As filed with the Securities
and Exchange Commission on May 1, 1998.
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.
Post-Effective Amendment No. 1
For Registration Under the Investment Company Act of 1940 X
---
Amendment No. 23
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
Linda L. Lanam
General Counsel, Senior Vice President and Secretary
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. 20004-2415
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on ___________ pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered: Interests in a separate account under
Single Premium Variable Immediate Annuity
<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
PART A
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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)
</TABLE>
<PAGE>
<TABLE>
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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. UndertakingsUndertakings
Signature Page...........................................................................Signatures
</TABLE>
<PAGE>
4
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
Policyowner allocates net premiums among one or more of the 37 Investment
Subdivisions of Account 4. Each Investment Subdivision of Account 4 will invest
solely in a designated investment portfolio that is part of a series-type
investment company. Currently, there are ten such Funds available under this
Policy: the Janus Aspen Series, the Variable Insurance Products Fund, the
Variable Insurance Products Fund II, the Variable Insurance Products Fund III,
the GE Investments Funds, Inc., the Oppenheimer Variable Account Funds, the
Federated Insurance Series, the Alger American Fund, the PBHG Insurance Series
Fund, Inc. and Goldman Sachs Variable Insurance Trust (collectively referred to
as the "Funds"). The Funds, their investment managers and their currently
available portfolios are listed on the following page.
This Prospectus must be read along with the current prospectuses for the Funds.
This Prospectus sets forth the basic information that a prospective investor
should know before investing. A Statement of Additional Information containing
more detailed information about the Policies and Account 4 is available free by
writing Life of Virginia at the address above or by calling (800) 352-9910. The
Statement of Additional Information, which has the same date as this Prospectus,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Table of Contents of the Statement of Additional
Information is included at the end of this Prospectus.
Please Read This Prospectus Carefully And Retain It For Future Reference
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES IN THE FUNDS AND INTERESTS IN THE POLICIES ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, A BANK, AND THE SHARES AND
INTERESTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Date of This Prospectus Is May 1, 1998.
<PAGE>
Janus Aspen Series:
Growth Portfolio, Aggressive Growth Portfolio, Worldwide Growth
Portfolio, International Growth Portfolio, Balanced Portfolio,
Flexible Income Portfolio, and Capital Appreciation Portfolio
Variable Insurance Products Fund:
VIP Equity-Income Portfolio, VIP Growth Portfolio and VIP Overseas
Portfolio
Variable Insurance Products Fund II:
VIP II Asset Manager Portfolio and VIP II Contrafund Portfolio
Variable Insurance Products Fund III:
VIP III Growth & Income Portfolio* and VIP III 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, Value Equity Fund, Income Fund and U.S. Equity Fund*
.
Oppenheimer Variable Account Funds:
Oppenheimer High Income Fund, Oppenheimer Bond Fund, Oppenheimer
Aggressive Growth, Oppenheimer Multiple Strategies Fund and Oppenheimer
Growth Fund.
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
Goldman Sachs Variable Insurance Trust*
Growth and Income Fund and Mid Cap Equity Fund
* The U.S. Equity Fund for GE Investments Funds, Inc., Growth and Income Fund
for Goldman Sachs Variable Insurance Trust and Mid Cap Equity Fund for Goldman
Sachs Variable Insurance Trust are not available at this time to policyowners in
the state of California.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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Definitions.........................................................................................
Fee Table...........................................................................................
Summary.............................................................................................
Financial Information...............................................................................
The Life Insurance Company of Virginia and Life of Virginia Separate Account 4......................
The Life Insurance Company of Virginia............................................................
IMSA Disclosure...................................................................................
Account 4.........................................................................................
Additions, Deletions, or Substitutions of Investments.............................................
The Funds...........................................................................................
Janus Aspen Series................................................................................
Variable Insurance Products Fund..................................................................
Variable Insurance Products Fund II...............................................................
Variable Insurance Products Fund III..............................................................
GE Investments Funds, Inc.........................................................................
Oppenheimer Variable Account Funds................................................................
Federated Insurance Series........................................................................
The Alger American Fund...........................................................................
PBHG Insurance Series Fund, Inc...................................................................
Goldman Sachs Variable Insurance Trust ...........................................................
Resolving Material Conflicts......................................................................
The Policy..........................................................................................
Purchasing the Policies...........................................................................
Restriction on Issuing Certain Policies...........................................................
Allocation of Net Premium Payments................................................................
Transfers.........................................................................................
Telephone Transfers...............................................................................
Automatic Transfers...............................................................................
Powers of Attorney...............................................................................
Examination of Policy (Right to Cancel Provision).................................................
Income Payments....................................................................................
General...........................................................................................
Determination of Income Payments..................................................................
Income Payment Plans..............................................................................
Income Payment Dates..............................................................................
Policy Distributions upon Death.....................................................................
Death Provisions..................................................................................
Charges and Deductions..............................................................................
Charges Against Account 4.........................................................................
Policy Fee........................................................................................
Sales Charge......................................................................................
Premium Taxes.....................................................................................
Other Taxes.......................................................................................
Other Charges.....................................................................................
Federal Tax Matters.................................................................................
Introduction......................................................................................
Non-Qualified Policies............................................................................
Qualified Policies................................................................................
Federal Income Tax Withholding......................................................................
General Provisions..................................................................................
The Owner.........................................................................................
The Annuitant.....................................................................................
The Beneficiary...................................................................................
Changes by the Owner..............................................................................
Evidence of Death, Age, Sex or Survival...........................................................
Payment Under The Policies........................................................................
Distribution of the Policies........................................................................
Voting Rights and Reports...........................................................................
Year 2000 Compliance................................................................................
Legal Proceedings...................................................................................
Appendix............................................................................................
Statement of Additional Information Table of Contents...............................................
</TABLE>
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.
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 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.
FEE TABLE
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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>
Fund Charges. The fees and expenses for each of the Funds (as a
percentage of net assets) for the year ended December 31, 1997 are set forth in
the following table. For more information on these fees and expenses, see the
prospectuses for the Funds which accompany this prospectus.
<TABLE>
<CAPTION>
Management
Fees
(after fee Other Expenses
waiver as (after reimbursement- Total Annual
Fund applicable) as applicable) Expenses
---- ----------- -------------- --------
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Janus Aspen Series
Growth Portfolio 0.65% 0.05% 0.70%
Aggressive Growth Portfolio 0.73% 0.03% 0.76%
International Growth Portfolio 0.67% 0.29% 0.96%
Worldwide Growth Portfolio 0.66% 0.08% 0.74%
Balanced Portfolio 0.76% 0.07% 0.83%
Flexible Income Portfolio 0.65% 0.10% 0.75%
Capital Appreciation Portfolio 0.23% 1.03% 1.26%
Variable Insurance Products Fund: *
Equity-Income Portfolio 0.50% 0.08% 0.58%
Overseas Portfolio 0.75% 0.17% 0.92%
Growth Portfolio 0.60% 0.09% 0.69%
Variable Insurance Products Fund II: *
Asset Manager Portfolio 0.55% 0.10% 0.65%
Contrafund Portfolio 0.60% 0.11% 0.71%
Variable Insurance Products Fund III: *
Growth and Income Portfolio 0.49% 0.21% 0.70%
Growth Opportunities Portfolio 0.60% 0.14% 0.74%
GE Investments Funds, Inc.:
S&P 500 Index Fund 0.34% 0.12% 0.46%
Money Market Fund 0.20% 0.12% 0.32%
Total Return Fund 0.50% 0.15% 0.65%
International Equity Fund 0.98% 0.36% 1.34%
Real Estate Securities Fund 0.83% 0.12% 0.95%
Global Income Fund 0.40% 0.17% 0.57%
Value Equity Fund 0.37% 0.09% 0.46%
Income Fund 0.42% 0.17% 0.59%
U.S. Equity Fund 0.55% 0.25% 0.80%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund 0.73% 0.05% 0.78%
Oppenheimer Aggressive Growth Fund 0.71% 0.02% 0.73%
Oppenheimer Growth Fund 0.73% 0.02% 0.75%
Oppenheimer High Income Fund 0.75% 0.07% 0.82%
Oppenheimer Multiple Strategies Fund 0.72% 0.03% 0.75%
Federated Insurance Series:
Federated American Leaders Fund II 0.66% 0.19% 0.85%
Federated Utility Fund II 0.48% 0.37% 0.85%
Federated High Income Bond Fund II 0.51% 0.29% 0.80%
The Alger American Fund:
Alger American Growth Portfolio 0.75% 0.04% 0.79%
Alger American Small Capitalization 0.85% 0.04% 0.89%
Portfolio
PBHG Insurance Series Fund, Inc.:
PBHG Growth II Portfolio 0.0% 1.20% 1.20%
PBHG Large Cap Growth Portfolio 0.0% 1.10% 1.10%
Goldman Sachs Variable Insurance Trust Fund
Goldman Sachs Growth and Income Fund 0.75% 0.15% 0.90%
Goldman Sachs Mid Cap Equity Fund 0.80% 0.15% 0.95%
</TABLE>
*The fees and expenses reported for Variable Insurance Products Fund, Variable
Insurance Products Fund II and Variable Insurance Products Fund III are prior to
any fee waiver and/or reimbursement as applicable.
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., Goldman Sachs Variable Insurance Trust 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 except as otherwise indicated. Life of Virginia
cannot guarantee that the reimbursements will continue.
Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1997 would have been .78% for Growth Portfolio, .78%
for Aggressive Growth Portfolio, 1.08% for International Growth Portfolio, .81%
for Worldwide Growth Portfolio, .83% for Balanced Portfolio and 2.19% for
Capital Appreciation Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund during 1997 would have been .57% for VIP
Equity-Income Portfolio, .90% for VIP Overseas Portfolio and .67% for VIP Growth
Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund II during 1997 would have been .64% for VIP
II Asset Manager Portfolio and .68% for VIP II Contrafund Portfolio.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund III during 1997 would have been .73% for VIP
III 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 1997
would have been .46% for S&P 500 Index Fund, .48% for Money Market Fund, .65%
for Total Return Fund, 1.43% for International Equity, .96% for Real Estate
Fund, .57% for Global Income Fund, .46% for Value Equity Fund, .76% for Income
Fund and .86% for U.S. Equity Fund.
Absent certain fee waivers or reimbursements, the total annual expenses
of the portfolios of the Federated Insurance Series during 1997 would have
been .94% for Federated American Leaders Fund II, 1.12% for Federated Utility
Fund II, and .89% for Federated High Income Bond Fund II.
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of PBHG Insurance Series Funds, Inc. during 1997 would have been
4.38% for Growth II Portfolio and 5.21% for Large Cap Growth Portfolio.
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of Goldman Sachs Variable Insurance Trust would have been 1.51% for
Growth and Income Fund and 1.33% for Mid Cap Equity Fund.
Other Policies
We offer other variable life insurance policies which also invest in the same
portfolios of the Funds. These Policies may have different charges that could
affect the value of the Investment Subdivisions and may offer different benefits
more suitable to your needs. To obtain more information about these policies,
contact your agent, or call (800) 352-9910.
<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.
Payment option selection does not have a material effect on the expenses an
Owner will pay.
Subdivision Investing In: 1 Year 3 Years 5 years 10 years
------------------------ ------ ------- ------- --------
Janus Aspen Series
Balanced Portfolio 21.63 65.28 108.87 211.96
Flexible Income Portfolio 20.85 62.99 105.11 204.96
Growth Portfolio 20.37 61.55 102.76 200.56
Aggressive Growth Portfolio 20.95 63.28 105.58 205.84
Worldwide Growth Portfolio 20.76 62.70 104.64 204.08
International Growth Portfolio 22.89 69.01 114.95 223.25
Capital Appreciation Portfolio 25.80 77.57 128.87 248.87
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 22.50 67.86 113.08 219.79
Variable Insurance Products
Fund II
Asset Manager Portfolio 19.88 60.11 100.40 196.15
Contrafund Portfolio 20.47 61.84 103.23 201.44
Variable Insurance Products
Fund III
Growth Opportunities Portfolio 20.76 62.70 104.64 204.08
Growth & Income Portfolio 20.37 61.55 102.76 200.56
"GE Investments Funds, Inc."
S&P 500 Index Fund 18.04 54.64 91.40 179.22
International Equity Fund 26.58 79.84 132.56 255.61
Real Estate Securities Fund 22.80 68.72 114.48 222.38
Total Return Fund 19.88 60.11 100.40 196.15
Income Fund 19.30 58.39 97.56 190.83
Money Market Fund 16.68 50.59 84.73 166.60
Value Equity Fund 18.04 54.64 91.40 179.22
Global Income Fund 19.11 57.81 96.62 189.05
U.S. Equity Fund 21.34 64.42 107.46 209.34
Oppenheimer Variable
Account Funds
Oppenheimer Multiple
Strategies Fund 20.85 62.99 105.11 204.96
Oppenheimer Aggressive
Growth Fund 20.66 62.41 104.17 203.20
Oppenheimer Growth Fund 20.85 62.99 105.11 204.96
Oppenheimer High Income Fund 21.53 65.00 108.40 211.09
Oppenheimer Bond Fund 21.15 63.85 106.52 207.59
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
Growth Portfolio 21.24 64.14 106.99 208.47
Small Capitalization Portfolio 22.21 67.00 111.68 217.18
"PBHG Insurance Series Funds, Inc."
PBHG Growth II Portfolio 25.22 75.86 126.10 243.79
PBHG Large Cap Growth
Portfolio 24.25 73.01 121.46 235.28
Goldman Sachs Variable
Insurance Trust Fund
Goldman Sachs Growth and
Income Fund 22.31 67.29 112.14 218.05
Goldman Sachs Mid Cap
Equity Fund 22.80 68.72 114.48 222.38
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.
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.
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
Financial Assurance Holdings, Inc. General Electric Capital Assurance
Corporation and GE Financial Assurance Holdings, Inc. are indirectly,
wholly-owned subsidiaries of General Electric Capital Corporation ("GE
Capital"). GE Capital, a 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.
IMSA Disclosure
Life of Virginia is a member of the Insurance Marketplace Standards Association
(IMSA). Life of Virginia may use the IMSA membership logo and language in its
advertisements, as outlined in IMSA's Marketing and Graphics Guidelines.
Companies that belong to IMSA subscribe to a set of ethical standards covering
the various aspects of sales and service for individually sold life insurance
and annuities.
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 74
Investment Subdivisions, 37 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 37 Investment Subdivisions available under the Policy. Each of these
Investment Subdivisions invests exclusively in one of the Funds described below.
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 ten 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 will not be
able to purchase additional shares of that Fund. In that event, Policyowners
will no longer be able to allocate Account Values or Premium Payments to
Investment Subdivisions investing in portfolios of that Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Account 4 despite the fact
that the participation agreement between the Fund and Life of Virginia has not
been terminated. Should a Fund or a portfolio of a Fund decide not to sell its
shares to Life of Virginia, Life of Virginia will be unable to honor policyowner
requests to allocate their account values or premium payments to Investment
Subdivisions investing in shares of that Fund or portfolio.
Therefore, before choosing Investment Subdivisions, carefully read the
individual prospectuses for the Funds, along with this prospectus.
Janus Aspen Series
The Janus Aspen Series has seven portfolios that are available under
this Policy: Growth Portfolio, Aggressive Growth Portfolio, Worldwide
Growth Portfolio, International Growth Portfolio, Balanced Portfolio, Flexible
Income Portfolio, and Capital Appreciation Portfolio
Growth Portfolio has the investment objective of long-term capital growth in a
manner consistent with the preservation of capital. The Growth Portfolio is a
diversified portfolio that pursues its objective by investing in common stocks
of 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.
Variable Insurance Products Fund
Variable Insurance Products Fund has three portfolios that are available under
this Policy: VIP Equity-Income Portfolio, VIP Overseas Portfolio and VIP Growth
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 exceeds the composite yield on the securities
comprising the Standard & Poor's Composite Index of 500 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.
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.
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 available
under this Policy: VIP II Asset Manager Portfolio and VIP II Contrafund
Portfolio.
VIP II 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 money market instruments.
VIP II 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
available under this Policy: VIP III Growth & Income Portfolio and VIP III
Growth Opportunities Portfolio.
VIP III Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing mainly in
equity securities.
VIP III 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 available under this Policy: S&P 500 Index Fund, Money Market Fund, Total
Return Fund, International Equity Fund, Real Estate Securities Fund, Global
Income Fund, Value Equity Fund, Income Fund and U.S. Equity Fund. The U.S.
Equity Fund is not available in the state of California at this time.
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.
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.
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.
- --------
1 "Standard & Poor's," "S&P," and S&P 500" are trademarks of Mc-Graw 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 or
warranty, express or implied, regarding the advisability of investing in this
Fund or the Policy.
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.
Income Fund has the investment objective or providing maximum income
consistent with prudent investment management and preservation of capital by
investing primarily in income-bearing debt securities and other income bearing
instruments.
U.S. Equity Fund has the investment objective of providing long-term growth of
capital by investing primarily in equity securities of U.S. companies.
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 available
under this Policy: Oppenheimer High Income Fund, Oppenheimer Bond Fund,
Oppenheimer Aggressive Growth 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.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. Bond Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation by
investing in "growth-type" companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by investing in
securities of well-known established companies.
Oppenheimer Multiple Strategies Fund seeks a total investment return (which
includes current income and capital appreciation in the value of its shares)
from investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
OppenheimerFunds, Inc. serves as investment adviser to Oppenheimer Variable
Accounts Funds.
Federated Insurance Series
The Federated Insurance Series has three portfolios that are 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.
Federated Advisers serves as investment adviser to Federated Insurance Series.
The Alger American Fund
The Alger American Fund has two portfolios that are available under this
Policy: Alger American Growth Portfolio and Alger American Small Capitalization
Portfolio.
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.
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.
Fred Alger Management, Inc. serves as the investment manager to The Alger
American Fund.
PBHG Insurance Series Fund, Inc.
PBHG Insurance Series Fund, Inc. (PBHG Insurance Series Fund) has two
portfolios that are available under this Policy: Growth II Portfolio and
Large Cap Growth Portfolio.
PBHG Growth II Portfolio seeks capital appreciation by investing at least 65%
of its total assets in the equity securities of small and medium sized growth
companies (market capitalization of up to $4 billion) that, in the Adviser's
opinion, have an outlook for strong earnings growth and the potential for
significant capital appreciation.
PBHG Large Cap Growth Portfolio seeks long-term growth of capital by investing
primarily in the equity securities of large capitalization companies (market
capitalization of greater than $1 billion) that, in the adviser's opinion, 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.
Goldman Sachs Variable Insurance Trust
Goldman Sachs Variable Insurance Trust has two portfolios that are under this
Policy: Goldman Sachs Mid Cap Equity Fund and Goldman Sachs Growth and Income
Fund. These two funds are not available to policyowners in the state of
California at this time.
Goldman Sachs Mid Cap Equity Fund seeks to meet its objective primarily
through investments in equity securities of companies with public stock market
capitalizations within the range of the market capitalization of companies
constituting the Russell Midcap Index at the time of investment (currently
between $400 million and $16 billion).
Goldman Sachs Growth and Income Fund seeks long-term capital growth and growth
of income, primarily through equity securities that, in the management team's
view, offer favorable capital appreciation and/or dividend-paying ability.
Goldman Sachs Asset Management serves as investment adviser to Goldman Sachs
Variable Insurance Trust.
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, The Alger American Fund
and Goldman Sachs Variable Insurance Trust may sell shares to certain retirement
plans. As a result, there is a possibility that a material conflict may arise
between the interests of Owners generally or certain classes of Owners, and such
retirement plans or participants in such retirement plans.
