variable Payout Rate -- Factor shown in the Policy which reflects the Assumed
Interest Rate and the frequency and duration of Income Payments and which is
used to calculate the number of Annuity Units.
<TABLE>
<CAPTION>
FEE TABLE
<S> <C>
Owner Transaction Expenses:
Sales Charge on Premium Payments none
Maximum Contingent Deferred Sales Charge (as a percentage of premium payments) none
Other surrender fees none
Maximum Policy Fee $300.00
Annual Expenses:
(as a percentage of average net assets)
Mortality and expense risk charge 1.25%
Administrative Expense Charge .15%
Total Annual Expenses 1.40%
=====
Other Annual Expenses: none
</TABLE>
Variable Insurance Products Fund Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Equity-
Income Growth Overseas
Portfolio Portfolio Portfolio
<S> <C>
Management Fees 0.51% 0.61% 0.76%
Other Expenses (after any expense reimbursement) 0.07% 0.08% 0.17%
----- ----- -----
Total Fund Annual Expenses 0.58% 0.69% 0.93%
===== ===== =====
</TABLE>
Variable Insurance Products Fund II Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Asset
Manager Contrafund
Portfolio Portfolio
<S> <C>
Management Fees 0.64% 0.61%
Other Expenses (after any expense reimbursement) 0.10% 0.13%
----- -----
Total Fund Annual Expenses 0.74% 0.74%
===== =====
</TABLE>
Variable Insurance Products Fund III Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Growth & Growth
Income Opportunities
Portfolio Portfolio
<S> <C>
Management Fees 0.50% 0.61%
Other Expenses (after any expense reimbursement) 0.20% 0.16%
----- -----
Total Fund Annual Expenses 0.70% 0.77%
===== =====
</TABLE>
GE Investments Funds, Inc. Annual Expenses
(as a % of average net assets)
6
<PAGE>
<TABLE>
<CAPTION>
Real
Money Government S&P 500 Total International Estate
Market Securities Index Return Equity Securities
Fund Fund Fund Fund Fund Fund
<S> <C>
Management Fees (after fee waiver) .10% .50% .35% .50% 1.00% .85%
Other Expenses (after any expense reimbursements) .05% .17% .13% .10% .50% .22%
---- ---- ---- ---- ---- ----
Total Fund Annual Expenses .15% .67% .48% .60% 1.50% 1.07%
==== ==== ==== ==== ===== =====
Global Value
Income Equity
Fund * Fund *
Management Fees (after fee waiver) .60% .65%
Other Expenses (after any expense reimbursements) .30% .26%
---- ----
Total Fund Annual Expenses .90% .91%
==== ====
* Global Income Fund and Value Equity Fund had not yet commenced operations as
of December 31, 1996.
</TABLE>
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>
Management Fees .75% .75% .72% .73% .75%
Other Expenses .06% .04 .03% .04% .04%
---- --- ---- ---- ----
Total Fund Annual Expenses .81% .78% .75% .77% .79%
==== ==== ==== ==== ====
</TABLE>
Janus Aspen Series Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Aggressive Worldwide International
Growth Growth Growth Growth Balanced
Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
Management Fees(after any fee waivers/reductions) .65% .72% .66% .05% .79%
Other Expenses (after any expense reimbursements) .04% .04% .14% 1.21% .15%
---- ---- ---- ----- ----
Total Fund Annual Expenses .69% .76% .80% 1.26% .94%
==== ==== ==== ===== =====
Flexible Capital
Income Appreciation
Portfolio Portfolio*
Management Fees .65% .75%
Other Expenses (after any expense reimbursements) .19% .30%
---- ----
Total Fund Annual Expenses .84% 1.05%
==== =====
* Capital Appreciation Portfolio had not yet commenced operations as of December 31, 1996.
</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>
Management Fees (after fee waiver) 0.24% 0.01% .53%
Other Expenses (after any expense reimbursement) 0.61% 0.79% .32%
------ ----- -----
Total Fund Annual Expenses 0.85% 0.80% 0.85%
====== ===== =======
</TABLE>
The Alger American Fund Annual Expenses
(as a % of average net assets)
7
<PAGE>
<TABLE>
<CAPTION>
Alger Alger
American American
Growth Small Capitalization
Portfolio Portfolio
<S> <C>
Management Fees 0.75% 0.85%
Other Expenses 0.04% 0.03%
----- -----
Total Expenses 0.79% 0.88%
===== =====
</TABLE>
PBHG Insurance Series Fund, Inc. Annual Expenses
(as a % of average net assets)
<TABLE>
<CAPTION>
Growth II Large Cap Growth
Portfolio * Portfolio *
<S> <C>
Management Fees 0.85% 0.72%
Other Expenses 0.30% 0.38%
----- -----
Total Expenses 1.15% 1.10%
===== =====
</TABLE>
* Growth II Portfolio and Large Cap Growth Portfolio had not commenced
operations as of December 31, 1996.
The purpose of these tables 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 Account 4 as
well as the underlying Funds for the most recent fiscal year. For more
information on the charges described in these Tables see Charges and Deductions
and the Prospectuses for the underlying Funds which accompany this Prospectus.
In addition to the expenses listed above, premium taxes varying from 0 to 3.5%
may be applicable.
The expense information regarding the Funds was provided by those Funds. The
Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable
Insurance Products Fund III, Oppenheimer Variable Account Funds, Janus Aspen
Series, Federated Insurance Series, The Alger American Fund, PBHG Insurance
Series Fund, Inc. and their investment advisers are not affiliated with Life of
Virginia. While Life of Virginia has no reason to doubt the accuracy of these
figures provided by these non-affiliated Funds, Life of Virginia has not
independently verified such information. The annual expenses listed for all the
Funds are net of certain reimbursements by the Funds' investment advisers. Life
of Virginia cannot guarantee that the reimbursements will continue.
Absent reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund during 1996 would have been 0.56% for
Equity-Income Portfolio, 0.67% for Growth Portfolio and O.92% for Overseas
Portfolio.
Absent reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund II during 1996 would have been 0.73% for Asset
Manager Portfolio and 0.71% for Contrafund Portfolio.
Absent reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund III during 1996 would have been 0.76% for
Growth Opportunities Portfolio.
GE Investment Management Incorporated currently serves as investment adviser
to GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.).
Prior to May 1, 1997, Aon Advisors, Inc. served as investment adviser to this
Fund and had agreed to reimburse the Fund for certain expenses of each of the
Fund's portfolios. Absent certain fee waivers or reimbursements, the total
annual expenses of the portfolios of GE Investments Funds, Inc. during 1996
would have been 0.48% for S&P 500 Index Fund, 0.67% for Government Securities
Fund, 0.55% for Money Market Fund, 0.60% for Total Return Fund, 1.07% for Real
Estate Securities Fund, 1.56% for International Equity Fund. The Other Expenses
for the Global Income Fund and the Value Equity Fund are estimates by the Fund
since these portfolios were recently organized and have no operating history,
and actual expenses may be greater or less than those shown.
Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1996 would have been .83% for Growth Portfolio, .83%
for Aggressive Growth Portfolio, 0.91% for Worldwide Growth Portfolio, 2.21% for
International Growth Portfolio, and 1.07% for Balanced Portfolio. The Other
Expenses listed for the Capital Appreciation Portfolio of Janus Aspen
Series are estimates provided by the Fund because the portfolio had not yet
commenced operations as of December 31, 1996. The total expenses absent fee
waivers are estimated to be 1.30%
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of the Federated Insurance Series during
8
<PAGE>
1996 would have been 1.36% for Federated Utility Fund II, 1.39% for Federated
High Income Bond Fund II, and 1.07% for Federated American Leaders Fund II.
The Other Expenses listed for the Growth II Portfolio and Large Cap Growth
Portfolio of PBHG Insurance Series Fund, Inc. are estimates provided by the Fund
because the portfolios were recently organized and have a brief operating
history. Actual expenses may be greater or less than those shown.
9
<PAGE>
EXAMPLES: An Owner would pay the following expenses on a policy with a $1000
premium, assuming a 5% annual return on assets and a 3% Assumed Interest Rate,
based on the charges and expenses reflected in the Fee Table above:
1. If the Life Annuity Payment Option of the Income Payment Plan selected, does
not have a material effect on expenses an Owner will pay:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C>
Variable Insurance Products Fund
Equity-Income Portfolio 19.21 58.10 97.09 189.94
Growth Portfolio 20.27 61.26 102.29 199.68
Overseas Portfolio 22.60 68.15 113.55 220.65
Variable Insurance Products Fund II
Asset Manager Portfolio 20.76 62.70 104.64 204.08
Contrafund Portfolio 20.76 62.70 104.64 204.08
Variable Insurance Products Fund III
Growth Opportunities Portfolio 21.05 63.56 106.05 206.72
Growth & Income Portfolio 20.37 61.55 102.76 200.56
GE Investments Funds, Inc.
Money Market Fund 15.03 45.66 76.59 151.08
Government Securities Fund 20.08 60.69 101.34 197.92
S&P 500 Index Fund 18.24 55.21 92.35 181.02
Total Return Fund 19.40 58.67 98.04 191.72
International Equity Fund 28.13 84.38 139.90 268.95
Real Estate Securities Fund 23.96 72.15 120.07 232.71
Value Equity Fund 22.41 67.58 112.61 218.92
Global Income Fund 22.31 67.29 112.14 218.05
Oppenheimer Variable Account Funds
Oppenheimer High Income Fund 21.44 64.71 107.93 210.22
Oppenheimer Bond Fund 21.15 63.85 106.52 207.59
Oppenheimer Capital Appreciation Fund 20.85 62.99 105.11 204.96
Oppenheimer Growth Fund 21.24 64.14 106.99 208.47
Oppenheimer Multiple Strategies Fund 21.05 63.56 106.05 206.72
Janus Aspen Series
Balanced Portfolio 22.70 68.44 114.01 221.52
Flexible Income Portfolio 21.73 65.57 109.33 212.83
Growth Portfolio 20.27 61.26 102.29 199.68
Aggressive Growth Portfolio 20.95 63.28 105.58 205.84
Worldwide Growth Portfolio 21.34 64.42 107.46 209.34
International Growth Portfolio 25.80 77.57 128.87 248.87
Capital Appreciation Portfolio 23.77 71.58 119.14 231.00
Federated Insurance Series
High Income Bond Fund II 21.34 64.42 107.46 209.34
Utility Fund II 21.82 65.86 109.80 213.70
American Leaders Fund II 21.82 65.86 109.80 213.70
The Alger American Fund
Small Capitalization Portfolio 22.12 66.72 111.21 216.32
Growth Portfolio 21.24 64.14 106.99 208.47
PBHG Insurance Series Funds, Inc.
PBHG Growth II Portfolio 24.74 74.43 123.78 239.54
PBHG Large Cap Growth Portfolio 24.25 73.01 121.46 235.28
The expense information regarding the Funds was provided by those Funds. The
Variable Insurance Products Fund, Variable Insurance Products Fund II, Variable
Insurance Products Fund III, Oppenheimer Variable Account Funds, Janus Aspen
Series, Federated Insurance Series, The Alger American Fund, PBHG Insurance
Series Fund, Inc. and their investment advisers are not affiliated with Life of
Virginia. While Life of Virginia has no reason to doubt the accuracy of these
figures provided by these non-affiliated Funds, Life of Virginia has not
independently verified such information. </TABLE>
10
<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 provides for Income Payments to be made for the life of the
Annuitant(s). The Owner may choose from a number of Income Payment Plans
available, two of which provide a variety of Guaranteed Periods. (See Income
Payments.) The Income Payment is equal to the sum of the Variable Income Payment
and the Fixed Income Payment. The Owner chooses the portion of the Net Premium
Payment to be allocated between Variable and Fixed Income Payments at the time
the Policy is purchased. The Owner also allocates the portion of the Net Premium
Payment chosen to provide Variable Income Payments among up to ten Investment
Subdivisions. Variable Income Payments are based upon the investment performance
of the selected Investment Subdivisions of Account 4; therefore, the
Annuitant(s) bears the entire investment risk with respect to the Variable
Income Payments. Fixed Income Payments are 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 in connection with certain
retirement or savings plans qualifying for favorable federal income tax
treatment (i.e., a Qualified Policy).
Premium Payment
A Single Premium of at least $25,000 is required. (See Purchasing the
Policies.)
The Owner, by written instructions, allocates a portion of the Net Premium
Payment to provide Variable Income Payments and/or a portion to provide Fixed
Income Payments at the time the Policy is purchased. The portion of the Net
Premium Payment chosen to provide Fixed Income Payments is allocated to our
General Account. The portion of the Net Premium Payment chosen to provide
Variable Income Payments may be allocated among up to ten Investment
Subdivisions. The minimum allocation permitted is 1% of the Net Premium Payment.
In states that require a return of the Single Premium as a refund privilege, the
Net Premium Payment will temporarily be placed in the Investment Subdivision
that invests in the Money Market Fund of the GE Investments Funds, Inc.
(See Allocation of Net Premium Payment.)
At any point in time, the value of Annuity Units attributable to a Policy may
not be invested in more than ten Investment Subdivisions.
Transfers
The Owner may transfer Annuity Units from one Investment Subdivision to
another available at the time the transfer is requested. The number of transfers
allowed may be limited to four each calendar year. Life of Virginia may not
honor transfers made by third parties holding multiple powers of attorney. (See
Powers of Attorney.)
Charges and Deductions
To cover the costs of administering the Policies, Life of Virginia deducts a
daily administrative expense charge at an effective annual rate of 0.15% of the
average daily net assets in Account 4 attributable to the Policies. Life of
Virginia may deduct a sales charge from the Single Premium, reflected in the Net
Premium Factor shown in the Policy. Life of Virginia will also deduct a Policy
fee of $300 for Policies issued with a Single Premium less than $75,000.
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.
Life of Virginia may also deduct a charge for any premium taxes incurred. (See
Charges and Deductions.)
Income Payments
The Annuitant and any Joint Annuitant (if the Annuitant, any Joint Annuitant
and Owner are living on the Annuity Commencement Date), will receive Income
Payments which are based upon the investment performance of the selected
Investment Subdivisions and/or the guarantees of Life of Virginia. The first
Income Payment is made as of the Due Date of the initial Income Payment. The
amount of each Income Payment will depend on: (1) the amount of any Fixed Income
Payment; (2) the value of the Annuity Units; (3) the amount of any applicable
charges and deductions; (4) the Annuitant's (and the Joint Annuitant's, if
applicable) Age on the Annuity Commencement Date and, where appropriate, sex;
and (5) the Income Payment Plan and Payment Period chosen.
11
<PAGE>
Death Benefits
If any Owner, Annuitant or Joint Annuitant dies prior to the Annuity
Commencement Date, a Death Benefit will be paid and the Policy will be
terminated. Upon receipt of Due Proof of Death, the Company will pay a Death
Benefit to the Beneficiary equal to the Single Premium, less the aggregate
amount of any Income Payments already made.
Right to Cancel
The Owner has 10 days after the Policy is received to examine the Policy and
return it for a refund equal to the Cancellation Payment. Unless state or
federal law requires that the Single Premium be returned as the refund, the
amount of the refund will equal the Single Premium modified by investment
experience. If state or federal law requires that the Single Premium be
returned, the amount of the refund will equal the greater of the Single Premium
or the Single Premium modified by investment experience. In certain states the
Owner may have more than 10 days to return the Policy for a refund. (See
Examination of Policy - Right to Cancel Provision.)
Questions
Any questions about the Policy or the Funds 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.
FINANCIAL INFORMATION
Financial statements for Account 4 are in the Statement of Additional
Information. The consolidated financial statements for Life of Virginia also are
in the Statement of Additional Information.
Condensed Financial Information
There are no Annuity Units in the Investment Subdivisions as of the date of
this Prospectus.
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. Eighty percent of the capital stock of Life of Virginia is owned by
General Electric Capital Assurance Corporation. The remaining 20% is owned by GE
Life Insurance Group, Inc. General Electric Capital Assurance Corporation and GE
Life Insurance Group, Inc. are indirectly, wholly-owned subsidiaries of General
Electric Capital Corporation ("GE Capital"). GE Capital, a New York corporation,
is a diversified financial services company. 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 80
Investment Subdivisions, 34 of which are available under the Policy. The portion
of the Net Premium Payment designated to provide Variable Income Payments is
allocated in accordance with the instructions of the Owner among up to ten of
the 34 Investment Subdivisions available under the Policy. Each of these
Investment Subdivisions invests exclusively in one of the Funds described below.
12
<PAGE>
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 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.
THE FUNDS
Account 4 currently invests in nine series-type mutual funds. Each of the
Funds currently available under the Policy is a registered open-end, diversified
investment company of the series-type.
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 has three portfolios that are currently
available under this Policy: VIP Equity-Income Portfolio, VIP Growth Portfolio,
and VIP Overseas Portfolio.
VIP Equity-Income Portfolio seeks reasonable income by investing primarily in
income-producing equity securities. In choosing these securities, the Portfolio
will also consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which
13
<PAGE>
exceeds the composite yield on the securities comprising the Standard & Poor's
Composite Index of 500 Stocks.
VIP Growth Portfolio seeks to achieve capital appreciation. The Portfolio
normally purchases common stocks, although its investments are not restricted to
any one type of security. Capital appreciation may also be found in other types
of securities, including bonds and preferred stocks.
VIP Overseas Portfolio seeks long-term growth of capital primarily through
investments in foreign securities. The Portfolio provides a means for investors
to diversify their own portfolios by participating in companies and economies
outside of the United States.
Fidelity Management & Research Company serves as investment adviser to
Variable Insurance Products Fund.
Variable Insurance Products Fund II
Variable Insurance Products Fund II has two portfolios that are currently
available under this Policy: VIP Asset Manager Portfolio and VIP Contrafund
Portfolio.
VIP Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among domestic and foreign stocks, bonds and
short-term fixed income instruments.
VIP Contrafund Portfolio seeks capital appreciation by investing mainly in
equity securities of companies believed to be undervalued or out-of-favor.
Fidelity Management & Research Company serves as investment adviser to
Variable Insurance Products Fund II.
Variable Insurance Products Fund III
Variable Insurance Products Fund III has two portfolios that are currently
available under this Policy: VIP Growth & Income Portfolio and VIP Growth
Opportunities Portfolio. THE VIP GROWTH & INCOME PORTFOLIO AND THE VIP GROWTH
OPPORTUNITIES PORTFOLIO ARE NOT CURRENTLY AVAILABLE IN CONNECTION WITH POLICIES
ISSUED TO CALIFORNIA POLICYOWNERS.
VIP Growth & Income Portfolio seeks high total return through a combination of
current income and capital appreciation by investing mainly in equity
securities.
VIP Growth Opportunities Portfolio seeks capital growth by investing primarily
in common stock and securities convertible to common stock.
Fidelity Management & Research Company serves as investment adviser to
Variable Insurance Products Fund III.
GE Investments Funds, Inc.
GE Investments Funds, Inc. (GE Investments Funds) has eight portfolios that
are currently available under this Policy: Money Market Fund, Government
Securities Fund, S&P 500 Index Fund, Total Return Fund, International Equity
Fund, Real Estate Securities Fund, Global Income Fund and Value Equity Fund. THE
GLOBAL INCOME FUND AND THE VALUE EQUITY FUND ARE NOT CURRENTLY AVAILABLE IN
CONNECTION WITH POLICIES ISSUED TO CALIFORNIA POLICYOWNERS.
Money Market Fund has the investment objective of providing the highest level
of current income as is consistent with high liquidity and safety of principal
by investing in high quality money market securities.
Government Securities Fund 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.
S&P 500 Index Fund1 has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange and the
American Stock Exchange, to a limited extent, in the over-the-counter markets.
- ---------------------------
1"Standard and Poor's", "S&P", and "S&P 500", "Standard & Poor's 500" and
"500" are trademarks of the McGraw-Hill Companies, Inc. and have been
licensed for use by GE Investment Management Incorporated. The S&P 500 Index
Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
investing in this Fund or purchasing this product.
- ----------------------------
14
<PAGE>
Total Return Fund has the investment objective of providing the highest total
return, composed of current income and capital appreciation, as is consistent
with prudent investment risk by investing in common stocks, bonds and money
market instruments, the proportion of each being continuously determined by the
investment adviser.
International Equity Fund has the investment objective of providing long-term
capital appreciation. The portfolio seeks to achieve its objective by investing
primarily in equity and equity-related securities of companies that are
organized outside of the U.S. or whose securities are principally traded outside
of the U.S.
Real Estate Securities Fund has the investment objective of 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.
Global Income Fund has the investment objective of high total return,
emphasizing current income and, to a lesser extent, capital appreciation. The
portfolio seeks to achieve these objectives by investing primarily in
income-bearing debt securities and other income-bearing instruments of U.S. and
foreign issuers.
Value Equity Fund has the investment objective of providing long-term capital
appreciation. The portfolio seeks to achieve this objective by investing
primarily in common stock and other equity securities that are undervalued by
the market and offer above-average capital appreciation potential.
GE Investment Management Incorporated serves as investment adviser to GE
Investments Funds.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds 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 Oppenheimer Variable Account
Funds, 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
15
<PAGE>
market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to Oppenheimer Variable
Accounts Funds.
Janus Aspen Series
The Janus Aspen Series currently has seven portfolios that are currently
available under this Policy: Growth Portfolio, Aggressive Growth Portfolio,
Worldwide Growth Portfolio, International Growth Portfolio, Balanced Portfolio,
Flexible Income Portfolio, and Capital Appreciation Portfolio. THE CAPITAL
APPRECIATION PORTFOLIO IS NOT CURRENTLY 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 Janus Aspen Series, which should be
read carefully before investing.
Capital Appreciation Portfolio has the investment objective of seeking
long-term growth of capital by investing primarily in common stocks of companies
of any size.
Janus Capital Corporation serves as investment adviser to Janus Aspen Series.
Federated Insurance Series
The Federated Insurance Series 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.
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 Federated Insurance Series, which should be read carefully
before investing.
Federated American Leaders Fund II has the primary investment objective of
long-term growth of capital, and a secondary objective of providing income. The
Federated American Leaders Fund II will seek to achieve its objective by
investing, under normal circumstances, at least 65% of its total assets in
common stock of "blue chip" companies.
16
<PAGE>
Federated Advisers serves as investment adviser to Federated Insurance Series.
The Alger American Fund
The Alger American Fund 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 seeks long-term capital
appreciation. Except during temporary defensive periods, the Portfolio invests
at least 65% of its total assets in equity securities of companies that, at the
time of purchase of the securities, have total market capitalization within the
range of companies included in the Russell 2000 Growth Index or the S&P Small
Cap 600 Index, updated quarterly. Both indexes are broad indexes of small
capitalization stocks. The Portfolio may invest up to 35% of its total assets in
equity securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount (up to
100% of its assets) during temporary defensive periods.
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 Alger American
Fund.
PBHG Insurance Series Fund, Inc.
PBHG Insurance Series Fund, Inc. (PBHG Insurance Series Fund) has two
portfolios that are currently available under this Policy: Growth II Portfolio
and Large Cap Growth Portfolio. THE GROWTH II PORTFOLIO AND THE LARGE CAP GROWTH
PORTFOLIO ARE NOT CURRENTLY AVAILABLE IN CONNECTION WITH POLICIES ISSUED TO
CALIFORNIA POLICYOWNERS.
Growth II Portfolio seeks long-term capital appreciation by investing in
equity securities of small and medium sized companies (market capitalization of
up to $4 billion) which have an outlook for strong earnings growth and
significant capital appreciation.
Large Cap Growth Portfolio seeks long-term capital appreciation by investing
primarily in equity securities of larger capitalization companies (market
capitalization of greater than $1 billion) which have an outlook for strong
growth in earnings and potential for capital appreciation.
Pilgrim Baxter & Associates, Ltd. serves as the Investment Adviser to PBHG
Insurance Series Fund, Inc.
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, 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, GE Investments Funds 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.
17
<PAGE>
In the event of a material conflict, Life of Virginia will take any necessary
steps, including removing Account 4 assets from the Fund, to resolve the matter.
See the individual Fund Prospectus for additional details.
THE POLICY
The Policy is an individual single premium variable immediate 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. The Policy will be issued with a Policy Date that is generally the date
the Single Premium was received and accepted by Life of Virginia at its Home
Office. The Policy Date is set forth in the Policy.
Purchasing the Policies
Individuals wishing to purchase a Policy must apply through an authorized
registered agent. The minimum Single Premium required under the Policy is
$25,000. Acceptance of a request for a Policy and acceptance of a Single Premium
are subject to Life of Virginia's rules, and Life of Virginia reserves the right
to reject any request for a Policy and any Single Premium for any lawful reason
and in a manner such that does not unfairly discriminate against similarly
situated purchasers.
The Single Premium will be processed within two Valuation Days of the Policy
date. If Life of Virginia is unable to issue a Policy due to incomplete
information, the Policy will be issued within two Valuation Days after receipt
of the information needed to issue the Policy. If Life of Virginia does not
receive the information necessary to issue the Policy within five Valuation Days
after receipt by Life of Virginia of the Single Premium, Life of Virginia will
contact the applicant, explain the reason for the delay, and refund the Single
Premium immediately, unless the applicant specifically consents to Life of
Virginia retaining the Single Premium until the required information is made
complete. If Life of Virginia retains the Single Premium, it will be processed
within two Valuation Days after the required information is received.
Restrictions on Issuing Certain Policies
A tax sheltered annuity contract provides tax-deferred retirement savings
pursuant to section 403(b) of the Code and may be purchased on behalf of an
employee by a public educational institution or certain other tax-exempt
employers. Such contracts must contain restrictions on withdrawals of (i)
contributions made pursuant to a salary reduction agreement in years beginning
after Decem-ber 31, 1988, (ii) earnings on those contributions, and (iii)
earnings after 1988 on amounts attributable to salary reduction contributions
(and earnings on those contributions) held as of the last day of the year
beginning before January 1, 1989. These amounts can be paid only if the employee
has reached age 59 1/2, separated from service, died, or become disabled (within
the meaning of the tax law), or in the case of hardship (within the meaning of
the tax law). Amounts permitted to be distributed in the event of hardship are
limited to actual contributions; earnings thereon cannot be distributed on
account of hardship. Amounts subject to the withdrawal restrictions applicable
to section 403(b)(7) custodial accounts may be subject to more stringent
restrictions.
Section 830.105 of the Texas Government Code permits participants in the Texas
Optional Retirement Program (ORP) to withdraw their interest 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.
The Policy, with appropriate endorsement, may in some circumstances be used to
distribute amounts with respect to a section 403(b) plan or ORP plan.
Specifically, certain "rollover" distributions (including trustee-to-trustee
transfers and so-called "Direct Rollovers;" see Federal Tax Matters, Federal
Income Tax Withholding) from such a plan may be made into this Policy. However,
before Life of Virginia will issue the Policy as a Section 403(b) Policy or in
connection with the ORP, proof must be furnished that distributions are
permitted from the plan.
Allocation of Net Premium Payment
The Owner, by written instructions, designates a portion of the Net Premium
Payment to provide Variable Income Payments and/or a portion to provide Fixed
Income Payments at the time the Policy is purchased. The Owner then allocates
the portion chosen to provide Variable Income Payments to up to ten Investment
Subdivisions. Allocations of less than 1% of the Net Premium Payment designated
to provide Variable Income Payments to any one Investment Subdivision are not
permitted. The portion of the Net Premium Payment designated to provide Fixed
Income Payments is allocated to our General Account.
For Policies issued in states which require that at least the Single Premium
be returned during the refund period (see Examination of Policy - Right to
Cancel Provision), the portion of the Net Premium Payment supporting the
Variable Income Payments will be placed in the Investment Subdivision that
invests exclusively in the Money Market Fund of the GE Investments Funds, Inc.
The Net Premium Payment will remain in that Investment Subdivision until the
earlier of 15 calendar days from the date the Net 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 value in the Investment
Subdivision that invests in the GE Investments Funds Money Market Fund at that
time
18
<PAGE>
will be allocated among the Investment Subdivisions in accordance with the
Owner's instructions.
The amount of the Income Payment will vary depending upon the allocation of
the Net Premium Payment between Variable and Fixed Income Payments chosen by the
Owner at the time the Policy is purchased. The amount of the Variable Income
Payment will vary with the investment performance of the Investment Subdivisions
the Owner selects, and therefore the Annuitant(s) bear the entire investment
risk for the value of Annuity Units in any particular Investment Subdivision.
The Owner should periodically review the allocation of Annuity Units in light
of market conditions and overall financial planning. The Owner may change the
allocation of Annuity Units without charge, subject to Life of Virginia's rules
described under "Transfers", "Telephone Transfers" and "Automatic Transfers"
(shown below).
Transfers
The Owner may transfer Annuity Units among and between 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. Subsequent Variable Income Payment amounts will
reflect the investment experience of the newly selected Investment Subdivisions.
At any one point in time, Annuity Units of no more than ten Investment
Subdivisions may be used. There is no charge imposed for transfers of Annuity
Units.
Currently, Life of Virginia reserves the right to limit the number of
transfers to four each calendar year. Additionally, if it is necessary in order
that the Policy will continue to receive annuity treatment, Life of Virginia
reserves the right to limit the number of transfers to a lower number. No
transfers are allowed between the portion of your Net Premium Payment allocated
to Fixed Income Payments and the portion of your Net Premium Payment allocated
to Variable Income Payments.
If the number of Annuity Units remaining in an Investment Subdivision after a
transfer is less than 1, then this unit 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.
The number of Annuity Units resulting from a transfer is equal to (1) times
(2) divided by (3) where: (1) is number of Annuity Units of the current
Investment Subdivision from which the Annuity Units are being transferred; (2)
is the Unit Value of the Investment Subdivision from which the Annuity Units are
being transferred; and (3) is the Unit Value of the Investment Subdivision to
which the Annuity Units are being transferred.
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.
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 prior to the close of
the New York Stock Exchange will be executed that Valuation Day at that day's
prices. Requests received after that time will be executed on the next Valuation
Day at that day's prices.
Automatic Transfers
Owners may elect to have Life of Virginia automatically transfer a specified
number of Annuity Units from the Investment Subdivision of Account 4 that
invests in the Money Market Fund of GE Investments Funds to any other available
Investment Subdivision(s) on a quarterly basis. This privilege is intended to
permit Owners to utilize "Portfolio Balancing," a long-term investment method
similar to "dollar-cost averaging", a method which provides for regular level
investments over a period of time. Life of Virginia makes no representations or
guarantees that Portfolio Balancing will result in a profit or protect against
loss.
Owners must complete the Portfolio Balancing section of the application or a
Portfolio Balancing Agreement in order to participate in the Portfolio Balancing
program. Amounts may be allocated to the GE Investments Funds Money Market
Investment Subdivision as a portion of the Net Premium Payment or in the form of
a transfer of Annuity Units from other Investment Subdivisions within
19
<PAGE>
Account 4. Any amount allocated must conform to the minimum amount and
percentage requirements. (See Purchasing the Policies, and Allocation of Net
Premium Payments.)
Portfolio Balancing transfers will continue as long as there are Annuity Units
in the Money Market Fund of the GE Investments Funds Investment Subdivision.
Prior to that time, the Owner may discontinue Portfolio Balancing by sending
Life of Virginia a written cancellation notice. Owners may make changes to their
Portfolio Balancing program by calling Life of Virginia's Telephone Transfer
Line at 800-772-3844. Also, Life of Virginia reserves the right to discontinue
Portfolio Balancing 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
Annuity Unit 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 Annuity Units. 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 transfer requests.
Examination of Policy (Right to Cancel Provision)
The Owner may examine the Policy and return it for a refund equal to the
Cancellation Payment within 10 days after it is received. Unless state or
federal law requires that the Single Premium be returned as the refund, the
amount of the Cancellation Payment payable to the Owner as of the date Life of
Virginia receives the cancellation request is (a) the amount that would be
payable as an Income Payment on that date adjusted by the Assumed Interest Rate
for the number of days since the Policy Date, divided by the amount that would
be payable as an Income Payment on the Policy Date; multiplied by (b) the Net
Premium Payment; plus (c) any charges deducted from the Single Premium; minus
(d) any Income Payments made prior to that date. If state or federal law
requires that the Single Premium be returned, then the Cancellation Payment will
equal the greater of the Single Premium or the amount described in this
provision.
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.
INCOME PAYMENTS
General
Life of Virginia will make Income Payments to the Annuitant(s) for the
lifetime of the Annuitant(s). The Income Payments will be paid in the form of
Fixed Income Payments and/or Variable Income Payments using the Age and, where
appropriate, sex of the Annuitant and any Joint Annuitant.
The Owner may choose from a number of Income Payment Plans available, as
described below, two of which offer a variety of Guaranteed Periods. The Owner
selects the frequency of Income Payments from choices of monthly, quarterly,
semi-annually or annually. The Owner may also choose to defer the Annuity
Commencement Date up to sixty (60) days from the Policy Date, subject to rules
described in the Income Payment Dates section below, provided the Owner(s) and
the Annuitant(s) are the same person(s). In the case of Joint Owners, Life of
Virginia additionally requires that in order to defer the Annuity Commencement
Date, one Owner must be the spouse of the other Owner. The initial Income
Payment will be made one Payment Period after the Annuity Commencement Date.
Subsequent Income Payments will be made each Payment Period thereafter, subject
to Policy provisions. All such elections must be designated by the Owner by
written instructions.
Certain states prohibit the use of actuarial tables that distinguish between
men and women in determining benefits for annuity policies issued on the lives
of residents. Similar restrictions exist when an annuity policy is issued in
connection with an employment relationship, such as in the context of Qualified
Plans. Therefore, Policies issued in these circumstances have Income Payments
which are based on actuarial tables that do not differentiate on the basis of
sex.
20
<PAGE>
Determination of Income Payments
The Income Payment is equal to the sum of the Variable Income Payment and the
Fixed Income Payment. The portion of the Single Premium credited to the Policy
to provide Income Payments is the Net Premium Payment. The Net Premium Payment
is calculated by first multiplying the Single Premium times the Net Premium
Factor, then deducting from the result any Policy fee and any premium tax
charge. The Owner designates the portion of the Net Premium Payment to be
allocated between Variable and Fixed Income Payments at the time the Policy is
purchased.
If the Owner fails to provide Life of Virginia with a written election not to
have federal income taxes withheld, Life of Virginia must by law withhold the
appropriate amount of taxes from the taxable portion of Income Payments and
remit that amount to the federal government. Also, in certain other
circumstances, Life of Virginia must withhold taxes. (See Federal Income Tax
Withholding, p.24.) In addition, the Single Premium may be subject to the
imposition of a premium tax charge in those states which impose such a tax. (See
Premium Taxes.) Other withholding requirements may apply with respect to state
income taxes.
Income Payment Plans
Income Payment Plans can provide either Fixed Income Payments or Variable
Income Payments or a combination of both. There are currently six Income Payment
Plans available as described below. The plan of Income Payments and allocation
of the Net Premium Payment between Fixed and/or Variable Income Payments must be
designated by the Owner at the time the Policy is purchased.
The portion of the Income Payment attributable to Fixed Income Payments is
guaranteed by Life of Virginia and does not vary except as provided by the
Income Payment Plan chosen. The portion of the Income Payment attributable to
Variable Income Payments is not guaranteed by Life of Virginia and varies based
on the investment experience of one or more Investment Subdivisions and as
provided by the Income Payment Plan chosen. Mortality, investment and expense
assumptions used to calculate Fixed Income Payments are determined by Life of
Virginia. Variable Income Payments are determined using similar factors for
mortality and expenses and an assumed interest rate as described below.
Fixed Income Payments. The amount of each Fixed Income Payment will be
calculated on the Policy Date. The portion of the Net Premium Payment designated
by the Owner to provide Fixed Income Payments will be allocated to the General
Account of Life of Virginia as of the Policy Date. Fixed Income Payments will be
fixed in amount, frequency and duration according to the Income Payment Plan
chosen, and the Age and, where appropriate, sex of the Annuitant(s) on the
Policy Date. The amount of Fixed Income Payments will not be less than any that
are required by the state where the Policy is delivered. For further
information, the Owner should contact Life of Virginia at its Home Office.
Variable Income Payments. Variable Income Payments will reflect the investment
performance of the selected Investment Subdivisions. With respect to the portion
of the Net Premium Payment selected to provide Variable Income Payments, the
Owner must designate allocations either totally or partially to any one or more
of up to ten of the available Investment Subdivisions of Account 4. The
Annuitant(s) bears the entire investment risk with respect to the Variable
Income Payments.
The number of Annuity Units of an Investment Subdivision attributable to a
Policy is determined as of the Policy Date and remains fixed unless transferred.
(See Transfers.) The number of Annuity Units of an Investment Subdivision
attributable to a Policy as of the Policy Date is determined by multiplying (a)
and (b) and dividing the result by (c) where: (a) is the Net Premium Payment
allocated to that Investment Subdivision on the Policy Date plus interest at the
Assumed Interest Rate for the period, if any, from the Policy Date to the
Annuity Commencement Date, divided by $1,000; (b) is the Variable Payout Rate
for the Policy; and (c) is the applicable Unit Value of that Investment
Subdivision on the Policy Date.
The amount of each Variable Income Payment is calculated as of the date five
Valuation Days prior to its Due Date. For a Policy, the value of the Annuity
Units attributable to each Investment Subdivision is the number of Annuity Units
attributable to the Investment Subdivision times the applicable Unit Value for
that Investment Subdivision as of the calculation date. The dollar value of the
total Variable Income Payment is the sum of the value of the Annuity Units
attributable to each Investment Subdivision.
The Unit Value of each Investment Subdivision was arbitrarily set at $10 when
the Investment Subdivision began operations. Thereafter, for a given Assumed
Interest Rate, the Unit Value of each Investment Subdivision for any Valuation
Period is equal to (a) times (b) times (c) where: (a) is the net investment
factor for the Investment Subdivision for that Valuation Period; (b) is the
applicable Unit Value for the preceding Valuation Period; and (c) is the
applicable investment result adjustment factor for the Valuation Period.
The net investment factor is used to measure the investment performance of an
Investment Subdivision. The net investment factor for any Investment Subdivision
for any Valuation Period is determined by (a) divided by (b), minus (c), where:
(a) is the result of:
21
<PAGE>
(1) the value of the assets in the Investment Subdivision at the end of the
preceding Valuation Period; plus (2) the investment income and capital gains,
realized or unrealized, crediting to those assets at the end of 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 the Separate Account for
taxes, or any amount Life of Virginia sets aside during the Valuation Period as
a provision for taxes attributable to the operation or maintenance of the
Separate Account; and (b) is the value of the assets in the Investment
Subdivision at the end of the preceding Valuation Period; and (c) is a factor
representing the charge for mortality and expense risks Life of Virginia assumes
and for administrative expenses deducted from the Investment Subdivision
adjusted for the number of days in the Valuation Period.
The investment result adjustment factor recognizes an Assumed Interest Rate
used in determining the amounts of the Variable 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 Assumed
Interest Rate, the Variable Income Payment will be greater than the previous
payment. If the net investment experience for such Investment Subdivision is
less than the monthly equivalent of the Assumed Interest Rate, the Variable
Income Payment will be less than the previous Variable Income Payment. The Owner
designates the Assumed Interest Rate from available choices at the time the
Policy is issued. Currently available choices are 3% and 5%.
Income Payment Dates
The initial Income Payment is due one Payment Period after the Annuity
Commencement Date. The Owner(s) can choose to defer the Annuity Commencement
Date up to 60 days from the Policy Date provided the Owner(s) and the
Annuitant(s) are the same person(s). In the case of Joint Owners, Life of
Virginia additionally requires that in order to defer the Annuity Commencement
Date, one Owner must be the spouse of the other Owner. The frequency of Income
Payments is chosen by the Owner(s) at the time the Policy is purchased from
available choices of annual, semi-annual, quarterly and monthly. The frequency
and duration of Income Payments will effect the amount of each Income Payment.
Income Payments cannot be made on the 29th, 30th or 31st day of the month.
The Income Payments Plans shown below are available for both Variable Income
Payments and Fixed Income Payments.
Single Life - Life Income. Life of Virginia will provide Income Payments
guaranteed for the life of the Annuitant. Income Payments will stop at the
death of the Annuitant. Under this Plan, an Annuitant could receive only
one Income Payment if he or she dies after the first Payment, two Income
Payments if he or she dies after the second Payment, etc.
Single Life - Life Income with Period Certain. Income Payments will be
made for a Guaranteed Period of 10, 15 or 20 years. If the Annuitant lives
longer than the Guaranteed Period, Income Payments will continue for his or
her life. If the Annuitant dies before the end of the Guaranteed Period,
the Income Payments then due for the remainder of the Guaranteed Period
will be paid when due to the Beneficiary.
Single Life - Life Income with Cash Refund. Income Payments will be made
for the life of the Annuitant. If at the death of the Annuitant the total
of all Income Payments made does not equal or exceed the Single Premium,
Life of Virginia will make a cash payment to the Beneficiary. The cash
payment will equal the difference between the Single Premium and the total
of Income Payments already made.
Joint Life - Life Income. Income Payments will be made for as long as
both the Annuitant and the Joint Annuitant are alive. At the first to die
of the Annuitant and the Joint Annuitant, Survivor Income Payments will be
made to the survivor for the remainder of his or her life. Survivor Income
Payments may be 50%, 75% or 100% of the Income Payments, as chosen by the
Owner on the application for the Policy. Other percentages may be available
upon request. Under this Plan, the Annuitant and Joint Annuitant could
receive only one Income Payment if they both die after the first Payment,
two Income Payments if they both die after the second Payment, etc.
Joint Life - Life Income with Period Certain. Income Payments will be
made for a Guaranteed Period of 10, 15 or 20 years. If both the Annuitant
and the Joint Annuitant live longer than the Guaranteed Period, Income
Payments will continue as long as both the Annuitant and the Joint
Annuitant are alive. At the first to die of the Annuitant and Joint
Annuitant, Survivor Income Payments will be made to the survivor for the
remainder of his or her life. Survivor Income Payments may be 50%, 75% or
100% of the Income Payments. Other percentages may be available upon
request. If both the Annuitant and the Joint Annuitant die prior to the end
of the Guaranteed Period, Income Payments for the remainder of the
Guaranteed Period will be paid when due to the Beneficiary.
Joint Life - Life Income with Cash Refund. Income Payments will be made
as long as both the Annuitant and Joint Annuitant are alive. At the first
to die of the Annuitant and the Joint Annuitant, Survivor Income Payments
will be made to the survivor for the remainder of his or her life. Survivor
Income Payments may be 50%, 75% or 100% of the Income Payments. Other
percentages may be available upon request. At the death of the last to die
of the Annuitant and Joint Annuitant, if the total of
22
<PAGE>
all Income Payments made and Survivor Income Payments made do not equal or
exceed the Single Premium, Life of Virginia will make a cash payment to the
Beneficiary. The cash payment will equal the difference in the total of the
Income Payments made and Survivor Income Payments made, and the Single
Premium.
POLICY DISTRIBUTIONS UPON DEATH
Death Provisions
If any Owner, the Annuitant or the Joint Annuitant dies prior to the Annuity
Commencement Date, a Death Benefit will be paid and the Policy will be
terminated. Upon receipt of Due Proof of Death, the Company will pay a Death
Benefit to the Beneficiary equal to the Single Premium paid, less the aggregate
amount of any Income Payments already made. Due Proof of Death is required
within 90 days of death or as soon thereafter as reasonably possible.
On or after the Annuity Commencement Date, any Income Payment due after the
death of the Final Annuitant will be paid when due to the surviving Beneficiary
unless you have otherwise requested. If no Beneficiary survives the Final
Annuitant any Income Payment due will be paid to the Owner or the Owner's
estate. Income Payments due after the death of an Annuitant and/or Joint
Annuitant will depend on the Income Payment Plan and Guaranteed Period chosen
when the Policy was purchased. Life of Virginia will adjust future payments
and/or require the return of previous payments to correct for any overpayments
made on or after the death of an Annuitant and/or Joint Annuitant and prior to
the Company receiving notice of such death(s).
Distribution Rules: The Code requires that if the Owner, Annuitant or any
Joint Annuitant dies on or after the Annuity Commencement Date and before 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 in effect at the time of such death, notwithstanding any other
provision of the Policy.
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. Life of Virginia guarantees that this
charge of 1.25% will never increase. The mortality risk assumed by Life of
Virginia arises from its contractual obligation to make Income Payments
regardless of how long Annuitants or any Joint Annuitants may live. 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 Fee
Life of Virginia may deduct a charge from the Single Premium in the form of a
$300 Policy fee to compensate Life of Virginia for certain administrative
expenses incurred in connection with the Policies. If the Single Premium is
$75,000 or greater, the Company will waive the Policy fee.
Sales Charge
Net Premium Factor. 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 and mailing
of prospectuses, conducting seminars and other marketing, sales and promotional
activities. To recover a portion of these expenses, a percent of premium sales
charge may be imposed at the time the Policy is issued. Currently Life of
Virginia does not impose a percent of premium sales charge, but reserves the
right to impose such a charge on new premium in the future.
Should Life of Virginia elect to impose a percent of premium sales charge,
this charge will be reflected in the Net Premium Factor.
23
<PAGE>
The Single Premium multiplied by the Net Premium Factor, less any charge for
premium tax and any policy fee, will equal the Net Premium Payment. The Net
Premium Payment is the portion of the Single Premium that is credited to provide
Income Payments under the Policy.
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 will be deducted from the Single Premium and
used in calculating the Net Premium Payment.
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.
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 in connection with other "Qualified
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 Status of Non-Qualified Policies. Under existing provisions of the Code,
except as described below, interest and investment gains arising under a
Non-Qualified Policy generally are not taxable until amounts are received from
the Policy. However, this rule applies only if (1) the investments of the
Investment Subdivisions are "adequately diversified" in accordance with Treasury
Department regulations, (2) Life of Virginia, rather than the Owner or
Annuitant, is considered the owner of the assets of Account 4 for federal income
tax purposes, and (3) the Policy is treated as owned by an individual.
(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 the investment gains of Account 4
to be taxable currently.
Account 4, through the Funds, intends to comply with the diversification
requirements prescribed by 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.
24
<PAGE>
(2) Ownership Treatment. In certain circumstances, variable contract owners
may be considered the owners, for federal tax purposes, of the assets of a
segregated asset account, such as Account 4, used to support their contracts. In
those circumstances, income and gains from the segregated asset 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
segregated asset 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 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 segregated asset account
assets. For example, the Owner of this Policy has the choice of more Funds to
which to allocate premiums, 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 policyholders, is the owner of the assets of an
insurance segregated asset account 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 Owners from being considered the owners of the
assets of Account 4. 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.
(3) Non-Natural Owners. In certain circumstances, if an Owner is a
"non-natural" person, such as a corporation or a trust, the Policy would not be
treated as an annuity contract for Federal tax purposes, and income may arise
under the Policy more rapidly than is described below (see Taxation of Annuity
Payments). Policies will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Policy as an agent for
a natural person. (However, this special exception will not apply in the case of
any employer who is the nominal owner of a Policy under a non-qualified deferred
compensation arrangement for its employees.) In addition, exceptions to the
general rule for non-natural Owners will apply with respect to (1) Policies
acquired by an estate of a decedent by reason of the death of the decedent, (2)
Policies issued in connection with certain qualified retirement plans, (3)
Policies purchased by employers upon the termination of certain qualified
retirement plans, (4) certain Policies used in connection with structured
settlement agreements, and (5) Policies purchased with a single purchase payment
when the Annuity starting date is no later than a year from purchase of the
contract and substantially equal periodic payments are made, not less frequently
than annually, during the annuity period. It is unclear whether the Policy
satisfies the requirements of exception (5).
Taxation of Annuity Payments. 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 is the amount
determined by dividing the "investment in the contract" for the Policy, adjusted
for any period-certain or refund feature, allocated to the variable annuity
option by the number of payments expected to be made (determined by Treasury
Department regulations). Also, in the case of Fixed Income Payments, 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, allocated to the fixed annuity option 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(s) before
the investment in the contract has been fully recovered, the deceased Annuitant
(or, in certain cases, the designated beneficiary) is allowed a deduction for
the unrecovered amount. For these purposes, a Policy's "investment in the
contract" generally will equal the Policy's Single Premium.
There may be special income tax issues present in situations where the Owner
and the Annuitant are not the same person or are not married to one another, or
where there is an assignment of rights under a Policy. A tax advisor should be
consulted in those situations.
Taxation of Death Benefit Proceeds. A Death Benefit will be paid if any Owner,
the Annuitant, or any Joint Annuitant dies prior to the Annuity Commencement
Date. Such Death Benefit will only be subject to income taxation to the extent
it exceeds the Policy's "investment in the contract" (as defined above).
Penalty Tax. Certain distributions under the Policy may be subject to a
penalty tax equal to 10% of the portion of the distribution
25
<PAGE>
which is includible in income. The penalty tax generally will not be imposed on
distributions under a Non-Qualified Policy that are made (1) on or after the
taxpayer attains age 59 1/2; (2) as part of a series of "substantially equal
periodic payments" over the life (or life expectancy) of the taxpayer or the
joint lives (or joint life expectancies) of the taxpayer and his or her
"designated beneficiary" (as defined in the tax law); (3) under an "immediate
annuity" (as that term is defined in the tax law); or (4) in certain other
situations. It is unclear at this time whether annuity distributions under a
Non-Qualified Policy prior to the taxpayer attaining age 59 1/2 satisfy an
exception to the penalty tax. Accordingly, a prospective purchaser of a
Non-Qualified Policy who expects to receive distributions prior to attaining age
59 1/2 should consult a qualified tax advisor regarding the application of the
penalty tax to those distributions.
Qualified Policies
The Policy may be used in connection with certain qualified retirement plans
which receive favorable tax treatment under the Code ("Qualified Policies").
Specifically, Life of Virginia may offer the Policy for use as an individual
retirement annuity (an "IRA Policy") available to certain eligible individuals,
as a tax sheltered annuity (a "Section 403(b) Policy") that may be purchased on
behalf of an employee by a public educational institution or certain other
tax-exempt employers, and in connection with certain other types of qualified
retirement plans. Prospective purchasers of Qualified Policies should contact
Life of Virginia's Home Office to ascertain the availability of specific types
of Qualified Policies at any given time.
Both the amount of the contribution that may be made, and the tax deduction or
exclusion that the Owner may claim for such contribution, are limited under
Qualified Plans. Because the Policy's minimum Single Premium is greater than the
maximum annual contribution generally permitted under Qualified Plans, use of
the Policy as a Qualified Policy is limited to certain "rollover" transactions
(i.e., including rollovers, trustee-to-trustee transfers, and so-called "Direct
Rollovers," described below).