In the event of a material conflict, Life of Virginia will take any
necessary steps, including removing Account 4 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 December 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 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 for tax purposes,
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 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.
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.) 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: (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, credit 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 affect 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 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. If proceeds from this charge are not needed to cover
mortality and expense risks, Life of Virginia may use the proceeds to finance
distribution of 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. 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 GE
Investments Funds, Inc.), it has entered into agreements regarding
participation in the Funds which require the Funds to be operated in compliance
with the requirements prescribed by the Treasury Department.
(2) Ownership Treatment. In certain circumstances, variable contract owners
may be considered the owners, for federal tax purposes, of the assets of 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 portfolios
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 (within the meaning of the tax law 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 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.
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.
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 Capital Brokerage Corporation, the principal underwriter of
the Policies, or of broker-dealers who have entered into written sales
agreements with the principal underwriter. Capital Brokerage Corporation, an
affiliate of Life of Virginia, is a Virginia corporation located at 6630 W.
Broad St., Richmond, Virginia 23230. Capital Brokerage 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. Capital
Brokerage Corporation also serves as principal underwriter for variable life
insurance policies issued by Life of Virginia. However, no amounts have been
retained by Capital Brokerage 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 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.
YEAR 2000 COMPLIANCE.
Like other financial services providers, Life of Virginia utilizes computer
systems that may be affected by Year 2000 date data processing issues and it
also relies on services providers, including banks, custodians, administrators,
and investment managers that also may be affected. Life of Virginia is engaged
in a process to evaluate and develop plans to have its computer systems and
critical applications ready to process Year 2000 date data. It is also
confirming that its service providers are also so engaged. The resources that
are being devoted to this effort are substantial. Remedial actions include
inventorying the company's computer systems, applications and interfaces,
assessing the impact of the Year 2000 date data on them, developing a range of
solutions specific to particular situations and implementing appropriate
solutions. Some systems, applications and interfaces will be replaced or
upgraded to new software or new releases of existing software which are Year
2000 ready. Others will be modified as necessary to become ready. It is
difficult to predict with precision whether the amount of resources ultimately
devoted, or the outcome of these efforts, will have any negative impact on Life
of Virginia and Account 4. However, as of the date of this prospectus, it is not
anticipated that Owners will experience negative effects on their investment, or
on the services provided in connection therewith, as a result of Year 2000
readiness implementation. Life of Virginia's target dates for completion of
these activities depend upon the particular situation. The Company's goal is to
be substantially Year 2000 ready for critical applications by mid-1999, but
there can be no assurance that Life of Virginia will be successful in meeting
its goal, or that interaction with other service providers will not impair Life
of Virginia's services at that time.
LEGAL PROCEEDINGS
Life of Virginia, like all other companies, is involved in lawsuits, including
class action lawsuits. In some class action and other lawsuits involving
insurance companies, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, Life of Virginia believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on it or Account 4.
<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.
<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]
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.
<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]
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]
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.
<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]
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]
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.
<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.
<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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
----
The Life Insurance Company of Virginia..............................
Termination of Participation Agreements.............................
Federal Tax Matters.................................................
Taxation of Life of Virginia......................................
IRS Required Distributions........................................
General Provisions..................................................
Using the Policies as Collateral..................................
Non-Participating.................................................
Misstatement of Age or Sex........................................
Incontestability..................................................
Statement of Values...............................................
Written Notice....................................................
Distribution of the Policies........................................
Legal Developments Regarding Employment-Related Benefit Plans.......
Additions, Deletions, or Substitutions..............................
State Regulation of Life of Virginia................................
Legal Matters.......................................................
Experts.............................................................
Changes in Auditors.................................................
Financial Statements................................................
<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 May 1, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
----
The Life Insurance Company of Virginia......................................
Termination of Participation Agreements.....................................
Federal Tax Matters..........................................................
Taxation of Life of Virginia...............................................
IRS Required Distributions.................................................
General Provisions...........................................................
Using the Policies as Collateral...........................................
Non-Participating..........................................................
Misstatement of Age or Sex.................................................
Incontestability...........................................................
Annual Statement...........................................................
Written Notice.............................................................
Distribution of the Policies.................................................
Legal Developments Regarding Employment-Related Benefit Plans................
Additions, Deletions, or Substitutions of Investments........................
State Regulation of Life of Virginia.........................................
Legal Matters................................................................
Experts......................................................................
Change in Auditors...........................................................
Financial Statements.........................................................
<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 Financial
Assurance Holdings, Inc. General Electric Capital Assurance Company and GE
Financial Assurance Holdings, 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 Capital Brokerage 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:
Janus Aspen Series. This agreement may be terminated by the parties on six
months' advance written notice.
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.
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.
Oppenheimer Variable Account Funds. 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.
Goldman Sachs Variable Insurance Trust. 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.
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
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.
<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.
Statement of Values
At least once each year, Life of Virginia will send the Owner a statement
of values within 30 days after each report date. The statement will show
Account Value, Premium Payments and charges made during the report period.
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.
<PAGE>
DISTRIBUTION OF THE POLICIES
Capital Brokerage 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 Capital Brokerage Corporation. The offering is continuous and
Forth Capital Brokerage 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.
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 LLP 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 balance sheets of The Life Insurance Company of Virginia and
subsidiary as of December 31, 1997 and 1996, and the related consolidated
statements of income, stockholders' equity and cash flows for the year ended
December 31, 1997, the nine month period ended December 31, 1996 and the
preacquisition three month period ended March 31, 1996, and the statement of
assets and liabilities of Life of Virginia Separate Account 4 as of December 31,
1997 and the related statements of operations and changes in net assets for each
of the two years or lesser periods then ended have been included herein and in
the registration statement in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of such firm as experts in accounting and auditing.
The report of KPMG Peat Marwick, LLP with respect to the consolidated
financial statements of The Life Insurance Company of Virginia and subsidiary
contains an explanatory paragraph that states 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.
Ernst & Young LLP.
The consolidated statements of income, stockholders' equity and cash flows of
The Life Insurance Company of Virginia and subsidiaries for the year ended
December 31, 1995 and the statements of operations and changes in net assets of
Life of Virginia Separate Account 4 for the year or period 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 us by GNA Corporation on April 1, 1996, we
selected KPMG Peat Marwick LLP to be our auditor. Accordingly, our 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, the indirect parent of GNA Corporation. This change was approved by the
members of our Board of Directors.
Neither KPMG Peat Marwick LLP's nor Ernst & Young LLP's reports on the
financial statements contain 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, 1997.
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.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities
Year ended December 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Table of Contents
Year ended December 31, 1997
=============================================================================
Page
Independent Auditors' Report................................................1
Financial Statements:
Statements of Assets and Liabilities..................................3
Statements of Operations..............................................9
Statements of Changes in Net Assets..................................20
Notes to Financial Statements..............................................31
=============================================================================
<PAGE>
1
Report of Independent Auditors
Contractholders
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 GE Investments Funds,
Inc.--S&P 500 Index, Money Market, Total Return, International Equity, Real
Estate Securities, Global Income, Value Equity and Income Funds; the Oppenheimer
Variable Account Funds--Bond, Capital Appreciation, Growth, High Income and
Multiple Strategies Funds; the Variable Insurance Products Fund--Equity-Income,
Growth and Overseas Portfolios; the Variable Insurance Products Fund II--Asset
Manager and Contrafund Portfolios; the Variable Insurance Products III--Growth &
Income and Growth Opportunities Portfolios; the Federated Investors Insurance
Series--American Leaders, High Income Bond and Utility Funds II; the Alger
American--Small Cap and Growth Portfolios; the PBHG Insurance Series Fund--PBHG
Large Cap Growth and PBHG Growth II Portfolios; and the Janus Aspen
Series--Aggressive Growth, Growth, Worldwide Growth, Balanced, Flexible Income,
International Growth and Capital Appreciation Portfolios) as of December 31,
1997 and the related statements of operations and changes in net assets for the
aforementioned funds and the GE Investments Funds Inc. --Government Securities
Fund; Oppenheimer Variable Account Funds--Money Fund; Variable Insurance
Products Funds--Money Market and High Income Portfolios; and Neuberger & Berman
Advisers Management Trust--Balanced, Bond and Growth Portfolios of Life of
Virginia Separate Account 4 for each of the two years or lesser periods then
ended. These financial statements are the responsibility of the Account's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The accompanying statements of operations and
changes in net assets of Life of Virginia Separate Account 4 for the year or
period ended December 31, 1995, were audited by other auditors, whose report
thereon dated February 8, 1996 expressed an unqualified opinion on those
statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the underlying mutual funds or their transfer agent. 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.
<PAGE>
In our opinion, the 1997 and 1996 financial statements referred to above present
fairly, in all material respects, the financial position of each of the
respective portfolios constituting Life of Virginia Separate Account 4 as of
December 31, 1997 and the results of their operations and changes in their net
assets for each of the two years or lesser periods then ended in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Richmond, Virginia
February 13, 1998
<PAGE>
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 the year 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, the
Janus Aspen Aggressive Growth, Growth, and Worldwide Growth 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 period from October 11, 1995 (date of inception) to December
31, 1995 for the Janus Aspen Balanced portfolio, for the period from October 13,
1995 (date of inception) to December 31, 1995 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 audit.
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. 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 out audit provides 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.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Policyholders
Life of Virginia Separate Account III
and
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying statements of operations and changes in net
assets for the year 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 June 30, 1995 (date of inception) to December 31, 1995
for the Life of Virginia Series Fund, Inc. International Equity portfolio,
for the period from December 6, 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 16, 1995 (date of inception) to December 31, 1995
for the Variable Insurance Products Fund II Contrafund portfolio for the period
from February 7, 1995 (date of inception) to December 31, 1995 for the
Insurance Management Series portfolios, for the year ended December 31, 1995
and for the period from May 11, 1994 (date of inception) to December 31, 1994
for the Janus Aspen Aggressive Growth, Growth, and Worldwide Growth portfolios,
for the period from October 27, 1995 (date of inception) to December 31, 1995
for the Janus Aspen Balanced portfolio, for the period from November 1, 1995
(date of inception) to December 31, 1995 for the Janus Aspen Flexible Income
portfolio, for the period from October 6, 1995 (date of inception) to December
31, 1995 for the Alger American Small Cap portfolio and for the period from
November 2, 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 audit.
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. 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 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 III, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Assets and Liabilities
December 31, 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GE Investment Funds, Inc.
(formerly Life Of Virginia Series Fund, Inc.)
------------------------------------------------
S&P 500 Money Total
Index Market Return
Fund Fund Fund
<S> <C>
- ----------------------------------------------------------------------------------------------------------------
Investment GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (7,976,419 shares; cost - $145,723,059) $ 153,386,538 - -
Money Market Fund (118,336,576 shares; cost - $117,791,205) - 118,336,576 -
Total Return Fund (3,370,192 shares; cost - $48,733,062) - - 44,520,238
International Equity Fund (2,151,087 shares; cost - $24,524,231) - - -
Real Estate Securities Fund (3,452,544 shares; cost - $48,950,718) - - -
Global Income Fund (611,834 shares; cost - $6,150,915) - - -
Value Equity Fund (1,199,676 shares; cost - $14,841,949) - - -
Income Fund (1,845,624 shares; cost - $22,362,706) - - -
Receivable from affiliate 131,054 - 34,825
Receivable for units sold 52,884 5,964,313 -
- ----------------------------------------------------------------------------------------------------------------
$ 153,570,476 124,300,889 44,555,063
- ----------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 144,152 606,185 27,866
Payable for units withdrawn - - 80
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 144,152 606,185 27,946
- ----------------------------------------------------------------------------------------------------------------
Net Assets $ 153,426,324 123,694,704 44,527,117
- ----------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders $ 153,426,324 123,694,704 44,527,117
The Life Insurance Company
of Virginia - - -
- ----------------------------------------------------------------------------------------------------------------
Net assets $ 153,426,324 123,694,704 44,527,117
- ----------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 918,847 3,512,260 631,828
- ----------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 39.63 14.77 28.96
- ----------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,025,140 4,980,487 928,145
- ----------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 38.68 14.42 28.26
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)(continued)
---------------------------------------------------------------------
International Real Estate Global Value
Equity Securities Income Equity Income
Fund Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (7,976,419 shares; cost - $145,723,059) - - - - -
Money Market Fund (118,336,576 shares; cost - $117,791,205) - - - - -
Total Return Fund (3,370,192 shares; cost - $48,733,062) - - - - -
International Equity Fund (2,151,087 shares; cost - $24,524,231) 22,973,610 - - - -
Real Estate Securities Fund (3,452,544 shares; cost - $48,950,718) - 52,754,866 - - -
Global Income Fund (611,834 shares; cost - $6,150,915) - - 6,026,567 - -
Value Equity Fund (1,199,676 shares; cost - $14,841,949) - - - 15,727,748 -
Income Fund (1,845,624 shares; cost - $22,362,706) - - - - 22,350,507
Receivable from affiliate 12,571 26,750 - 14,492 -
Receivable for units sold - 27 89,788 166,328 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets 22,986,181 52,781,643 6,116,355 15,908,568 2,350,507
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 7,311 22,389 1,057 8,560 306,136
Payable for units withdrawn 102,337 75,457 - - 33,511
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 109,648 97,846 1,057 8,560 339,647
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets 22,876,533 52,683,797 6,115,298 15,900,008 22,010,860
- ----------------------------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders 9,954,696 33,635,732 944,793 11,923,320 22,010,860
The Life Insurance Company
of Virginia 12,921,837 19,048,065 5,170,505 3,976,688 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets 22,876,533 52,683,797 6,115,298 15,900,008 22,010,860
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,212,802 1,385,306 516,898 479,621 1,295,638
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 12.53 18.46 10.26 13.15 10.01
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 614,410 1,478,247 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 12.50 18.34 10.24 13.13 10.01
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------------------------------------
Capital High Multiple
Bond Appreciation Growth Income Strategies
Assets Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds,
at fair value (note 2):
Bond Fund (3,338,044 shares; cost-$38,648,132) $39,756,108 - - - -
Capital Appreciation Fund (5,085,365 shares; cost-$177,299,340) - 208,296,549 - - -
Growth Fund (4,282,333 shares; cost-$115,624,020) - - 138,918,887 - -
High Income Fund (12,856,952 shares; cost-$143,356,020) - - - 148,112,092 -
Multiple Strategies Fund (4,239,791 shares; cost-$61,776,406) - - - - 72,118,841
Receivable from affiliate 3,463 56,595 - 89,573 13,227
Receivable for units sold 84,091 81,846 211,756 188,070 6,302
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $39,843,662 208,434,990 139,130,643 148,389,735 72,138,370
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 43,140 587,754 114,827 104,109 114,775
Payable for units withdrawn 54,839 - - - 42
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 97,979 587,754 114,827 104,109 114,817
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity
contractholders $39,745,683 207,847,236 139,015,816 148,285,626 72,023,553
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 929,630 2,591,419 1,291,813 1,869,843 1,553,549
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 20.92 36.52 37.62 31.32 26.43
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 994,017 3,176,448 2,462,359 2,934,974 1,200,126
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 20.42 35.64 36.72 30.57 25.80
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------------------
Equity-
Income Growth Overseas
Portfolio Portfolio Portfolio
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------
Investment in Variable Insurance Products
Fund, at fair value (note 2):
Equity-Income Portfolio (25,284,474 shares; cost - $481,451,916) $ 613,907,020 - -
Growth Portfolio (8,496,260 shares; cost - $238,768,154) - 315,211,237 -
Overseas Portfolio (5,812,347 shares; cost - $99,900,187) - - 111,597,056
Receivable from affiliate 204,695 116,417 14,558
Receivable for units sold 118,450 58,665 -
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 614,230,165 315,386,319 111,611,614
- -----------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note3) $ 437,839 312,937 172,653
Payable for units withdrawn 209,554 59,775 3,134,340
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 647,393 372,712 3,306,993
- -----------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 613,582,772 315,013,607 108,304,621
- -----------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 6,589,338 4,467,825 3,398,260
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 37.36 39.40 21.16
- -----------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 10,074,173 3,614,598 1,762,588
- -----------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 36.47 38.45 20.65
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III
--------------------------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Investment in Variable Insurance Products Fund II, at fair value (note 2):
Asset Manager Portfolio (26,932,347 shares; cost - $393,528,382) $ 485,051,564 - - -
Contrafund Portfolio (12,134,794 shares; cost - $193,722,470) - 241,967,789 - -
Investment in Variable Insurance Products Fund III, at fair value (note 2):
Growth & Income Portfolio (1,247,313 shares; cost - $15,170,737) - - 15,628,837 -
Growth Opportunities Portfolio (883,879 shares; cost - $15,976,584) - - - 17,032,342
Receivable from affiliate 5,351 176,780 25,307 3,157
Receivable for units sold 43,195 255,163 64,010 64,775
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $ 485,100,110 242,399,732 15,718,154 17,100,274
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 1,187,116 176,209 9,932 12,499
Payable for units withdrawn 38,182 86,127 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,225,298 262,336 9,932 12,499
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 483,874,812 242,137,396 15,708,222 17,087,775
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 17,101,510 3,296,201 294,329 341,417
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 24.53 20.47 12.38 12.30
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 2,678,933 8,595,677 976,086 1,049,540
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 24.03 20.32 12.36 12.28
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Federated Investors
Insurance Series
-----------------------------------------
American High
Leaders Income Bond Utility
Assets Fund II Fund II Fund II
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (1,767,003 shares; cost - $31,138,913) $ 34,686,268 - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - 35,218,348 -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - - 30,391,148
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) - - -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - - -
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) - - -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - - -
Receivable from affiliate 9,118 6,282 20,101
Receivable for units sold 223,715 12,611 12,121
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 34,919,101 35,237,241 30,423,370
- -------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) $ 25,357 26,612 22,088
Payable for units withdrawn 18 15,282 3,388
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 25,375 41,894 25,476
- -------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $ 34,893,726 35,195,347 30,397,894
- -------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 361,619 456,124 485,332
- -------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I $ 14.48 15.11 16.88
- -------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 2,056,691 1,886,887 1,325,701
- -------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II $ 14.42 15.00 16.75
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Assets and Liabilities, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Alger American
---------------------------
Small
Cap Growth
Assets Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (1,767,003 shares; cost - $31,138,913) - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - -
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) 73,961,717 -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - 72,336,337
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) - -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - -
Receivable from affiliate 23,461 28,703
Receivable for units sold - 7,598
- -----------------------------------------------------------------------------------------------------------
Total assets 73,985,178 72,372,638
- -----------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 56,893 156,426
Payable for units withdrawn 100,595 62,399
- -----------------------------------------------------------------------------------------------------------
Total liabilities 157,488 218,825
- -----------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 73,827,690 72,153,813
- -----------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,325,070 1,022,514
- -----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 10.64 13.42
- -----------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 5,645,458 4,380,186
- -----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 10.58 13.34
- -----------------------------------------------------------------------------------------------------------
</TABLE>
Statements of Assets and Liabilities, Continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PBHG Insurance Series Fund
--------------------------
PBHG Large PBHG
Cap Growth Growth II
Assets Portfolio Portfolio
<S> <C>
- -------------------------------------------------------------------------------------------------------
Investments in Federated Investors Insurance Series, at fair value (note 2):
American Leaders Fund II (1,767,003 shares; cost - $31,138,913) - -
High Income Bond Fund II (3,216,287 shares; cost - $33,511,201) - -
Utility Fund II (2,126,742 shares - cost - $24,061,328) - -
Investment in Alger American, at fair value (note 2):
Small Cap Portfolio (1,690,554 shares; cost - $70,050,792) - -
Growth Portfolio (1,691,682 shares; cost - $61,989,581) - -
PBHG Insurance Series Fund at fair value (note 2):
PBHG Large Cap Growth Portfolio (401,761 shares; cost - $4,598,913) 4,748,811 -
PBHG Growth II Portfolio (629,476 shares; cost - $6,856,693) - 6,766,864
Receivable from affiliate 19,040 423
Receivable for units sold 24,969 241,497
- -------------------------------------------------------------------------------------------------------
Total assets 4,792,820 7,008,784
- -------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 21,750 5,127
Payable for units withdrawn 52,803 51,717
- -------------------------------------------------------------------------------------------------------
Total liabilities 74,553 56,844
- -------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 4,718,267 6,951,940
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 55,997 76,611
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 11.73 10.67
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 346,833 576,010
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 11.71 10.65
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Statements of Assets and Liabilities, Continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Janus Aspen Series
-----------------------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Assets Portfolio Portfolio Portfolio Portfolio
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(5,150,041 shares; cost - $90,470,714) 105,833,338 - - -
Growth Portfolio (12,128,299
shares; cost - $177,459,821) - 224,130,972 - -
Worldwide Growth Portfolio
(14,763,565 shares; cost - $285,300,634) - - 345,319,777 -
Balanced Portfolio (4,444,303
shares; cost - $72,670,094) - - - 77,641,966
Flexible Income Portfolio
(1,218,449 shares; cost - $14,017,277) - - - -
International Growth Portfolio
(3,130,281 shares; cost - $56,025,325) - - - -
Capital Appreciation Portfolio
(214,897 shares; cost - $2,699,822) - - - -
Receivable from affiliate 48,595 24,477 118,902 52,126
Receivable for units sold 10,900 166,892 194,595 5,036
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 105,892,833 224,322,341 345,633,274 77,699,128
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 77,711 253,424 249,062 52,851
Payable for units withdrawn - - 258,130 8,042
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 77,711 253,424 507,192 60,893
- -------------------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders $105,815,122 224,068,917 345,126,082 77,638,235
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,817,576 4,505,765 4,938,272 2,481,552
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 20.26 19.15 23.10 14.73
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,442,667 7,270,898 10,111,685 2,804,435
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 20.04 18.95 22.85 14.65
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Statements of Assets and Liabilities, Continued
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------
Flexible International Capital
Income Growth Appreciation
Assets Portfolio Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio
(5,150,041 shares; cost - $90,470,714) - - -
Growth Portfolio (12,128,299
shares; cost - $177,459,821) - - -
Worldwide Growth Portfolio
(14,763,565 shares; cost - $285,300,634) - - -
Balanced Portfolio (4,444,303
shares; cost - $72,670,094) - - -
Flexible Income Portfolio
(1,218,449 shares; cost - $14,017,277) 14,353,326 - -
International Growth Portfolio
(3,130,281 shares; cost - $56,025,325) - 57,847,585 -
Capital Appreciation Portfolio
(214,897 shares; cost - $2,699,822) - - 2,712,004
Receivable from affiliate 4,412 34,124 812
Receivable for units sold 42,930 - 1,500
- ------------------------------------------------------------------------------------------------------------------
Total assets 14,400,668 57,881,709 2,714,316
- ------------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 10,126 40,026 39,487
Payable for units withdrawn 53,791 3,175,957 5,254
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 63,917 3,215,983 44,741
- ------------------------------------------------------------------------------------------------------------------
Net assets attributable to variable deferred annuity contractholders 14,336,751 54,665,726 2,669,575
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 280,878 1,004,669 49,257
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 12.52 13.69 12.56
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 869,089 3,001,600 163,550
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 12.45 13.63 12.54
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
- -------------------------------------------------------------------------------------------------
<S> <C>
S&P 500 Government
Index Securities
Fund Fund
-------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends 4,001,897 23,435,279 411,769 - 1,309,648 565,524
Expenses - Mortality and expense
risk charges (note 3) 1,356,740 492,403 139,329 147,796 143,919 83,929
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 2,645,157 22,942,876 272,440 (147,796) 1,165,729 481,595
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) (899,446) 1,510,464 345,068 (242,895) (68,248) (20,275)
Unrealized appreciation
(depreciation) on investments 21,611,136 (16,204,375) 2,539,788 987,049 (995,503) 567,616
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 20,711,690 (14,693,911) 2,884,856 744,154 (1,063,751) 547,341
- ----------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 23,356,847 8,248,965 3,157,296 596,358 101,978 1,028,936
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life
of Virginia Series Fund, Inc.)
-----------------------------------------------------------------
<S> <C>
Money Market Total Return
Fund Fund
--------------------------------- ----------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
Investment income:
Income - Dividends 5,626,589 5,204,323 1,098,198 6,098,862 9,319,880 1,576,466
Expenses - Mortality and expense
risk charges (note 3) 1,421,044 980,270 144,841 496,469 357,589 187,419
- --------------------------------------------------------------------------------------------------------
Net investment income (expense) 4,205,545 4,224,053 953,357 5,602,393 8,962,291 1,389,047
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) (4,421,730) 1,686,452 312,501 (454,827) 614,446 308,073
Unrealized appreciation
(depreciation) on investments 4,383,879 (2,984,484) (757,472) 657,828 (6,827,262) 1,987,241
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (37,851) (1,298,032) (444,971) 203,001 (6,212,816) 2,295,314
- --------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 4,167,694 2,926,021 508,386 5,805,394 2,749,475 3,684,361
- --------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (formerly Life
of Virginia Series Fund, Inc.)
(continued)
<S> <C>
-------------------------------------------------------------------------------
International Real Estate
Equity Securities
Fund Fund
--------------------------------- ----------------------------------------
Period from Period from
May 23, May 2,
Year ended Year ended 1996 to Year ended Year ended 1995 to
December 31 December 31 December 31, December 31, December 31, December 31
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------- ----------------------- -----------------------------------------
Investment income:
Income - Dividends 2,686,699 1,056,063 31,010 5,456,896 1,627,291 670,339
Expenses - Mortality and expense risk
charges (note 3) 113,987 56,953 4,298 292,230 49,030 2,663
- ------------------------------------------------------- ----------------------- -----------------------------------------
Net investment income 2,572,712 999,110 26,712 5,164,666 1,578,261 667,676
- ------------------------------------------------------- ----------------------- -----------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 665,649 86,537 646 2,710,582 299,159 24,928
Unrealized appreciation (depreciation)
on investments (1,565,382) (11,119) 25,880 (1,305,117) 4,059,521 1,049,744
- ------------------------------------------------------- ------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (899,733) 75,418 26,526 1,405,465 4,358,680 1,074,672
- ------------------------------------------------------- ------------------------------------------------------------------
Increase in net assets from operations 1,672,979 1,074,528 53,238 6,570,131 5,936,941 1,742,348
- ------------------------------------------------------- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
(continued)
-------------------------------------------
Global Value
Income Equity Income
Fund Fund Fund
---------- ---------- ----------
Period from Period from Period from
May 1, May 1, December 12,
1997 to 1997 to 1997 to
December 31 December 31 December 31,
1997 1997 1997
- ------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 300,672 142,788 58,034
Expenses - Mortality and expense risk
charges (note 3) 2,982 38,307 14,197
- ------------------------------------------------------------------------------------
Net investment income 297,690 104,481 43,837
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) 2,417 357,048 (6,710)
Unrealized appreciation (depreciation)
on investments (124,348) 885,799 (12,199)
- -----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments (121,931) 1,242,847 (18,909)
- -----------------------------------------------------------------------------------
Increase in net assets from operations 175,759 1,347,328 24,928
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------
Money
Fund
----------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 110,711 175,537 303,556
Expenses - Mortality and expense
risk charges (note 3) 25,908 40,663 64,415
- ---------------------------------------------------------------------
Net investment income (expense) 84,803 134,874 239,141
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain - - -
Unrealized appreciation
(depreciation) on investments - - -
- --------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - -
- --------------------------------------------------------------------
Increase in net assets
from operations $ 84,803 134,874 239,141
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
---------------------------------------------
Bond
Fund
-----------------------------------
Year ended December 31,
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 2,260,511 1,774,226 1,222,079
Expenses - Mortality and expense
risk charges (note 3) 437,693 336,825 220,766
- ---------------------------------------------------------------------
Net investment income (expense) 1,822,818 1,437,401 1,001,313
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 187,695 106,242 53,120
Unrealized appreciation
(depreciation) on investments 663,371 (442,815) 1,654,610
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 851,066 (336,573) 1,707,730
- ---------------------------------------------------------------------
Increase in net assets
from operations 2,673,884 1,100,828 2,709,043
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
-----------------------------------------------
Capital
Appreciation
Fund
------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 8,221,818 6,069,096 331,803
Expenses - Mortality and expense
risk charges (note 3) 2,381,196 1,506,102 868,053
- ---------------------------------------------------------------------
Net investment income (expense) 5,840,622 4,562,994 (536,250)
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 6,868,228 6,301,279 1,666,666
Unrealized appreciation
(depreciation) on
investments) 5,927,622 7,478,382 18,977,772
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 12,795,850 13,779,661 20,644,438
- ----------------------------------------------------------------------
Increase in net assets
from operations 18,636,472 18,342,655 20,108,188
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
---------------------------------------------
Growth
Fund
---------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 4,911,400 3,110,376 393,011
Expenses - Mortality and expense
risk charges (note 3) 1,372,378 599,846 265,718
- ----------------------------------------------------------------------------
Net investment income (expense) 3,539,022 2,510,530 127,293
- ----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 5,826,603 1,959,742 739,151
Unrealized appreciation
(depreciation) on
investments) 11,621,155 5,568,726 5,287,316
- ----------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 17,447,758 7,528,468 6,026,467
- ----------------------------------------------------------------------------
Increase in net assets
from operations 20,986,780 10,038,998 6,153,760
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
----------------------------------------------------------------------
High Multiple
Income Strategies
Fund Fund
-------------------------------- -------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $9,138,791 6,387,294 3,582,283 4,485,399 3,343,955 2,521,297
Expenses - Mortality and expense
risk charges (note 3) 1,397,317 825,956 471,932 794,598 571,993 410,701
- ------------------------------------------------------------------------------------------------------
Net investment income 7,741,474 5,561,338 3,110,351 3,690,801 2,771,962 2,110,596
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 1,298,149 763,575 (105,319) 1,435,981 701,256 353,442
Unrealized appreciation
(depreciation) on
investments) 2,089,422 2,079,281 2,497,291 4,025,778 2,786,345 3,750,075
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 3,387,571 2,842,856 2,391,972 5,461,759 3,487,601 4,103,517
- -----------------------------------------------------------------------------------------------------
Increase in net assets
from operations $11,129,045 8,404,194 5,502,323 9,152,560 6,259,563 6,214,113
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------------------------------------------------
High Equity-
Money Market Income Income
Portfolio Portfolio Portfolio
-------------------------------- -----------------------------------------------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $843,023 1,655,033 3,320,468 1,930,318 2,780,632 1,144,671 42,510,440 12,605,854 10,037,638
Expenses - Mortality and expense
risk charges (note 3) 212,121 382,911 699,880 277,254 332,922 297,241 6,650,343 4,253,036 2,138,272
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 630,902 1,272,122 2,620,588 1,653,064 2,447,710 847,430 35,860,097 8,352,818 7,899,366
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) - - - 4,673,705 479,085 425,760 15,417,526 9,394,625 4,284,587
Unrealized appreciation
(depreciation) on
investments - - - (2,814,608) 308,688 2,702,738 65,899,106 23,601,942 37,953,951
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments - - - 1,859,097 787,773 3,128,498 81,316,632 32,996,567 42,238,538
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from
operations $630,902 1,272,122 2,620,588 3,512,161 3,235,483 3,975,928 117,176,729 41,349,385 50,137,904
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund
----------------------------------------
Growth
Portfolio (continued)
---------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 9,229,913 13,903,188 567,790
Expenses - Mortality and expense
risk charges (note 3) 3,552,903 2,834,086 1,696,933
- ----------------------------------------------------------------------
Net investment income (expense) 5,677,010 11,069,102 (1,129,143)
- ----------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 14,576,544 9,229,819 7,510,176
Unrealized appreciation
(depreciation) on
investments) 34,536,532 6,990,625 29,804,134
- ---------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 49,113,076 16,220,444 37,314,310
- ---------------------------------------------------------------------
Increase in net assets from
operations 54,790,086 27,289,546 36,185,167
- ---------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund Variable Insurance Products Fund II
-------------------------------- ---------------------------------------------------
Asset
Overseas Manager Contrafund
Portfolio Portfolio Portfolio
------------------------------- ------------------------------- ---------------------
Year ended Year ended
Year ended December 31, Year ended December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $9,303,257 2,309,161 644,375 52,909,448 27,801,550 9,085,957 4,672,962 634,656
Expenses - Mortality and expense
risk charges (note 3) 1,401,167 1,245,263 999,548 5,474,604 4,059,911 4,926,810 2,588,608 1,322,883
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 7,902,090 1,063,898 (355,173) 47,434,844 23,741,639 4,159,147 2,084,354 (688,227)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain 6,802,686 2,693,770 734,798 9,093,636 7,507,674 1,958,733 9,468,307 2,738,082
Unrealized appreciation
(depreciation) on investments (3,387,543) 7,585,836 6,428,977 24,430,304 23,008,153 55,306,129 26,750,686 17,275,767
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on
investments 3,415,143 10,279,606 7,163,775 33,523,940 30,515,827 57,264,862 36,218,993 20,013,849
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 11,317,233 11,343,504 6,808,602 80,958,784 54,257,466 61,424,009 38,303,347 19,325,622
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Variable Insurance Products
Fund II (continued) Fund III
----------------------------- --------------------------
Growth & Growth
Contrafund Income Opportunities
Portfolio Portfolio Portfolio
------------- --------- ----------
Period from Period from Period from
January 5, May 1, May 1,
1995 to 1997 to 1997 to
December 3 December 31, December 31,
1995 1997 1997
- ------------------------------------------------------- -------------------------
<S> <C>
Investment income:
Income - Dividends 784,088 - -
Expenses - Mortality and expense risk
charges (note 3) 323,922 53,296 69,440
- ----------------------------------------------------- -------------------------
Net investment income (expense) 460,166 (53,296) (69,440)
- ----------------------------------------------------- -------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 905,255 103,153 67,071
Unrealized appreciation (depreciation)
on investments 4,218,866 458,100 1,055,758
- ----------------------------------------------------- -----------------------
Net realized and unrealized gain on
investments 5,124,121 561,253 1,122,829
- ----------------------------------------------------- -----------------------
Increase in net assets from operations 5,584,287 507,957 1,053,389
- ------------------------------------------------------- ----------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust
---------------------------------------------------------------------
Balanced Bond
Portfolio Portfolio
-------------------------------- ------------------------------------
Year ended December 31, Year ended December 31,
1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $1,992,971 5,226,886 748,770 550,544 1,231,424 958,338
Expenses - Mortality and expense
risk charges (note 3) 337,918 381,777 385,789 99,586 151,484 210,707
- ----------------------------------------------- ----------------------------------------------------
Net investment income 1,655,053 4,845,109 362,981 450,958 1,079,940 747,631
- ----------------------------------------------- ----------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 5,097,861 419,822 895,552 12,018 (136,701) 45,793
Unrealized appreciation
(depreciation) on
investments) (2,501,835) (3,501,201) 5,264,633 (23,525) (646,673) 816,276
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 2,596,026 (3,081,379) 6,160,185 (11,507) (783,374) 862,069
- ------------------------------------------------------------------------------------------------------
Increase in net assets from
operations $ 4,251,079 1,763,730 6,523,166 439,451 296,566 1,609,700
- ------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust (continued)
-----------------------------------
Growth
Portfolio
-----------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 903,849 1,152,528 246,676
Expenses - Mortality and expense
risk charges (note 3) 132,989 146,484 127,144
- --------------------------------------------------------------------
Net investment income 770,860 1,006,044 119,532
- --------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 2,304,768 315,046 242,067
Unrealized appreciation
(depreciation) on
investments) (880,241) (363,320) 1,957,190
- --------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1,424,527 (48,274) 2,199,257
- --------------------------------------------------------------------
Increase in net assets from
operations 2,195,387 957,770 2,318,789
- ---------------------------------------------------------------------
</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
--------------------- ------------------------------- --------------------------------
Year ended Period from Year ended Year ended Period from Year ended Year ended Period from
December 31, May 6, 1996 to December 31, December 31, February 3, December 31, December 31, January 27,
1997 December 31, 1997 1996 1995 to 1997 1996 1995 to
1996 December 31, December 31,
1995 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $228,362 15,977 1,129,533 579,337 45,272 1,046,132 766,616 223,744
Expenses - Mortality
and expense risk
charges (note 3) 228,448 12,003 302,211 87,381 6,392 326,253 243,314 61,497
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income
(expense) (86) 3,974 827,322 491,956 38,880 719,879 523,302 162,247
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on
investments:
Net realized gain
(loss) 544,140 29,680 630,351 31,769 3,368 731,431 336,527 90,613
Unrealized appreciation
(depreciation) on
investments 3,385,309 162,046 1,256,745 424,014 26,388 4,302,272 1,113,241 914,307
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) loss
on investments 3,929,449 191,726 1,887,096 455,783 29,756 5,033,703 1,449,768 1,004,920
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations $3,929,363 195,700 2,714,418 947,739 68,636 5,753,582 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 Year ended 1995 to Year ended Year ended 1995 to
December 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 2,044,748 105,411 - 528,437 668,828 -
Expenses - Mortality and expense
risk charges (note 3) 799,242 414,206 9,745 811,338 358,846 6,776
- ----------------------------------------------------------------------------------------------------------
Net investment income (expense) 1,245,506 (308,795) (9,745) (282,901) 309,982 (6,776)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) 411,624 (122,299) (20,417) 3,954,588 315,644 (2,380)
Unrealized appreciation
(depreciation) on
investments) 4,016,910 (80,937) (25,048) 8,095,163 2,224,353 27,240
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
loss) on investments 4,428,534 (203,236) (45,465) 12,049,751 2,539,997 24,860
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 5,674,040 (512,031) (55,210) 11,766,850 2,849,979 18,084
- ------------------------------------------------------------------------------------------------------------
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
PBHG Insurance
Series Fund
---------------------
PBHG
Large Cap PBHG
Growth Growth II
Portfolio Portfolio
---------- ----------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
- -------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - -
Expenses - Mortality and expense
risk charges (note 3) 17,112 30,512
- ---------------------------------------------------------------------
Net investment income (expense) (17,112) (30,512)
- ---------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 13,525 7,643
Unrealized appreciation
(depreciation) on investments 149,898 (89,829)
- ---------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 163,423 (82,186)
- ---------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 146,311 (112,698)
- ---------------------------------------------------------------------
</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,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - 755,467 701,550 5,821,316 3,316,849 1,774,926
Expenses - Mortality and expense risk charges
(note 3) 1,187,720 880,271 464,496 2,533,302 1,496,337 686,203
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (1,187,720) (124,804) 237,054 3,288,014 1,820,512 1,088,723
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 6,675,700 3,422,984 1,735,504 9,346,395 4,286,543 1,220,855
Unrealized appreciation (depreciation) on
investments 5,540,954 109,555 7,840,280 23,212,981 11,457,707 11,886,046
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 12,216,654 3,532,539 9,575,784 32,559,376 15,744,250 13,106,901
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 11,028,934 3,407,735 9,812,838 35,847,390 17,564,762 14,195,624
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
--------------------------------------
Worldwide
Growth
Portfolio
------------------------------------
Year ended
December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 4,490,822 2,094,632 225,282
Expenses - Mortality and expense risk charges
(note 3) 3,656,021 1,418,611 477,320
- ----------------------------------------------------------------------------------------
Net investment income (expense) 834,801 676,021 (252,038)
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 11,585,008 5,069,677 439,501
Unrealized appreciation (depreciation) on
investments 32,530,512 18,944,795 9,549,318
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 44,115,520 24,014,472 9,988,819
- ----------------------------------------------------------------------------------------
Increase in net assets from operations 44,950,321 24,690,493 9,736,781
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Operations, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------------------
Flexible
Balanced Income
Portfolio Portfolio
-------------------------------------- ------------------------------------
Period from Period from
October 11, October 13,
Year ended Year ended 1995 to Year ended 1995 to
December 31,December 31, December 31, December 31, December 31,
1997 1996 1995 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 1,376,630 283,521 12,299 699,223 288,802 20,133
Expenses - Mortality and expense risk charges
(note 3) 445,275 113,425 2,009 120,354 40,424 980
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 931,355 170,096 10,290 578,869 248,378 19,153
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 1,239,519 122,576 9,364 86,470 4,524 29
Unrealized appreciation (depreciation) on
investments 4,013,343 920,620 37,909 269,390 68,898 (2,240)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 5,252,862 1,043,196 47,273 355,860 73,422 (2,211)
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 6,184,217 1,213,292 57,563 934,729 321,800 16,942
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-----------------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
----------------------- --------------
Period from Period from
May 3, 1996 May 2, 1997
Year ended to
December 31, December 31, December 31,
1997 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 348,585 54,433 8,437
Expenses - Mortality and expense risk charges
(note 3) 516,236 45,378 9,981
- --------------------------------------------------------------------------------------------
Net investment income (expense) (167,651) 9,055 (1,544)
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments:
Net realized gain 3,329,942 187,391 31,894
Unrealized appreciation (depreciation) on
investments 1,235,644 586,615 12,182
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments 4,565,586 774,006 44,076
- --------------------------------------------------------------------------------------------
Increase in net assets from operations 4,397,935 783,061 42,532
- --------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.)