If the Policy is used as a Qualified Policy, the Owner and Annuitant must be
the same individual. If a Joint Annuitant is named, all distributions made while
the Annuitant is alive must be made to the Annuitant. Also, if a Joint Annuitant
is named who is not the Annuitant's spouse, the Income Payment Plans which are
available may be limited, depending on the difference in Ages between the
Annuitant and Joint Annuitant. Furthermore, the length of any guarantee period
may be limited in some circumstances to satisfy certain minimum distribution
requirements under the Code. In addition, this Policy, when used as a Section
403(b) Policy, generally may not be purchased unless the plan participant has
reached age 59 1/2, separated from service, or become disabled (within the
meaning of the tax law).
If all contributions to the Qualified Plan were either deductible or
excludable from the participant's income, all amounts distributed from the
Policy will be included in the recipient's income when distributed. However, if
some "after-tax" contributions (i.e., contributions that were neither deductible
nor excludable from income when made) were made to the Qualified Plan, then, in
certain circumstances, the Single Premium paid for this Policy will give rise to
an "investment in the contract" and, in consequence, only a portion of each
distribution from the Policy typically would be included in income when it is
distributed. The portion includible in income will be determined applying rules
similar to those described above with respect to annuity payments from
Non-Qualified Policies, generally treating as the investment in the contract the
sum of the after-tax contributions attributable to the Single Premium as of the
time the distribution commences.
In addition, subject to certain exceptions, a penalty tax is imposed on
distributions from certain Qualified Policies equal to 10 percent of the amount
of the distribution includible in income. However, the exceptions include, for
example, that this penalty tax does not apply to distributions made (1) on or
after the participant's attainment of age 59 1/2, (2) on or after death or
because of disability of the participant (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 participant or the joint lives (or joint life expectancies)
of the participant and his or her designated beneficiary (as defined in the tax
law) which, for certain Qualified Policies, must begin after the participant
separates from service. 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 the Qualified Plan.
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.
Federal Income Tax Withholding
Amounts which are distributed from a Policy (whether a Non-Qualified Policy or
Qualified Policy), other than "eligible rollover distributions" (described
below), are subject to federal income tax withholding to the extent includible
in income under the federal tax laws. Life of Virginia will withhold federal
income tax from distributions and remit such amounts to the U.S. Government
based on the federal tax rules in effect at the time the distribution is made
unless properly notified by the recipient, at or before the time of the
distribution, that he or she chooses not to have any income taxes withheld.
Other withholding rules may apply to distributions to non-resident aliens.
26
<PAGE>
In the case of any "eligible rollover distribution" from a Qualified Plan,
withholding at a 20% rate by the payor generally is required (i.e., a recipient
may not elect out of withholding). An "eligible rollover distribution" generally
is any portion of a taxable distribution from a Qualified Plan governed by
sections 401(a), 403(a), or 403(b) of the Code, 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 not less frequently than annually for the life (or life
expectancy) of the participant, for joint lives (or joint life expectancies) of
the participant and a "designated beneficiary," or for a specified period of 10
years or more). Although a recipient may not elect out of withholding with
respect to such distributions, withholding will not apply if, instead of
receiving the eligible rollover distribution, a "Direct Rollover" is made into
certain other Qualified Plans. (In some circumstances, this Policy may be used
to receive a "Direct Rollover" from another Qualified Plan.)
GENERAL PROVISIONS
The Owner
The Owner or Joint Owners are designated in the Policy. The Owner or Joint
Owners may exercise all of the rights and privileges under the Policy, subject
to the rights of the Annuitant(s) and any Beneficiary named irrevocably, and any
assignee under an assignment filed with Life of Virginia. If the Owner dies
before the Annuitant and on or after the Annuity Commencement Date, the Owner's
Estate will become the sole Owner of the Policy following such a death. If a
Joint Owner dies before the Annuitant and on or after the Annuity Commencement
Date, the surviving Joint Owner will become the sole Owner of the Policy
following such a death. The Owner must also be the Annuitant in order to defer
the Annuity Commencement Date for up to 60 days after the Policy Date.
The Annuitant
The Policy names the Owner or someone else as the Annuitant. A Joint Annuitant
also may be named. Life of Virginia reserves the right to restrict the
designation of a Joint Annuitant to conform to its administrative procedures and
the restrictions of federal and state law.
The Beneficiary
One or more Beneficiary(ies) may be designated by the Owner in an application
or in a written request. If changed, the Beneficiary is as shown in the latest
change filed with Life of Virginia.
Changes By the Owner
During the Annuitant's life, the Owner or Joint Owner may be changed by
written request to the Home Office. The Beneficiary 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.
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.
Payment under the Policies
Life of Virginia will usually pay any Death Benefit within seven days after it
receives Due Proof of Death. Amounts payable 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.
27
<PAGE>
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 applicable law.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being licensed to
sell variable annuity policies for Life of Virginia, are also registered
representatives of Forth Financial Securities Corporation, the principal
underwriter of the Policies, or of broker-dealers who have entered into written
sales agreements with the principal underwriter. Forth Financial Securities
Corporation, an affiliate of Life of Virginia, is a Virginia corporation located
at 6610 W. Broad St., Richmond, Virginia 23230. Forth Financial Securities
Corporation is registered with the Commission under the Securities Exchange Act
of 1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. Forth Financial Securities Corporation also serves as
principal underwriter for variable life insurance policies issued by Life of
Virginia. However, no amounts have been retained by Forth Financial Securities
Corporation for acting as principal underwriter of the Life of Virginia
policies.
Writing agents of Life of Virginia will receive commissions based on a
commission schedule and rules. Commissions depend on the premiums paid. The
agent will receive a commission of up to 2.75% of the Single Premium paid.
Agents may also be eligible to receive certain bonuses and allowances, as well
as retirement plan credits, based on commissions earned. Field management of
Life of Virginia receives compensation which may be based in part on the level
of agent commissions in their management units. Broker-dealers and their
registered agents will receive first-year and subsequent year commissions
equivalent to the total commissions and benefits received by the field
management and writing agents of Life of Virginia.
VOTING RIGHTS AND REPORTS
To the extent required by law, Life of Virginia will vote the Funds' shares
held in Account 4 at regular and special shareholder meetings of the Funds, in
accordance with instructions received from persons having voting interests in
Account 4. If, however, the 1940 Act or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result,
Life of Virginia determines that it is permitted to vote Fund shares in its own
right, it may elect to do so.
The Owner exercises the voting rights under the Policy. The number of votes
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
Fund. The reserves attributable to a Policy decrease as the Annuitant(s) ages.
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.
GE Investments Funds, Inc. also serves as an investment vehicle for variable
life insurance policies sold by Life of Virginia. The Funds other than GE
Investments Funds, Inc. 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 result of "seed
money" that it contributed to Account 4 or 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.
28
<PAGE>
APPENDIX
ILLUSTRATIONS OF VARIABLE INCOME PAYMENTS ASSUMING HYPOTHETICAL FUND PERFORMANCE
The following tables show how investment performance affects variable income
payments, using three different hypothetical assumptions for fund performance.
Each assumption provides for a constant investment return for the period
indicated. The assumed returns are 0%, 6% and 12%, before investment expenses
and other charges made under the policy. (Net of all expenses and charges, these
correspond to net returns of -2.21%, 3.66%, and 9.53% respectively). These
returns are hypothetical figures, and Life of Virginia does not guarantee these
returns for any period of time. The tables are for illustrative purposes only
and do not represent past or future returns.
The variable income payments shown in the tables reflect deduction of all
expenses of the policy. Fund management and operating expenses are assumed to be
deducted at an annual rate of .82% of the average daily net assets, based on
the average of the Fund expenses shown in the fee table. Actual
management and operating expenses of the Funds may be higher or lower, will vary
from time to time, and will depend upon the allocation of variable income
payments to the investment subdivisions. The mortality and expense risk charge
and administrative expense charge are assumed to be deducted at annual rates of
1.25% and 0.15%, respectively, of the average daily net assets of the investment
subdivisions.
Variable income payments will be different from those shown if the actual
performance of the investment subdivisions selected is different from the
returns assumed in the illustration. Since it is likely that the actual return
of an investment subdivision will vary over time, variable income payments can
be expected to fluctuate accordingly. The total amount of income payments
ultimately received will depend upon how long the annuitant lives, and any
guaranteed period for income payments.
One factor used to determine the amount of variable income payments is the
Assumed Interest Rate. In most jurisdictions, the owner can choose the assumed
interest rate, within a range of values set by Life of Virginia. Generally, a
lower AIR provides a smaller initial income payment. However, variable income
payments fluctuate based on the net performance of the subdivisions compared to
the assumed interest rate. Variable income payments increase from one payment
date to the next if the net return of the investment subdivision during the
payment period exceeds the assumed interest rate. Correspondingly, variable
income payments will decrease if the net return is less than the assumed
interest rate. So, a higher AIR requires a larger net return to remain level or
increase from one payment date to the next.
Upon request, Life of Virginia will furnish a customized illustration based on
the individual circumstances of a prospective owner. The illustration will be
based on similar assumptions for investment return as used here, but may contain
other hypothetical rates of return, within ranges established by Life of
Virginia.
29
<PAGE>
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income
Annuitant: Jack Frost Guaranteed Period: None
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 3%
If Fixed Income Payments are selected, monthly payments of $839.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
675.00 1 672.09 675.36 678.46
675.00 2 638.10 679.68 721.45
675.00 3 605.83 684.03 767.17
675.00 4 575.20 688.40 815.78
675.00 5 546.11 692.81 867.47
675.00 6 518.50 697.24 922.44
675.00 7 492.28 701.70 980.89
675.00 8 467.38 706.19 1,043.04
675.00 9 443.75 710.71 1,109.13
675.00 10 421.31 715.26 1,179.41
675.00 11 400.00 719.83 1,254.14
675.00 12 379.78 724.44 1,333.61
675.00 13 360.57 729.07 1,418.11
675.00 14 342.34 733.74 1,507.96
675.00 15 325.03 738.43 1,603.51
675.00 16 308.59 743.16 1,705.12
675.00 17 292.99 747.91 1,813.16
675.00 18 278.17 752.69 1,928.05
675.00 19 264.10 757.51 2,050.22
675.00 20 250.75 767.23 2,318.27
675.00 22 226.03 772.14 2,465.16
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income
Annuitant: Jack Frost Guaranteed Period: None
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 5%
If Fixed Income Payments are selected, monthly payments of $839.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
798.00 1 793.28 797.15 800.81
798.00 2 738.82 786.96 835.33
798.00 3 688.10 776.91 871.34
798.00 4 640.86 766.99 908.91
798.00 5 596.86 757.20 948.09
798.00 6 555.89 747.52 988.96
798.00 7 517.73 737.98 1,031.59
798.00 8 482.18 728.55 1,076.07
798.00 9 449.08 719.25 1,122.45
798.00 10 418.25 710.06 1,170.84
798.00 11 389.53 700.99 1,221.32
798.00 12 362.79 692.04 1,273.97
798.00 13 337.89 683.20 1,328.88
798.00 14 314.69 674.48 1,386.17
798.00 15 293.08 665.86 1,508.26
798.00 17 254.22 648.96 1,573.28
798.00 18 236.77 640.67 1,641.10
798.00 19 220.52 632.49 1,711.85
798.00 20 205.38 624.41 1,785.65
798.00 21 191.28 616.44 1,862.62
798.00 22 178.15 608.57 1,942.92
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
30
<PAGE>
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income with Period Certain
Annuitant: Jack Frost Guaranteed Period: 10 Year
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 3%
If Fixed Income Payments are selected, monthly payments of $625.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
625.00 1 622.30 625.33 628.21
625.00 2 590.83 629.33 668.01
625.00 3 560.96 633.36 710.34
625.00 4 532.59 637.41 755.35
625.00 5 505.66 641.49 803.21
625.00 6 480.09 645.59 854.11
625.00 7 455.81 649.72 908.23
625.00 8 432.76 653.88 965.78
625.00 9 410.88 658.06 1,026.97
625.00 10 390.10 662.27 1,092.04
625.00 11 370.37 666.51 1,161.24
625.00 12 351.64 670.78 1,234.82
625.00 13 333.86 675.07 1,313.06
625.00 14 316.98 679.39 1,396.26
625.00 15 300.95 683.73 1,484.73
625.00 16 285.73 688.11 1,578.81
625.00 17 271.28 692.51 1,678.85
625.00 18 257.56 696.94 1,785.23
625.00 19 244.54 701.40 1,898.35
625.00 20 232.17 705.89 2,018.64
625.00 21 220.43 710.40 2,146.54
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income with Period Certain
Annuitant: Jack Frost Guaranteed Period: 10 Year
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 5%
If Fixed Income Payments are selected, monthly payments of $772.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
736.00 1 731.65 735.21 738.59
736.00 2 681.42 725.82 770.43
736.00 3 634.64 716.55 803.65
736.00 4 591.07 707.40 838.29
736.00 5 550.49 698.37 874.43
736.00 6 512.70 689.45 912.12
736.00 7 477.50 680.64 951.45
736.00 8 444.72 671.95 992.46
736.00 9 414.19 663.37 1,035.25
736.00 10 385.75 654.89 1,079.87
736.00 11 359.27 646.53 1,126.43
736.00 12 334.61 638.27 1,174.99
736.00 13 311.63 630.12 1,225.64
736.00 14 290.24 622.07 1,278.47
736.00 15 270.31 614.13 1,333.59
736.00 16 251.76 606.28 1,391.08
736.00 17 234.47 598.54 1,451.05
736.00 18 218.38 590.90 1,513.60
736.00 19 203.38 583.35 1,578.85
736.00 20 189.42 575.90 1,646.91
736.00 21 176.42 568.54 1,717.91
736.00 22 164.30 561.28 1,791.97
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
31
<PAGE>
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income with Cash Refund
Annuitant: Jack Frost Guaranteed Period: Cash Refund
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 3%
If Fixed Income Payments are selected, monthly payments of $556.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
556.00 1 553.60 556.30 558.85
556.00 2 525.61 559.85 594.26
556.00 3 499.03 563.44 631.92
556.00 4 473.79 567.04 671.96
556.00 5 449.83 570.67 714.54
556.00 6 427.09 574.32 759.81
556.00 7 405.49 577.99 807.96
556.00 8 384.98 581.69 859.15
556.00 9 365.52 585.41 913.59
556.00 10 347.03 589.16 971.48
556.00 11 329.48 592.93 1,033.04
556.00 12 312.82 596.72 1,098.50
556.00 13 297.00 600.54 1,168.10
556.00 14 281.99 604.38 1,242.12
556.00 15 267.73 608.25 1,320.82
556.00 16 254.19 612.14 1,404.51
556.00 17 241.33 616.06 1,493.51
556.00 18 229.13 620.00 1,588.14
556.00 19 217.54 623.96 1,688.77
556.00 20 206.54 627.96 1,795.78
556.00 21 196.10 631.97 1,909.57
556.00 22 186.18 636.02 2,030.56
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
COMMONWEALTH INCOME PLAN ILLUSTRATION
Single Life - Life Income with Cash Refund
Annuitant: Jack Frost Guaranteed Period: Cash Refund
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 5%
If Fixed Income Payments are selected, monthly payments of $556.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
710.00 1 705.80 709.24 712.50
710.00 2 657.35 700.18 743.22
710.00 3 612.22 691.24 775.26
710.00 4 570.19 682.41 808.68
710.00 5 531.04 673.70 843.54
710.00 6 494.59 665.09 879.90
710.00 7 460.63 656.60 917.83
710.00 8 429.01 648.21 957.40
710.00 9 399.56 639.93 998.67
710.00 10 372.13 631.76 1,041.73
710.00 11 346.58 623.69 1,086.63
710.00 12 322.78 615.72 1,133.48
710.00 13 300.62 607.86 1,182.34
710.00 14 279.99 600.10 1,233.31
710.00 15 260.76 592.43 1,286.48
710.00 16 242.86 584.87 1,341.94
710.00 17 226.19 577.40 1,399.79
710.00 18 210.66 570.02 1,460.13
710.00 19 196.20 562.74 1,523.07
710.00 20 182.73 555.56 1,588.73
710.00 21 170.18 548.46 1,657.22
710.00 22 158.50 541.46 1,728.66
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
32
<PAGE>
COMMONWEALTH INCOME PLAN ILLUSTRATION
Joint Life - Life Income
Annuitant: Jack Frost Guaranteed Period: 10 year
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 3%
If Fixed Income Payments are selected, monthly payments of $662.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
495.00 1 492.86 495.26 497.54
495.00 2 467.94 498.43 529.07
495.00 3 444.28 501.62 562.59
495.00 4 421.81 504.83 598.24
495.00 5 400.48 508.06 636.14
495.00 6 380.23 511.31 676.45
495.00 7 361.00 514.58 719.32
495.00 8 342.75 517.87 764.89
495.00 9 325.41 521.19 813.36
495.00 10 308.96 524.52 864.90
495.00 11 293.34 527.88 919.70
495.00 12 278.50 531.25 977.98
495.00 13 264.42 534.65 1,039.95
495.00 14 251.05 538.07 1,105.84
495.00 15 238.35 541.52 1,175.91
495.00 16 226.30 544.98 1,250.42
495.00 17 214.86 548.47 1,329.65
495.00 18 203.99 551.98 1,413.90
495.00 19 193.68 555.51 1,503.49
495.00 20 183.88 559.06 1,598.76
495.00 21 174.58 562.64 1,700.06
495.00 22 165.76 566.24 1,807.79
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
33
<PAGE>
COMMONWEALTH INCOME PLAN ILLUSTRATION
Joint Life - Life Income with Period Certain
Annuitant: Jack Frost Guaranteed Period: 10 Year
Date of Birth: 12/1/26 Annuity Commencement Date: 12/1/96
Annuity Premium: $100,000 Payment Period: monthly
Premium Tax: 0% Assumed Interest Rate: 5%
If Fixed Income Payments are selected, monthly payments of $662.00 will be made.
This illustration of variable income payments assumes constant investment
returns of 0%, 6% and 12% during the period indicated. These correspond to net
investment returns of -2.21%, 3.66% and 9.53%, respectively, after deduction of
all policy charges and expenses. The actual amount of variable income payments
will depend on the performance of the underlying investment subdivisions
selected, among other factors.
Variable income payments may increase or decrease. There is no minimum dollar
amount of variable income. The assumed interest rate shown above was used to set
the income payment amount. Payments will remain level if the annualized
performance of the investment subdivision(s) selected in each payment period is
equal to the Assumed Interest Rate. The table below shows hypothetical payments
at the beginning of certain policy years. Actual variable income payments vary
from one payment date to the next.
[graph goes here]
Initial Gross Return 0% Gross Return 6% Gross Return 12%
Income Year Net Return -2.21% Net Return 3.66% Net Return 9.53%
606.00 2 561.62 597.62 634.35
606.00 3 522.54 589.99 661.70
606.00 4 486.67 582.45 690.22
606.00 5 453.26 575.01 719.98
606.00 6 422.14 567.67 751.02
606.00 7 393.16 560.42 783.39
606.00 8 366.17 553.26 817.16
606.00 9 341.03 546.20 852.39
606.00 10 317.62 539.22 889.14
606.00 11 295.81 532.33 927.46
606.00 12 275.50 525.53 967.45
606.00 13 256.59 518.82 1,009.15
606.00 14 238.97 512.20 1,052.66
606.00 15 222.57 505.65 1,098.04
606.00 16 207.29 499.20 1,145.37
606.00 17 193.06 492.82 1,194.75
606.00 18 179.80 486.53 1,246.25
606.00 19 167.46 480.31 1,299.98
606.00 20 155.96 474.18 1,356.02
606.00 21 145.26 468.12 1,414.47
606.00 22 135.28 462.14 1,475.45
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ARE ILLUSTRATIVE ONLY AND
SHOULD NOT BE DEEMED TO REPRESENT PAST OR FUTURE INVESTMENT PERFORMANCE. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN, AND MAY VARY. RESULTS WILL
ALSO DIFFER IF THE ACTUAL AVERAGE RATE OF RETURN FOR THE PERIOD EQUALS THE RATE
SHOWN BUT FLUCTUATES DURING THE PERIOD.
34
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
The Life Insurance Company of Virginia............................................................................3
Termination of Participation Agreements...........................................................................3
Federal Tax Matters...............................................................................................3
Taxation of Life of Virginia....................................................................................3
IRS Required Distributions......................................................................................4
General Provisions................................................................................................5
Using the Policies as Collateral................................................................................5
Non-Participating...............................................................................................5
Misstatement of Age or Sex......................................................................................5
Incontestability................................................................................................5
Annual Statement................................................................................................5
Written Notice..................................................................................................5
Distribution of the Policies......................................................................................6
Legal Developments Regarding Employment-Related Benefit Plans.....................................................6
Additions, Deletions, or Substitutions............................................................................6
State Regulation of Life of Virginia..............................................................................6
Legal Matters.....................................................................................................7
Experts...........................................................................................................7
Changes in Auditors...............................................................................................7
Financial Statements..............................................................................................7
</TABLE>
36
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
SEPARATE ACCOUNT 4
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
SINGLE PREMIUM VARIABLE IMMEDIATE ANNUITY POLICY
FORM P1711 1/97
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 Single Premium Variable Immediate Annuity
Policy ("Policy") offered by The Life Insurance Company of Virginia. You may
obtain a copy of the Prospectus dated June 30, 1997 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 June 30, 1997
1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
The Life Insurance Company of Virginia........................................................................... 3
Termination of Participation Agreements.......................................................................... 3
Federal Tax Matters...............................................................................................3
Taxation of Life of Virginia....................................................................................3
IRS Required Distributions......................................................................................4
General Provisions................................................................................................5
Using the Policies as Collateral................................................................................5
Non-Participating...............................................................................................5
Misstatement of Age or Sex......................................................................................5
Incontestability................................................................................................5
Annual Statement................................................................................................5
Written Notice..................................................................................................5
Distribution of the Policies......................................................................................6
Legal Developments Regarding Employment-Related Benefit Plans.....................................................6
Additions, Deletions, or Substitutions of Investments.............................................................6
State Regulation of Life of Virginia..............................................................................6
Legal Matters.....................................................................................................7
Experts...........................................................................................................7
Change in Auditors................................................................................................7
Financial Statements..............................................................................................7
</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."
Eighty percent of the capital stock of Life of Virginia is owned by General
Electric Capital Assurance Company. The remaining 20% is owned by GE Life
Insurance Group, Inc. General Electric Capital Assurance Company and GE Life
Insurance Group, Inc. are indirectly, wholly-owned subsidiaries of GE Capital.
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).
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:
Variable Insurance Products Fund, Variable Insurance Products Fund II, and
Variable Insurance Products Fund III ("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.
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.
PBHG Insurance Series Fund, Inc. 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.
GE Investments Funds, Inc. has entered into a Stock Sale Agreement with Life
of Virginia pursuant to which the Fund sells its shares to Separate Account 4.
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.) 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
3
<PAGE>
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
The Non-Qualified Policies contain provisions which are intended to comply
with the minimum distribution 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 minimum distribution rules apply to Qualified Policies.
4
<PAGE>
GENERAL PROVISIONS
Using the Policies as Collateral
A Non-Qualified Policy can be assigned provided the Owner is the same person
as the Annuitant and a Joint Annuitant is not named in the Policy. Life of
Virginia must be notified in writing if a Policy is assigned. Life of Virginia
is not responsible for the validity of an assignment. An Owner's/Annuitant'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 not a participating Policy. No dividends are payable.
Misstatement of Age or Sex
If an Annuitant(s) Age or sex was misstated by the applicant and used to
calculate benefits, 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 Income Payments made during
the Policy year, Annuity Units and Unit Values.
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.
5
<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.
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 Funds that are held by Account 4 or that Account 4 may purchase. If the
shares of a Fund 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 Funds and to substitute shares of another Fund. 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 Fund, or in shares of
another Fund. 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.
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.
6
<PAGE>
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, L.L.P. 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. J. Neil McMurdie,
Associate Counsel and Assistant Vice President of Life of Virginia, has provided
advice on certain legal matters pertaining to the Policy, including the validity
of the Policy and Life of Virginia's right to issue the Policies under Virginia
insurance law.
EXPERTS
KPMG Peat Marwick LLP
The consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries as of December 31, 1996 and for the nine months ended
December 31, 1996 and the preacquisition three month period ended March 31, 1996
and the financial statements of Life of Virginia Separate Account 4 as of
December 31, 1996 and for the years or periods then ended have been included
herein and in the registration statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
Ernst & Young LLP
The consolidated financial statements of The Life Insurance Company of
Virginia and subsidiaries at December 31, 1995 and for each of the two years in
the period ended December 31, 1995 and the statements of operations and
statements of changes in net assets of Life of Virginia Separate Account 4 for
each of the two years or periods ended December 31, 1995, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, to the extent indicated in their reports thereon also
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
CHANGE IN AUDITORS
Subsequent to the acquisition of Life of Virginia by GNA Corporation on April
1, 1996, Life of Virginia selected KPMG Peat Marwick LLP to be its auditor.
Accordingly, Life of Virginia's principal auditor has changed for the year
ending December 31, 1996, from Ernst & Young LLP, to KPMG Peat Marwick LLP. The
former auditors were dismissed and KPMG Peat Marwick LLP was retained because
KPMG Peat Marwick LLP is the auditor for GE Capital, GNA Corporation's parent.
This change of auditors was approved by the members of Life of Virginia's Board
of Directors.
Neither KPMG Peat Marwick LLP nor Ernst & Young LLP's reports on the financial
statements contains any adverse opinion or a disclaimer of opinion, or was
qualified or modified as to uncertainty or audit scope. Furthermore, there were
no disagreements with either on any matter of accounting principle or practice,
financial statement disclosure or auditing scope or procedure which would have
caused them to make reference to the subject matter of the disagreement in
connection with their reports.