----------------------------------------------------
S&P 500
Index
Fund
---------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 2,645,157 22,942,876 272,440
Net realized gain (loss) (899,446) 1,510,464 345,068
Unrealized appreciation (depreciation)
on investments 21,611,136 (16,204,375) 2,539,788
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 23,356,847 8,248,965 3,157,296
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 40,575,050 18,225,715 7,357,078
Transfers (to) from the general account of
Life of Virginia:
Death benefits (1,735,027) (77,864) (143,652)
Surrenders (3,415,596) (1,079,082) (306,506)
Administrative expense (note 3) (102,362) (45,091) (22,813)
Transfer gain (loss) and transfer fees (4,503) 7,463 (8,822)
Transfers (to) from the Guarantee
Account (note 1) 14,747,561 3,139,208 695,771
Interfund transfers 24,135,903 5,665,381 5,341,899
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 74,201,026 25,835,730 12,912,955
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 97,557,873 34,084,695 16,070,251
Net assets at beginning of year 55,868,451 21,783,756 5,713,505
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 153,426,324 55,868,451 21,783,756
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
--------------------------------------------------------------------------
Government
Securities
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (147,796) 1,165,729 481,595
Net realized gain (loss) (242,895) (68,248) (20,275)
Unrealized appreciation (depreciation)
on investments 987,049 (995,503) 567,616
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 596,358 101,978 1,028,936
- -------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,053,538 3,734,757 1,619,783
Transfers (to) from the general account of
Life of Virginia:
Death benefits (64,230) (76,802) (44,216)
Surrenders (666,510) (492,750) (500,706)
Administrative expense (note 3) (18,501) (21,731) (17,040)
Transfer gain (loss) and transfer fees (36,688) 8,420 (9,439)
Transfers (to) from the Guarantee
Account (note 1) 827,432 135,548 60,927
Interfund transfers (14,821,369) (65,339) 2,038,922
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions (13,726,328) 3,222,103 3,148,231
- -------------------------------------------------------------------------------------------------------------
Increase in net assets (13,129,970) 3,324,081 4,177,167
Net assets at beginning of year 13,129,970 9,805,889 5,628,722
- -------------------------------------------------------------------------------------------------------------
Net assets at end of year - 13,129,970 9,805,889
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
----------------------------------------------------------
Money Market
Fund
-------------------------------------------------
Year ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 4,205,545 4,224,053 953,357
Net realized gain (loss) (4,421,730) 1,686,452 312,501
Unrealized appreciation (depreciation)
on investments 4,383,879 (2,984,484) (757,472)
- ------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,167,694 2,926,021 508,386
- ------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 107,140,555 153,728,177 52,511,585
Transfers (to) from the general account of
Life of Virginia:
Death benefits (1,753,311) (781,386) (4,954)
Surrenders (18,383,973) (8,255,412) (2,099,100)
Administrative expense (note 3) (134,339) (78,769) (17,072)
Transfer gain (loss) and transfer fees (130,614) 28,173 52,426
Transfers (to) from the Guarantee
Account (note 1) 10,195,112 4,298,099 4,957,966
Interfund transfers (67,593,593) (93,981,321) (30,878,764)
- ------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 29,339,837 54,957,561 24,522,087
- ------------------------------------------------------------------------------------------------------------
Increase in net assets 33,507,531 57,883,582 25,030,473
Net assets at beginning of year 90,187,173 32,303,591 7,273,118
- ------------------------------------------------------------------------------------------------------------
Net assets at end of year 123,694,704 90,187,173 32,303,591
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.) (continued)
- --------------------------------------------------------------------------------------------------------------
Total Return
Fund
- --------------------------------------------------------------------------------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,602,393 8,962,291 1,389,047
Net realized gain (loss) (454,827) 614,446 308,073
Unrealized appreciation (depreciation)
on investments 657,828 (6,827,262) 1,987,241
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 5,805,394 2,749,475 3,684,361
- ----------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,641,626 8,515,814 4,777,568
Transfers (to) from the general account of
Life of Virginia:
Death benefits (271,179) (153,153) (184,615)
Surrenders (2,558,265) (946,894) (685,070)
Administrative expense (note 3) (60,731) (51,588) (40,610)
Transfer gain (loss) and transfer fees (15,082) (69,616) 5,627
Transfers (to) from the Guarantee
Account (note 1) 2,622,768 919,901 401,449
Interfund transfers (231,875) 75,151 2,419,115
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 5,127,262 8,289,615 6,693,464
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets 10,932,656 11,039,090 10,377,825
Net assets at beginning of year 33,594,461 22,555,371 12,177,546
- ----------------------------------------------------------------------------------------------------------------
Net assets at end of year 44,527,117 33,594,461 22,555,371
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
(continued)
---------------------------------------------
International
Equity
Fund
--------------------------------------------
Period from
May 23,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 2,572,712 999,110 26,712
Net realized gain (loss) 665,649 86,537 646
Unrealized appreciation (depreciation) on investments (1,565,382) (11,119) 25,880
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,672,979 1,074,528 53,238
- -------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,854,537 2,563,735 332,761
Transfers (to) from the general account of Life of Virginia:
Death benefits (2,360) (3,522) (2,053)
Surrenders (349,063) (103,501) (1,796)
Administrative expense (note 3) (10,458) (6,060) (661)
Transfer gain and transfer fees 49,348 (92,027) 1,565
Capital contribution - 10,925,561 -
Transfers from the Guarantee Account (note 1) 1,095,648 557,466 101,612
Interfund transfers 664,758 1,263,184 1,237,114
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 3,302,410 15,104,836 1,668,542
- -------------------------------------------------------------------------------------------------------------------
Increase in net assets 4,975,389 16,179,364 1,721,780
Net assets at beginning of period 17,901,144 1,721,780 -
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 22,876,533 17,901,144 1,721,780
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc. (formerly Life of Virginia
Series Fund, Inc.) (continued)
-------------------------------------------------------
Real Estate
Securities
Fund
-------------------------------------------------------
Period from
May 2,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 5,164,666 1,578,261 667,676
Net realized gain (loss) 2,710,582 299,159 24,928
Unrealized appreciation (depreciation) on investments (1,305,117) 4,059,521 1,049,744
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 6,570,131 5,936,941 1,742,348
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 10,679,221 2,949,990 301,414
Transfers (to) from the general account of Life of Virginia:
Death benefits (18,462) - (1,392)
Surrenders (654,786) (41,760) (1,136)
Administrative expense (note 3) (19,846) (3,136) (286)
Transfer gain and transfer fees 122,915 (107,856) 1,212
Capital contribution - - 10,000,000
Transfers from the Guarantee Account (note 1) 4,443,497 539,647 70,614
Interfund transfers 5,849,780 4,063,439 261,308
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 20,402,319 7,400,324 10,631,734
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 26,972,450 13,337,265 12,374,082
Net assets at beginning of period 25,711,347 12,374,082 -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 52,683,797 25,711,347 12,374,082
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
(formerly Life of Virginia Series Fund, Inc.) (continued)
----------------------------------------------------------------
Global Value
Income Equity Income
Fund Fund Fund
------------------ ----------------- -----------------
Period from Period from Period from
May 1, May 1, December 12,
1997 to 1997 to 1997 to
December 31, December 31, December 31,
1997 1997 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 297,690 104,481 43,837
Net realized gain (loss) 2,417 357,048 (6,710)
Unrealized appreciation (depreciation) on investments (124,348) 885,799 (12,199)
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 175,759 1,347,328 24,928
- --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 198,123 3,244,942 19,521
Transfers (to) from the general account of Life of Virginia:
Death benefits - (1,960) -
Surrenders (5,701) (75,503) (59,137)
Administrative expense (note 3) (209) (1,938) (2,414)
Transfer gain and transfer fees (472) 15,109 (467)
Capital contribution 5,000,000 3,000,000 -
Transfers from the Guarantee Account (note 1) 234,749 2,034,025 52,096
Interfund transfers 513,049 6,338,005 21,976,333
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 5,939,539 14,552,680 21,985,932
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 6,115,298 15,900,008 22,010,860
Net assets at beginning of period - - -
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 6,115,298 15,900,008 22,010,860
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
--------------------------------------------------------
Money
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 84,803 134,874 239,141
Net realized gain - - -
Unrealized appreciation (depreciation) on investments - - -
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 84,803 134,874 239,141
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 440 1,000 1,236,189
Transfers (to) from the general account of Life of Virginia:
Death benefits - (25,650) -
Surrenders $ (84,605) (248,877) (534,163)
Administrative expense (note 3) - (7,741) (12,911)
Transfer gain (loss) and transfer fees (4,611) (6,711) (10,807)
Transfers (to) from the Guarantee Account (note 1) (9,897) (72,686) (522,980)
Interfund transfers (2,736,806) (1,858,335) (3,724,005)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (2,835,479) (2,219,000) (3,568,677)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (2,750,676) (2,084,126) (3,329,536)
Net assets at beginning of year 2,750,676 4,834,802 8,164,338
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 2,750,676 4,834,802
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
Bond
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,822,818 1,437,401 1,001,313
Net realized gain 187,695 106,242 53,120
Unrealized appreciation (depreciation) on investments 663,371 (442,815) 1,654,610
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 2,673,884 1,100,828 2,709,043
- --------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,472,666 6,447,661 3,897,393
Transfers (to) from the general account of Life of Virginia:
Death benefits (234,610) (255,232) (103,070)
Surrenders (2,350,488) (1,174,644) (1,044,752)
Administrative expense (note 3) (53,814) (47,633) (43,224)
Transfer gain (loss) and transfer fees (12,509) 15,212 (70,035)
Transfers (to) from the Guarantee Account (note 1) 3,535,189 1,424,034 277,812
Interfund transfers 1,076,424 1,248,636 1,434,738
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 5,432,858 7,658,034 4,348,862
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 8,106,742 8,758,862 7,057,905
Net assets at beginning of year 31,638,941 22,880,079 15,822,174
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 39,745,683 31,638,941 22,880,079
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
Capital
Appreciation
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,840,622 4,562,994 (536,250)
Net realized gain 6,868,228 6,301,279 1,666,666
Unrealized appreciation (depreciation) on investments 5,927,622 7,478,382 18,977,772
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 18,636,472 18,342,655 20,108,188
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 25,418,900 35,523,585 13,056,769
Transfers (to) from the general account of Life of Virginia:
Death benefits (450,528) (577,949) (315,870)
Surrenders (7,755,383) (5,679,609) (3,725,572)
Administrative expense (note 3) (291,649) (237,053) (179,980)
Transfer gain (loss) and transfer fees (53,714) (234,268) (110,449)
Transfers (to) from the Guarantee Account (note 1) 13,461,161 5,093,547 910,511
Interfund transfers 37,796 16,982,928 899,125
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 30,366,583 50,871,181 10,534,534
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 49,003,055 69,213,836 30,642,722
Net assets at beginning of year 158,844,181 89,630,345 58,987,623
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 207,847,236 158,844,181 89,630,345
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
------------------------------------------------------
Growth
Fund
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 3,539,022 2,510,530 127,293
Net realized gain 5,826,603 1,959,742 739,151
Unrealized appreciation (depreciation) on investments 11,621,155 5,568,726 5,287,316
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 20,986,780 10,038,998 6,153,760
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 31,719,458 15,322,231 8,623,363
Transfers (to) from the general account of Life of Virginia:
Death benefits (350,617) (246,052) (11,683)
Surrenders (5,238,134) (1,802,707) (531,276)
Administrative expense (note 3) (138,883) (79,593) (49,718)
Transfer gain (loss) and transfer fees (28,403) (9,390) (2,381)
Transfers (to) from the Guarantee Account (note 1) 12,928,357 2,323,647 807,793
Interfund transfers 11,277,889 8,265,699 5,644,624
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 50,169,667 23,773,835 14,480,722
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 71,156,447 33,812,833 20,634,482
Net assets at beginning of year 67,859,369 34,046,536 13,412,054
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 139,015,816 67,859,369 34,046,536
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
--------------------------------------------------------
High
Income
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 7,741,474 5,561,338 3,110,351
Net realized gain (loss) 1,298,149 763,575 (105,319)
Unrealized appreciation (depreciation) on investments 2,089,422 2,079,281 2,497,291
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,129,045 8,404,194 5,502,323
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 21,931,355 22,356,655 11,530,804
Transfers (to) from the general account of Life of Virginia:
Death benefits (689,590) (693,092) (69,961)
Surrenders (5,920,831) (2,655,530) (1,461,891)
Administrative expense (note 3) (139,006) (100,320) (73,580)
Transfer gain (loss) and transfer fees (112,330) (25,953) 144,255
Transfers (to) from the Guarantee Account (note 1) 12,750,648 3,777,050 1,497,477
Interfund transfers 23,573,698 9,730,803 2,860,809
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 51,393,944 32,389,613 14,427,913
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 62,522,989 40,793,807 19,930,236
Net assets at beginning of year 85,762,637 44,968,830 25,038,594
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 148,285,626 85,762,637 44,968,830
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds (continued)
-------------------------------------------------------
Multiple
Strategies
Fund
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 3,690,801 2,771,962 2,110,596
Net realized gain (loss) 1,435,981 701,256 353,442
Unrealized appreciation (depreciation) on investments 4,025,778 2,786,345 3,750,075
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 9,152,560 6,259,563 6,214,113
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 9,089,218 8,520,761 4,566,130
Transfers (to) from the general account of Life of Virginia:
Death benefits (332,263) (389,751) (183,215)
Surrenders (4,493,985) (2,097,537) (1,641,635)
Administrative expense (note 3) (119,442) (104,392) (93,990)
Transfer gain (loss) and transfer fees (8,995) (27,395) (65,699)
Transfers (to) from the Guarantee Account (note 1) 4,101,390 1,507,791 282,847
Interfund transfers 516,158 198,943 787,704
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 8,752,081 7,608,420 3,652,142
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets 17,904,641 13,867,983 9,866,255
Net assets at beginning of year 54,118,912 40,250,929 30,384,674
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 72,023,553 54,118,912 40,250,929
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------------
Money Market
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 630,902 1,272,122 2,620,588
Net realized gain - - -
Unrealized appreciation (depreciation) on investments - - -
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 630,902 1,272,122 2,620,588
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums (28,472) 117,921 36,176,530
Transfers (to) from the general account of Life of Virginia:
Death benefits (193,170) (458,667) 103,982
Surrenders (1,206,916) (2,213,343) (4,660,173)
Administrative expense (note 3) (39,130) (65,257) (121,073)
Transfer gain (loss) and transfer fees 86,971 (204,381) 49,754
Transfers (to) from the Guarantee Account (note 1) (27,901) (661,457) (141,309)
Interfund transfers (21,205,932) (23,959,305) (47,938,008)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (22,614,550) (27,444,489) (16,530,297)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (21,983,648) (26,172,367) (13,909,709)
Net assets at beginning of year 21,983,648 48,156,015 62,065,724
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 21,983,648 48,156,015
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
--------------------------------------------------------
High
Income
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 1,653,064 2,447,710 847,430
Net realized gain 4,673,705 479,085 425,760
Unrealized appreciation (depreciation) on investments (2,814,608) 308,688 2,702,738
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 3,512,161 3,235,483 3,975,928
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 8,207 (248,987) 7,262,170
Transfers (to) from the general account of Life of Virginia:
Death benefits (66,792) (33,131) (117,911)
Surrenders (2,281,288) (1,859,776) (953,927)
Administrative expense (note 3) (46,012) (54,571) (51,018)
Transfer gain (loss) and transfer fees (18,007) (14,545) (10,918)
Transfers (to) from the Guarantee Account (note 1) (23,044) (109,624) 860,461
Interfund transfers (25,886,326) (7,008,575) 4,509,566
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (28,313,262) (9,329,209) 11,498,423
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (24,801,101) (6,093,726) 15,474,351
Net assets at beginning of year 24,801,101 30,894,827 15,420,476
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 24,801,101 30,894,827
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
--------------------------------------------------------
Equity-
Income
Portfolio
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 35,860,097 8,352,818 7,899,366
Net realized gain 15,417,526 9,394,625 4,284,587
Unrealized appreciation (depreciation) on investments 65,899,106 23,601,942 37,953,951
- -------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 117,176,729 41,349,385 50,137,904
- -------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 78,673,490 91,217,558 63,044,040
Transfers (to) from the general account of Life of Virginia:
Death benefits (3,144,602) (2,317,929) (623,306)
Surrenders (22,544,378) (12,923,609) (7,390,359)
Administrative expense (note 3) (744,663) (565,181) (384,060)
Transfer gain (loss) and transfer fees (156,609) (81,577) (128,097)
Transfers (to) from the Guarantee Account (note 1) 34,236,802 14,669,920 8,592,478
Interfund transfers 4,787,401 12,688,430 43,164,815
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 91,107,441 102,687,612 106,275,511
- -------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 208,284,170 144,036,997 156,413,415
Net assets at beginning of year 405,298,602 261,261,605 104,848,190
- -------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 613,582,772 405,298,602 261,261,605
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
-----------------------------------------------------
Growth
Portfolio
-----------------------------------------------------
Year ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 5,677,010 11,069,102 (1,129,143)
Net realized gain 14,576,544 9,229,819 7,510,176
Unrealized appreciation (depreciation) on investments 34,536,532 6,990,625 29,804,134
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 54,790,086 27,289,546 36,185,167
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 19,742,111 40,351,417 35,842,400
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,127,415) (1,395,457) (338,418)
Surrenders (15,488,583) (8,362,725) (5,531,711)
Administrative expense (note 3) (502,085) (441,506) (345,393)
Transfer gain (loss) and transfer fees (84,076) (243,398) 13,309
Transfers (to) from the Guarantee Account (note 1) 9,277,787 7,334,280 3,842,828
Interfund transfers (3,139,585) (3,259,632) 18,922,427
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 8,678,154 33,982,979 52,405,442
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 63,468,240 61,272,525 88,590,609
Net assets at beginning of year 251,545,367 190,272,842 101,682,233
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of year 315,013,607 251,545,367 190,272,842
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund (continued)
-------------------------------------------------------
Overseas
Portfolio
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 7,902,090 1,063,898 (355,173)
Net realized gain 6,802,686 2,693,770 734,798
Unrealized appreciation (depreciation) on investments (3,387,543) 7,585,836 6,428,977
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,317,233 11,343,504 6,808,602
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,009,263 11,020,984 10,634,049
Transfers (to) from the general account of Life of Virginia:
Death benefits (527,674) (528,522) (556,976)
Surrenders (5,102,924) (3,972,175) (3,063,268)
Administrative expense (note 3) (220,173) (214,759) (208,318)
Transfer gain (loss) and transfer fees (38,435) (85,300) (53,050)
Transfers (to) from Guarantee Account (note 1) 3,378,950 3,116,987 590,771
Interfund transfers (12,846,872) (4,620,473) (7,084,976)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (10,347,865) 4,716,742 258,232
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 969,368 16,060,246 7,066,834
Net assets at beginning of period 107,335,253 91,275,007 84,208,173
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 108,304,621 107,335,253 91,275,007
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II
---------------------------------------------------------
Asset
Manager
Portfolio
--------------------------------------------------------
Year ended December 31,
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 47,434,844 23,741,639 4,159,147
Net realized gain 9,093,636 7,507,674 1,958,733
Unrealized appreciation (depreciation) on investments 24,430,304 23,008,153 55,306,129
- --------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 80,958,784 54,257,466 61,424,009
- --------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 12,956,133 15,580,792 21,217,331
Transfers (to) from the general account of Life of Virginia:
Death benefits (2,389,147) (3,090,108) (2,849,779)
Surrenders (26,860,066) (23,863,347) (23,760,769)
Administrative expense (note 3) (1,170,300) (1,159,170) (1,245,010)
Transfer gain (loss) and transfer fees (5,281,252) (2,150,299) (305,606)
Transfers (to) from Guarantee Account (note 1) 4,580,560 2,112,849 (7,015,144)
Interfund transfers (14,758,069) (31,512,425) (58,702,053)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (32,922,141) (44,081,708) (72,661,030)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 48,036,643 10,175,758 (11,237,021)
Net assets at beginning of period 435,838,169 425,662,411 436,899,432
- --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 483,874,812 435,838,169 425,662,411
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund II (continued)
------------------------------------------------------
Contrafund
Portfolio
------------------------------------------------------
Period from
January 5,
Year ended Year ended 1995
December 31, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 2,084,354 (688,227) 460,166
Net realized gain 9,468,307 2,738,082 905,255
Unrealized appreciation (depreciation) on investments 26,750,686 17,275,767 4,218,866
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 38,303,347 19,325,622 5,584,287
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 39,049,020 41,520,289 26,666,752
Transfers (to) from the general account of Life of Virginia:
Death benefits (778,781) (569,391) (17,699)
Surrenders (7,578,528) (3,409,236) (676,614)
Administrative expense (note 3) (239,385) (139,550) (42,327)
Transfer gain (loss) and transfer fees (1,813) (6,491) (28,134)
Transfers (to) from Guarantee Account (note 1) 20,874,655 8,894,897 4,851,438
Interfund transfers 9,642,188 15,486,630 25,426,220
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 60,967,356 61,777,148 56,179,636
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 99,270,703 81,102,770 61,763,923
Net assets at beginning of period 142,866,693 61,763,923 -
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 242,137,396 142,866,693 61,763,923
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Variable Insurance Products
Fund III
------------------------------------
Growth & Growth
Income Opportunities
Portfolio Portfolio
------------------------------------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
- ----------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (53,296) (69,440)
Net realized gain 103,153 67,071
Unrealized appreciation (depreciation) on investments 458,100 1,055,758
- ----------------------------------------------------------------------------------------------------
Increase in net assets from operations 507,957 1,053,389
- ----------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 5,782,503 6,759,512
Transfers (to) from the general account of Life of Virginia
Death benefits (2,062) (11,218)
Surrenders (116,741) (178,411)
Administrative expense (note 3) (3,046) (4,370)
Transfer gain (loss) and transfer fees 358,955 734
Transfers (to) from Guarantee Account (note 1) 2,665,501 2,684,605
Interfund transfers 6,515,155 6,783,534
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 15,200,265 16,034,386
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 15,708,222 17,087,775
Net assets at beginning of period - -
- ----------------------------------------------------------------------------------------------------
Net assets at end of period 15,708,222 17,087,775
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust
---------------------------------------------------------
Balanced
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 1,655,053 4,845,109 362,981
Net realized gain (loss) 5,097,861 419,822 895,552
Unrealized appreciation (depreciation) on investments (2,501,835) (3,501,201) 5,264,633
- ------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,251,079 1,763,730 6,523,166
- ------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums (6,001) - 2,535,815
Transfers (to) from the general account of Life of Virginia:
Death benefits (126,435) (191,199) (153,937)
Surrenders (2,675,228) (2,074,244) (1,503,514)
Administrative expense (note 3) (71,576) (82,124) (88,114)
Transfer gain (loss) and transfer fees (78,959) (12,205) 7,049
Capital contribution (629,209) - -
Transfers (to) from the Guarantee Account (note 1) (185,078) (37,694) (134,229)
Interfund transfers (31,241,057) (3,810,712) (2,179,193)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (35,013,543) (6,208,178) (1,516,123)
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (30,762,464) (4,444,448) 5,007,043
Net assets at beginning of year 30,762,464 35,206,912 30,199,869
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ - 30,762,464 35,206,912
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust (continued)
--------------------------------------------------------
Bond
Portfolio
------------------------------------------------------
Year ended December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 450,958 1,079,940 747,631
Net realized gain (loss) 12,018 (136,701) 45,793
Unrealized appreciation (depreciation) on investments (23,525) (646,673) 816,276
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 439,451 296,566 1,609,700
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,800 - 4,761,820
Transfers (to) from the general account of Life of Virginia:
Death benefits (196,037) (225,838) (7,505)
Surrenders (508,821) (366,908) (522,591)
Administrative expense (note 3) (15,911) (24,278) (37,167)
Transfer gain (loss) and transfer fees (11,476) (9,665) (23,158)
Capital contribution - - -
Transfers (to) from the Guarantee Account (note 1) (86,454) (92,797) 798,511
Interfund transfers (9,344,589) (5,700,964) (9,447,152)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (10,161,488) (6,420,450) (4,477,242)
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (9,722,037) (6,123,884) (2,867,542)
Net assets at beginning of year 9,722,037 15,845,921 18,713,463
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 9,722,037 15,845,921
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust (continued)
-------------------------------------------------------
Growth
Portfolio
-------------------------------------------------------
Year ended December 31,
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 770,860 1,006,044 119,532
Net realized gain (loss) 2,304,768 315,046 242,067
Unrealized appreciation (depreciation) on investments (880,241) (363,320) 1,957,190
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 2,195,387 957,770 2,318,789
- ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 6,456 4,370 2,833,430
Transfers (to) from the general account of Life of Virginia:
Death benefits (58,098) (56,431) (78,819)
Surrenders (247,815) (415,296) (251,354)
Administrative expense (note 3) (22,353) (25,172) (23,723)
Transfer gain (loss) and transfer fees (2,057) (10,420) (697)
Capital contribution - - -
Transfers (to) from the Guarantee Account (note 1) - (14,970) 36,976
Interfund transfers (12,373,616) (3,652,818) 1,961,133
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (12,697,483) (4,170,737) 4,476,946
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets (10,502,096) (3,212,967) 6,795,735
Net assets at beginning of year 10,502,096 13,715,063 6,919,328
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of year - 10,502,096 13,715,063
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series
---------------------------------------
American
Leaders
Fund II
---------------------------------------
Period from
Year ended May 6, 1996 to
December 31, December 31,
1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (86) 3,974
Net realized gain 544,140 29,680
Unrealized appreciation (depreciation)
on investments 3,385,309 162,046
- ---------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 3,929,363 195,700
- ---------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 13,540,849 2,249,062
Transfers (to) from the general account
of Life of Virginia:
Death benefits (91,917) -
Surrenders (423,567) (28,376)
Administrative expense (note 3) (11,789) (522)
Transfer gain (loss) and transfer fees 791 4,221
Transfers from the Guarantee Account (note 1) 4,966,466 146,563
Interfund transfers 9,208,512 1,208,370
- ---------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 27,189,345 3,579,318
- ---------------------------------------------------------------------------------------------------------
Increase in net assets 31,118,708 3,775,018
Net assets at beginning of period 3,775,018 -
- ---------------------------------------------------------------------------------------------------------
Net assets at end of period $ 34,893,726 3,775,018
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series (continued)
----------------------------------------------------------
High Income
Bond
Fund II
----------------------------------------------------------
Period from
February 3,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 827,322 491,956 38,880
Net realized gain 630,351 31,769 3,368
Unrealized appreciation (depreciation)
on investments 1,256,745 424,014 26,388
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 2,714,418 947,739 68,636
- ---------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 9,254,617 4,468,263 1,448,946
Transfers (to) from the general account
of Life of Virginia:
Death benefits (120,443) (42,084) -
Surrenders (861,128) (428,701) (12,805)
Administrative expense (note 3) (18,435) (5,233) (601)
Transfer gain (loss) and transfer fees (2,424) (43) 5,535
Transfers from the Guarantee Account (note 1) 4,882,888 670,397 200,240
Interfund transfers 5,675,771 6,113,878 235,916
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 18,810,846 10,776,477 1,877,231
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets 21,525,264 11,724,216 1,945,867
Net assets at beginning of period 13,670,083 1,945,867 -
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 35,195,347 13,670,083 1,945,867
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance
Series (continued)
------------------------------------------------------
Utility
Fund II
------------------------------------------------------
Period from
January 27,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 719,879 523,302 162,247
Net realized gain 731,431 336,527 90,613
Unrealized appreciation (depreciation)
on investments 4,302,272 1,113,241 914,307
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets
from operations 5,753,582 1,973,070 1,167,167
- -----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,510,754 7,032,730 4,723,697
Transfers (to) from the general account
of Life of Virginia:
Death benefits (63,646) (172,666) -
Surrenders (1,420,075) (708,499) (150,715)
Administrative expense (note 3) (32,050) (25,376) (7,470)
Transfer gain (loss) and transfer fees (1,043) 11,752 (650)
Transfers from the Guarantee Account (note 1) 1,540,929 1,313,211 982,260
Interfund transfers (1,399,267) 830,436 5,539,763
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 2,135,602 8,281,588 11,086,885
- -----------------------------------------------------------------------------------------------------------------------
Increase in net assets 7,889,184 10,254,658 12,254,052
Net assets at beginning of period 22,508,710 12,254,052 -
- -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 30,397,894 22,508,710 12,254,052
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Alger American
--------------------------------------------------------------
Small
Cap
Portfolio
--------------------------------------------------------------
Period from
October 3,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
-----------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 1,245,506 (308,795) (9,745)
Net realized gain (loss) 411,624 (122,299) (20,417)
Unrealized appreciation (depreciation)
on investments 4,016,910 (80,937) (25,048)
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 5,674,040 (512,031) (55,210)
- --------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 12,048,925 25,934,981 3,369,922
Transfers (to) from the general account
of Life of Virginia:
Death benefits (296,448) (167,439) -
Surrenders (1,974,869) (837,016) (18,166)
Administrative expense (note 3) (69,752) (32,819) (1,420)
Transfer gain (loss) and transfer fees 20,656 (18,410) 7,625
Transfers from the Guarantee Account (note 1) 9,339,897 5,067,731 298,188
Interfund transfers 1,782,889 10,297,239 3,969,177
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 20,851,298 40,244,267 7,625,326
- --------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 26,525,338 39,732,236 7,570,116
Net assets at beginning of period 47,302,352 7,570,116 -
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 73,827,690 47,302,352 7,570,116
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Alger American
----------------------------------------------------
Growth
Portfolio
----------------------------------------------------
Period from
October 4,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
-----------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (282,901) 309,982 (6,776)
Net realized gain (loss) 3,954,588 315,644 (2,380)
Unrealized appreciation (depreciation)
on investments 8,095,163 2,224,353 27,240
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 11,766,850 2,849,979 18,084
- ----------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 13,470,987 21,518,317 2,632,716
Transfers (to) from the general account
of Life of Virginia:
Death benefits (317,671) (22,815) -
Surrenders (2,065,182) (539,265) (4,789)
Administrative expense (note 3) (68,206) (26,996) (895)
Transfer gain (loss) and transfer fees (390,379) (32,858) 1,883
Transfers from the Guarantee Account (note 1) 6,594,835 3,628,084 (47,006)
Interfund transfers (1,557,814) 11,823,073 2,922,881
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 15,666,570 36,347,540 5,504,790
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets 27,433,420 39,197,519 5,522,874
Net assets at beginning of period 44,720,393 5,522,874 -
- ----------------------------------------------------------------------------------------------------------------------
Net assets at end of period 72,153,813 44,720,393 5,522,874
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PBHG Insurance Series Fund
------------------------------------
PBHG PBHG
Large Cap Growth II
Portfolio Portfolio
------------------------------------
Period from Period from
May 1, May 1,
1997 to 1997 to
December 31, December 31,
1997 1997
------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (17,112) (30,512)
Net realized gain (loss) 13,525 7,643
Unrealized appreciation (depreciation)
on investments 149,898 (89,829)
- --------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 146,311 (112,698)
- --------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,239,113 3,502,382
Transfers (to) from the general account
of Life of Virginia:
Death benefits (715) -
Surrenders (12,383) (53,142)
Administrative expense (note 3) (684) (1,455)
Transfer gain (loss) and transfer fees 865 787
Transfers from the Guarantee Account (note 1) 610,146 1,108,447
Interfund transfers 2,735,614 2,507,619
- --------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 4,571,956 7,064,638
- --------------------------------------------------------------------------------------------------
Increase in net assets 4,718,267 6,951,940
Net assets at beginning of period - -
- --------------------------------------------------------------------------------------------------
Net assets at end of period 4,718,267 6,951,940
- --------------------------------------------------------------------------------------------------
</TABLE>
<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,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (1,187,720) (124,804) 237,054
Net realized gain 6,675,700 3,422,984 1,735,504
Unrealized appreciation (depreciation) on investments 5,540,954 109,555 7,840,280
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 11,028,934 3,407,735 9,812,838
- ----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 11,681,150 17,880,226 16,756,982
Transfers (to) from the general account of Life of Virginia:
Death benefits (427,386) (394,284) (86,506)
Surrenders (2,997,601) (2,851,517) (1,216,524)
Administrative expense (note 3) (120,078) (112,813) (73,928)
Transfer gain (loss) and transfer fees (19,458) (40,003) 38,529
Transfers (to) from the Guarantee Account (note 1) 4,987,441 3,328,781 2,434,875
Interfund transfers (2,281,417) 8,025,078 7,553,096
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 10,822,651 25,835,468 25,406,524
- ----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 21,851,585 29,243,203 35,219,362
Net assets at beginning of year 83,963,537 54,720,334 19,500,972
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 105,815,122 83,963,537 54,720,334
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
----------------------------------------------------------------
Growth
Portfolio
----------------------------------------------------------------
Year ended
December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 3,288,014 1,820,512 1,088,723
Net realized gain 9,346,395 4,286,543 1,220,855
Unrealized appreciation (depreciation) on investments 23,212,981 11,457,707 11,886,046
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 35,847,390 17,564,762 14,195,624
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 30,338,859 35,456,497 20,907,687
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,849,634) (483,092) (292,563)
Surrenders (9,041,380) (3,747,509) (1,304,563)
Administrative expense (note 3) (280,500) (199,595) (125,440)
Transfer gain (loss) and transfer fees (152,642) (208,664) (42,445)
Transfers (to) from the Guarantee Account (note 1) 16,216,500 7,027,293 2,397,459
Interfund transfers 1,293,752 11,381,396 14,146,981
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 36,524,955 49,226,326 35,687,116
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 72,372,345 66,791,088 49,882,740
Net assets at beginning of year 151,696,572 84,905,484 35,022,744
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 224,068,917 151,696,572 84,905,484
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-----------------------------------------------------------------
Worldwide
Growth
Portfolio
---------------------------------------------------------------
Year ended
December 31,
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 834,801 676,021 (252,038)
Net realized gain 11,585,008 5,069,677 439,501
Unrealized appreciation (depreciation) on investments 32,530,512 18,944,795 9,549,318
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 44,950,321 24,690,493 9,736,781
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 77,908,754 45,862,046 14,202,159
Transfers (to) from the general account of Life of Virginia:
Death benefits (916,155) (407,146) (146,748)
Surrenders (9,754,795) (2,394,900) (1,173,774)
Administrative expense (note 3) (346,218) (172,873) (87,512)
Transfer gain (loss) and transfer fees (116,774) (183,599) (23,608)
Transfers (to) from the Guarantee Account (note 1) 30,845,279 8,313,366 1,874,804
Interfund transfers 25,144,972 42,049,450 7,110,222
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 122,765,063 93,066,344 21,755,543
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 167,715,384 117,756,837 31,492,324
Net assets at beginning of year 177,410,698 59,653,861 28,161,537
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 345,126,082 177,410,698 59,653,861
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-----------------------------------------------------------------
Balanced
Portfolio
--------------------------------------------------------------
Period from
October 11,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 931,355 170,096 10,290
Net realized gain 1,239,519 122,576 9,364
Unrealized appreciation (depreciation) on investments 4,013,343 920,620 37,909
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 6,184,217 1,213,292 57,563
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 15,654,806 8,643,527 619,039
Transfers (to) from the general account of
Life of Virginia:
Death benefits (98,529) (37,496) -
Surrenders (1,560,191) (271,087) (61,992)
Administrative expense (note 3) (34,113) (7,301) (379)
Transfer gain (loss) and transfer fees (11,920) 5,413 (240)
Transfer (to) from the Guarantee Account (note 1) 6,551,408 1,091,622 210,233
Interfund transfers 34,492,843 3,850,513 1,147,007
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 54,994,304 13,275,191 1,913,668
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 61,178,521 14,488,483 1,971,231
Net assets at beginning of period 16,459,714 1,971,231 -
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 77,638,235 16,459,714 1,971,231
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
--------------------------------------------------------------
Flexible
Income
Portfolio
--------------------------------------------------------------
Period from
October 13,
Year ended Year ended 1995 to
December 31, December 31, December 31,
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 578,869 248,378 19,153
Net realized gain 86,470 4,524 29
Unrealized appreciation (depreciation) on investments 269,390 68,898 (2,240)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 934,729 321,800 16,942
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,465,715 2,591,080 312,671
Transfers (to) from the general account of Life of Virginia:
Death benefits (55,866) - -
Surrenders (425,891) (29,518) (451)
Administrative expense (note 3) (8,897) (2,717) (111)
Transfer gain (loss) and transfer fees 1,786 (413) 179
Transfer (to) from the Guarantee Account (note 1) 3,010,637 345,536 41,646
Interfund transfers 2,406,219 992,086 419,589
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 8,393,703 3,896,054 773,523
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 9,328,432 4,217,854 790,465
Net assets at beginning of period 5,008,319 790,465 -
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 14,336,751 5,008,319 790,465
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series (continued)
-------------------------------------------------------------
International Capital
Growth Appreciation
Portfolio Portfolio
--------------------------------------- -------------------
Period from Period from
May 3, 1996 May 2, 1997
Year ended to to
December 31, December 31, December 31,
1997 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (167,651) 9,055 (1,544)
Net realized gain 3,329,942 187,391 31,894
Unrealized appreciation (depreciation) on investments 1,235,644 586,615 12,182
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,397,935 783,061 42,532
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 19,031,016 4,654,797 720,613
Transfers (to) from the general account of Life of Virginia:
Death benefits (197,552) - -
Surrenders (1,293,141) (51,116) (37,177)
Administrative expense (note 3) (39,068) (3,441) (826)
Transfer gain (loss) and transfer fees 24,476 3,766 (33,752)
Transfer (to) from the Guarantee Account (note 1) 8,279,728 935,954 446,414
Interfund transfers 10,950,154 7,189,157 1,531,771
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 36,755,613 12,729,117 2,627,043
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 41,153,548 13,512,178 2,669,575
Net assets at beginning of period 13,512,178 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 54,665,726 13,512,178 2,669,575
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
December 31, 1997
================================================================================
(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. The Life Insurance Company of
Virginia is a stock life insurance company operating under a charter
granted by the Commonwealth of Virginia on March 21, 1871. Eighty
percent of the capital stock of Life of Virginia is owned by General
Electric Capital Assurance Corporation. The remaining 20% is owned by
GE Financial Assurance Holdings, Inc. General Electric Capital
Assurance Corporation and GE Financial Assurance Holdings, Inc. are
indirectly, wholly-owned subsidiaries of General Electric Capital ("GE
Capital"). GE Capital, a diversified financial services company, is a
wholly-owned subsidiary of General Electric Company (GE), a New York
corporation. Prior to April 1, 1996, Life of Virginia was an indirect
wholly-owned subsidiary of Aon Corporation (Aon).