FINANCIAL STATEMENTS
This Statement of Additional Information contains financial statements for
Life of Virginia Separate Account 4 as of December 31, 1996.
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.
7
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Table of Contents
Year ended December 31, 1996
================================================================================
PAGE
Independent Auditors' Report................................................ 1
Financial Statements:
Statements of Assets and Liabilities.................................3
Statements of Operations.............................................9
Statements of Changes in Net Assets.................................19
Notes to Financial Statements...............................................29
================================================================================
<PAGE>
[KPMG PEAT MARWICK 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 (the Account) (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 Fund--Money, Bond, Capital Appreciation, Growth,
High Income and Multiple Strategies Funds; the 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 Federated Investors Insurance Series--American Leaders, High Income Bond and
Utility Funds II; the Alger American--Small Cap and Growth Portfolios; and the
Janus Aspen Series--Aggressive Growth, Growth, Worldwide Growth, Balanced,
Flexible Income and International Growth Portfolios) as of December 31, 1996 and
the related statements of operations and changes in net assets for the year or
periods then ended. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based onour audit. The accompanying statements of
operations and changes in net assets of Life of Virginia Separate Account 4 for
the years or periods ended December 31, 1995 and 1994, were audited by other
auditors, whose report thereon dated February 8, 1996 expressed an unqualified
opinion on those statements.
We conducted our audit 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, 1996, by correspondence with
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
1
<PAGE>
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
portfolios constituting Life of Virginia Separate Account 4 as of December 31,
1996 and the results of their operations and changes in their net assets for the
year or period then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
February 11, 1997
<PAGE>
[Letterhead of Ernst & Young LLP]
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 operations and changes in net
assets for each of the two years in the period ended December 31, 1995 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, 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall
<PAGE>
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 results of operations and changes in net assets for the
periods described in the first paragraph of each of the respective portfolios
constituting Life of Virginia Separate Account 4, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1997
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities
December 31, 1996
<TABLE>
<CAPTION>
===========================================================================================================
Life of Virginia Series Fund, Inc.
-------------------------------------------------------------
Common Government Money Total
Stock Index Securities Market Return
Assets Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S><C>
Investment in Life of Virginia Series Fund, Inc., at fair value (note 2):
Common Stock Index Portfolio (2,131,438
shares; cost - $46,217,621) $ 32,269,964 - - -
Government Securities Portfolio (1,235,517
shares; cost - $12,798,597) - 11,811,538 - -
Money Market Portfolio (9,637,636 shares;
cost - $103,877,167) - - 100,038,662 -
Total Return Portolio (1,906,688 shares;
cost - $29,142,790) - - - 24,272,138
International Equity Portfolio
1,557,616 shares; cost - $16,854,215) - - - -
Real Estate Securities Portfolio
(1,722,003 shares; cost - $19,188,197 - - - -
Dividend receivable 23,435,279 1,309,648 5,204,323 9,319,880
Receivable from affiliate (note 3) 37,318 1,073 68,067 48,704
Receivable for units sold 140,775 11,880 327,754 -
- -----------------------------------------------------------------------------------------------------------
Total assets 55,883,336 13,134,139 105,638,806 33,640,722
===========================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 11,608 2,997 26,073 7,252
Payable for units withdrawn 3,277 1,172 15,425,560 39,009
- -----------------------------------------------------------------------------------------------------------
Total liabilities 14,885 4,169 15,451,633 46,261
===========================================================================================================
Net assets $ 55,868,451 13,129,970 90,187,173 33,594,461
===========================================================================================================
Analysis of net assets:
For variable deferred annuity policies $ 55,868,451 13,129,970 90,187,173 33,594,461
Attributable to The Life Insurance Company
of Virginia - - - -
- -----------------------------------------------------------------------------------------------------------
Net assets $ 55,868,451 13,129,970 90,187,173 33,594,461
===========================================================================================================
Outstanding units: Type I (note 2) 580,257 504,597 2,549,159 708,065
===========================================================================================================
Net asset value per unit: Type I $ 30.77 16.94 14.18 24.83
===========================================================================================================
Outstanding units: Type II (note 2) 1,262,502 276,196 3,893,379 659,251
===========================================================================================================
Net asset value per unit: Type II $ 30.11 16.59 13.88 24.29
===========================================================================================================
</TABLE>
1
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===========================================================================================================
Life of Virginia Series Fund, Inc.
-------------------------------------------------------------
International Real Estate
Equity Securities
Assets Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Life of Virginia Series Fund, Inc., at fair value (note 2):
Common Stock Index Portfolio (2,131,438
shares; cost - $46,217,621) $ - -
Government Securities Portfolio (1,235,517
shares; cost - $12,798,597) - -
Money Market Portfolio (9,637,636 shares;
cost - $103,877,167) - -
Total Return Portolio (1,906,688 shares;
cost - $29,142,790) - -
International Equity Portfolio
1,557,616 shares; cost - $16,854,215) 16,868,976 -
Real Estate Securities Portfolio
(1,722,003 shares; cost - $19,188,197 - 24,297,462
Dividend receivable 1,056,063 1,627,291
Receivable from affiliate (note 3) - -
Receivable for units sold 14,480 57,027
- -----------------------------------------------------------------------------------------------------------
Total assets 17,939,519 25,981,780
===========================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 38,349 106,080
Payable for units withdrawn 26 164,353
- -----------------------------------------------------------------------------------------------------------
Total liabilities 38,375 270,433
===========================================================================================================
Net assets $ 17,901,144 25,711,347
===========================================================================================================
Analysis of net assets:
For variable deferred annuity policies $ 6,211,202 9,881,935
Attributable to The Life Insurance Company
of Virginia 11,689,942 15,829,412
- -----------------------------------------------------------------------------------------------------------
Net assets $ 17,901,144 25,711,347
===========================================================================================================
Outstanding units: Type I (note 2) 207,412 204,919
===========================================================================================================
Net asset value per unit: Type I $ 11.50 15.63
===========================================================================================================
Outstanding units: Type II (note 2) 332,403 428,969
===========================================================================================================
Net asset value per unit: Type II $ 11.51 15.57
===========================================================================================================
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===========================================================================================================
Oppenheimer Variable Account Fund
-------------------------------------------------------------
Capital
Money Bond Appreciation Growth
Assets Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S><C>
Investment in Oppenheimer Variable Account Funds, at fair value (note 2):
Money Fund (2,716,513 shares;
cost - $2,716,513) $ 2,716,513 -- -- --
Bond Fund (2,720,745 shares;
cost - $31,197,660) -- 31,642,265 -- --
Capital Appreciation Fund
(4,108,154 shares; cost - $133,957,044) -- -- 159,026,631 --
Growth Fund (2,488,187 shares;
cost - $56,104,503) -- -- -- 67,778,215
High Income Fund (7,704,733
shares; cost - $83,087,026) -- -- -- --
Multiple Strategies Fund
(3,464,713 shares; cost - $47,836,811) -- -- -- --
Receivable from affiliate (note 3) 34,795 3,974 -- --
Receivable for units sold -- 5,271 306,641 129,828
- -----------------------------------------------------------------------------------------------------------
Total assets 2,751,308 31,651,510 159,333,272 67,908,043
===========================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 627 7,650 435,623 40,248
Payable for units withdrawn 5 4,919 53,468 8,426
- -----------------------------------------------------------------------------------------------------------
Total liabilities 632 12,569 489,091 48,674
===========================================================================================================
Net assets for variable deferred annuity
policies $ 2,750,676 31,638,941 158,844,181 67,859,369
===========================================================================================================
Outstanding units: Type I (note 2) 162,505 941,269 2,726,055 1,190,622
===========================================================================================================
Net asset value per unit: Type I $ 14.80 19.37 33.08 30.04
===========================================================================================================
Outstanding units: Type II (note 2) 23,868 707,097 2,121,294 1,091,602
===========================================================================================================
Net asset value per unit: Type II $ 14.48 18.96 32.37 29.40
===========================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
=========================================================================================================
Oppenheimer Variable Account Fund
-------------------------------------------------------------
High Multiple
Income Strategies
Assets Fund Fund
- ---------------------------------------------------------------------------------------------------------
<S><C>
Investment in Oppenheimer Variable Account Funds, at fair value (note 2):
Money Fund (2,716,513 shares;
cost - $2,716,513) - -
Bond Fund (2,720,745 shares;
cost - $31,197,660) - -
Capital Appreciation Fund
(4,108,154 shares; cost - $133,957,044) - -
Growth Fund (2,488,187 shares;
cost - $56,104,503) - -
High Income Fund (7,704,733
shares; cost - $83,087,026) 85,753,676 -
Multiple Strategies Fund
(3,464,713 shares; cost - $47,836,811) - 54,153,468
Receivable from affiliate (note 3) 62,906 -
Receivable for units sold 4,948 56,944
- -----------------------------------------------------------------------------------------------------------
Total assets 85,821,530 54,210,412
===========================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 21,263 73,554
Payable for units withdrawn 37,630 17,946
- -----------------------------------------------------------------------------------------------------------
Total liabilities 58,893 91,500
===========================================================================================================
Net assets for variable deferred annuity
policies 85,762,637 54,118,912
===========================================================================================================
Outstanding units: Type I (note 2) 1,358,227 1,640,662
===========================================================================================================
Net asset value per unit: Type I 28.24 22.81
===========================================================================================================
Outstanding units: Type II (note 2) 1,715,755 748,002
===========================================================================================================
Net asset value per unit: Type II 27.63 22.32
===========================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===========================================================================================================
Variable Insurance Products Fund
-------------------------------------------------------------
Money High Equity-
Market Income Income
Assets Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S><C>
Investment in Variable Insurance Products Fund, at fair value (note 2):
Money Market Portfolio (22,001,350 shares;
cost - $22,001,350) 22,001,350 -- --
High Income Portfolio (1,986,368 shares;
cost - $22,054,714) -- 24,869,322 --
Equity-Income Portfolio (19,267,440 shares;
cost - $338,638,261) -- -- 405,194,259
Growth Portfolio (8,071,281 shares;
cost - $209,433,139) -- -- --
Overseas Portfolio (5,698,984 shares;
cost - $92,284,455) -- -- --
Accrued interest income 103,152 -- --
Receivable from affiliate -- -- 126,153
Receivable for units sold -- -- 77,690
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 22,104,502 24,869,322 405,398,102
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate
(note 3) 117,120 67,294 99,500
Payable for units withdrawn 3,734 927 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 120,854 68,221 99,500
===================================================================================================================================
Net assets for variable deferred
annuity policies 21,983,648 24,801,101 405,298,602
===================================================================================================================================
Outstanding units: Type I (note 2) 1,193,173 731,930 6,847,454
===================================================================================================================================
Net asset value per unit: Type I 14.82 24.11 29.50
===================================================================================================================================
Outstanding units: Type II (note 2) 296,609 303,275 7,041,867
===================================================================================================================================
Net asset value per unit: Type II 14.50 23.59 28.87
===================================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Variable Insurance
-------------------------------------------------------------------
Growth Overseas
Assets Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment in Variable Insurance Products Fund, at fair value (note 2):
Money Market Portfolio (22,001,350 shares;
cost - $22,001,350) - -
High Income Portfolio (1,986,368 shares;
cost - $22,054,714) - -
Equity-Income Portfolio (19,267,440 shares;
cost - $338,638,261) - -
Growth Portfolio (8,071,281 shares;
cost - $209,433,139) 251,339,690 -
Overseas Portfolio (5,698,984 shares;
cost - $92,284,455) - 107,368,867
Accrued interest income - -
Receivable from affiliate 48,303 -
Receivable for units sold 263,458 85,315
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 251,651,451 107,454,182
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 60,313 116,786
Payable for units withdrawn 45,771 2,143
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 106,084 118,929
===================================================================================================================================
Net assets for variable deferred annuity policies 251,545,367 107,335,253
===================================================================================================================================
Outstanding units: Type I (note 2) 4,831,665 4,069,123
===================================================================================================================================
Net asset value per unit: Type I 32.28 19.19
===================================================================================================================================
Outstanding units: Type II (note 2) 3,026,574 1,557,443
===================================================================================================================================
Net asset value per unit: Type II 31.58 18.78
===================================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Variable Insurance
Products Fund II Advisers Management Trust
---------------------------------------------------------------------------
Asset
Manager Contrafund Balanced
Assets Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment in Variable Insurance Products Fund II, at fair value (note 2):
Asset Manager Portfolio (25,784,849 shares;
cost - $369,444,622) 436,537,500 -- --
Contrafund Portfolio (8,610,261 shares;
cost - $121,091,296) -- 142,585,929 --
Investment in Advisers Management Trust, at fair value (note 2):
Balanced Portfolio (1,937,087 shares;
cost - $28,336,586) -- -- 30,838,421
Bond Portfolio (697,791 shares;
cost - $9,780,434) -- -- --
Growth Portfolio (408,170 shares;
cost - $9,642,393) -- -- --
Receivable from affiliate (note 3) -- 50,092 928
Receivable for units sold 172,962 266,662 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 436,710,462 142,902,683 30,839,349
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 798,134 35,990 6,833
Payable for units withdrawn 74,159 -- 70,052
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 872,293 35,990 76,885
===================================================================================================================================
Net assets $435,838,169 142,866,693 30,762,464
===================================================================================================================================
Analysis of net assets:
For variable deferred annuity policies $435,838,169 142,866,693 30,220,971
Attributable to The Life Insurance Company of Virginia -- -- 541,493
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $435,838,169 142,866,693 30,762,464
===================================================================================================================================
Outstanding units: Type I (note 2) $ 18,979,975 3,097,501 1,684,576
===================================================================================================================================
Net asset value per unit: Type I 20.57 16.68 16.56
===================================================================================================================================
Outstanding units: Type II (note 2) 2,248,519 5,493,999 142,952
===================================================================================================================================
Net asset value per unit: Type II $ 20.20 16.60 16.26
===================================================================================================================================
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===========================================================================================================
Advisers Management Trust
------------------------------------------------------
Bond Growth
Assets Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------
<S><C>
Investment in Variable Insurance Products Fund II, at fair value (note 2):
Asset Manager Portfolio (25,784,849 shares;
cost - $369,444,622) - -
Contrafund Portfolio (8,610,261 shares;
cost - $121,091,296) - -
Investment in Advisers Management Trust, at fair value (note 2):
Balanced Portfolio (1,937,087 shares;
cost - $28,336,586) - -
Bond Portfolio (697,791 shares;
cost - $9,780,434) 9,803,959 -
Growth Portfolio (408,170 shares;
cost - $9,642,393) - 10,522,634
Receivable from affiliate (note 3) - -
Receivable for units sold - -
- -----------------------------------------------------------------------------------------------------------
Total assets 9,803,959 10,522,634
===========================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 72,385 18,458
Payable for units withdrawn 9,537 2,080
- -----------------------------------------------------------------------------------------------------------
Total liabilities 81,922 20,538
===========================================================================================================
Net assets 9,722,037 10,502,096
===========================================================================================================
Analysis of net assets:
For variable deferred annuity policies 9,722,037 10,502,096
Attributable to The Life Insurance Company of Virginia - -
- -----------------------------------------------------------------------------------------------------------
Net assets 9,722,037 10,502,096
===========================================================================================================
Outstanding units: Type I (note 2) 539,602 531,306
===========================================================================================================
Net asset value per unit: Type I 12.24 15.34
===========================================================================================================
Outstanding units: Type II (note 2) 257,629 155,136
===========================================================================================================
Net asset value per unit: Type II 12.10 15.16
===========================================================================================================
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Federated Investors
Insurance Series Alger American
------------------------------------------- ------------------------------------
American High Small
Leaders Income Bond Utility Cap Growth
Assets Fund II Fund II Fund II Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II
(244,220 shares; cost -- $3,564,748) $3,726,794 -- -- -- --
High Income Bond Fund II
(1,334,922 shares; cost -- $13,219,202) -- 13,669,604 -- -- --
Utility Fund II (1,908,872 shares --
cost -- $20,516,233) -- -- 22,543,781 -- --
Investment in Alger American,
at fair value (note 2):
Small Cap Portfolio (1,153,425 shares;
cost -- $47,292,583) -- -- -- 47,186,598 --
Growth Portfolio (1,306,751 shares;
cost -- $42,609,173) -- -- -- -- 44,860,766
Receivable from affiliate (note 3) -- 4,012 14,387 3,285 --
Receivable for units sold 49,516 -- -- 124,620 119,332
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 3,776,310 13,673,616 22,558,168 47,314,503 44,980,098
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,292 3,523 5,708 12,103 32,762
Payable for units withdrawn -- 10 43,750 48 226,943
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,292 3,533 49,458 12,151 259,705
===================================================================================================================================
Net assets for variable deferred annuity policies $3,775,018 13,670,083 22,508,710 47,302,352 44,720,393
===================================================================================================================================
Oustanding units: Type I (note 2) 75,662 211,506 545,223 1,339,653 1,190,674
===================================================================================================================================
Net asset value per unit: Type I $ 11.07 13.43 13.48 9.66 10.79
===================================================================================================================================
Outstanding units: Type II (note 2) 265,832 809,989 1,130,433 3,568,152 2,962,177
===================================================================================================================================
Net asset value per unit: Type II $ 11.05 13.37 13.41 9.63 10.76
===================================================================================================================================
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
===================================================================================================================================
Janus Aspen Series
-------------------------------------------------------------------------------
Aggressive Worldwide Flexible International
Growth Growth Growth Balanced Income Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio
(4,598,027 shares; cost -- $74,046,345) $83,868,015 -- -- -- -- --
Growth Portfolio (9,768,429
shares; cost -- $128,050,160) -- 151,508,330 -- -- -- --
Worldwide Growth Portfolio
(9,124,593 shares; cost -- $149,893,458) -- -- 177,382,089 -- -- --
Balanced Portfolio (1,113,921
shares; cost -- $15,494,087) -- -- -- 16,452,616 -- --
Flexible Income Portfolio
(445,638 shares; cost -- $4,942,310) -- -- -- -- 5,008,969 --
International Growth Portfolio
(845,209 shares; cost -- $12,700,072) -- -- -- -- -- 13,286,688
Receivable from affiliate (note 3) 51,355 -- 9,823 7,937 353 66
Receivable for units sold 94,296 296,313 123,604 12,798 257 228,679
- ----------------------------------------------------------------------------------------------------------------------------------
Totals 84,013,666 151,804,643 177,515,516 16,473,351 5,009,579 13,515,433
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 19,750 108,071 42,618 4,193 1,253 3,255
Payable for units withdrawn 30,379 -- 62,200 9,444 7 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 50,129 108,071 104,818 13,637 1,260 3,255
===================================================================================================================================
Net assets for variable deferred anuity policies $83,963,537 151,696,572 177,410,698 16,459,714 5,008,319 13,512,178
===================================================================================================================================
Outstanding units: Type I (note 2) 1,975,818 4,764,409 4,170,807 358,807 118,020 474,438
===================================================================================================================================
Net asset value per unit: Type I $ 18.19 15.79 19.13 12.21 11.33 11.69
===================================================================================================================================
Outstanding units: Type II (note 2) 2,662,051 4,882,922 5,146,187 992,496 325,169 682,605
===================================================================================================================================
Net asset value per unit: Type II $ 18.04 15.66 18.97 12.17 11.29 11.67
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
Common
Stock Index
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 23,435,279 411,769 91,337
Expenses -- Mortality and expense risk charges (note 3) 492,403 139,329 58,672
- -------------------------------------------------------------------------------------------------------------------
Net investment income 22,942,876 272,440 32,665
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 1,510,464 345,068 (65,078)
Unrealized appreciation (depreciation) on investments (16,204,375) 2,539,788 (8,702)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (14,693,911) 2,884,856 (73,780)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 8,248,965 3,157,296 (41,115)
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
Government
Securities Money Market
Portfolio Portfolio
Year ended December 31, Year ended December
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends 1,309,648 565,524 238,661 5,204,323 1,098,198 222,610
Expenses -- Mortality and expense
risk charges (note 3) 143,919 83,929 67,780 980,270 144,841 72,014
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income 1,165,729 481,595 170,881 4,224,053 953,357 150,596
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (68,248) (20,275) (401,286) 1,686,452 312,501 56,347
Unrealized appreciation (depreciation)
on investments (995,503) 567,616 (216,822) (2,984,484) (757,472) (36,981)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (1,063,751) 547,341 (618,108) (1,298,032) (444,971) 19,366
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations 101,978 1,028,936 (447,227) 2,926,021 508,386 169,962
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
Total Return
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends 9,319,880 1,576,466 461,727
Expenses -- Mortality and expense risk charges (note 3) 357,589 187,419 162,211
- ----------------------------------------------------------------------------------------------------------
Net investment income 8,962,291 1,389,047 299,516
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 614,446 308,073 52,519
Unrealized appreciation (depreciation) on investments (6,827,262) 1,987,241 (190,731)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (6,212,816) 2,295,314 (138,212)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 2,749,475 3,684,361 161,304
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Life of Virginia Series
Fund, Inc. (continued)
International Real Estate
Equity Securities
Portfolio Portfolio
Period from Period from
May 23, May 2,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
<S> <C>
Investment income:
Income -- Dividends $ 1,056,063 31,010 1,627,291 670,339
Expenses -- Mortality and expense risk charges (note 3) 56,953 4,298 49,030 2,663
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 999,110 26,712 1,578,261 667,676
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 86,537 646 299,159 24,928
Unrealized appreciation (depreciation) on investments (11,119) 25,880 4,059,521 1,049,744
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 75,418 26,526 4,358,680 1,074,672
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 1,074,528 53,238 5,936,941 1,742,348
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
Money Bond
Fund Fund
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 175,537 303,556 246,677 1,774,226 1,222,079 858,801
Expenses -- Mortality and
expense risk charges (note 3) 40,663 64,415 70,775 336,825 220,766 160,466
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 134,874 239,141 175,902 1,437,401 1,001,313 698,335
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) -- -- -- 106,242 53,120 (47,152)
Unrealized appreciation (depreciation)
on investments -- -- -- (442,815) 1,654,610 (1,076,673)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments -- -- -- (336,573) 1,707,730 (1,123,825)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 134,874 239,141 175,902 1,100,828 2,709,043 (425,490)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
Capital
Appreciation Growth
Fund Fund
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends 6,069,096 331,803 4,077,084 3,110,376 393,011 110,209