In May 1997, seven new investment subdivisions were added to the
Account, for both Type I and II policies. The Growth & Income Portfolio
and Growth Opportunities Portfolio each invest solely in a designated
portfolio of the Variable Insurance Products Fund III. The Global
Income Fund and the Value Equity Fund each invest solely in a
designated portfolio of the GE Investments Funds, Inc. The Capital
Appreciation Portfolio invests solely in a designated portfolio of the
Janus Aspen Series. The Growth II Portfolio and the Large Cap Growth
Portfolio each invest solely in a designated portfolio of the PBHG
Insurance Series Fund. All designated portfolios described above are
series type mutual funds.
During 1997, the Life of Virginia Series Fund, Inc. changed its name to
the GE Investments Funds, Inc. As a result the Life of Virginia Series
Funds, Inc.--Common Stock Index, Government Securities, Money Market,
Total Return, International Equity and Real Estate Securities
Portfolios were renamed the GE Investments Funds, Inc.--S&P 500 Index,
Government Securities, Money Market, Total Return, International Equity
and Real Estate Securities Funds, respectively. On December 12, 1997,
the Account added the GE Investments Funds, Inc.--Income Fund as a new
investment subdivision and made the following substitutions of shares
held by the investment subdivisions:
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
================================================================
(1) Continued
<TABLE>
<S> <C>
Before the Substitution After the Substitution
Shares of Money Market Portfolio - Shares of Money Market Fund -
Variable Insurance Products Fund GE Investments Funds, Inc.
Shares of Money Fund - Shares of Money Market Fund -
Oppenheimer Variable Account Funds GE Investments Funds, Inc.
Shares of Bond Portfolio - Shares of Income Fund Neuberger & Berman -
Advisers Management Trust GE Investments Funds, Inc.
Shares of High Income Portfolio - Shares of High Income Fund -
Variable Insurance Products Fund Oppenheimer Variable Account Funds
Shares of Growth Portfolio - Shares of Growth Portfolio -
Neuberger & Berman Advisers Management Trust Variable Insurance Products Fund
Shares of Balanced Portfolio - Shares of Balanced Portfolio -
Neuberger & Berman Advisers Management Trust Janus Aspen Series
</TABLE>
The foregoing substitutions were carried out pursuant to an order of
the Securities and Exchange Commission (Commission) issued on December
11, 1997, with the approval of any necessary department of insurance.
The effect of such a share substitution was to replace certain
portfolios of Variable Insurance Products Fund, Oppenheimer Variable
Account Funds, GE Investments Funds, Inc., and Neuberger & Berman
Advisers Management Trust with those of GE Investments Funds, Inc.,
Oppenheimer Variable Account Funds, Variable Insurance Products Fund,
and Janus Aspen Series as investment options.
<PAGE>
(1) Continued
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 invest 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 invest solely in a designated portfolio of GE Investments Funds,
Inc., a series type mutual fund. The Balanced Portfolio and Flexible
Income Portfolio each invest solely in a designated portfolio of the
Janus Aspen Series, a series type mutual fund. The Growth Portfolio and
Small Cap Portfolio each invest 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 invest 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 invest 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.
<PAGE>
(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 and
income distributions are recorded on the ex-dividend date. Realized
gains and losses on investments are determined on the average cost
basis. The units and unit values are disclosed as of the last business
day in the applicable year or period.
<PAGE>
(2) Continued
The aggregate cost of investments acquired and the aggregate proceeds
of investments sold, for the year or period ended December 31, 1997
were:
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- ----------------------------------------------------------------------------
GE Investments Funds, Inc.:
S&P 500 Index $ 132,222,938 31,818,054
Government Securities 10,499,388 23,055,080
Money Market 887,060,254 868,724,486
Total Return 30,724,166 10,679,067
International Equity 18,393,561 11,389,194
Real Estate Securities 43,204,050 16,152,111
Global Income 6,336,231 187,733
Value Equity 17,622,017 3,137,116
Income 25,679,422 3,310,006
Oppenheimer Variable Account Funds:
Money 314,112 3,030,625
Bond 16,807,159 9,544,382
Capital Appreciation 93,466,672 56,992,604
Growth 85,183,495 31,490,581
High Income 95,915,615 36,944,770
Multiple Strategies 23,819,771 11,316,157
Variable Insurance Products Fund:
Money Market 1,556,148 23,557,498
High Income 3,620,650 30,349,068
Equity - Income 220,439,185 93,043,056
Growth 83,553,084 68,794,613
Overseas 72,741,759 71,928,713
Variable Insurance Products Fund II:
Asset Manager 85,456,484 70,466,360
Contrafund 118,473,800 55,310,933
Variable Insurance Products Fund III:
Growth & Income 18,484,934 3,417,350
Growth Opportunities 17,590,719 1,681,206
- ----------------------------------------------------------------------------
<PAGE>
(2) Continued
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- -----------------------------------------------------------------------------
Neuberger & Berman Advisers
Management Trust:
Balanced $ 2,635,418 36,069,865
Bond 1,856,865 11,649,317
Growth 977,918 12,925,079
Federated Investors Insurance Series:
American Leaders II 32,823,606 5,793,581
High Income Bond II 38,421,195 18,759,547
Utility 10,012,564 7,198,898
II
Alger American:
Small Cap 46,888,772 24,542,187
Growth 46,869,978 31,444,158
PBHG Insurance Series Fund:
PBHG Large Cap Growth 6,296,317 1,710,929
PBHG Growth II 7,969,729 1,120,679
Janus Aspen Series:
Aggressive Growth 99,975,217 90,226,548
Growth 86,207,354 46,144,088
Worldwide Growth 183,578,974 59,756,806
Balanced 67,917,334 11,980,846
Flexible Income 12,301,658 3,313,161
International Growth 94,751,055 54,755,744
Capital Appreciation 5,675,613 3,007,685
- -----------------------------------------------------------------------------
Capital Transactions
The increase (decrease) in outstanding units for Type I and Type II
from capital transactions for the years or periods ended December 31,
1997, 1996 and 1995 are as follows:
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-----------------------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Type I Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 297,274 384,930 484,719 666,497 - -
Net premiums 37,545 7,450 265,952 38,485 5,889 3,842
Transfers (to) from the
general account of Life of Virginia:
Death benefits (3,332) (2,593) (365) (8,225) (201) (130)
Surrenders (11,616) (27,386) (138,205) (30,218) (166) (82)
Administrative expenses (991) (994) (1,241) (1,911) (64) (27)
Transfers (to)/from the Guarantee Account 17,804 (78) 347,444 6,958 8,347 6,278
Interfund transfers 142,337 67,621 (64,330) 73,915 101,757 13,762
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 181,747 44,020 409,255 79,004 115,562 23,643
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 479,021 428,950 893,974 745,501 115,562 23,643
Net premiums 34,082 36,100 706,581 33,745 22,527 14,587
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,231) (163) (16,043) (6,096) - -
Surrenders (22,370) (25,884) (412,885) (31,853) (5,008) (1,361)
Administrative expenses (1,347) (1,204) (4,925) (2,175) (446) (192)
Transfers (to)/from the Guarantee Account 37,400 4,534 358,505 1,905 22,249 21,124
Interfund transfers 54,702 62,264 1,023,952 (32,962) 52,528 147,118
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 101,236 75,647 1,655,185 (37,436) 91,850 181,276
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 580,257 504,597 2,549,159 708,065 207,412 204,919
Net premiums 43,467 2,027 273,183 24,404 (153,291) 215,116
Transfers (to) from the
general account of Life of Virginia:
Death benefits (2,505) (3,654) (88,771) (5,480) - -
Surrenders (34,875) (27,521) (773,658) (56,645) 494,961 (112,838)
Administrative expenses (1,886) (938) (6,382) (1,805) 20,280 (5,712)
Transfers (to)/from the Guarantee Account 41,669 9,540 304,035 5,882 (736,706) 208,742
Interfund transfers 292,720 (484,051) 1,254,694 (42,593) 1,380,146 875,079
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 338,590 (504,597) 963,101 (76,237) 1,005,390 1,180,387
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 918,847 - 3,512,260 631,828 1,212,802 1,385,306
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. Oppenheimer Variable Account Funds
----------------------------------- -------------------------------------------
Global Capital
Income Value Equity Income Money Bond Appreciation Growth
Type I Units Fund Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------- -------------------------------------------
Units outstanding at December 31, 1994 - - - 549,261 967,029 2,708,957 734,287
Net premiums - - - 36,722 (11,303) 222,696 (521,582)
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - 263 (31,865) 48,092
Surrenders - - - (38,250) 5,282 (311,147) 564,254
Administrative expenses - - - (910) 309 (13,475) 27,690
Transfers (to)/from the Guarantee Account - - - (33,828) (4,115) 27,379 (11,025)
Interfund transfers - - - (230,533) (4,765) 45,448 144,969
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - - (266,799) (14,329) (60,964) 252,398
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - - - 282,462 952,700 2,647,993 986,685
Net premiums - - - - (4,744) (181,755) 267,359
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - (1,782) 2,016 44,441 (29,174)
Surrenders - - - (16,283) 7,728 332,700 (364,042)
Administrative expenses - - - (531) 407 14,718 (16,121)
Transfers (to)/from the Guarantee Account - - - (4,896) (7,110) (185,173) 105,286
Interfund transfers - - - (96,465) (9,728) 53,131 240,629
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - - (119,957) (11,431) 78,062 203,937
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - - - 162,505 941,269 2,726,055 1,190,622
Net premiums 15,669 30,034 595 - 12,729 48,378 50,650
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - (4,708) (2,476) (1,990)
Surrenders (2,874) (1,979) (5,500) (5,366) (114,775) (146,760) (99,247)
Administrative expenses (489) (345) (199) (298) (2,868) (6,721) (2,955)
Transfers (to)/from the Guarantee Account 131,841 33,741 - - 30,993 33,837 40,477
Interfund transfers 372,751 418,170 1,300,742 (156,841) 66,990 (60,894) 114,256
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 516,898 479,621 1,295,638 (162,505) (11,639) (134,636) 101,191
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 516,898 479,621 1,295,638 - 929,630 2,591,419 1,291,813
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION> Oppenheimer Variable
Account Funds Variable Insurance Products Fund
----------------------- ----------------------------------------------------------
High Multiple Money High Equity-
Income Strategies Market Income Income Growth Overseas
Type I Units Fund Fund Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------- ---------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 1,125,497 1,797,950 4,123,571 804,420 5,088,608 4,641,036 5,128,595
Net premiums 44,999 65,632 730,434 85,480 485,381 247,726 200,203
Transfers (to) from the
general account of Life of Virginia:
Death benefits (296) (9,569) 8,759 (5,083) (26,937) (11,327) (22,477)
Surrenders (12,636) (95,101) (323,643) (42,301) (295,625) (179,497) (183,059)
Administrative expenses (1,249) (5,559) (8,471) (2,631) (16,777) (12,038) (12,905)
Transfers (to)/from the Guarantee Account 10,579 (3,036) 36,658 35,020 214,956 67,303 (35,433)
Interfund transfers 96,818 12,445 (2,144,243) 83,390 1,492,501 433,983 (566,178)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 138,215 (35,188) (1,700,506) 153,875 1,853,499 546,150 (619,849)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1995 1,263,712 1,762,762 2,423,065 958,295 6,942,107 5,187,186 4,508,746
Net premiums 15,693 26,028 8,114 (11,013) 209,607 133,676 102,472
Transfers (to) from the
general account of Life of Virginia:
Death benefits (411) (15,299) (26,867) - (39,084) (25,152) (17,537)
Surrenders (23,047) (88,160) (136,342) (64,247) (314,228) (232,300) (188,428)
Administrative expenses (1,163) (4,615) (4,247) (2,193) (16,695) (13,593) (11,116)
Transfers (to)/from the Guarantee Account 13,792 26,304 (46,251) (1,584) 129,570 60,757 48,453
Interfund transfers 89,651 (66,358) (1,024,299) (147,328) (63,823) (278,909) (373,467)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 94,515 (122,100) (1,229,892) (226,365) (94,653) (355,521) (439,623)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1996 1,358,227 1,640,662 1,193,173 731,930 6,847,454 4,831,665 4,069,123
Net premiums 44,846 26,455 (2,769) - 132,909 46,481 33,637
Transfers (to) from the
general account of Life of Virginia:
Death benefits (6,846) (7,589) (3,458) (2,224) (25,251) (14,556) (15,035)
Surrenders (87,976) (127,118) (72,594) (65,456) (376,813) (325,620) (189,716)
Administrative expenses (3,299) (4,137) (2,380) (1,503) (17,119) (12,146) (9,227)
Transfers (to)/from the Guarantee Account 54,141 17,555 (1,822) (257) 81,689 26,348 10,283
Interfund transfers 510,750 7,721 (1,110,150) (662,490) (53,531) (84,347) (500,805)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 511,616 (87,113) (1,193,173) (731,930) (258,116) (363,840) (670,863)
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
Units outstanding at December 31, 1997 1,869,843 1,553,549 - - 6,589,338 4,467,825 3,398,260
- ----------------------------------------------- ---------- ----------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Products Variable Insurance Products
Fund II Fund III Advisers Management Trust
---------------------------- --------------------------- -------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities Balanced Bond Growth
Type I Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Units outstanding at December 31, 1994 27,382,848 - - - 2,303,795 1,644,509 619,834
Net premiums 387,499 582,483 - - 19,872 (319,688) (14,507)
Transfers (to) from the
general account of Life of Virginia:
Death benefits (158,949) (1,220) - - (260) 29,267 4,454
Surrenders (1,411,202) (39,641) - - (16,268) 86,040 50,773
Administrative expenses (74,816) (3,373) - - (1,256) 8,665 2,990
Transfers (to)/from the Guarantee Account (514,204) 257,604 - - 22,814 19,812 13,112
Interfund transfers (3,617,814) 1,639,032 - - (302,761) (529,362) 79,845
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (5,389,486) 2,434,885 - - (277,859) (705,266) 136,667
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 21,993,362 2,434,885 - - 2,025,936 939,243 756,501
Net premiums 164,394 191,853 - - - 692 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (142,857) (14,740) - - (13,542) (625) (7,106)
Surrenders (1,189,857) (156,723) - - (19,441) (46,729) (82,100)
Administrative expenses (60,017) (7,215) - - (1,491) (2,782) (3,304)
Transfers (to)/from the Guarantee Account (9,338) 168,994 - - (6,661) (1,863) (1,563)
Interfund transfers (1,775,712) 480,447 - - (300,225) (348,334) (131,122)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (3,013,387) 662,616 - - (341,360) (399,641) (225,195)
- --------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 18,979,975 3,097,501 - - 1,684,576 539,602 531,306
Net premiums 152,156 110,477 41,831 30,072 (343) 141 348
Transfers (to) from the
general account of Life of Virginia:
Death benefits (89,850) (9,932) - - (4,573) (13,722) (3,133)
Surrenders (1,096,143) (211,184) (813) (5,989) (131,590) (27,704) (10,160)
Administrative expenses (52,182) (7,854) (183) (318) (3,702) (1,043) (1,125)
Transfers (to)/from the Guarantee Account 25,895 101,581 19,562 24,545 (9,256) (144) -
Interfund transfers (818,341) 215,612 233,932 293,107 (1,535,112) (497,130) (517,236)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (1,878,465) 198,700 294,329 341,417 (1,684,576) (539,602) (531,306)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 17,101,510 3,296,201 294,329 341,417 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Federated Investors Insurance PBHG Insurance
Series Alger American Series Fund
--------------------------------- --------------------- --------------------
American High
Leaders Income Large Cap
Portfolio Bonds Utility Small Cap Growth Growth Growth II
Type I Units Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - - - - - -
Net premiums - 6,661 74,380 67,353 46,215 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - - -
Surrenders - (60) (682) (606) (423) - -
Administrative expenses - (15) (144) (147) (90) - -
Transfers (to)/from the Guarantee Account - 1,534 126,922 8,574 4,799 - -
Interfund transfers - 32,694 339,152 330,617 210,724 - -
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - 40,814 539,628 405,791 261,225 - -
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 40,814 539,628 405,791 261,225 - -
Net premiums 6,132 11,997 34,892 260,309 140,387 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (1,489) (13,689) (10,458) - - -
Surrenders (234) (8,472) (35,752) (35,446) (31,027) - -
Administrative expenses (47) (273) (1,868) (2,659) (2,129) - -
Transfers (to)/from the Guarantee Account 1,547 23,451 31,866 150,713 122,150 - -
Interfund transfers 68,264 145,478 (9,854) 571,403 700,068 - -
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 75,662 170,692 5,595 933,862 929,449 - -
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 75,662 211,506 545,223 1,339,653 1,190,674 - -
Net premiums 35,396 49,848 7,670 694,521 66,490 1,019 17,111
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (469) (853) (42,319) (2,907) - -
Surrenders (1,961) (14,353) (38,555)(1,148,701) (80,029) (92) (49)
Administrative expenses (502) (718) (1,375) (36,907) (3,546) (32) (101)
Transfers (to)/from the Guarantee Account 24,074 50,940 9,699 749,029 2,066 2,432 1,623
Interfund transfers 228,950 159,370 (36,477) (230,206) (150,234) 52,670 58,027
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 285,957 244,618 (59,891) (14,583) (168,160) 55,997 76,611
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 361,619 456,124 485,332 1,325,070 1,022,514 55,997 76,611
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------------------------------------------
Aggressive Flexible International Capital
Growth Growth Worldwide Balanced Income Growth Appreciation
Type I Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 1,272,142 3,183,404 2,247,224 - - - -
Net premiums 41,540 495,631 154,654 47,108 369 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (8,424) (9,493) (2,123) - - -
Surrenders (37,096) (129,651) (38,101) (16,212) (8) - -
Administrative expenses (196) (9,290) (4,194) (1,376) (11) - -
Transfers (to)/from the Guarantee Account 90,712 109,046 25,268 9,645 2,769 - -
Interfund transfers 598,635 792,010 381,858 74,930 35,960 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 693,595 1,249,322 509,992 111,972 39,079 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,965,737 4,432,726 2,757,216 111,972 39,079 - -
Net premiums 1,581 1,661,740 880,684 49,343 4,021 34,924 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (181,059) (51,566) (2,953) - - -
Surrenders (429) (2,320,448) (739,842) (15,986) (1,075) (1,689) -
Administrative expenses (22) (113,310) (48,025) (1,541) (194) (301) -
Transfers (to)/from the Guarantee Account 1,256 1,066,999 455,640 26,519 11,223 37,626 -
Interfund transfers 7,695 217,761 916,700 191,453 64,966 403,878 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 10,081 331,683 1,413,591 246,835 78,941 474,438 -
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 1,975,818 4,764,409 4,170,807 358,807 118,020 474,438 -
Net premiums 55,368 109,351 257,478 32,492 8,506 99,898 2,452
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,972) (66,404) (7,323) - - - -
Surrenders (87,614) (321,901) (229,991) (34,024) (17,779) (40,170) (1,327)
Administrative expenses (4,772) (11,195) (12,079) (1,430) (403) (2,200) (58)
Transfers (to)/from the Guarantee Account 29,407 64,006 148,276 55,427 78,205 64,693 344
Interfund transfers (148,659) (32,501) 611,104 2,070,280 94,329 408,010 47,846
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (158,242) (258,644) 767,465 2,122,745 162,858 530,231 49,257
- ----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 1,817,576 4,505,765 4,938,272 2,481,552 280,878 1,004,669 49,257
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
- ------------------------------------------------------------------------------
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-----------------------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Type II Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 10,408 889 75,600 12,498 - -
Net premiums 287,747 94,804 3,703,628 189,643 26,411 23,750
Transfers (to) from the
general account of Life of Virginia:
Death benefits (3,020) - - (523) - -
Surrenders (1,937) (2,139) (17,008) (2,245) (10) (23)
Administrative expenses (18) (6) (18) (12) (1) -
Transfers (to)/from the Guarantee Account 12,961 3,954 18,590 12,174 1,577 324
Interfund transfers 93,868 56,254 (2,272,432) 41,049 19,067 10,426
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 389,601 152,867 1,432,760 240,086 47,044 34,477
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 400,009 153,756 1,508,360 252,584 47,044 34,477
Net premiums 647,438 194,563 10,719,294 345,169 204,787 214,051
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,638) (4,586) (41,657) (930) (313) -
Surrenders (17,183) (4,362) (189,358) (11,361) (4,056) (1,826)
Administrative expenses (290) (130) (792) (196) (80) (43)
Transfers (to)/from the Guarantee Account 78,749 3,809 (49,295) 38,959 26,698 19,914
Interfund transfers 155,417 (66,854) (8,053,173) 35,026 58,323 162,396
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 862,493 122,440 2,385,019 406,667 285,359 394,492
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 1,262,502 276,196 3,893,379 659,251 332,403 428,969
Net premiums 1,106,640 58,332 7,321,970 188,455 143,803 604,427
Transfers (to) from the
general account of Life of Virginia:
Death benefits (46,669) - (31,824) (4,811) (188) (1,092)
Surrenders (61,683) (10,472) (497,702) (40,510) (16,180) (24,343)
Loans - - - - - -
Administrative expenses (1,001) (115) (2,877) (508) (358) (445)
Transfers (to)/from the Guarantee Account 376,140 37,807 406,500 93,000 69,865 236,279
Interfund transfers 389,211 (361,748) (6,108,959) 33,268 85,065 234,452
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,762,638 (276,196) 1,087,108 268,894 282,007 1,049,278
- ------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 3,025,140 - 4,980,487 928,145 614,410 1,478,247
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------------
Global
Income Value Equity Income
Type II Units Fund Fund Fund
<S> <C>
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - -
Net premiums - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Administrative expenses - - -
Transfers (to)/from the Guarantee Account - - -
Interfund transfers - - -
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - -
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - - -
Net premiums - - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - - -
Administrative expenses - - -
Transfers (to)/from the Guarantee Account - - -
Interfund transfers - - -
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - - -
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 - - -
Net premiums 19,022 242,987 1,357
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (153) -
Surrenders (487) (5,196) (415)
Loans - - -
Administrative expenses (8) (28) (42)
Transfers (to)/from the Guarantee Account 19,733 146,978 5,210
Interfund transfers 41,030 346,028 897,139
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 79,290 730,616 903,249
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-------------------------------------------------------------------------
Capital High Multiple
Money Bond Appreciation Growth Income Strategies
Type II Units Fund Fund Fund Fund Fund Fund
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 50,143 11,655 68,052 12,276 77,818 26,302
Net premiums 54,745 214,451 355,504 325,547 366,507 185,233
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (219) (166) (229) - (1,207)
Surrenders (652) (5,734) (5,891) (3,339) (1,757) (2,408)
Administrative expenses (31) (49) (30) (68) (24) (36)
Transfers (to)/from the Guarantee Account (4,360) 13,097 21,250 28,166 20,898 17,850
Interfund transfers (41,682) 42,279 143,860 61,411 97,702 30,947
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 8,020 263,825 514,527 411,488 483,326 230,379
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 58,163 275,480 582,579 423,764 561,144 256,681
Net premiums 70 307,614 1,152,800 440,344 922,316 383,300
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (3,625) (23,778) (2,446) (14,183) (3,190)
Surrenders (1,020) (13,875) (34,224) (9,335) (24,799) (11,252)
Administrative expenses (6) (160) (668) (213) (520) (329)
Transfers (to)/from the Guarantee Account (156) 32,015 169,506 50,413 94,808 45,770
Interfund transfers (33,183) 109,648 275,079 189,075 176,989 77,022
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (34,295) 431,617 1,538,715 667,838 1,154,611 491,321
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 23,868 707,097 2,121,294 1,091,602 1,715,755 748,002
Net premiums 30 167,289 713,649 880,279 703,696 349,189
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (8,306) (10,958) (8,211) (16,328) (5,971)
Surrenders (202) (30,599) (79,872) (48,836) (109,043) (55,647)
Loans - - - - - -
Administrative expenses (5) (513) (1,748) (951) (1,245) (701)
Transfers (to)/from the Guarantee Account - 156,266 369,347 337,722 379,179 151,804
Interfund transfers (23,691) 2,783 64,736 210,754 262,960 13,450
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (23,868) 286,920 1,055,154 1,370,757 1,219,219 452,124
- ---------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - 994,017 3,176,448 2,462,359 2,934,974 1,200,126
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Product Funds
-------------------------------------------------------------
Money High Equity-
Market Income Income Growth Overseas
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 450,740 56,076 276,392 141,845 197,672
Net premiums 1,923,388 288,601 2,285,441 1,079,779 464,979
Transfers (to) from the
general account of Life of Virginia:
Death benefits (1,352) (1,092) (898) (663) (12,509)
Surrenders (10,590) (7,686) (33,936) (16,831) (10,082)
Administrative expenses (211) (53) (378) (170) (235)
Transfers (to)/from the Guarantee Account (48,336) 9,984 165,649 72,558 71,820
Interfund transfers (1,333,295) 149,732 427,705 248,497 117,726
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 529,604 439,486 2,843,583 1,383,170 631,699
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 980,344 495,562 3,119,975 1,525,015 829,371
Net premiums 138 - 3,158,538 1,222,269 521,600
Transfers (to) from the
general account of Life of Virginia:
Death benefits (5,285) (1,518) (43,181) (21,919) (11,961)
Surrenders (18,734) (18,658) (134,965) (50,499) (31,329)
Administrative expenses (323) (228) (2,658) (1,349) (733)
Transfers (to)/from the Guarantee Account (31) (3,382) 402,673 186,018 127,385
Interfund transfers (659,500) (168,501) 541,485 167,039 123,110
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (683,735) (192,287) 3,921,892 1,501,559 728,072
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 296,609 303,275 7,041,867 3,026,574 1,557,443
Net premiums 931 306 2,260,371 504,224 230,215
Transfers (to) from the
general account of Life of Virginia:
Death benefits (9,387) (206) (70,511) (17,520) (11,283)
Surrenders (6,379) (17,828) (310,722) (121,652) (59,094)
Loans - - - - -
Administrative expenses (179) (172) (5,614) (2,437) (1,374)
Transfers (to)/from the Guarantee Account - (595) 959,930 232,691 169,290
Interfund transfers (281,595) (284,780) 198,852 (7,282) (122,609)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions (296,609) (303,275) 3,032,306 588,024 205,145
- --------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 - - 10,074,173 3,614,598 1,762,588
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III Advisers Management Trust
-------------------- ------------------------- --------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities Balanced Bond Growth
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 450,885 - - - 22,065 83,962 13,906
Net premiums 902,148 1,499,030 - - 199,692 240,461 167,067
Transfers (to) from the
general account of Life of Virginia:
Death benefits (13,552) (200) - - - - (1,865)
Surrenders (26,495) (14,316) - - (2,564) (2,394) (1,381)
Administrative expenses (510) (43) - - (46) (47) (47)
Transfers (to)/from the Guarantee Account 88,564 128,048 - - 6,725 11,012 19,747
Interfund transfers 68,627 395,429 - - (34,434) 65,282 12,482
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,018,782 2,007,948 - - 169,373 314,314 196,003
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,469,667 2,007,948 - - 191,438 398,276 209,909
Net premiums 640,444 2,595,994 - - - (252) -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (19,704) (23,500) - - (1,089) (8,981) (1,419)
Surrenders (67,829) (72,281) - - (2,814) (3,959) (6,733)
Administrative expenses (1,135) (2,159) - - (103) (315) (174)
Transfers (to)/from the Guarantee Account 117,636 428,333 - - - 120 -
Interfund transfers 109,440 559,664 - - (44,480) (127,260) (46,447)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 778,852 3,486,051 - - (48,486) (140,647) (54,773)
- ---------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 2,248,519 5,493,999 - - 142,952 257,629 155,136
Net premiums 317,380 2,003,590 452,458 553,737 25 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (14,483) (32,105) (176) (968) (2,194) (1,620) -
Surrenders (101,528) (196,054) (9,166) (9,539) (10,921) (12,250) (3,242)
Loans - - - - - - -
Administrative expenses (1,272) (4,990) (79) (66) (108) (204) (81)
Transfers (to)/from the Guarantee Account 132,093 1,027,864 208,287 207,607 (601) (6,721) -
Interfund transfers 98,224 303,373 324,762 298,769 (129,153) (236,834) (151,813)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 430,414 3,101,678 976,086 1,049,540 (142,952) (257,629) (155,136)
- -----------------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 2,678,933 8,595,677 976,086 1,049,540 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Federated Investors Insurance
Series
-----------------------------------
American High
Leaders Income
Portfolio Bonds Utility
Type II Units Fund II Fund II Fund II
<S> <C>
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - -
Net premiums - 112,682 377,786
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - -
Surrenders - (398) (2,336)
Administrative expenses - - (32)
Transfers (to)/from the Guarantee Account - 4,581 19,944
Interfund transfers - 6,287 68,114
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions - 123,152 463,476
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 - 123,152 463,476
Net premiums 208,871 343,618 543,077
Transfers (to) from the
general account of Life of Virginia:
Death benefits - (1,859) (3,067)
Surrenders (2,478) (25,640) (28,920)
Administrative expenses (2) (143) (566)
Transfers (to)/from the Guarantee Account 12,459 29,882 81,126
Interfund transfers 46,982 340,979 75,307
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 265,832 686,837 666,957
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 265,832 809,989 1,130,433
Net premiums 998,765 599,938 229,931
Transfers (to) from the
general account of Life of Virginia:
Death benefits (7,020) (7,987) (3,557)
Surrenders (30,390) (46,149) (62,619)
Loans - - -
Administrative expenses (399) (579) (981)
Transfers (to)/from the Guarantee Account 355,249 292,000 95,492
Interfund transfers 474,654 239,675 (62,998)
- ----------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,790,859 1,076,898 195,268
- ----------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 2,056,691 1,886,887 1,325,701
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
<TABLE>
<CAPTION>
PBHG Insurance
Alger American Series Fund Janus Aspen Series
------------------------------------------- ----------------------
Large Cap Aggressive
Small Cap Growth Growth Growth II Growth Growth
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 - - - - 169,799 159,068
Net premiums 291,288 228,664 - - 781,202 1,408,112
Transfers (to) from the
general account of Life of Virginia:
Death benefits - - - - - (2,390)
Surrenders (1,324) (74) - - (487) (24,299)
Administrative expenses (2) (3) - - (77) (303)
Transfers (to)/from the Guarantee Account 23,122 (9,752) - - 84,482 173,800
Interfund transfers 88,174 93,176 216,085 161,652
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 401,258 312,011 - - 1,081,205 1,716,572
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 401,258 312,011 - - 1,251,004 1,875,640
Net premiums 2,385,857 1,979,744 - - 1,109,539 1,939,884
Transfers (to) from the
general account of Life of Virginia:
Death benefits (6,505) (2,249) - - (5,075) (28,847)
Surrenders (49,583) (21,913) - - (20,314) (111,109)
Administrative expenses (658) (517) - - (141) (2,321)
Transfers (to)/from the Guarantee Account 364,980 234,626 - - 99,771 288,072
Interfund transfers 472,803 460,475 - - 227,267 921,603
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 3,166,894 2,650,166 - - 1,411,047 3,007,282
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 3,568,152 2,962,177 - - 2,662,051 4,882,922
Net premiums 1,139,813 1,030,593 108,061 306,146 608,750 1,633,216
Transfers (to) from the
general account of Life of Virginia:
Death benefits (25,827) (23,277) (63) - (22,328) (36,365)
Surrenders (95,915) (104,485) (998) (4,853) (80,725) (180,611)
Loans - - - - - -
Administrative expenses (3,710) (2,759) (28) (35) (1,935) (4,325)
Transfers (to)/from the Guarantee Account 865,037 527,894 51,297 100,624 253,985 867,094
Interfund transfers 197,908 (9,957) 188,564 174,128 22,869 108,967
- --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 2,077,306 1,418,009 346,833 576,010 780,616 2,387,976
- --------------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 5,645,458 4,380,186 346,833 576,010 3,442,667 7,270,898
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Continued
<TABLE>
<CAPTION>
Janus Aspen Series
------------------------------------------------------------------
Flexible International Capital
Worldwide Balanced Income Growth Appreciation
Type II Units Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1994 117,700 - - - -
Net premiums 873,533 55,928 30,062 - -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (786) (74) - - -
Surrenders (10,106) (831) (36) - -
Administrative expenses (144) (10) - - -
Transfers (to)/from the Guarantee Account 88,410 6,328 1,290 - -
Interfund transfers 158,463 12,197 4,956 -
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 1,109,370 73,538 36,272 - -
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1995 1,227,070 73,538 36,272 - -
Net premiums 2,853,570 547,525 240,317 388,753 -
Transfers (to) from the
general account of Life of Virginia:
Death benefits (26,212) (1,525) - - -
Surrenders (94,535) (10,808) (1,714) (2,959) -
Administrative expenses (2,275) (267) (63) (11) -
Transfers (to)/from the Guarantee Account 475,568 75,940 21,420 47,466 -
Interfund transfers 713,001 308,093 28,937 249,356 -
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 3,919,117 918,958 288,897 682,605 -
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1996 5,146,187 992,496 325,169 682,605 -
Net premiums 3,372,062 1,117,148 284,347 1,872,823 55,458
Transfers (to) from the
general account of Life of Virginia:
Death benefits (35,456) (7,246) (4,723) (15,267) -
Surrenders (228,974) (78,945) (17,933) (60,571) (1,630)
Loans - - - - -
Administrative expenses (4,300) (1,005) (342) (863) (7)
Transfers (to)/from the Guarantee Account 1,289,775 423,506 175,029 576,462 35,560
Interfund transfers 572,391 358,481 107,542 446,411 74,169
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in units
from capital transactions 4,965,498 1,811,939 543,920 2,818,995 163,550
- ---------------------------------------------------------------------------------------------------------------------
Units outstanding at December 31, 1997 10,111,685 2,804,435 869,089 3,501,600 163,550
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
Federal Income Taxes
The Account is not taxed separately because the operations of the
Account are part of the total operations of Life of Virginia. Life of
Virginia is taxed as a life insurance company under the Internal
Revenue Code (the Code). Life of Virginia is included in the General
Electric Capital Assurance Company consolidated federal income tax
return. The Account will not be taxed as a regulated investment company
under subchapter M of the Code. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains
of the Account.
Use of Estimates
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that affect amounts and disclosures reported therein.
Actual results could differ from those estimates.
(3) Related Party Transactions
Net premiums transferred from Life of Virginia to the Account represent
gross premiums recorded by Life of Virginia on its flexible premium
variable 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 charge of .20% of the premium payment 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
<PAGE>
(3) Continued
that Life of Virginia assumes. Administrative expenses as well as
mortality and risk charges are deducted daily and reflect the effective
annual rates.
GE Investments Funds, Inc. (the Fund) is an open-end diversified
management investment company.
Capital Brokerage Corporation, an affiliate of Life of Virginia, is a
Washington Corporation registered with the Commission under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc. Capital Brokerage
Corporation also serves as principal underwriter for variable life
insurance policies issued by Life of Virginia.
GE Investment Management Incorporated (Investment Advisor), a
wholly-owned subsidiary of GE, currently serves as investment advisor
to GE Investments Funds, Inc. As compensation for its services, the
Investment Advisor is paid an investment advisory fee by the Fund based
on the average daily net assets at an effective annual rate of .35% for
the S&P 500 Index Fund, .10% for the Government Securities Fund, .50%
for the Money Market and Total Return Funds, 1.00% for the
International Equity Fund and .85% for the Real Estate Securities Fund.
Prior to May 1, 1997, Aon Advisors, Inc. served as investment advisor
to the Fund and was subject to the same compensation arrangement as GE
Investment Management Incorporated.
Certain officers and directors of Life of Virginia are also officers
and directors of Capital Brokerage Corporation.
===============================================================================
<PAGE>
THE LIFE INSURANCE COMPANY OF
VIRGINIA AND SUBSIDIARY
Consolidated Financial Statements
December 31, 1997, 1996, and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The 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 subsidiary as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the year ended December 31, 1997 and 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 consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The accompanying consolidated
financial statements of The Life Insurance Company of Virginia for the year
ended December 31, 1995, were audited by other auditors whose report, dated
February 8, 1996 on those consolidated 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Life Insurance
Company of Virginia and subsidiary as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the year ended December 31,
1997, 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.
KPMG Peat Marwick LLP
Richmond, Virginia
January 6, 1998
<PAGE>
REPORT OF INDEPENDENT AUDITIORS
Board of Directors
The Life Insurance Company of Virginia
We have audited the accompanying consolidated statements of income,
stockholder's equity, and cash flows of The Life Insurance Company of Virginia
and subsidiaries for the year 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 audit.