Expenses -- Mortality and
expense risk charges (note 3) 1,506,102 868,053 517,863 599,846 265,718 130,807
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 4,562,994 (536,250) 3,559,221 2,510,530 127,293 (20,598)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 6,301,279 1,666,666 (295,786) 1,959,742 739,151 156,193
Unrealized appreciation (depreciation)
on investments 7,478,382 18,977,772 (5,974,329) 5,568,726 5,287,316 (131,358)
- -----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 13,779,661 20,644,438 (6,270,115) 7,528,468 6,026,467 24,835
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 18,342,655 20,108,188 (2,710,894) 10,038,998 6,153,760 4,237
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
High Multiple
Income Strategies
Fund Fund
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 6,387,294 3,582,283 1,862,474 3,343,955 2,521,297 1,498,286
Expenses -- Mortality and
expense risk charges (note 3) 825,956 471,932 239,523 571,993 410,701 315,765
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 5,561,338 3,110,351 1,622,951 2,771,962 2,110,596 1,182,521
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 763,575 (105,319) (231,920) 701,256 353,442 173,683
Unrealized appreciation
(depreciation) on investments 2,079,281 2,497,291 (2,323,932) 2,786,345 3,750,075 (2,203,089)
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2,842,856 2,391,972 (2,555,852) 3,487,601 4,103,517 (2,029,406)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 8,404,194 5,502,323 (932,901) 6,259,563 6,214,113 (846,885)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
High
Money Market Income
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 1,655,033 3,320,468 2,051,133 2,780,632 1,144,671 798,967
Expenses -- Mortality and
expense risk charges (note 3) 382,911 699,880 540,987 332,922 297,241 135,458
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 1,272,122 2,620,588 1,510,146 2,447,710 847,430 663,509
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) -- -- -- 479,085 425,760 (100,779)
Unrealized appreciation
(depreciation) on investments -- -- -- 308,688 2,702,738 (890,395)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments -- -- -- 787,773 3,128,498 (991,174)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 1,272,122 2,620,588 1,510,146 3,235,483 3,975,928 (327,665)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
Equity-
Income Growth
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends 12,605,854 10,037,638 4,675,559 13,903,188 567,790 4,043,602
Expenses -- Mortality and
expense risk charges (note 3) 4,253,036 2,138,272 902,437 2,834,086 1,696,933 943,085
- -------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 8,352,818 7,899,366 3,773,122 11,069,102 (1,129,143) 3,100,517
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 9,394,625 4,284,587 284,694 9,229,819 7,510,176 424,903
Unrealized appreciation
(depreciation) on investments 23,601,942 37,953,951 (106,600) 6,990,625 29,804,134 (3,300,969)
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 32,996,567 42,238,538 178,094 16,220,444 37,314,310 (2,876,066)
- -------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 41,349,385 50,137,904 3,951,216 27,289,546 36,185,167 224,451
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
Overseas
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 2,309,161 644,375 196,613
Expenses -- Mortality and expense risk charges (note 3) 1,245,263 999,548 750,229
- ---------------------------------------------------------------------------------------------------
Net investment income (expense) 1,063,898 (355,173) (553,616)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 2,693,770 734,798 810,922
Unrealized appreciation (depreciation) on investments 7,585,836 6,428,977 (1,667,636)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 10,279,606 7,163,775 (856,714)
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 11,343,504 6,808,602 (1,410,330)
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund II
Asset
Manager Contrafund
Portfolio Portfolio
Period from
January 5,
Year ended 1995 to
Year ended December 31, December 31, December 31,
1996 1995 1994 1996 1995
<S> <C>
Investment income:
Income -- Dividends 27,801,550 9,085,957 15,691,643 634,656 784,088
Expenses -- Mortality and expense risk charges (note 3) 4,059,911 4,926,810 4,653,566 1,322,883 323,922
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 23,741,639 4,159,147 11,038,077 (688,227) 460,166
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 7,507,674 1,958,733 275,628 2,738,082 905,255
Unrealized appreciation (depreciation) on investments 23,008,153 55,306,129 (40,761,110) 17,275,767 4,218,866
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 30,515,827 57,264,862 (40,485,482) 20,013,849 5,124,121
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 54,257,466 61,424,009 (29,447,405) 19,325,622 5,584,287
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Advisers Management Trust
Balanced Bond
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends $ 5,226,886 748,770 1,202,168 1,231,424 958,338 708,775
Expenses -- Mortality and
expense risk charges (note 3) 381,777 385,789 345,231 151,484 210,707 234,710
- ----------------------------------------------------------------------------------------------------------------------
Net investment income 4,845,109 362,981 856,937 1,079,940 747,631 474,065
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 419,822 895,552 369,206 (136,701) 45,793 (487,357)
Unrealized appreciation (depreciation)
on investments (3,501,201) 5,264,633 (2,580,253) (646,673) 816,276 (236,796)
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (3,081,379) 6,160,185 (2,211,047) (783,374) 862,069 (724,153)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
operations $ 1,763,730 6,523,166 (1,354,110) 296,566 1,609,700 (250,088)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Advisers Management Trust
Growth
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Investment income:
Income -- Dividends 1,152,528 246,676 813,202
Expenses -- Mortality and
expense risk charges (note 3) 146,484 127,144 73,324
- -----------------------------------------------------------------------------
Net investment income 1,006,044 119,532 739,878
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 315,046 242,067 (88,698)
Unrealized appreciation (depreciation)
on investments (363,320) 1,957,190 (1,043,018)
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (48,274) 2,199,257 (1,131,716)
- -----------------------------------------------------------------------------
Increase (decrease) in net assets from
operations 957,770 2,318,789 (391,838)
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Federated Investors Insurance
Series
American High Income
Leaders Bond Utility
Fund II Fund II Fund II
Period from Period from
Period from February 3, January 27,
May 6, 1996 to Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31, December 31,
1996 1996 1995 1996 1995
<S> <C>
Investment income:
Income -- Dividends $ 15,977 579,337 45,272 766,616 223,744
Expenses -- Mortality and
expense risk charges (note 3) 12,003 87,381 6,392 243,314 61,497
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 3,974 491,956 38,880 523,302 162,247
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 29,680 31,769 3,368 336,527 90,613
Unrealized appreciation
(depreciation) on investments 162,046 424,014 26,388 1,113,241 914,307
- ---------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 191,726 455,783 29,756 1,449,768 1,004,920
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 195,700 947,739 68,636 1,973,070 1,167,167
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Alger American
Small
Cap Growth
Portfolio Portfolio
Period from Period from
October 3, October 4,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
<S> <C>
Investment income:
Income -- Dividends 105,411 -- 668,828 --
Expenses -- Mortality and
expense risk charges (note 3) 414,206 9,745 358,846 6,776
- -------------------------------------------------------------------------------------------------
Net investment income (expense) (308,795) (9,745) 309,982 (6,776)
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (122,299) (20,417) 315,644 (2,380)
Unrealized appreciation
(depreciation) on investments (80,937) (25,048) 2,224,353 27,240
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (203,236) (45,465) 2,539,997 24,860
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations (512,031) (55,210) 2,849,979 18,084
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series
Aggressive
Growth Growth
Portfolio Portfolio
Year ended Year ended
December 31, December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Investment income:
Income - Dividends $ 755,467 701,550 143,307 3,316,849 1,774,926 109,722
Expenses - Mortality and expense risk charges (note 3) 880,271 464,496 102,376 1,496,337 686,203 258,877
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (124,804) 237,054 40,931 1,820,512 1,088,723 (149,155)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 3,422,984 1,735,504 117,926 4,286,543 1,220,855 141,619
Unrealized appreciation (depreciation) on investments 109,555 7,840,280 1,778,397 11,457,707 11,886,046 75,874
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3,532,539 9,575,784 1,896,323 15,744,250 13,106,901 217,493
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations $ 3,407,735 9,812,838 1,937,254 17,564,762 14,195,624 68,338
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series
Worldwide
Growth
Portfolio
Year ended
December 31,
1996 1995 1994
<S> <C>
Investment income:
Income - Dividends 2,094,632 225,282 3,147
Expenses - Mortality and expense risk charges (note 3) 1,418,611 477,320 204,215
- ------------------------------------------------------------------------------------------------
Net investment income (expense) 676,021 (252,038) (201,068)
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 5,069,677 439,501 1,394,128
Unrealized appreciation (depreciation) on investments 18,944,795 9,549,318 (1,349,019)
- ------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 24,014,472 9,988,819 45,109
- ------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 24,690,493 9,736,781 (155,959)
- ------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
Flexible International
Balanced Income Growth
Portfolio Portfolio Portfolio
Period from Period from Period from
October 11, October 13, May 3, 1996
Year ended 1995 to Year ended 1995 to to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996
<S> <C>
Investment income:
Income - Dividends $ 283,521 12,299 288,802 20,133 54,433
Expenses - Mortality and expense risk
charges (note 3) 113,425 2,009 40,424 980 45,378
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income 170,096 10,290 248,378 19,153 9,055
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 122,576 9,364 4,524 29 187,391
Unrealized appreciation (depreciation)
on investments 920,620 37,909 68,898 (2,240) 586,615
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 1,043,196 47,273 73,422 (2,211) 774,006
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 1,213,292 57,563 321,800 16,942 783,061
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
Common Government
Stock Index Securities
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 22,942,876 272,440 32,665 1,165,729 481,595 170,881
Net realized gain (loss) 1,510,464 345,068 (65,078) (68,248) (20,275) (401,286)
Unrealized appreciation
(depreciation) on investments (16,204,375) 2,539,788 (8,702) (995,503) 567,616 (216,822)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 8,248,965 3,157,296 (41,115) 101,978 1,028,936 (447,227)
- ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 18,225,715 7,357,078 1,724,390 3,734,757 1,619,783 2,890,849
Transfers (to) from the general account of Life of
Virginia:
Death benefits (77,864) (143,652) (10,380) (76,802) (44,216) (14,693)
Surrenders (1,079,082) (306,506) (177,818) (492,750) (500,706) (213,354)
Cost of insurance and administrative expense
(note 3) (45,091) (22,813) (14,229) (21,731) (17,040) (17,841)
Transfer gain (loss) and transfer fees (note 3) 7,463 (8,822) (1,218) 8,420 (9,439) 1,433
Transfers (to) from the Guarantee Account (note 1) 3,139,208 695,771 (20,371) 135,548 60,927 (424,053)
Interfund transfers 5,665,381 5,341,899 396,185 (65,339) 2,038,922 (797,830)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 25,835,730 12,912,955 1,896,559 3,222,103 3,148,231 1,424,511
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 34,084,695 16,070,251 1,855,444 3,324,081 4,177,167 977,284
Net assets at beginning of year 21,783,756 5,713,505 3,858,061 9,805,889 5,628,722 4,651,438
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $55,868,451 21,783,756 5,713,505 13,129,970 9,805,889 5,628,722
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Life of Virginia Series Fund, Inc.
<S> <C>
Money Market Total Return
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
Increase (decrease) in net assets From operations:
Net investment income $ 4,224,053 953,357 150,596 8,962,291 1,389,047 299,516
Net realized gain (loss) 1,686,452 312,501 56,347 614,446 308,073 52,519
Unrealized appreciation
(depreciation) on investments (2,984,484) (757,472) (36,981) (6,827,262) 1,987,241 (190,731)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 2,926,021 508,386 169,962 2,749,475 3,684,361 161,304
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 153,728,177 52,511,585 26,435,513 8,515,814 4,777,568 4,226,681
Transfers (to) from the general account of Life of
Virginia:
Death benefits (781,386) (4,954) (19,063) (153,153) (184,615) (42,532)
Surrenders (8,255,412) (2,099,100) (2,204,998) (946,894) (685,070) (477,463)
Cost of insurance and administrative expense
(note 3) (78,769) (17,072) (30,941) (51,588) (40,610) (34,693)
Transfer gain (loss) and transfer fees (note 3) 28,173 52,426 11,405 (69,616) 5,627 25,934
Transfers (to) from the Guarantee Account (note 1) 4,298,099 4,957,966 (2,851,523) 919,901 401,449 (436,022)
Interfund transfers (93,981,321) (30,878,764) (17,423,556) 75,151 2,419,115 92,268
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 54,957,561 24,522,087 3,916,837 8,289,615 6,693,464 3,354,173
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 57,883,582 25,030,473 4,086,799 11,039,090 10,377,825 3,515,477
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of year 32,303,591 7,273,118 3,186,319 22,555,371 12,177,546 8,662,069
Net assets at end of year 90,187,173 32,303,591 7,273,118 33,594,461 22,555,371 12,177,546
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Life of Virginia Series
<S> <C>
Fund, Inc. (continued)
International Real Estate
Equity Securities
Portfolio Portfolio
Period from Period from
May 23, May 2,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
Increase (decrease) in net assets From operations:
Net investment income $ 999,110 26,712 1,578,261 667,676
Net realized gain 86,537 646 299,159 24,928
Unrealized appreciation (depreciation) on investments (11,119) 25,880 4,059,521 1,049,744
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,074,528 53,238 5,936,941 1,742,348
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 2,563,735 332,761 2,949,990 301,414
Transfers (to) from the general account of Life of Virginia:
Death benefits (3,522) (2,053) -- (1,392)
Surrenders (103,501) (1,796) (41,760) (1,136)
Cost of insurance and administrative expense (note 3) (6,060) (661) (3,136) (286)
Transfer gain and transfer fees (note 3) (92,027) 1,565 (107,856) 1,212
Capital contribution 10,925,561 -- -- 10,000,000
Transfers from the Guarantee Account (note 1) 557,466 101,612 539,647 70,614
Interfund transfers 1,263,184 1,237,114 4,063,439 261,308
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 15,104,836 1,668,542 7,400,324 10,631,734
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 16,179,364 1,721,780 13,337,265 12,374,082
Net assets at beginning of period 1,721,780 -- 12,374,082 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 17,901,144 1,721,780 25,711,347 12,374,082
- ----------------------------------------------------------------------------------------------------------------------------------
20
<PAGE>
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
Money
Fund
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 134,874 239,141 175,902
Net realized gain (loss) -- -- --
Unrealized appreciation (depreciation) on investments -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 134,874 239,141 175,902
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,000 1,236,189 7,678,267
Transfers (to) from the general account of Life of Virginia:
Death benefits (25,650) -- --
Surrenders (248,877) (534,163) (546,418)
Cost of insurance and administrative expense (note 3) (7,741) (12,911) (18,965)
Transfer gain (loss) and transfer fees (note 3) (6,711) (10,807) 17,648
Transfers (to) from the Guarantee Account (note 1) (72,686) (522,980) (386,202)
Interfund transfers (1,858,335) (3,724,005) (1,087,392)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (2,219,000) (3,568,677) 5,656,938
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,084,126) (3,329,536) 5,832,840
Net assets at beginning of year 4,834,802 8,164,338 2,331,498
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 2,750,676 4,834,802 8,164,338
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
Bond
Fund
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,437,401 1,001,313 698,335
Net realized gain (loss) 106,242 53,120 (47,152)
Unrealized appreciation (depreciation) on investments (442,815) 1,654,610 (1,076,673)
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 1,100,828 2,709,043 (425,490)
- --------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 6,447,661 3,897,393 5,611,237
Transfers (to) from the general account of Life of Virginia:
Death benefits (255,232) (103,070) (186,474)
Surrenders (1,174,644) (1,044,752) (413,064)
Cost of insurance and administrative expense (note 3) (47,633) (43,224) (37,823)
Transfer gain (loss) and transfer fees (note 3) 15,212 (70,035) (16,223)
Transfers (to) from the Guarantee Account (note 1) 1,424,034 277,812 (532,602)
Interfund transfers 1,248,636 1,434,738 385,204
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 7,658,034 4,348,862 4,810,255
- --------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 8,758,862 7,057,905 4,384,765
Net assets at beginning of year 22,880,079 15,822,174 11,437,409
- --------------------------------------------------------------------------------------------------------
Net assets at end of year 31,638,941 22,880,079 15,822,174
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Fund
Capital
Appreciation Growth
Fund Fund
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 4,562,994 (536,250) 3,559,221 2,510,530 127,293 (20,598)
Net realized gain (loss) 6,301,279 1,666,666 (295,786) 1,959,742 739,151 156,193
Unrealized appreciation
(depreciation) on investments 7,478,382 18,977,772 (5,974,329) 5,568,726 5,287,316 (131,358)
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets from operations 18,342,655 20,108,188 (2,710,894) 10,038,998 6,153,760 4,237
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 35,523,585 13,056,769 33,580,537 15,322,231 8,623,363 3,884,748
Transfers (to) from the general
account of Life of Virginia:
Death benefits (577,949) (315,870) (93,328) (246,052) (11,683) (9,773)
Surrenders (5,679,609) (3,725,572) (995,422) (1,802,707) (531,276) (515,377)
Cost of insurance and administrative
expense (note 3) (237,053) (179,980) (140,228) (79,593) (49,718) (33,196)
Transfer gain (loss) and
transfer fees (note 3) (234,268) (110,449) (217,849) (9,390) (2,381) (9,445)
Transfers (to) from the
Guarantee Account (note 1) 5,093,547 910,511 (361,814) 2,323,647 807,793 (99,892)
Interfund transfers 16,982,928 899,125 5,252,436 8,265,699 5,644,624 703,654
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 50,871,181 10,534,534 37,024,332 23,773,835 14,480,722 3,920,719
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 69,213,836 30,642,722 34,313,438 33,812,833 20,634,482 3,924,956
Net assets at beginning of year 89,630,345 58,987,623 24,674,185 34,046,536 13,412,054 9,487,098
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 158,844,181 89,630,345 58,987,623 67,859,369 34,046,536 13,412,054
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
<S> <C>
Oppenheimer Variable Account Fund
High Multiple
Income Strategies
Fund Fund
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
Increase (decrease) in net assets From operations:
Net investment income $ 5,561,338 3,110,351 1,622,951 2,771,962 2,110,596 1,182,521
Net realized gain (loss) 763,575 (105,319) (231,920) 701,256 353,442 173,683
Unrealized appreciation
(depreciation) on investments 2,079,281 2,497,291 (2,323,932) 2,786,345 3,750,075 (2,203,089)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 8,404,194 5,502,323 (932,901) 6,259,563 6,214,113 (846,885)
- ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 22,356,655 11,530,804 16,369,336 8,520,761 4,566,130 10,981,087
Transfers (to) from the general
account of Life of Virginia:
Death benefits (693,092) (69,961) (55,784) (389,751) (183,215) (122,743)
Surrenders (2,655,530) (1,461,891) (757,957) (2,097,537) (1,641,635) (903,275)
Cost of insurance and administrative
expense (note 3) (100,320) (73,580) (62,628) (104,392) (93,990) (83,415)
Transfer gain (loss) and transfer
fees (note 3) (25,953) 144,255 (34,514) (27,395) (65,699) (24,108)
Tranfers (to) from the Guarantee
Account (note 1) 3,777,050 1,497,477 (523,877) 1,507,791 282,847 (564,250)
Interfund transfers 9,730,803 2,860,809 (888,148) 198,943 787,704 1,327,916
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from
capital transactions 32,389,613 14,427,913 13,046,428 7,608,420 3,652,142 10,611,212
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets 40,793,807 19,930,236 12,113,527 13,867,983 9,866,255 9,764,327
Net assets at beginning of year 44,968,830 25,038,594 12,925,067 40,250,929 30,384,674 20,620,347
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 85,762,637 44,968,830 25,038,594 54,118,912 40,250,929 30,384,674
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
High
Money Market
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 1,272,122 2,620,588 1,510,146
Net realized gain (loss) -- -- --
Unrealized appreciation (depreciation) on investments -- -- --
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 1,272,122 2,620,588 1,510,146
- --------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 117,921 36,176,530 79,067,408
Transfers (to) from the general account of Life of Virginia:
Death benefits (458,667) 103,982 (1,460,159)
Surrenders (2,213,343) (4,660,173) (3,367,219)
Cost of insurance and administrative expense (note 3) (65,257) (121,073) (146,671)
Transfer gain (loss) and transfer fees (note 3) (204,381) 49,754 (20,591)
Transfers (to) from the Guarantee Account (note 1) (661,457) (141,309) (6,872,564)
Interfund transfers (23,959,305) (47,938,008) (25,417,768)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (27,444,489) (16,530,297) 41,782,436
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (26,172,367) (13,909,709) 43,292,582
Net assets at beginning of year 48,156,015 62,065,724 18,773,142
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 21,983,648 48,156,015 62,065,724
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
Equity--
Income
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 2,447,710 847,430 663,509
Net realized gain (loss) 479,085 425,760 (100,779)
Unrealized appreciation (depreciation) on investments 308,688 2,702,738 (890,395)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 3,235,483 3,975,928 (327,665)
- ----------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums (248,987) 7,262,170 8,930,853
Transfers (to) from the general account of Life of Virginia:
Death benefits (33,131) (117,911) (23,586)
Surrenders (1,859,776) (953,927) (317,616)
Cost of insurance and administrative expense (note 3) (54,571) (51,018) (36,445)
Transfer gain (loss) and transfer fees (note 3) (14,545) (10,918) (47,417)
Transfers (to) from the Guarantee Account (note 1) (109,624) 860,461 (281,733)
Interfund transfers (7,008,575) 4,509,566 (116,753)
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (9,329,209) 11,498,423 8,107,303
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (6,093,726) 15,474,351 7,779,638
Net assets at beginning of year 30,894,827 15,420,476 7,640,838
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of year 24,801,101 30,894,827 15,420,476
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
Equity--
Income Growth
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 8,352,818 7,899,366 3,773,122 11,069,102 (1,129,143) 3,100,517
Net realized gain (loss) 9,394,625 4,284,587 284,694 9,229,819 7,510,176 424,903
Unrealized appreciation
(depreciation) on investments 23,601,942 37,953,951 (106,600) 6,990,625 29,804,134 (3,300,969)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations 41,349,385 50,137,904 3,951,216 27,289,546 36,185,167 224,451
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 91,217,558 63,044,040 43,319,748 40,351,417 35,842,400 38,436,463
Transfers (to) from the
general account of Life of Virginia:
Death benefits (2,317,929) (623,306) (890,708) (1,395,457) (338,418) (266,922)
Surrenders (12,923,609) (7,390,359) (1,798,386) (8,362,725) (5,531,711) (2,014,772)
Cost of insurance and
administrative expense (note 3) (565,181) (384,060) (224,723) (441,506) (345,393) (244,798)
Transfer gain (loss) and
transfer fees (note 3) (81,577) (128,097) 45,914 (243,398) 13,309 (94,035)
Transfers (to) from the
Guarantee Account (note 1) 14,669,920 8,592,478 (707,930) 7,334,280 3,842,828 (241,053)
Interfund transfers 12,688,430 43,164,815 13,086,320 (3,259,632) 18,922,427 6,890,505
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from capital transactions 102,687,612 106,275,511 52,830,235 33,982,979 52,405,442 42,465,388
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 144,036,997 156,413,415 56,781,451 61,272,525 88,590,609 42,689,839
Net assets at beginning of year 261,261,605 104,848,190 48,066,739 190,272,842 101,682,233 58,992,394
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 405,298,602 261,261,605 104,848,190 251,545,367 190,272,842 101,682,233
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Variable Insuracne Products Fund
Overseas
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 1,063,898 (355,173) (553,616)
Net realized gain 2,693,770 734,798 810,922
Unrealized appreciation (depreciation) on investments 7,585,836 6,428,977 (1,667,636)
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 11,343,504 6,808,602 (1,410,330)
- ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 11,020,984 10,634,049 47,044,690
Transfers (to) from the general account of Life of Virginia:
Death benefits (528,522) (556,976) (171,446)
Surrenders (3,972,175) (3,063,268) (1,164,675)
Cost of insurance and administrative expense (note 3) (214,759) (208,318) (185,276)
Transfer gain (loss) and transfer fees (note 3) (85,300) (53,050) 2,802
Transfers (to) from Gurantee Account (note 1) 3,116,987 590,771 (114,884)
Interfund transfers (4,620,473) (7,084,976) 12,111,215
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 4,716,742 258,232 57,522,426
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 16,060,246 7,066,834 56,112,096
Net assets at beginning of period 91,275,007 84,208,173 28,096,077
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 107,335,253 91,275,007 84,208,173
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund II
Asset
Manager Contrafund
Portfolio Portfolio
Period from
January 5,
Year ended 1995 to
Year ended December 31, December 31, December 31,
1996 1995 1994 1996 1995
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 23,741,639 4,159,147 11,038,077 (688,227) 460,166
Net realized gain 7,507,674 1,958,733 275,628 2,738,082 905,255
Unrealized appreciation (depreciation) on investments 23,008,153 55,306,129 (40,761,110) 17,275,767 4,218,866
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 54,257,466 61,424,009 (29,447,405) 19,325,622 5,584,287
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 15,580,792 21,217,331 210,283,774 41,520,289 26,666,752
Transfers (to) from the general account of Life of Virginia:
Death benefits (3,090,108) (2,849,779) (1,132,025) (569,391) (17,699)
Surrenders (23,863,347) (23,760,769) (13,957,293) (3,409,236) (676,614)
Cost of insurance and administrative expense (note 3) (1,159,170) (1,245,010) (1,320,021) (139,550) (42,327)
Transfer gain (loss) and transfer fees (note 3) (2,150,299) (305,606) (598,560) (6,491) (28,134)
Transfers (to) from Gurantee Account (note 1) 2,112,849 (7,015,144) (6,414,358) 8,894,897 4,851,438
Interfund transfers (31,512,425) (58,702,053) 7,913,872 15,486,630 25,426,220
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (44,081,708) (72,661,030) 194,775,389 61,777,148 56,179,636
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 10,175,758 (11,237,021) 165,327,984 81,102,770 61,763,923
Net assets at beginning of period 425,662,411 436,899,432 271,571,448 61,763,923 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 435,838,169 425,662,411 436,899,432 142,866,693 61,763,923
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Advisors Management Trust
Balanced
Portfolio
Year ended December 31,
1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 4,845,109 362,981 856,937
Net realized gain (loss) 419,822 895,552 369,206
Unrealized appreciation (depreciation) on investments (3,501,201) 5,264,633 (2,580,253)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 1,763,730 6,523,166 (1,354,110)
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums -- 2,535,815 4,905,972
Transfers (to) from the general account of Life of Virginia:
Death benefits (191,199) (153,937) (222,647)
Surrenders (2,074,244) (1,503,514) (850,409)
Cost of insurance and administrative expense (note 3) (82,124) (88,114) (87,021)
Transfer gain (loss) and transfer fees (note 3) (12,205) 7,049 (6,823)
Transfers (to) from the Guarantee Account (note 1) (37,694) (134,229) (303,659)
Interfund transfers (3,810,712) (2,179,193) (1,980,780)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (6,208,178) (1,516,123) 1,454,633
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (4,444,448) 5,007,043 100,523
Net assets at beginning of year 35,206,912 30,199,869 30,099,346
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 30,762,464 35,206,912 30,199,869
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Advisors Management Trust
Bond Growth
Portfolio Portfolio
Year ended December 31, Year ended December 31,
1996 1995 1994 1996 1995 1994
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 1,079,940 747,631 474,065 1,006,044 119,532 739,878
Net realized gain (loss) (136,701) 45,793 (487,357) 315,046 242,067 (88,698)
Unrealized appreciation
(depreciation) on investments (646,673) 816,276 (236,796) (363,320) 1,957,190 (1,043,018)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations 296,566 1,609,700 (250,088) 957,770 2,318,789 (391,838)
- ------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums -- 4,761,820 26,294,787 4,370 2,833,430 2,626,919
Transfers (to) from the general
account of Life of Virginia:
Death benefits (225,838) (7,505) (95,897) (56,431) (78,819) (9,898)
Surrenders (366,908) (522,591) (440,989) (415,296) (251,354) (120,880)
Cost of insurance and administrative
expense (note 3) (24,278) (37,167) (59,746) (25,172) (23,723) (17,468)
Transfer gain (loss) and
transfer fees (note 3) (9,665) (23,158) (26,596) (10,420) (697) 4,278
Transfers (to) from the
Guarantee Account (note 1) (92,797) 798,511 (1,028,597) (14,970) 36,976 (65,829)
Interfund transfers (5,700,964) (9,447,152) (16,482,327) (3,652,818) 1,961,133 (1,243,094)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital transactions (6,420,450) (4,477,242) 8,160,635 (4,170,737) 4,476,946 1,174,028
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (6,123,884) (2,867,542) 7,910,547 (3,212,967) 6,795,735 782,190
Net assets at beginning of year 15,845,921 18,713,463 10,802,916 13,715,063 6,919,328 6,137,138
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 9,722,037 15,845,921 18,713,463 10,502,096 13,715,063 6,919,328
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
<S> <C>
Federated Investors Insurance
Series
American High Income
Leaders Bond Utility
Fund II Fund II Fund II
Period from Period from
Period from February 3, January 27,
May 6, 1996 to Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31, December 31,
1996 1996 1995 1996 1995
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 3,974 491,956 38,880 523,302 162,247
Net realized gain (loss) 29,680 31,769 3,368 336,527 90,613
Unrealized appreciation (depreciation)
on investments 162,046 424,014 26,388 1,113,241 914,307
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 195,700 947,739 68,636 1,973,070 1,167,167
- ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 2,249,062 4,468,263 1,448,946 7,032,730 4,723,697
Transfers (to) from the general
account of Life of Virginia:
Death benefits -- (42,084) -- (172,666) --
Surrenders (28,376) (428,701) (12,805) (708,499) (150,715)
Cost of insurance and administrative
expense (note 3) (522) (5,233) (601) (25,376) (7,470)
Transfer gain (loss) and
transfer fees (note 3) 4,221 (43) 5,535 11,752 (650)
Transfers from the Guarantee
Account (note 1) 146,563 670,397 200,240 1,313,211 982,260
Interfund transfers 1,208,370 6,113,878 235,916 830,436 5,539,763
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets from
capital transactions 3,579,318 10,776,477 1,877,231 8,281,588 11,086,885
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets 3,775,018 11,724,216 1,945,867 10,254,658 12,254,052
Net assets at beginning of period -- 1,945,867 -- 12,254,052 --
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 3,775,018 13,670,083 1,945,867 22,508,710 12,254,052
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Alger American
Small
Cap Growth
Portfolio Portfolio
Period from Period from
October 3, October 4,
Year ended 1995 to Year ended 1995 to
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (308,795) (9,745) 309,982 (6,776)
Net realized gain (loss) (122,299) (20,417) 315,644 (2,380)
Unrealized appreciation (depreciation) on investments (80,937) (25,048) 2,224,353 27,240
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (512,031) (55,210) 2,849,979 18,084
- --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 25,934,981 3,369,922 21,518,317 2,632,716
Transfers (to) from the general account of Life of Virginia:
Death benefits (167,439) -- (22,815) --
Surrenders (837,016) (18,166) (539,265) (4,789)
Cost of insurance and administrative expense (note 3) (32,819) (1,420) (26,996) (895)
Transfer gain (loss) and transfer fees (note 3) (18,410) 7,625 (32,858) 1,883
Transfers from the Guarantee Account (note 1) 5,067,731 298,188 3,628,084 (47,006)
Interfund transfers 10,297,239 3,969,177 11,823,073 2,922,881
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 40,244,267 7,625,326 36,347,540 5,504,790
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 39,732,236 7,570,116 39,197,519 5,522,874
Net assets at beginning of period 7,570,116 -- 5,522,874 --
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 47,302,352 7,570,116 44,720,393 5,522,874
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
======================================================================================================
Janus Aspen Series
--------------------------------------
Aggressive
Growth
Portfolio
--------------------------------------
Year ended
December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (124,804) 237,054 40,931
Net realized gain 3,422,984 1,735,504 117,926
Unrealized appreciation (depreciation) on investments 109,555 7,840,280 1,778,397
- ------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 3,407,735 9,812,838 1,937,254
- ------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 17,880,226 16,756,982 11,040,719
Transfers (to) from the general account of Life of Virginia:
Death benefits (394,284) (86,506) (46,281)
Surrenders (2,851,517) (1,216,524) (143,136)
Cost of insurance and administrative expense (note 3) (112,813) (73,928) (27,618)
Transfer gain (loss) and transfer fees (note 3) (40,003) 38,529 16,650
Transfers (to) from the Guarantee Account (note 1) 3,328,781 2,434,875 (194,133)
Interfund transfers 8,025,078 7,553,096 5,460,535
- ------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 25,835,468 25,406,524 16,106,736
- ------------------------------------------------------------------------------------------------------
Increase in net assets 29,243,203 35,219,362 18,043,990
Net assets at beginning of year 54,720,334 19,500,972 1,456,982
- ------------------------------------------------------------------------------------------------------
Net assets at end of year $ 83,963,537 54,720,334 19,500,972
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=========================================================================================================
Janus Aspen Series
-----------------------------------------
Growth
Portfolio
---------------------------------------
Year ended
December 31,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,820,512 1,088,723 (149,155)
Net realized gain 4,286,543 1,220,855 141,619
Unrealized appreciation (depreciation) on investments 11,457,707 11,886,046 75,874
- ---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 17,564,762 14,195,624 68,338
- ---------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 35,456,497 20,907,687 23,804,072
Transfers (to) from the general account of Life of Virginia:
Death benefits (483,092) (292,563) (88,205)
Surrenders (3,747,509) (1,304,563) (335,606)
Cost of insurance and administrative expense (note 3) (199,595) (125,440) (70,249)
Transfer gain (loss) and transfer fees (note 3) (208,664) (42,445) (30,507)
Transfers (to) from the Guarantee Account (note 1) 7,027,293 2,397,459 (64,235)
Interfund transfers 11,381,396 14,146,981 5,733,375
- ---------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 49,226,326 35,687,116 28,948,645
- ---------------------------------------------------------------------------------------------------------
Increase in net assets 66,791,088 49,882,740 29,016,983
Net assets at beginning of year 84,905,484 35,022,744 6,005,761
- ---------------------------------------------------------------------------------------------------------
Net assets at end of year 151,696,572 84,905,484 35,022,744
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================================
Janus Aspen Series
------------------------------------------
Worldwide
Growth
Portfolio
---------------------------------------
Year ended
December 31,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 676,021 (252,038) (201,068)
Net realized gain 5,069,677 439,501 1,394,128
Unrealized appreciation (depreciation) on investments 18,944,795 9,549,318 (1,349,019)
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 24,690,493 9,736,781 (155,959)
- ----------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 45,862,046 14,202,159 17,754,295
Transfers (to) from the general account of Life of Virginia:
Death benefits (407,146) (146,748) (74,067)
Surrenders (2,394,900) (1,173,774) (321,790)
Cost of insurance and administrative expense (note 3) (172,873) (87,512) (53,600)
Transfer gain (loss) and transfer fees (note 3) (183,599) (23,608) (34,313)
Transfers (to) from the Guarantee Account (note 1) 8,313,366 1,874,804 40,818
Interfund transfers 42,049,450 7,110,222 7,084,163
- ----------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 93,066,344 21,755,543 24,395,506
- ----------------------------------------------------------------------------------------------------------
Increase in net assets 117,756,837 31,492,324 24,239,547
Net assets at beginning of year 59,653,861 28,161,537 3,921,990
- ----------------------------------------------------------------------------------------------------------
Net assets at end of year 177,410,698 59,653,861 28,161,537
==========================================================================================================
</TABLE>
27
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
==================================================================================================================================
Janus Aspen Series (continued)
--------------------------------------------------------------------
Flexible International
Balanced Income Growth
Portfolio Portfolio Portfolio
-------------------------- -------------------------- -----------
Period from Period from Period from
October 11, October 13, May 3, 1996
Year ended 1995 to Year ended 1995 to to
December 31, December 31, December 31, December 31, December 31,
1996 1995 1996 1995 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 170,096 10,290 248,378 19,153 9,055
Net realized gain 122,576 9,364 4,524 29 187,391
Unrealized appreciation (depreciation) on investments 920,620 37,909 68,898 (2,240) 586,615
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,213,292 57,563 321,800 16,942 783,061
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 8,643,527 619,039 2,591,080 312,671 4,654,797
Transfers (to) from the general account of Life of Virginia:
Death benefits (37,496) - - -
Surrenders (271,087) (61,992) (29,518) (451) (51,116)
Cost of insurance (note 3) (7,301) (379) (2,717) (111) (3,441)
Transfer gain (loss) and transfer fees (note 3) 5,413 (240) (413) 179 3,766
Transfer (to) from the Guarantee Account (note 1) 1,091,622 210,233 345,536 41,646 935,954
Interfund transfers 3,850,513 1,147,007 992,086 419,589 7,189,157
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 13,275,191 1,913,668 3,896,054 773,523 12,729,117
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 14,488,483 1,971,231 4,217,854 790,465 13,512,178
Net assets at beginning of period 1,971,231 - 790,465 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 16,459,714 1,971,231 5,008,319 790,465 13,512,178
==================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
December 31, 1996
==============================================================================
(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 life
insurance policies issued by Life of Virginia. As of April 1, 1996,
Life of Virginia is a wholly-owned subsidiary of GNA Corporation,
which is a wholly-owned subsidiary of General Electric Capital
Corporation. Prior to April 1, 1996, Life of Virginia was an
indirect wholly-owned subsidiary of Aon Corporation (Aon).
In May 1996, two new investment subdivisions were added to the
Account, for both Type I and II policies. One of these subdivisions,
the International Growth Portfolio, invests solely in a designated
portfolio of the Janus Aspen Series, a series type mutual fund. The
other new subdivision, the American Leaders Fund II, invests solely
in a designated portfolio of the Federated Investors Insurance
Series, a series type mutual fund. During 1995, nine new investment
subdivisions were added to the Account, for both Type I and Type II
policies. The Utility Fund II and High Income Bond Fund II each
invests solely in a designated portfolio of the Federated Investors
Insurance Series, a series type mutual fund. The Contrafund
Portfolio invests solely in a designated portfolio of the Variable
Insurance Products Fund II, a series type mutual fund. The
International Equity Portfolio and the Real Estate Securities
Portfolio each invests solely in a designated portfolio of Life of
Virginia Series Fund, Inc., a series type mutual fund. The Balanced
Portfolio and Flexible Income Portfolio each invests solely in a
designated portfolio of the Janus Aspen Series, a series type mutual
fund. The Growth Portfolio and Small Cap Portfolio 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 Portfolio, Bond Portfolio, and Growth
Portfolio 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 Portfolio and High
Income Portfolio, each invests solely in a designated portfolio of
the Variable Insurance Products Fund, a series type mutual fund. The
sixth closed subdivision, the Money Fund 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.
(continued)
29
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
===========================================================================
(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
underlying net asset value per share 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 or period ended December
31, 1996 were:
<TABLE>
<CAPTION>
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- -----------------------------------------------------------------------------------------
<S> <C>
Life of Virginia Series Fund, Inc.:
Common Stock Index $ 36,692,341 11,432,318
Government Securities 10,166,532 7,107,213
Money Market 391,196,364 320,815,562
Total Return 14,983,042 6,885,672
International Equity 17,478,593 2,392,057
Real Estate Securities 9,552,202 1,984,313
Oppenheimer Variable Account Fund:
Money 409,499 2,486,649
Bond 16,439,807 7,336,076
Capital Appreciation 88,810,248 33,430,618
Growth 38,577,404 12,290,558
High Income 69,670,128 31,594,537
Multiple Strategies 17,675,982 7,308,232
Variable Insurance Products Fund:
Money Market 5,800,488 32,080,726
High Income 3,660,044 10,528,929
Equity-Income 181,615,544 70,351,272
Growth 107,512,949 62,292,603
Overseas 34,150,165 28,339,524
Variable Insurance Products Fund II:
Asset Manager 61,300,567 81,645,379
Contrafund 90,161,281 29,333,769
- -----------------------------------------------------------------------------------------
</TABLE>
(continued)
30
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
===========================================================================
(2) CONTINUED
<TABLE>
<CAPTION>
<S> <C>
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- ----------------------------------------------------------------------------------
Advisers Management Trust:
Balanced 5,655,090 6,936,160
Bond 1,830,648 7,157,297
Growth 1,244,527 4,399,296
Federated Investors Insurance Series:
American Leaders 3,953,558 418,490
High Income Bond 14,357,897 3,076,071
Utility 15,642,812 6,776,198
Alger American:
Small Cap 61,955,161 22,013,976
Growth 50,723,947 13,854,932
Janus Aspen Series:
Aggressive Growth 46,001,651 20,237,777
Growth 77,939,677 26,907,321
Worldwide Growth 123,483,783 29,699,308
Balanced 16,888,386 3,423,052
Flexible Income 5,308,689 1,139,810
International Growth 15,855,069 3,342,387
- ----------------------------------------------------------------------------------
</TABLE>
FEDERAL INCOME TAXES
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life
of Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the General
Electric Capital Assurance Company consolidated federal income tax
return. The Account will not be taxed as a regulated investment
company under subchapter M of the Code. Under existing federal
income tax law, no taxes are payable on the investment income or on
the capital gains of the Account.
USE OF ESTIMATES
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.
(continued)
31
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
================================================================================
(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 (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
crediting 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 sale of the underlying shares is also charged to
Life of Virginia.
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), a wholly-owned
subsidiary of GNA Corporation, 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%.
Certain officers and directors of Life of Virginia are also officers
and directors of FFSC and the Fund.
===============================================================================
(continued)
32
[KPMG PEAT MARWICK LETTERHEAD]
Suite 1900
1021 East Cary Street
Richmond, VA 23219-4023
INDEPENDENT AUDITORS' REPORT
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated balance sheets of The Life
Insurance Company of Virginia (an indirect wholly-owned subsidiary of General
Electric Capital Corporation) and subsidiaries as of December 31, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the nine months ended December 31, 1996. We have also audited the
preacquisition statements of income, stockholders' equity and cash flows for the
three months ended March 31, 1996. 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. The accompanying
financial statements of the Life Insurance Company of Virginia as of and for the
years ended December 31, 1995 and 1994, were audited by other auditors whose
report, dated February 8, 1996 on those financial statements included an
explanatory paragraph that described the change in the company's method of
accounting for certain investments.
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 audit provides a reasonable basis for our opinion.
In our opinion, the 1996 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Life
Insurance Company of Virginia and subsidiaries as of December 31, 1996, and the
results of their operations and their cash flows for the nine month period ended
December 31, 1996 and the preacquisition three month period ended March 31, 1996
in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective April
1, 1996, General Electric Capital Corporation acquired all of the outstanding
stock of The Life Insurance Company of Virginia in a business combination
accounted for as a purchase. As a result of the acquisition, the consolidated
financial information for the periods after the acquisition is presented on a
different cost basis than that for the periods before the acquisition and,
therefore, is not comparable.
/s/ KPMG PEAT MARWICK LLP
January 15, 1997
<PAGE>
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated statement of financial position of
The Life Insurance Company of Virginia and subsidiaries as of December 31, 1995,
and the related consolidated statements of income, stockholder's equity, and
cash flows for each of the two 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 the consolidated
results of their operations and their cash flows for each of the two 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
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
(in millions)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Preacquisition
ASSETS 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments:
Fixed maturities:
Available for sale - at fair value; (amortized cost:
December 31, 1996 - $5,102.2; 1995 - $4,267.2) $ 5,142.7 4,411.0
Equity securities - at fair value
Common stocks (cost: December 31, 1996 - $31.6; 1995 - $31.5) 34.7 35.4
Preferred stocks (cost: December 31, 1996 - $123.5; 1995 - $102.2) 130.8 121.5
Mortgage loans on real estate (net of reserve for losses:
December 31, 1996 - $20.8; 1995 - $23.6) 585.4 592.5
Real estate (net of accumulated depreciation: December 31, 1996 -
$4.4; 1995 - $5.6) 19.4 36.6
Policy loans 179.5 151.7
Short-term investments 42.4 81.7
- --------------------------------------------------------------------------------------------------------------------
Total investments 6,134.9 5,430.4
- --------------------------------------------------------------------------------------------------------------------
Cash 6.4 1.6
Receivables:
Premiums and other 21.0 13.5
Accrued investment income 116.6 72.3
Receivable from affiliates, net - 558.4
- --------------------------------------------------------------------------------------------------------------------
Total receivables 137.6 644.2
Deferred policy acquisition costs 70.3 363.9
Goodwill (net of accumulated amortization: December 31, 1996 - $5.0) 125.4 -
Present value of future profits
(net of accumulated amortization: December 31, 1996 - $45.2; 419.2 32.6
1995 - $32.5)
Property and equipment at cost
(net of accumulated depreciation: December 31, 1996 - $1.7; 1.7 3.7
1995 - $18.4)
Deferred income tax benefit 72.9 -
Other assets 12.3 65.9
Assets held in separate accounts 2,762.7 2,019.6
- --------------------------------------------------------------------------------------------------------------------
Total assets 9,743.4 8,561.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Balance Sheets, Continued
December 31, 1996 and 1995
(in millions, except share data)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Preacquisition
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Policy liabilities:
Future policy benefits $ 518.3 472.4
Policy and contract claims 69.1 31.7
Unearned and advance premiums 0.1 0.3
Other policyholder funds 5,094.4 5,013.9
- --------------------------------------------------------------------------------------------------------------------
Total policy liabilities 5,681.9 5,518.3
General liabilities:
Payable to affiliate, net 8.8 -
Commissions and general expenses 46.8 12.8
Current income taxes 45.4 9.5
Deferred income taxes - 75.5
Other liabilities 192.2 104.3
Liabilities related to separate accounts 2,762.7 2,019.6
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 8,737.8 7,740.0
- --------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0 4.0
Paid-in additional capital 928.1 749.1
Net unrealized investment gains 19.4 103.1
Retained earnings (deficit) 54.1 (34.3)
- --------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,005.6 821.9
- --------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity 9,743.4 8,561.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Income
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Preacquisition
-----------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
REVENUE
Premiums and policy fees $ 154.7 92.4 179.3 218.8
Separate account fees 23.1 5.9 17.7 11.3
Net investment income (note 2) 334.4 112.0 402.1 490.6
Realized investment gains (losses) (note 2) 6.0 9.0 (76.5) (25.8)
Other income 0.6 1.0 2.8 8.5
- -----------------------------------------------------------------------------------------------------------------------------
Total revenue earned 518.8 220.3 525.4 703.4
- -----------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Benefits to policyholders 326.4 166.0 372.9 477.1
Commissions and general expenses 53.2 28.8 43.7 75.7
Amortization of intangibles 50.1 0.6 3.2 5.1
Amortization of deferred policy acquisition costs 3.2 6.0 39.3 57.1
- -----------------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 432.9 201.4 459.1 615.0
INCOME BEFORE INCOME TAX 85.9 18.9 66.3 88.4
Provision for income tax (note 3)
Current expense (benefit) 39.7 (3.8) 37.9 21.0
Deferred expense (benefit) (7.9) 10.8 (10.8) (5.7)
- -----------------------------------------------------------------------------------------------------------------------------
31.8 7.0 27.1 15.3
NET INCOME (LOSS) $ 54.1 11.9 39.2 73.1
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Preacquisition
----------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK
$1,000 par value common stock, authorized,
issued and outstanding 4,000 in 1996,
1995 and 1994)
Balance at beginning and end of period $ 4.0 4.0 4.0 4.0
PAID-IN ADDITIONAL CAPITAL
Balance at beginning of period 818.4 749.1 704.1 704.1
Adjustment to reflect purchase method (note 1) 109.7 - - -
Capital contribution from parent (notes 4, 7) - 69.3 45.0 -
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 928.1 818.4 749.1 704.1
NET UNREALIZED INVESTMENT GAINS (LOSSES)
Balance at beginning of period 11.9 103.1 (97.5) 23.6
Adjustment to reflect purchase method
(note 1) (11.9) - - -
Effect of change in accounting principles
at January 1 (note 2) - - - 25.1
Net unrealized investment gains (losses) 19.4 (91.2) 200.6 (146.2)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 19.4 11.9 103.1 (97.5)
NET FOREIGN EXCHANGE GAINS (LOSSES)
Balance at beginning of period - - (3.0) (2.3)
Net foreign exchange gains (losses) - - 3.0 (0.7)
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period - - - (3.0)
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period (22.4) (34.3) 159.8 126.7
Adjustment to reflect purchase method
(note 1) 22.4 - - -
Net income 54.1 11.9 39.2 73.1
Dividends to stockholder - - (40.0) (40.0)
Stock dividend to affiliate (note 7) - - (193.3) -
- -------------------------------------------------------------------------------------------------------------------
Balance at end of period 54.1 (22.4) (34.3) 159.8
- -------------------------------------------------------------------------------------------------------------------
Stockholders' equity at end of period $ 1,005.6 811.9 821.9 767.4
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the periods from April 1, 1996 to December 31, 1996 and from January 1, 1996
to March 31, 1996, and the years ended December 31, 1995 and 1994 (in millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Preacquisition
-------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 54.1 11.9 39.2 73.1
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 53.5 (32.8) 114.2 331.4
Change in accrued investment income (37.6) 4.1 (2.1) 1.8
Deferred policy acquisition costs (74.9) (22.2) (76.1) (91.8)
Amortization of deferred policy acquisition costs 3.2 6.0 39.3 57.1
Amortization of intangibles 50.1 0.6 3.2 5.1
Other amortization and depreciation 7.3 1.4 (1.2) 2.3
Premiums and operating receivables, commissions and general
expenses, income taxes, other assets and other liabilities 77.8 22.9 (65.7) (139.7)
Realized investment (gains) losses (6.0) (9.0) 76.5 25.8
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 127.5 (17.1) 127.3 265.1
- -----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale (purchase) of short-term investments - net 49.4 (10.1) (18.8) (0.3)
Sale or maturity of investments
Fixed maturities - held to maturity:
Maturities - - 3.9 50.8
Calls and prepayments - - 60.9 727.5
Sales - - - -
Fixed maturities - available for sale
Maturities 201.5 46.1 35.0 50.4
Calls and prepayments 353.5 101.0 58.6 269.1
Sales 452.0 115.8 1,700.3 444.7
All other investments 177.3 44.9 124.6 231.1
Purchase of investments:
Fixed maturities - held to maturity - - - (734.0)
Fixed maturities - available for sale (1,279.5) (144.1) (1,950.7) (1,018.5)
All other investments (39.5) (65.5) (183.5) (357.1)
Sale (purchase) of property and equipment - (0.2) (0.8) (1.8)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (85.3) 87.9 (170.5) (338.1)
Cash flows from financing activities:
Capital contribution - 2.8 - -
Cash dividends to stockholder - (40.0) (6.0) (20.0)
Change in cash overdrafts (12.7) 28.8 - -
Interest sensitive life, annuity and investment contract deposits 1,275.4 301.9 1,059.5 1,455.5
Interest sensitive life, annuity and investment contract withdrawals (1,305.6) (358.8) (1,031.7) (1,362.6)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (42.9) (65.3) 21.8 72.9
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (0.7) 5.5 (21.4) (0.1)
Cash at beginning of period 7.1 1.6 23.0 23.1
- -----------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 6.4 7.1 1.6 23.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996
===============================================================================
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND PRACTICES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles (GAAP) and
include the accounts of The Life Insurance Company of Virginia and its
subsidiaries ("Life of Virginia" or "Company"). Subsidiaries include
Globe Life Insurance Company and Assigned Settlements Inc. at December
31, 1994 and only Assigned Settlements Inc. at December 31, 1996 and
1995. All material intercompany accounts and transactions have been
eliminated.
Prior to April 1, 1996 Combined Insurance Company of America ("CICA")
owned 100% or 4,000 shares of Life of Virginia. CICA is a wholly-owned
subsidiary of AON Corporation (AON). On April 1, 1996, CICA sold 100% of
the issued and outstanding shares of Life of Virginia to General Electric
Capital Corporation ("GE Capital"). Immediately thereafter, 80% was
contributed to General Electric Capital Assurance Company (the "Parent").
On December 31, 1996, the remaining 20% was contributed to General
Electric Life Insurance Group, Inc. ("GELIC").
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 34%, 43% and 46% of premium and annuity
consideration collected, in 1996, 1995, and 1994, respectively, came from
customers residing in the South Atlantic region of the United States.
Although the Company markets its products through numerous distributors,
approximately 21.2% and 13.8% of the Company's sales in 1996 and 1995,
respectively, have been through two specific national stockbrokers. Loss
of all or a substantial portion of the business provided by these
stockbrokers could have a material adverse effect on the business and
operations of the Company. The Company does not believe, however, that
the loss of such business would have a long-term adverse effect because
of the Company's competitive position in the marketplace and the
availability of business from other distributors.
Certain 1995 and 1994 amounts have been reclassified to conform to 1996
presentation.
PURCHASE ACCOUNTING METHOD
Upon acquisition of Life of Virginia by GE Capital, Life of Virginia
restated its financial statements in accordance with the purchase method
of accounting which allocates the net purchase price for Life of Virginia
and its subsidiaries of $932.1 million according to the fair values of
the acquired assets and liabilities, including the estimated present
value of future profits. These allocated values were dependent upon
policies in force and market conditions at the time of closing.
(Continued)
7
<PAGE>
<TABLE>
<CAPTION>
============================================================================
(1) CONTINUED
These allocations are summarized below:
(In millions) April 1, 1996
- ----------------------------------------------------------------------------
<S> <C>
Assets acquired:
Cash and investments (including mortgages) $ 6,006.2
Goodwill 130.3
Present value of future profits 484.1
Assets held in separate accounts 2,096.6
Other assets 194.2
- ---------------------------------------------------------------------------------------------------------------
Total $ 8,911.4
- ---------------------------------------------------------------------------------------------------------------
Liabilities assumed:
Policyholder liabilities $ 5,658.7
Other liabilities 224.0
Liabilities related to separate accounts 2,096.6
- ---------------------------------------------------------------------------------------------------------------
Total 7,979.3
- ---------------------------------------------------------------------------------------------------------------
Adjusted purchase price $ 932.1
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to revaluing all material tangible assets and liabilities to
their respective estimated market values as of the closing date of the
sale, Life of Virginia also recorded in its financial statements the
excess of cost over fair value of net assets acquired (goodwill) as well
as the present value of future profits to be derived from the purchased
business. These amounts were determined in accordance with the purchase
method of accounting. This new basis of accounting resulted in an
increase in stockholders' equity of $120.2 million in 1996 reflecting the
application of the purchase method of accounting. The Company's
consolidated financial statements subsequent to April 1, 1996 reflect
this new basis of accounting.
All amounts for periods ended before April 1, 1996 are labeled
"Preacquisition" and are based on the preacquisition historical costs in
accordance with generally accepted accounting principles. The periods
ending after such date are based on fair values at April 1, 1996 and
subsequent costs in accordance with the purchase method of accounting.
PRESENT VALUE OF FUTURE PROFITS
As of April 1, 1996 Life of Virginia established an intangible asset
which represents the "present value of future profits" (PVFP). PVFP
reflects the estimated fair value of the Company's life insurance
business in-force and represents the portion of the cost to acquire the
Company that is allocated to the value of the right to receive future
cash flows from insurance contracts existing at the date of acquisition.
Such value is the present value of the actuarially determined projected
cash flows for the acquired policies discounted at a rate of 15%, the
rate of return required by the Parent to invest in the business being
acquired.
(Continued)
8
<PAGE>
(1) CONTINUED
PVFP is amortized over the estimated contract life of the business
acquired in relation to the present value of estimated gross profits. The
estimated gross profit streams are periodically reevaluated and the
unamortized balance of PVFP adjusted to the amount that would have
existed had the actual experience and revised estimates been known and
applied since inception. The amortization period is the remaining life of
the policies, which ranges from 10 to 30 years from the date of original
policy issue. Based on current assumptions, net amortization of the PVFP
asset, expressed as a percentage, is projected to be 13.3%, 12.1%, 10.9%,
9.7% and 8.3% for the years ended December 31, 1997 through 2001,
respectively. Actual amortization incurred during these years may vary as
assumptions are modified to incorporate actual results.
Prior to April 1, 1996, Life of Virginia's PVFP was calculated in a
similar manner as the PVFP discussed above and related to policies
in-force on April 30, 1986, the date the Company was acquired by Aon.
Under purchase accounting this PVFP was removed.
The projected ending balance of PVFP will be further adjusted to reflect
the impact of unrealized gains or losses on fixed maturities held as
available for sale in the investment portfolios. Such adjustments are not
recorded in the Company's net income but rather as a credit or charge to
stockholders' equity, net of income tax. The components of PVFP are as
follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------------------------------
Nine months Three months
ended ended Year ended, Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S><C>
PVFP - beginning of period $ - 32.6 48.6 53.7
Adjustment related to the purchase
method of accounting 484.0 - - -
Interest added 22.4 0.5 2.1 3.2
Gross amortization, excluding interest (67.5) (1.1) (5.3) (8.3)
Dividend of Globe Life Insurance
Company (note 7) - - (12.8) -
PVFP attributable to unrealized gains (19.7) - - -
- -----------------------------------------------------------------------------------------------------------------
PVFP - end of period $ 419.2 32.0 32.6 48.6
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
GOODWILL
Under the purchase method of accounting, the excess of purchase price
over the fair value of assets and liabilities acquired and PVFP is
established as an asset and referred to as "goodwill." The Company has
elected to amortize goodwill on the straight line basis over a 20 year
period.
(Continued)
9
<PAGE>
(1) CONTINUED
The Company reviews goodwill to determine if events or changes in
circumstances may have affected the recoverability of the outstanding
goodwill as of each reporting period. In the event that the Company
determined that goodwill was not recoverable it would amortize such
amounts as additional goodwill expense in the accompanying financial
statements. As of December 31, 1996, the Company believes that no such
adjustment is necessary.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that could affect the reported amounts of assets and
liabilities as well as the disclosure of contingent assets or liabilities
at the date of the financial statements. As a result, actual results
reported as revenue and expenses could differ from the estimates reported
in the accompanying financial statements. As further discussed in the
accompanying notes to the consolidated financial statements, significant
estimates and assumptions affect deferred acquisition costs, PVFP, future
life policy benefits, provisions for real estate-related losses and
related reserves, other-than-temporary declines in values for fixed
maturities, the valuation allowance for deferred income taxes and the
calculation of fair value disclosures for certain financial instruments.
DEFERRED TAX ASSETS AND LIABILITIES
Pursuant to the acquisition on April 1, 1996, GE Capital, the Company's
ultimate parent, and Aon Corporation, the Company's previous ultimate
parent, agreed to file an election to treat the acquisition of Life of
Virginia as an asset acquisition under the provisions of Internal Revenue
Code Section 338(h)(10). As a result of that election, the tax basis of
the Company's assets as of the date of acquisition were revalued based
upon fair market values. The principal effect of the election was to
establish a tax basis of intangibles of approximately $348 million for
the value of the business acquired that is amortizable for tax purposes
over 10-15 years.
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.
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.
(Continued)
10
<PAGE>
(1) CONTINUED
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.
INVESTMENTS
Fixed maturities 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 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.
Short-term investments are carried at amortized cost which approximates
market value. Equity securities are valued at fair value. Mortgage loans
are carried at their unpaid balance, net of unamortized discounts and
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. Unrealized gains and temporary unrealized losses on
fixed maturities available for sale and equity securities are excluded
from income and are recorded directly to stockholders' equity, net of
related deferred income taxes and adjustments to amortization of deferred
policy acquisition costs and present value of future profits.
(Continued)
11
<PAGE>
(1) CONTINUED
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, the Company ceases to
accrue investment income when interest or dividend payments are in
arrears.
Life of Virginia measures "impaired" loans at the present value of the
loans discounted cash flow using the effective interest rate of the
original loan as the discount rate. Impaired loans are loans for which it
is probable that the Company will be unable to collect all amounts due
according to terms of the original contractual terms of the loan
agreement. This definition includes, among other things, leases, or
larger groups of small-homogenous loans, and therefore applies
principally to the Company's commercial loans.
Accounting policies relating to interest rate swaps are discussed in Note
9.
DEFERRED POLICY ACQUISITION COSTS
Costs of acquiring new business, principally 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 are related to and
based on the present value of expected premium revenues on the policies.
Periodically amortization is adjusted to reflect current withdrawal
experience. Expected premium revenues are estimated by using the same
assumptions used in estimating future policy benefits.
Deferred policy acquisition costs 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 to deferred policy acquisition
costs amortization, 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 stockholders' equity with
no effect on net income.
(Continued)
12
<PAGE>
(1) CONTINUED
The components of deferred acquisition costs are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S><C>
Deferred acquisition costs - $ - 363.9 388.1 413.2
beginning of period
Commissions and expenses deferred 74.9 22.2 76.1 108.8
Amortization (3.2) (6.0) (39.3) (57.1)
Credit Life and Health cession (note 4) - - - (107.0)
Dividend of Globe Life Insurance
Company (note 7) - - (22.8) -
Deferred acquisition costs attributable
to unrealized gains (losses) (1.4) 17.9 (38.2) 30.2
- --------------------------------------------------------------------------------------------------------------------
Deferred acquisition costs - end of period $ 70.3 398.0 363.9 388.1
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are generally depreciated using the straight- line
method over their estimated useful lives. As a result of purchase
accounting fully depreciated property and equipment were removed.
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 or in the case of private placements, are estimated by
discounted expected future cash flows using a current market rate
applicable to the yield credit quality, call features and maturity of the
investments, as applicable. 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.
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.
(Continued)
13
<PAGE>
(1) CONTINUED
SEPARATE ACCOUNT BUSINESS
The assets and liabilities of the separate accounts represent designated
funds of group pension, variable life and annuity policyholders and are
not guaranteed or supported by other general investments of the Company.
The Company earns mortality and expense risk fees from the separate
accounts and assesses withdrawal charges in the event of early
withdrawals. The assets are carried at fair value and 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.
The Company has periodically transferred capital to the separate accounts
to provide for the initial purchase of investments in the new portfolios.
As of December 31, 1996, approximately $29.3 million of the Company's
common stock investment related to its capital investments in the
separate accounts.
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 the Parent, and
provide for possible adverse deviations. Interest assumptions are graded
and range from 7.4% to 6.5%.
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 crediting rates
for these products range from 8.6% to 4.5%.
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
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.
(Continued)
14
<PAGE>
(1) CONTINUED
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 stockholders' equity. No tax effect was taken into
consideration for unrealized losses.
(2) INVESTED ASSETS AND RELATED INCOME
Under purchase accounting, the market value of Life of Virginia's fixed
maturity investments as of April 1, 1996, became Life of Virginia's new
cost basis in such investments. The difference between the new cost basis
and original par is then amortized against investment income over the
remaining effective lives of the fixed maturity investments. As a result
of the interest rate environment as of April 1, 1996, the market value of
Life of Virginia's fixed maturity investments was approximately $37.4
million lower than original amortized cost.
The Company's investments in debt and equity securities are considered
available for sale and are carried at estimated fair value, with the
aggregate unrealized appreciation or depreciation being recorded as a
separate component of stockholders' equity. The carrying value and
amortized cost of investments at December 31, 1996 and 1995 were as
follows:
<TABLE>
<CAPTION>
December 31, 1996
----------------- --------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Available for sale:
U.S. government and agencies $ 65.5 2.1 - 67.6
States and political subdivisions 2.1 - - 2.1
Foreign governments 178.2 5.6 - 183.8
Corporate securities 3,092.1 29.0 (19.6) 3,101.5
Mortgage-backed securities 1,764.3 29.7 (6.3) 1,787.7
- ---------------------------------------------------------------------------------------------------------------------
Total fixed maturities 5,102.2 66.4 (25.9) 5,142.7
Total equity securities 155.1 11.2 (0.8) 165.5
- ---------------------------------------------------------------------------------------------------------------------
Total available for sale $ 5,257.3 77.6 (26.7) 5,308.2
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
15
<PAGE>
(2) CONTINUED
<TABLE>
<CAPTION>
Preacquisition
----------------- --------------------------------------------------
December 31, 1995
--------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Available for sale:
U.S. government and agencies $ 60.7 1.5 - 62.2
States and political subdivisions 2.2 0.2 - 2.4
Foreign governments 18.6 0.6 - 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
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
<TABLE>
<CAPTION>
December 31, 1996
---------------------------------------------
Amortized Fair
(millions) Cost Value
- ----------------------------------------------------------------------------------------------------------------------
<S><C>
Due in one year or less $ 82.1 82.5
Due after one year through five years 961.8 902.8
Due after five years through ten years 1,626.5 1,671.5
Due after ten years 667.5 698.2
Mortgage-backed securities 1,764.3 1,787.7
- ----------------------------------------------------------------------------------------------------------------------
$ 5,102.2 5,142.7
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative effect on January 1, 1994 of adopting Statement No. 115
increased stockholders 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.
(Continued)
16
<PAGE>
(2) CONTINUED
On November 30, 1995, Life of Virginia reclassified all held to maturity
securities to available for sale. The amortized cost and related
unrealized gains for the securities reclassified was $2,698.3 million and
$50.9 million, respectively.
Securities on deposit for regulatory authorities as required by law
amounted to $4.5 million at December 31, 1996 and 1995.
Life of Virginia had $12.6 million and $34.2 million of non-income
producing investments on December 31, 1996 and December 31, 1995,
respectively.
Life of Virginia's "impaired" loans consist of loans requiring allowances
for loan losses of .2 and 12.2 as of December 31, 1996 and 1995,
respectively. Interest income earned on these loans while they were
considered impaired was 1.2 and 5.5 as of December 31, 1996 and 1995,
respectively.
Life of Virginia's mortgage and real estate portfolio is distributed by
geographic location and type. However, Life of Virginia has concentration
exposures in certain regions and in certain types as shown in the
following two tables.
Geographic distribution as of December 31, 1996:
<TABLE>
<CAPTION>
Mortgage Real estate
- -------------------------------------------------------------------------- ----------------------------------------
<S><C>
South Atlantic 48.3% 75.2%
East North Central 14.6% 1.4%
Mountain 12.7% -
West South Central 11.2% -
Pacific 7.3% 8.1%
Middle Atlantic 4.5% 15.3%
East South Central 1.4% -
- -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
17
<PAGE>
(2) CONTINUED
Type distribution as of December 31, 1996:
<TABLE>
<CAPTION>
Mortgage Real estate
- -------------------------------------------------------------------------- ----------------------------------------
<S><C>
Office building 23.7% 66.4%
Retail 22.8% 18.4%
Industrial 21.9% -
Apartments 19.2% -
Other commercial 8.2% 15.2%
Hotel/motel 4.2% -
- -------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The components of net unrealized investment gains (losses) are as
follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Gross unrealized investment gains (losses)
Fixed maturities available for sale $ 40.5 2.8 143.8 (154.9)
Equity securities 10.4 5.8 23.2 (2.9)
PVFP (19.7) - - -
Deferred policy acquisition costs (1.4) 9.9 (8.0) 30.2
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized before deferred tax $ 29.8 18.5 159.0 (127.6)
Unrealized income tax benefit (expense) (10.4) (6.6) (55.9) 30.1
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized $ 19.4 11.9 103.1 (97.5)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
18
<PAGE>
(2) CONTINUED
The components of net investment income are as follows:
<TABLE>
<CAPTION>
Preacquisition
----------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities $ 276.8 93.1 332.8 404.1
Equity securities 8.7 4.2 10.8 25.2
Mortgage loans on real estate 41.3 13.5 49.8 49.9
Short-term investments 3.1 0.5 3.5 3.8
Other investments 9.9 3.0 13.2 18.0
- -----------------------------------------------------------------------------------------------------------------------
Gross investment income 339.8 114.3 410.1 501.0
Investment expenses (5.4) (2.3) (8.0) (10.4)
- -----------------------------------------------------------------------------------------------------------------------
Net investment income $ 334.4 112.0 402.1 490.6
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities:
Gross gains $ 0.6 0.5 12.9 8.6
Gross losses (0.7) (1.4) (90.2) (39.2)
Fixed maturities held to maturity:
Gross gains - - 1.1 11.3
Gross losses - - (13.8) (9.8)
Equity securities 6.0 10.3 5.6 (1.9)
Mortgage loans on real estate - (0.4) 2.3 9.6
Other 0.1 - 5.6 (4.4)
- -----------------------------------------------------------------------------------------------------------------------
Total before tax 6.0 9.0 (76.5) (25.8)
Less applicable tax (2.3) (1.9) 26.8 9.0
- -----------------------------------------------------------------------------------------------------------------------
Total $ 3.7 7.1 (49.7) (16.8)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
19
<PAGE>
(2) CONTINUED
The changes in net unrealized gains (losses) on fixed maturities and
equity security investments are as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S><C>
Fixed maturities:
Available for sale $ 40.5 (141.0) 298.7 (214.2)
Held to maturity - - 233.7 (351.0)
Equity securities 10.4 (17.4) 26.1 (38.8)
- -----------------------------------------------------------------------------------------------------------------------
Net unrealized investment gains (losses) $ 50.9 (158.4) 558.5 (604.0)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(3) INCOME TAX
Beginning April 1, 1996, Life of Virginia and its subsidiary will be
included in the life insurance company consolidated Federal income tax
return of GECA. Prior to the April 1, 1996, Life of Virginia was included
in the consolidated federal income tax return of Aon and its principal
domestic subsidiaries and in accordance with intercompany policy,
provided taxes on income based on a separate company basis. Amounts
payable or recoverable related to periods before April 1, 1996, are
subject to an indemnification agreement with Aon. As such the Company is
not at risk for any income taxes nor entitled to recoveries related to
those periods.
Income taxes are recorded in the statements of income and directly in
stockholders' equity accounts. Income tax expense (benefit) for the years
ending December 31 was allocated as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------
<S><C>
Statement of income:
Operating income (excluding
realized investment gains
and losses) $ 29.5 5.1 53.9 24.3
Realized investment gains/losses 2.3 1.9 (26.8) (9.0)
Income tax expense/(benefit)
included in the statement of
income 31.8 7.0 27.1 15.3
Stockholders' equity:
Unrealized gains/(losses) on
securities available for sale 10.4 (49.3) 86.0 (42.4)
- ---------------------------------------------------------------------------------------------------------------------
Total income tax expense/(benefit) $ 42.2 (42.3) 113.1 (27.1)
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
20
<PAGE>
(3) CONTINUED
The actual Federal income tax expense differed from the expected tax
expense computed by applying the U.S. Federal statutory rate to income
before income tax expense. 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:
<TABLE>
<CAPTION>
Preacquisition
-------- -------------------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S><C>
Statutory tax rate $ 30.1 35.0% $ 6.6 35.0% $ 23.2 35.0% $ 31.0 35.0%
Tax-exempt
investment
income
deductions (1.0) (1.2) - (0.1) (0.1) (0.1) (0.8) (0.9)
Adjustment of prior
year taxes - - - - 3.5 5.3 (11.8) (13.3)
Other - net 2.7 3.2 0.4 2.1 0.5 0.7 (3.1) (3.5)
- -------------------------------------------------------------------------------------------------------------------------
Effective tax rate $ 31.8 37.0% $ 7.0 37.0% $ 27.1 40.9% $ 15.3 17.3%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(Continued)
21
<PAGE>
(3) CONTINUED
Significant components of Life of Virginia's deferred tax liabilities and
assets are as follows (in millions):
<TABLE>
<CAPTION>
Preacquisition
------------------
December 31, December 31,
1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S><C>
Deferred tax liabilities:
Present value of future profits $ 89.8 -
Policy acquisition costs - 96.9
Employee benefits - 11.0
Unrealized investment gains 10.4 58.7
Other 6.5 35.2
- ----------------------------------------------------------------------------------------------------------------------
Total deferred tax liabilities 106.7 201.8
- ----------------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Insurance reserve amounts 120.4 78.2
Policy acquisition costs 34.3 -
Guaranty fund amounts 10.8 -
Other 14.1 48.1
- ----------------------------------------------------------------------------------------------------------------------
Total deferred tax assets 179.6 126.3
- ----------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities (assets) $ (72.9) 75.5
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax assets will not be realized. Management
believes the deferred tax assets will be fully realized in the future
based on the expectation of the reversal of existing temporary
differences, anticipated future earnings, and consideration of all other
available evidence. Accordingly, no valuation allowance is established.
The amount of income taxes paid (refund) for nine months ended December
31, 1996, three months ended March 31, 1996, the years ended December 31,
1995 and 1994 was $38.6 million, $(2.4) million, $44.9 million, and $56.7
million, respectively.
(Continued)
22
<PAGE>
(4) REINSURANCE AND CLAIM RESERVES
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. In 1996 and 1995, Life of Virginia's
reinsurance consists primarily of long-duration contracts that are
entered into with financial institutions and related party reinsurance.
In 1994, 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.
Although these reinsurance agreements contractually obligate the
reinsurers to reimburse the Company, they do not discharge the Company
from its primary liabilities and the Company remains liable to the extent
that the reinsuring companies are unable to meet their obligations.
A summary of reinsurance activity is as follows:
<TABLE>
<CAPTION>
Preacquisition
--------------------------------------------------------
Nine months Three months
ended ended Year ended Year ended
December 31, March 31, December 31, December 31,
1996 1996 1995 1994
---------------- ---------------- ---------------- ------------------
Earned Earned Earned Earned
---------------- ---------------- ---------------- ------------------
<S><C>
Direct $ 210.5 77.2 261.5 404.2
Assumed 6.6 35.0 4.3 8.3
Ceded 62.4 19.8 86.5 193.7
- -------------------------------------------------------------------------------------------------------------------
Net premiums 154.7 92.4 179.3 218.8
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Due to the nature of the Company's reinsurance contracts, premiums earned
approximate premiums written.
A significant portion of Life of Virginia's ceded premiums relates to
group life and health premiums. Life of Virginia is the primary carrier
for the State of Virginia employees group life and health plan. By
statute, Life of Virginia must reinsure these risks with other Virginia
domiciled companies who wish to participate.
Incurred losses and loss adjustment expenses are net of reinsurance of
$60.5 million, $17.2 million, $63.1 million and $102.1 million for the
nine months ended December 31, 1996, three months ended March 31, 1996
and the years ended December 31, 1995 and 1994, respectively.
In December 1994, Life of Virginia ceded to CICA $406.6 million of its
guaranteed investment contract liabilities. In conjunction with the
liability cession, Life of Virginia transferred to CICA 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. Included in receivable from affiliates at
December 31, 1995 is $212.6 million which represents the remaining ceded
guaranty investment contract liability.
(Continued)
23
<PAGE>
(4) 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 recognized 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.
In January 1995, Life of Virginia ceded to CICA $600 million of its
single premium deferred annuity liabilities. In conjunction with the
liability cession, Life of Virginia transferred to CICA 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 CICA. This
transaction resulted in a deferred reinsurance gain of $77.0 million, $24
million of which was recognized in 1995. Additionally, Life of Virginia
recognized a $79.0 million realized investment loss. Included in
receivable from affiliates at December 31, 1995 is $357.5 million which
represents the ceded single premium deferred annuity liability of $410.5
million less a deferred reinsurance gain of $53 million.
In connection with the sale of the Company, the following transactions
occurred effective January 1, 1996: single premium deferred annuity
liabilities reinsured with CICA in 1995 were recaptured, guaranteed
investment contract liabilities reinsured with CICA in 1994 were
recaptured, other lines of CICA insurance business inforce were assumed,
and other related liabilities of CICA were assumed. In conjunction with
the recapture and assumption, CICA transferred to Life of Virginia assets
with a fair market value totaling $842.6 million. For the three months
ended March 31, 1996, premiums of $33.9 million, benefits of $46.7
million, commission expense of $10.2 million and a capital contribution
of $69.3 million as a result of various reinsurance transactions. The $53
million deferred reinsurance gain remaining at December 31, 1995 from the
January 1995 single premium deferred annuity cession to CICA was
recognized as a capital contribution. The tables below summarize the
assets and liabilities transferred from CICA to the Company.
(Continued)
24
<PAGE>
(4) CONTINUED
<TABLE>
<CAPTION>
Millions Fair Market Value
- ---------------------------------------------------------------------------------
<S><C>
Assets transferred:
Fixed maturity $ 727.4
Preferred stock 88.2
Policy loans 14.2
Accrued investment income 10.0
Cash 2.8
- ---------------------------------------------------------------------------------
Total 842.6
- ---------------------------------------------------------------------------------
Liabilities recaptured and assumed:
Single premium deferred annuity 410.5
Guaranteed investment contracts 212.6
Universal life contracts 156.6
Individual traditional contracts 33.2
Other lines of business inforce 19.9
Other liabilities 16.5
- ---------------------------------------------------------------------------------
Total 849.3
- ---------------------------------------------------------------------------------
</TABLE>
(5) EMPLOYEE BENEFITS
SAVINGS PLAN
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric contributory savings plan.
Provisions made for the savings plan were $.6 million for the nine months
ended December 31, 1996.
Prior to the acquisition on April 1, 1996, Life of Virginia participated
in Aon's contributory savings plan for the benefit of salaried and
commissioned employees. Provisions made for the savings plan were $.3
million, $.8 million and $1.2 million for the three months ended March
31, 1996, and the years ended December 31, 1995 and 1994, respectively.
This plan terminated upon the acquisition of Life of Virginia by GE
Capital.
EMPLOYEE STOCK OWNERSHIP PLAN
Prior to the acquisition on April 1, 1996, Life of Virginia participated
in Aon's leveraged ESOP for the benefit of salaried and certain
commissioned employees. Contributions to the ESOP for the three months
ended March 31, 1996 and the years ended December 31, 1995 and 1994
charged to Life of Virginia's operations amounted to $.1 million, $.5
million and $.6 million, respectively. This plan terminated upon the
acquisition of Life of Virginia by GE Capital.
(Continued)
25
<PAGE>
(5) CONTINUED
PENSION PLAN
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric contributory defined
benefit pension plan. Generally, benefits are based on the greater of a
formula recognizing career earnings or a formula recognizing length of
service and final average earnings. Benefit provisions are subject to
collective bargaining. General Electric's funding policy is to contribute
amounts sufficient to meet minimum funding requirements as set forth in
employee benefit and tax laws plus such additional amounts as determined
appropriate. The components of net periodic pension cost and benefit
obligations of the General Electric defined benefit plan are not
separately available for Life of Virginia. In connection with Life of
Virginia's participation in the General Electric contributory defined
benefit pension plan a $.4 million expense was incurred for the nine
months ended December 31, 1996.
Prior to the acquisition on April 1, 1996, Life of Virginia participated
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 was
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 were 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
$1.2 million, $3.8 million and $3.1 million in the three months ended
March 31, 1996 and the years ended December 31, 1995 and 1994. This plan
terminated upon the acquisition of Life of Virginia by GE Capital.
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
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employee's participated in a General Electric retiree health and life
insurance benefit plan. The plan's principally provide health and life
insurance benefits to employees who retire under the General Electric
pension plan with 10 or more years of service. Retirees share in the cost
of their health care benefits. The funding policy for retiree health
benefits is generally to pay covered expenses as they are incurred.
Expenses incurred by Life of Virginia for the nine months ended December
31, 1996 for the retiree health and life insurance benefit plan were $1.3
million.
(Continued)
26
<PAGE>
(5) CONTINUED
Prior to the acquisition on April 1, 1996, Aon sponsored two defined
benefit postretirement health and welfare plans in which Life of Virginia
participated 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. These
plans terminated upon the acquisition of Life of Virginia by GE Capital.
(6) 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, 1996 are as follows:
<TABLE>
<CAPTION>
(millions) Minimum lease payments
-------------------------------------------------------------------
<S> <C>
1997 $ 1.1
1998 0.8
1999 0.4
2000 0.2
2001 0.1
Later years -
-------------------------------------------------------------------
Total minimum payments required $ 2.6
-------------------------------------------------------------------
</TABLE>
MINIMUM LEASE PAYMENTS
Rental expenses for all operating leases for the nine months ended
December 31, 1996, the three months ended March 31, 1996 and the years
ended December 31, 1995 and 1994 amounted to $2.5 million, $.8 million,
$3.6 million and $5.1 million, respectively.
(7) RELATED PARTY TRANSACTIONS
Life of Virginia pays investment advisory fees and other fees to
affiliates; Parent after April 1, 1996 and Aon previous to that date.
Amounts incurred for these items aggregated $3.2 million, $3.5 million,
$5.8 million and $37.8 million for nine months ended December 31, 1996,
the three months ended March 31, 1996 and the years ended December 31,
1995 and 1994, respectively. Life of Virginia charges affiliates for
certain services and for the use of facilities and equipment which
aggregated $2.0 million, $1.0 million, $10.0 million and $101.2 million
for the nine months ended December 31, 1996, the three months ended March
31, 1996 and the years ended December 31, 1995, and 1994, respectively.
(Continued)
27
<PAGE>
(7) CONTINUED
At December 31, 1996 and 1995, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6 million and $12.6
million, respectively. Amounts included in net investment income related
to these holdings totaled $0.1 million, $0.2 million, $1.0 million and
$3.5 million for the nine months ended December 31, 1996, the three
months ended March 31, 1996 and the years ended December 31, 1995 and
1994, respectively.
In January 1995, Life of Virginia dividended 100% of its Globe Life
Insurance Company ("Globe") common stock to CICA, a subsidiary of Aon. At
December 31, 1994, Globe had assets of $954.9 million, liabilities of
$765.7 million and stockholders' equity of $189.2 million. The fair
market value of this dividend was $193.3 million.
In 1995, Life of Virginia received from CICA, 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 CICA'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 CICA's fair value of $60.9 million
resulting in a $5.7 million realized loss that is reflected in the
statement of income.
(8) 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.
(Continued)
28
<PAGE>
(9) FINANCIAL INSTRUMENTS
INTEREST RATE RISK MANAGEMENT
Life of Virginia used 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 was no settlement of
underlying notional amounts.
Life of Virginia performed frequent analyses to measure the degree of
correlation associated with its derivative program. Life of Virginia
assessed 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 were deferred and reported
as an adjustment of the cost basis of the hedged item. Deferred gains and
losses were amortized into income over the life of the hedged item. The
fair value of swap agreements hedging liabilities were not recognized in
the consolidated statements of financial position.
These interest rate swaps gave rise to credit risks due to possible
non-performance by counterparties. The credit risk was generally limited
to the fair value of those contracts that were favorable to Life of
Virginia. Life of Virginia limited its credit risk by restricting
investments in derivative contracts to a diverse group of highly rated
major financial institutions. Life of Virginia closely monitored the
credit worthiness of, and exposure to, its counterparties and considered
its credit risk to be minimal.
Life of Virginia had $0.0 million and $250.0 million notional amount of
interest rate swaps outstanding at December 31, 1996 and 1995,
respectively.
During the three months ended March 31, 1996 and the year ended December
31, 1995 Life of Virginia amortized $.6 million and $1.4 million,
respectively, 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% 5.40%
------------------------------------------------------------------
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. These swaps were terminated prior to March 31, 1996
resulting in a $1.1 million gain which was deferred.
(Continued)
29
<PAGE>
(9) CONTINUED
OTHER FINANCIAL INSTRUMENTS
Life of Virginia has certain investment commitments to provide fixed-rate
loans. 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, 1996 and December 31, 1995, totaled $1.7 million and $21.7
million, respectively.
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:
<TABLE>
<CAPTION>
Preacquisition
----------------------------
December 31, 1996 December 31, 1995
-------------------------------------------------------
Carrying Fair Carrying Fair
(millions) Amount Value Amount Value
- ------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Fixed maturities and
equity securities
(note 2) $ 5,308.2 5,308.2 4,567.9 4,567.9
Mortgage loans on
real estate 585.4 622.6 592.5 638.2
Policy loans 179.5 179.5 151.7 150.2
Cash, short-term
investments and
receivables 186.4 186.4 727.5 727.5
Assets held in separate accounts 2,762.7 2,762.7 2,019.6 2,019.6
- ------------------------------------------------------------------------------------------------------
Liabilities:
Investment type
insurance contracts 3,055.0 3,027.6 2,769.7 2,796.9
Commissions and
general expenses 46.8 46.8 12.8 12.8
Interest rate swaps - - - 24.1
Liabilities related to separate accounts 2,762.7 2,762.7 2,019.6 2,019.6
- ------------------------------------------------------------------------------------------------------
</TABLE>
See Note 1 regarding the method used to estimate fair values.
(Continued)
30
<PAGE>
(10) STOCKHOLDERS' EQUITY
Generally, the capital and surplus of Life of Virginia available for
transfer to the Parent 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. The maximum amount of dividends which can be
paid by the Company without prior approval at December 31, 1996, is $41.9
million.
Statutory net income (loss) and stockholders' equity is summarized below:
<TABLE>
<CAPTION>
Preacquisition
------------------------------------------------------
Nine months Three months
ended ended
December 31, March 31, December 31, December 31,
(millions) 1996 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S><C>
Statutory net income $ 69.7 (8.3) 53.9 58.2
Statutory stockholders equity 419.1 360.5 364.2 400.6
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The National Association of Insurance Commissioners has developed certain
Risk Based Capital (RBC) requirements for life insurers. If prescribed
levels of RBC are not maintained, certain actions may be required on the
part of the Company or its regulators. At December 31, 1996 the Company's
Total Adjusted Capital and Authoritized Control Level - RBC were, $504.6
million and $78.6 million, respectively. This level of adjusted capital
qualifies under all tests.
================================================================================
31
<PAGE>
<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 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)(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 Growth Portfolio,
the Aggressive Growth Portfolio, and the Worldwide Growth
Portfolio of the Janus Aspen Series. 4/
(1)(d) 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 Variable
Insurance Products Fund; Asset Manager Portfolio of the 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)(e) 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)(f) 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)(g) 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)(h) 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.
(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/
1
<PAGE>
(b) Dealer Sales Agreement.1/
(4)(a) Form of Policy.10/
(b) Endorsements to Policy.10/
(i) IRA Endorsement 10/
(ii) Section 403(b) Endorsement 10/
(iii) Qualified Plan Endorsement
(5)(a) Form of Application.10/
(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) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance
Company of Virginia. 1/
(a)(i) Amendment to Participation Agreement Referencing Policy Form
Numbers. 1/
(a)(ii) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation, and The
Life Insurance Company of Virginia. 9/
(a)(iii) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
(b) Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance
Company of Virginia. 1/
(b)(i) Amendment to Agreement between Oppenheimer Variable Account
Funds, Oppenheimer Management Corporation, and The Life
Insurance Company of Virginia. 1/
(c) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Life Insurance
Company of Virginia. 1/
(d) Participation Agreement between Janus Capital Corporation and
The Life Insurance Company of Virginia. 4/
(e) Participation Agreement between Insurance Management Series,
Federated Securities Corp., and The Life Insurance Company of
Virginia. 6/
(f) 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 Sutherland, Asbill and Brennan, L.L.P.
(b) Consent of Independent Auditors.
(11). Not Applicable.
(12). Not Applicable.
(13). Schedule showing computation for Performance Data
(14). Power of Attorney 3/
(a) Power of Attorney dated April 2, 1996. 9/
2
<PAGE>
--------------------------
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.
10/ Incorporated herein by reference to post-effective amendment number 4 to
the Registrant's registration statement on Form N-4, File No. 333-21031,
filed with the Securities and Exchange Commission on January 31, 1997.
3
<PAGE>
Item 25. Directors and Officers of Life of Virginia
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Depositor
Ronald V. Dolan* Director and Chairman of the Board
Paul E. Rutledge III* Director, President, Chief Executive Officer
Selwyn L. Flournoy, Jr.* Director and Senior Vice President
Linda L. Lanam* Director and Senior Vice President
Robert D. Chinn* Director and Senior Vice President - Agency
Thomas A. Barefield* Director and Senior Vice President - Special
Markets
Michael A. Weitz Senior Vice President - Brokerage
Elliot Rosenthal Senior Vice President - Investment Products
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.
The address for Mr. Dolan and Mr. Stiff is First Colony Life Insurance Company, 700 Main Street, Lynchburg,
VA 24505
The principal business address for Mr. Moses is GNA Corporation, Two Union Square, 601 Union Street, Seattle,
WA 98101
*Messrs. Dolan, Rutledge, Flournoy, Chinn, Barefield and Ms. Lanam are members of the Executive Committee
of the Board of Directors of Life of Virginia.
</TABLE>
- -------------------------------------------------------------------------------
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
Not applicable
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,
4
<PAGE>
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.
(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.
5
<PAGE>
(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
Scott R. Reeks Director, President, Treasurer and
Compliance Officer
Robert Z. Peranski Director
Linda L. Lanam Secretary
William E. Daner, Jr. General Counsel & Director
Robert D. Chinn Director
John L. Knowles Director
Thomas A. Barefield Director
* The principal business address of all listed above is 6610 West Broad Street,
Richmond, Virginia 23230.
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.
6
<PAGE>
(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.
SECTION 26(e)(2)A) REPRESENTATION
Life of Virginia hereby represents that the fees and charges deducted under the
policy, in the aggregate, are reasonable in relation to the services rendered,
the expenses expected to be incurred, and the risks assumed by Life of Virginia.
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 30th of June, 1997.
Life of Virginia Separate Account 4
(Registrant)
By:__/s/SELWYN L. FLOURNOY, JR.
Selwyn L. Flournoy, Jr.
Senior Vice President
The Life Insurance Company of Virginia
The Life Insurance Company of Virginia
(Depositor)
By:_/s/SELWYN L. FLOURNOY, JR.
Selwyn L. Flournoy, Jr.
Senior Vice President
Given under my hand this _____ day of _______, 19__ in the City/County of
_____________, Commonwealth of Virginia.
-----------------------
Notary Public
-----------------------
My Commission Expires
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>
RONALD V. DOLAN Director, Chairman of the Board 4/29/97
Ronald V. Dolan
PAUL E. RUTLEDGE III Director, President, and Chief Executive Officer 4/29/97
Paul E. Rutledge III
/s/SELWYN L. FLOURNOY, JR. Director, Senior Vice President 4/29/97
Selwyn L. Flournoy, Jr.
LINDA L. LANAM Director, Senior Vice President 4/29/97
Linda L. Lanam
ROBERT D. CHINN Director, Senior Vice President 4/29/97
Robert D. Chinn
THOMAS A. BAREFIELD Director, Senior Vice President 4/29/97
Thomas A. Barefield
VICTOR C. MOSES Director 4/29/97
Victor C. Moses
GEOFFREY S. STIFF Director 4/2/9/97
Geoffrey S. Stiff
</TABLE>
By _______________________________, pursuant to Power of Attorney executed on
April 16, 1997.
9
<PAGE>
Exhibit List
Page
(4)(a)(iii) Qualified Plan Endorsement
(9) Opinion and Consent of Counsel
(10)(a) Consent of Counsel
(10(b) Consent of Auditors
10
<PAGE>
EXHIBIT (4)(a)(iii)
Qualified Plan Endorsement
11
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
QUALIFIED PLAN ENDORSEMENT
- -----------------------------------------------
All provisions of the policy or contract ("Contract") to which this Endorsement
is attached shall be interpreted in accordance with the applicable requirements
of Section 401(a) of the Internal Revenue Code and the applicable regulations
(the "Code"). References to Income Payments include Survivor Income Payments,
where applicable. Notwithstanding any provision contained therein to the
contrary, the Contract to which this Endorsement is attached is amended as
follows:
Article 1 - Owner and Annuitant
The Contract is issued to a custodian or trustee of a qualified retirement plan
under Section 401(a) of the Code maintained on behalf of the Participants for
whom the Contract is purchased. Such custodian or trustee must be the Owner and
the Beneficiary.
The term "Participant" as used in this Endorsement shall mean the individual
employee for whose benefit the employer established the plan. The Annuitant
shall be the Participant and, except as otherwise provided under the Code and
applicable regulations, the Annuitant cannot be changed.
The Owner shall not distribute the Contract to the Annuitant until a
distributable event under the plan, for which the Contract is purchased, occurs.
If the Contract is distributed by the Owner to the Participant, (1) the
Participant becomes the Owner, (2) the provisions below apply to such Owner, and
(3) a Beneficiary may be designated by such Owner (or, in the absence of such a
designation, the Owner's estate shall be the Beneficiary), subject to the
provisions below.
Article 2 - Joint Annuitant
The Joint Annuitant, if one is named, must be either the Participant's spouse or
an individual who is not more than 10 years younger than the Participant. All
payments made under a joint and survivor Income Payment Plan after the
Participant's death while the Joint Annuitant is alive must be made to the Joint
Annuitant.
Article 3 - Nontransferable
Ownership of this Contract may not be transferred except: (1) to the
Participant, (2) to a trustee or successor trustee of a retirement plan
qualified under Section 401(a) of the Code; or (3) as otherwise permitted by
applicable regulations.
If the Contract is distributed to the Participant, thereafter the Contract is
nontransferable and may not be sold, assigned, discounted, or pledged as
collateral for a loan or as security for the performance of an obligation or for
any other purpose other than to the Company. Income Payments under the Contract
cannot be surrendered, commuted, assigned, encumbered or anticipated in any way,
except to the extent required by a qualified domestic relations order as defined
in Section 414(p) of the Code.
Article 4 - Unisex Rates
Income Payments will be based on unisex rates.
Article 5 - Required Beginning Date
The Participant's entire interest in this Contract shall be distributed as
required by Section 401(a)(9) of the Code, and the regulations thereunder,
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations.
12
<PAGE>
Except as otherwise provided by law, the term "required beginning date" as used
in this Endorsement means April 1 of the calendar year following the later of
the calendar year in which (1) the Participant attains age 70 1/2, or (2) the
Participant retires. However, the required beginning date means April 1 of the
calendar year following the calendar year in which the Participant attains age
70 1/2 for a Participant who (1) is a 5-percent owner (as defined in Section 416
of the Code) with respect to the plan year ending in the calendar year in which
the Participant attains age 70 1/2; and (2) is not in a governmental plan or
church plan (as defined in Section 401(a)(9)(C) of the Code).
The requirements of Articles 5, 6, and 8 of this Endorsement do not apply with
respect to a benefit to which a proper designation is in effect under section
242(b)(2) of the Tax Equity and Fiscal Responsibility Act of 1982.
Article 6 - Distributions During Participant's Life
Unless otherwise provided under applicable law, the Participant's entire
interest shall be distributed, or commence to be distributed, no later than the
required beginning date, over (a) the life of the Participant, or the lives of
the Participant, or the lives of the Participant and his or her designated
beneficiary (within the meaning of Section 401(a)(9) of the Code), or (b) if
permitted by the Company, a period not extending beyond the life expectancy of
the Participant, or the joint and last survivor expectancy of the Participant
and his or her designated beneficiary.
If the Participant's interest is to be distributed over a period greater than
one year, then the amount to be distributed by December 31 of each year
(including the year in which the required beginning date occurs) shall be made
in accordance with the requirements of Section 401(a)(9) of the Code, and the
regulations thereunder, including the incidental death benefit requirements of
Section 401(a)(9)(G) of the Code, including the minimum distribution incidental
benefit requirement of Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Article 7 - Death Benefit
If, in the event of the Participant's death prior to the Annuity Commencement
Date, the Death Benefit is not paid to the trustee of a retirement plan
qualified under Section 401(a) of the Code, it shall be paid to:
(a) the surviving spouse of the Participant as a Qualified Preretirement
Survivor Annuity (within the meaning of Section 417 of the Code), unless the
spouse has consented to the designation of someone else as beneficiary, or
elects otherwise and such designation is permitted under applicable law, and
such consent or election is made in accordance with the requirements of Section
417 of the Code and regulations promulgated thereunder; or
(b) if there is no surviving spouse, or if the surviving spouse has consented in
the manner required by Section 417 of the Code, or to the extent regulations
under Section 417 otherwise permit, to the beneficiary under the Contract.
The "Death Benefit" section of the Contract is amended by inserting at the end
thereof the following: "If the Owner is a custodian or trustee of a qualified
retirement plan under Sections 401(a) of the Code, the death of the Annuitant
(but not of any Joint Annuitant) is treated as the death of an Owner."
13
<PAGE>
Article 8 - Distributions After Participant's Death
Unless otherwise permitted under applicable law, if the Participant dies on or
after the required beginning date (or if distributions have begun before the
required beginning date as irrevocable annuity payments), any remaining portion
of the Participant's interest shall be distributed at least as rapidly as under
the method of distribution in effect as of the Participant's death.
Unless otherwise permitted under applicable law, if the Participant dies before
the required beginning date and an irrevocable annuity distribution has not
begun, the entire interest will be distributed by December 31 of the calendar
year containing the fifth anniversary of the Participant's death, except that:
(a) if the interest is payable to an individual who is the Participant's
designated beneficiary, the designated beneficiary may elect to receive the
entire interest over the life of the designated beneficiary or, if permitted by
the Company, over a period not extending beyond the life expectancy of the
designated beneficiary, commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Participant died; or
(b) if the designated beneficiary is the Participant's surviving spouse, the
surviving spouse may elect to receive the entire interest over the life of the
surviving spouse or, if permitted by the Company, over a period not extending
beyond the life expectancy of the surviving spouse, commencing at any date on or
before the later of:
(i) December 31 of the calendar year immediately following the calendar year
in which the Participant died, and
(ii) December 31 of the calendar year in which the Participant would have
attained age 70 1/2.
If the surviving spouse dies before distributions begin, the limitations
of this Article 8 (without regard to this paragraph (b) will be applied as if
the surviving spouse were the Participant.
An irrevocable election of the method of distribution by a designated
beneficiary who is the surviving spouse must be made no later than the earlier
of December 31 of the calendar year containing the fifth anniversary of the
Participant's death or the date distributions are required to begin pursuant to
this paragraph (b). If no election is made, the entire interest will be
distributed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death.
Distributions under this Article 8 are considered to have begun if the
distributions are made on account of the Participant reaching his or her
Required Beginning Date or, if prior to the Required Beginning Date,
distributions irrevocable commence to a Participant over a period permitted and
in an annuity form acceptable under Section 1.401(a)(9) of the Proposed Income
Tax Regulations.
Article 9 - Life Expectancy Calculations
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations.
Life expectancies shall be recalculated annually provided that annual
recalculation is permitted, the Participant (or for purposes of distributions
beginning after the Participant's death, the Participant's surviving spouse)
elects at the time distributions are to begin that life expectancies are to be
recalculated annually, and we consent. Such an election shall be irrevocable as
to the Participant (or the Participant's surviving spouse), and shall apply to
all subsequent years.
14
<PAGE>
The life expectancy of a non-spouse beneficiary may not be recalculated, and
shall be calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to this
Endorsement. Payments for any subsequent calendar year shall be calculated based
on such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year in which life expectancy was first calculated.
Article 10 - Income Payments
All Income Payments under the Contract must meet the requirements of Code
Section 401(a)(9) and applicable regulations, including the requirement that
payments to persons other than the Participant are incidental. The provisions of
this Endorsement reflecting the requirements of Section 401(a)(9) of the Code
override any Income Payment provision inconsistent with such requirements.
Payments must be made in periodic intervals of no longer than one year. In
addition, payments must be either nonincreasing or they may increase only as
provided in Q&A F-3 of Section 1.401(a)(9)-1 of the Proposed Income Tax
Regulations.
A Participant who is married must have the consent of his or her spouse in order
to choose annuity payments other than a Qualified Joint and Survivor Annuity
(within the meaning of Section 417 of the Code). The form of the spouse's
consent must satisfy Section 417 of the Code (and applicable regulations). An
unmarried Participant will be deemed to have elected a life annuity unless he or
she makes a different election in the manner required under Section 417 of the
Code.
If guaranteed payments are to be made under the Contract, the period over which
the guaranteed payments are to be made must not exceed the shorter of (1) the
Participant's life expectancy, or if a Joint Annuitant is named, the joint and
last survivor expectancy of the Participant and the Joint Annuitant, and (2) the
applicable maximum period under Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
Article 11 - Elections and Consents
Elections and consents made pursuant to the Contract and this Endorsement may be
made and revoked only in the form, time, and manner prescribed in Section 417 of
the Code (and applicable regulations).
Article 12 - Direct Rollovers
A distributee may elect, at the time and in the manner prescribed by the
Company, to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the distributee in a direct
rollover.
A distributee, within the meaning of this Article 12, includes a Participant. In
addition, the Participant's surviving spouse and the Participant's spouse or
former spouse who is the alternate payee under a qualified domestic relations
order, as defined in Section 414(p) of the Code, are distributees with regard to
the interest of the spouse or former spouse.
An eligible rollover distribution is any distribution of all or any portion of
the balance to the credit of the distributee, except that an eligible rollover
distribution does not include (1) any distribution that is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the distributee or the joint lives (or
joint and last survivor expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; (2) any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and (3) the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
15
<PAGE>
An eligible retirement plan is an individual retirement account described in
Section 408(a) of the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an eligible retirement
plan is an individual retirement account or individual retirement annuity.
A direct rollover is a payment by the plan administrator or the Company to the
eligible retirement plan specified by the distributee.
This Article 12 applies to all eligible rollover distributions made after
December 31, 1992.
Article 13 - Plan Provisions
The terms of the Contract and this Endorsement are subject to the provisions of
any plan under which the Contract and Endorsement are issued.
No amount may be paid from the Contract in a lump sum unless such payment is
allowed under both the retirement plan for which the Contract is purchased and
the Code and related regulations.
Article 14 - Code Requirements
The provisions of this Endorsement are intended to comply with the requirements
of the Code, as amended, and any regulations relating to the Contract under
Section 401(a) of the Code. The Company reserves the right to amend the Contract
and this Endorsement from time to time, without the Owner's consent, when such
amendment is necessary to assure continued qualification of this Contract under
Section 401(a) of the Code (and any successor provisions) as in effect from time
to time.
For THE LIFE INSURANCE COMPANY OF VIRGINIA
President
16
<PAGE>
(9)
Opinion and Consent of Counsel
17
<PAGE>
[Letterhead of Life of Virginia]
June 20, 1997
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Pre-Effective Amendment No. 18 to Form N-4 (File Number
321031) filed by The Life Insurance Company of Virginia and Life of Virginia
Separate Account 4 with the Securities and Exchange Commission covering single
premium variable immediate 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 single premium variable immediate 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 single premium variable immediate 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 use of this letter, or copy thereof, as an exhibit to
Post Effective Amendment No. 16 to the Registration Statement on Form N-4 (File
Number 333-21031) and the reference to me under the caption "Legal Matters" in
the Statement of Additional Information contained in said Post-Effective
Amendment.
Sincerely,
/s/J. NEIL MCMURDIE
J. Neil McMurdie
Associate Counsel and
Assistant Vice President
Law Department
18
<PAGE>
(10)(a)
Consent of Counsel
19
<PAGE>
[Letterhead of Sutherland, Asbill & Brennan]
June 27, 1997
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
RE: Life of Virginia Separate Account 4
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
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed
by Life of Virginia Separate Account 4 for certain immediate annuity
contracts (Form No. 333-21031). 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/KIMBERLY J. SMITH
Kimberly J. Smith
20
Exhibit 10(b)
Consent of Independent Auditors
21
<PAGE>
Consent of Independent Auditors
The Board of Directors
The Life Insurance Company of Virginia
Life of Virginia Separate Account 4
We consent to the reference to our firm under the caption "Experts" and to the
use of our report with respect to the consolidated financial statements of The
Life Insurance Company of Virginia and subsidiaries as of December 31, 1996 and
for the nine month period ended December 31, 1996 and the preacquisition three
month period ended March 31, 1996, dated January 15, 1997, and our report with
respect to the financial statement of Life of Virginia Separate Account 4 as of
December 31, 1996 and for the year or periods then ended, dated February 11,
1997, in the Registration Statement under the Securities Act of 1933 (Form N-4
No. 333-21031) of Life of Virginia Separate Account 4, and in the Registration
Statement under the Investment Company Act of 1940 (Registration No. 811-5343),
for the registration of an indefinite amount of securities.
/s/KPMG PEAT MARWICK LLP
Richmond, Virginia
June 23, 1997
22
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and "Change
in Auditors" 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. 18 to the Registration
Statement under the Securities Act of 1933 (Form N-4 No. 333-21031) of the Life
of Virginia Separate Account 4, and in Amendment No. 1 to the Registration
Statement under the Securities Act of 1933 (Form N-4 No. 333-21031) of the Life
of Virginia Separate Account 4, and in Amendment No. 18 to the Registration
Statement under the Investment Company Act of 1940 (Registration No. 811-5343),
for the registration of an indefinite amount of securities.
ERNST & YOUNG LLP
/s/ERNST & YOUNG
Richmond, Virginia
June 23, 1997
23