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. 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 financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of The Life Insurance Company of Virginia and subsidiaries for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Richmond, Virginia
February 8, 1996
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1997 and 1996
(in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments:
Fixed maturities:
Available for sale - at fair value (amortized cost:
December 31, 1997 - $5,468.1; 1996 - $5,102.2) $ 5,622.6 5,142.7
Equity securities - at fair value
Common stocks (cost: December 31, 1997 - $43.1; 1996 - $31.6) 54.1 34.7
Preferred stocks (cost: December 31, 1997 - $87.6; 1996 - $123.5) 97.6 130.8
Mortgage loans on real estate (net of reserve for losses:
December 31, 1997 - $17.2; 1996 - $20.8) 496.2 585.4
Real estate (net) 11.8 19.4
Policy loans 188.4 179.5
Short-term investments - 42.4
- ------------------------------------------------------------------------------------------------------------------
Total investments 6,470.7 6,134.9
- ------------------------------------------------------------------------------------------------------------------
Cash 0.2 6.4
Receivables:
Premiums and other 6.6 7.9
Reinsurance recoverable 8.7 13.1
Accrued investment income 123.1 116.6
- ------------------------------------------------------------------------------------------------------------------
Total receivables 138.4 137.6
Deferred policy acquisition costs 165.0 70.3
Goodwill (net of accumulated amortization: December 31, 1997 - $11.3;
1996 - $5.0) 117.1 125.4
Present value of future profits (net) 332.6 419.2
Property and equipment at cost (net) 3.2 1.7
Deferred income taxes 57.4 72.9
Other assets 15.4 12.3
Assets held in separate accounts 4,066.4 2,762.7
- ------------------------------------------------------------------------------------------------------------------
Total assets $ 11,366.4 9,743.4
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(continued)
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets, Continued
December 31, 1997 and 1996
(in millions, except share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Policy liabilities:
Future policy benefits $ 520.6 518.3
Policy and contract claims 83.0 69.1
Unearned and advance premiums 0.1 0.1
Other policyholder funds 5,369.2 5,094.4
- ------------------------------------------------------------------------------------------------------------------
Total policy liabilities 5,972.9 5,681.9
General liabilities:
Payable to affiliate, net 9.4 8.8
Commissions and general expenses 51.1 46.8
Current income taxes 45.8 45.4
Other liabilities 71.5 192.2
Liabilities related to separate accounts 4,066.4 2,762.7
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 10,217.1 8,737.8
- ------------------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0 4.0
Additional paid-in capital 925.9 928.1
Net unrealized investment gains 74.3 19.4
Retained earnings 145.1 54.1
- ------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,149.3 1,005.6
- ------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,366.4 9,743.4
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Income
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Preacquisition
--------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenue
Premiums and policy fees $ 273.2 154.7 92.4 179.3
Separate account fees 44.4 23.1 5.9 17.7
Net investment income (note 2) 472.5 334.4 112.0 402.1
Realized investment gains (losses) (note 2) 13.3 6.0 9.0 (76.5)
Other income 2.5 0.6 1.0 2.8
- ----------------------------------------------------------------------------------------------------------------------
Total revenue earned 805.9 518.8 220.3 525.4
- ----------------------------------------------------------------------------------------------------------------------
Benefits and Expenses
Benefits to policyholders 509.8 326.4 166.0 372.9
Commissions and general expenses 82.5 53.2 28.8 43.7
Amortization of intangibles 59.6 50.1 0.6 3.2
Amortization of deferred policy acquisition
costs 10.8 3.2 6.0 39.3
- ----------------------------------------------------------------------------------------------------------------------
Total benefits and expenses 662.7 432.9 201.4 459.1
Income Before Income Tax 143.2 85.9 18.9 66.3
Provision for income tax (note 3)
Current expense (benefit) 64.8 39.7 (3.8) 37.9
Deferred expense (benefit) (12.6) (7.9) 10.8 (10.8)
- ----------------------------------------------------------------------------------------------------------------------
52.2 31.8 7.0 27.1
- ----------------------------------------------------------------------------------------------------------------------
Net income $ 91.0 54.1 11.9 39.2
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Preacquisition
---------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Common stock
$1,000 par value common stock, authorized,
issued and outstanding 4,000 in 1997,
1996 and 1995)
- ------------------------------------------------------------------------------------------------------------------
Balance at beginning and end of period $ 4.0 4.0 4.0 4.0
- ------------------------------------------------------------------------------------------------------------------
Additional Paid-in Capital
Balance at beginning of period 928.1 818.4 749.1 704.1
Adjustment to reflect purchase method (note 1) (2.2) 109.7 - -
Capital contribution from parent (notes 4, 7) - - 69.3 45.0
- ------------------------------------------------------------------------------------------------------------------
Balance at end of period 925.9 928.1 818.4 749.1
- ------------------------------------------------------------------------------------------------------------------
Net Unrealized Investment Gains (Losses)
Balance at beginning of period 19.4 11.9 103.1 (97.5)
Adjustment to reflect purchase method
(note 1) - (11.9) - -
Net unrealized investment gains (losses) 54.9 19.4 (91.2) 200.6
- ------------------------------------------------------------------------------------------------------------------
Balance at end of period 74.3 19.4 11.9 103.1
- ------------------------------------------------------------------------------------------------------------------
Net Foreign Exchange Gains (Losses)
Balance at beginning of period - - - (3.0)
Net foreign exchange gains (losses) - - - 3.0
- ------------------------------------------------------------------------------------------------------------------
Balance at end of period - - - -
- ------------------------------------------------------------------------------------------------------------------
Retained Earnings (Deficit)
Balance at beginning of period 54.1 (22.4) (34.3) 159.8
Adjustment to reflect purchase method
(note 1) - 22.4 - -
Net income 91.0 54.1 11.9 39.2
Dividends to stockholder - - - (40.0)
Stock dividend to affiliate (note 7) - - - (193.3)
- ------------------------------------------------------------------------------------------------------------------
Balance at end of period 145.1 54.1 (22.4) (34.3)
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity at end of period $ 1,149.3 1,005.6 811.9 821.9
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the year ended December 31, 1997, the periods from April 1, 1996 to December
31, 1996 and from January 1, 1996 to March 31, 1996, and the year ended December
31, 1995 (in millions)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Preacquisition
----------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 91.0 54.1 11.9 39.2
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 239.0 53.5 (32.8) 114.2
Change in accrued investment income (6.5) (37.6) 4.1 (2.1)
Deferred policy acquisition costs (112.3) (74.9) (22.2) (76.1)
Amortization of deferred policy acquisition costs 10.8 3.2 6.0 39.3
Amortization of intangibles 59.6 50.1 0.6 3.2
Other amortization and depreciation 8.0 7.3 1.4 (1.2)
Premiums and operating receivables, commissions and general
expenses, income taxes and other (128.5) 77.8 22.9 (65.7)
Realized investment (gains) losses (13.3) (6.0) (9.0) 76.5
- ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 147.8 127.5 (17.1) 127.3
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale (purchase) of short-term investments - net 42.4 49.4 (10.1) (18.8)
Sale or maturity of investments
Fixed maturities - held to maturity:
Maturities - - - 3.9
Calls and prepayments - - - 60.9
Fixed maturities - available for sale
Maturities - 201.5 46.1 35.0
Calls and prepayments - 353.5 101.0 58.6
Sales 739.1 452.0 115.8 1,700.3
All other investments 145.1 177.3 44.9 124.6
Purchase of investments:
Fixed maturities - available for sale (1,104.1) (1,279.5) (144.1) (1,950.7)
All other investments (30.8) (39.5) (65.5) (183.5)
Purchase of property and equipment (2.4) - (0.2) (0.8)
- ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (210.7) (85.3) 87.9 (170.5)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Capital contribution - - 2.8 -
Cash dividends to stockholder - - (40.0) (6.0)
Change in cash overdrafts 4.7 (12.7) 28.8 -
Interest sensitive life, annuity and investment contract deposits 1,894.2 1,275.4 301.9 1,059.5
Interest sensitive life, annuity and investment contract withdrawals (1,842.2) (1,305.6) (358.8) (1,031.7)
- ------------------------------------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities 56.7 (42.9) (65.3) 21.8
- ------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (6.2) (0.7) 5.5 (21.4)
Cash at beginning of period 6.4 7.1 1.6 23.0
- ------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 0.2 6.4 7.1 1.6
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1997
===============================================================================
(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 ("Life
of Virginia" or "Company") and its subsidiary, Assigned Settlements
Inc. 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 Financial Assurance Holdings, Inc. ("GEFAH").
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 23%, 34% and 43% of premium and
annuity consideration collected, in 1997, 1996, and 1995, respectively,
came from customers residing in the South Atlantic region of the United
States.
Although the Company markets its products through numerous
distributors, approximately 22%, 21% and 14% of the Company's sales in
1997, 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.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA & SUBSIDIARY
Notes to Consolidated Financial Statements
===============================================================================
(1) Continued
Estimates
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and
assumptions that could affect amounts and disclosures reported therein.
Actual results could differ from those estimates. 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.
Certain 1996 and 1995 amounts have been reclassified to conform to 1997
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. The net purchase price for Life of Virginia and
its subsidiary of $929.9 million was allocated 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.
In addition to revaluing all material tangible assets and liabilities
to their respective estimated fair values as of the closing date of the
sale, Life of Virginia also recorded in its consolidated 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 $118
million (net of purchase accounting adjustments of $2.2 million in
1997), 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.
<PAGE>
(1) Continued
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 (which becomes the new cost basis) 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
an appropriate rate.
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 range 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 12.4%,
11.6%, 10.8%, 9.5% and 8.1% for the years ended December 31, 1998
through 2002, 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.
<PAGE>
(1) Continued
The projected ending balance of PVFP will be further adjusted to
reflect the impact of unrealized gains or losses on fixed maturities
classified 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 applicable income
tax. The components of PVFP are as follows:
<TABLE>
<CAPTION>
Preacquisition
------------------------------
Nine months Three months
Year ended ended ended Year ended,
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
PVFP - beginning of period $ 419.2 - 32.6 48.6
Adjustment related to the purchase
method of accounting - 484.0 - -
Interest accreted at 6.75% for 1997
and 6.25% for 1996 28.4 22.4 0.5 2.1
Gross amortization, excluding interest (81.6) (67.5) (1.1) (5.3)
Dividend of Globe Life Insurance
Company (note 7) - - - (12.8)
Effect of net unrealized
investment (gains) losses (33.4) (19.7) - -
- ---------------------------------------------------------------------------------------------------------------
PVFP - end of period $ 332.6 419.2 32.0 32.6
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Goodwill
Under the purchase method of accounting, Goodwill is the excess of the
purchase price over the fair value of assets and liabilities acquired
and PVFP. The Company has elected to amortize goodwill on the straight
line basis over a 20 year period.
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 consolidated
financial statements. As of December 31, 1997, the Company believes
that no such adjustment is necessary.
<PAGE>
(1) Continued
Deferred Tax Assets and Liabilities
Pursuant to the acquisition on April 1, 1996, GE Capital, 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 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 the payment of a premium other than to maintain account
values at a level sufficient to pay mortality and expense charges.
Consequently, premiums for universal life-type policies and investment
products are not reported as revenue, but as deposits. Policy fee
revenue for universal life-type policies and investment products
consists of charges for the cost of insurance, policy administration,
and surrenders assessed during the period. Expenses include interest
credited to policy account balances and benefit claims incurred in
excess of policy account balances.
In general, for accident and health products, premiums collected are
reported as earned proportionately over the period covered by the
policies. For all other life products, premiums are recognized as
revenue when due. Benefits and related expenses associated with the
premium revenues are charged to expense proportionately over the lives
of the policies through a provision for future policy benefit
liabilities and through deferral and amortization of deferred policy
acquisition costs.
<PAGE>
(1) Continued
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 classified as available for sale and 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 mortgage-backed securities. Investment income on
mortgage-backed securities is initially based upon yield, cash flow and
prepayment assumptions at the date of purchase. Subsequent revisions in
those assumptions are recorded using the retrospective method, whereby
the amortized cost of the securities is adjusted to the amount that
would have existed had the revised assumptions been in place at the
date of purchase. The adjustments to amortized cost are recorded as a
charge or credit to investment income.
Short-term investments are carried at amortized cost which approximates
fair value. Equity securities are valued at fair value. Mortgage loans
are carried at their unpaid principal balance, net of allowances for
estimated uncollectible amounts. 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.
Changes in the market values of investments available-for-sale, net of
the effect on deferred policy acquisition costs, present value of
future profits and deferred federal income taxes are reflected as
unrealized investment gains or losses in a separate component of
stockholders' interest and accordingly, have no effect on net income.
<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
value 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 consolidated statements of
income. In general, the Company ceases to accrue investment income when
interest or dividend payments are in arrears.
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.
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.
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 policy acquisition costs is 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.
<PAGE>
(1) Continued
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.
The components of deferred policy acquisition costs are as follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Deferred policy acquisition costs - $ 70.3 - 363.9 388.1
beginning of period
Commissions and expenses deferred 112.3 74.9 22.2 76.1
Amortization (10.8) (3.2) (6.0) (39.3)
Dividend of Globe Life Insurance
Company (note 7) - - - (22.8)
Effect of net unrealized investment
(gains) losses (6.8) (1.4) 17.9 (38.2)
- ------------------------------------------------------------------------------------------------------------
Deferred policy acquisition costs - end of period $ 165.0 70.3 398.0 363.9
- ------------------------------------------------------------------------------------------------------------
</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
<PAGE>
(1) Continued
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.
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, 1997, approximately $44.6 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
<PAGE>
(1) Continued
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.
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 fair 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.
<PAGE>
(2) Continued
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, 1997 and 1996 were as
follows:
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(millions) Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Available for sale:
U.S. government and agencies $ 44.3 1.3 - 45.6
States and political subdivisions 1.8 0.3 - 2.1
Foreign governments 200.1 6.5 (0.3) 206.3
Corporate securities 3,362.1 120.6 (8.1) 3,474.6
Mortgage-backed securities 1,859.8 39.6 (5.4) 1,894.0
- ----------------------------------------------------------------------------------------------------------------
Total fixed maturities 5,468.1 168.3 (13.8) 5,622.6
Total equity securities 130.7 21.5 (0.5) 151.7
- ----------------------------------------------------------------------------------------------------------------
Total available for sale $ 5,598.8 189.8 (14.3) 5,774.3
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<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>
<PAGE>
(2) Continued
The scheduled maturity distribution of the fixed maturity portfolio at
December 31 follows. Expected maturities may differ from scheduled
contractual maturities because issuers of securities may have the right
to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
1997
---------------------------
Amortized Fair
(millions) Cost Value
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Due in one year or less $ 105.8 106.7
Due after one year through five years 1,196.8 1,224.3
Due after five years through ten years 1,654.9 1,705.3
Due after ten years 650.8 692.3
- -----------------------------------------------------------------------------------------------------------
Subtotals 3,608.3 3,728.6
Mortgage-backed securities 1,859.8 1,894.0
- -----------------------------------------------------------------------------------------------------------
Totals $ 5,468.1 5,622.6
- -----------------------------------------------------------------------------------------------------------
</TABLE>
As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders
of $4.7 million and $4.5 million at December 31, 1997 and 1996,
respectively.
At December 31, 1997, approximately 24.8% and 15.9% of the Company's
investment portfolio is comprised of securities issued by the
manufacturing and financial industries, respectively, the vast majority
of which are rated investment grade, and which are senior secured
bonds. No other industry group comprises more than 10% of the Company's
investment portfolio. This portfolio is widely diversified among
various geographic regions in the United States, and is not dependent
on the economic stability of one particular region.
At December 31, 1997, the Company did not hold any fixed maturity
securities, other than securities issued or guaranteed by the U.S.
government, which exceeded 10% of shareholders interest.
<PAGE>
(2) Continued
The credit quality of the fixed maturity portfolio at December 31,
follows. The categories are based on the higher of the ratings
published by Standard & Poors or Moody's.
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Fair Fair
value Percent value Percent
- ------------------------------------------------------------------------------------------------------
<S> <C>
Agencies and treasuries $ 308 5.5% $ 317 6.2%
AAA/Aaa 1,465 26.0 1,437 27.9
AA/Aa 320 5.7 247 4.8
A/A 1,101 19.6 988 19.2
BBB/Baa 1,862 33.1 1,864 36.3
BB/Ba 307 5.5 207 4.0
B/B 77 1.4 13 0.3
Not rated 182 3.2 69 1.3
- -----------------------------------------------------------------------------------------------------
Totals $ 5,622 100.0% $ 5,142. 100.0%
- -----------------------------------------------------------------------------------------------------
</TABLE>
Bonds with earnings ranging from AAA/Aaa to BBB-/Baa3 are generally
regarded as investment grade securities. Some agencies and treasuries
(that is, those securities issued by the United States government or an
agency thereof) are not rated, but all are considered to be investment
grade securities. Finally, some securities, such as private placements,
have not been assigned a rating by any rating service and are therefore
categorized as "not rated." This has neither positive nor negative
implications regarding the value of the security.
<PAGE>
(2) Continued
The Company had $6.4 million and $12.6 million of non-income producing
investments on December 31, 1997 and December 31, 1996, respectively.
"Impaired" loans are defined under generally accepted accounting
principles as loans for which it is probable that the lender will be
unable to collect all amounts due according to the original contractual
terms of the loan agreement. That definition excludes, among other
things, leases or large groups of smaller-balance homogenous loans, and
therefore applies principally to the Company's commercial loans.
Under these principles, the Company has two types of "impaired" loans
as of December 31, 1997 and 1996: loans requiring allowances for losses
and loans expected to be fully recoverable because the carrying amount
has been reduced previously through charge-offs or deferral at income
recognition ($23.0 million and $-, respectively). There was no
allowance for losses on these loans as of December 31, 1997 and 1996.
Average investment in impaired loans during 1997 was $23.0 million and
interest income earned on these loans while they were considered
impaired was $2.0 million. There were no impaired loans nor related
interest income earned on such loans in 1996.
The Company's mortgage and real estate portfolio is distributed by
geographic location and type. However, the Company has concentration
exposures in certain regions and in certain types as shown in the
following two tables.
Geographic distribution as of December 31, 1997:
<TABLE>
<CAPTION>
Mortgage Real estate
- -----------------------------------------------------------------------------------------------------------
<S> <C>
South Atlantic 47.0% 60.3%
East North Central 14.8 2.3
Mountain 14.1 -
West South Central 12.0 37.4
Pacific 6.6 -
Middle Atlantic 3.9 -
East South Central 1.6 -
- ------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
Type distribution as of December 31, 1997:
<TABLE>
<CAPTION>
Mortgage Real estate
- --------------------------------------------------------------------------------------------------------
<S> <C>
Office building 19.8% 51.1%
Retail 23.7 21.3
Industrial 21.2 -
Apartments 21.8 25.3
Other 13.5 2.3
- --------------------------------------------------------------------------------------------------------
Total 100.0% 100.0%
- --------------------------------------------------------------------------------------------------------
</TABLE>
Net unrealized gains and losses on investment securities classified as
available-for-sale are reduced by deferred income taxes and adjustments
to the present value of future profits and deferred policy acquisition
costs that would have resulted had such gains and losses been realized.
Net unrealized gains and losses on available-for-sale investment
securities reflected as a separate component of stockholders' equity
are summarized as follows:
<TABLE>
<CAPTION>
Preacquisition
-------------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Net unrealized gains on available-for-sale investment securities before
adjustments:
Fixed maturities $ 154.5 40.5 2.8 143.8
Equity securities 21.0 10.4 5.8 23.2
- --------------------------------------------------------------------------------------------------------------------
Subtotal 175.5 50.9 8.6 167.0
Adjustments to the present value
of future profits and deferred policy
acquisition costs (61.2) (21.1) 9.9 (8.0)
Deferred income taxes (40.0) (10.4) (6.6) (55.9)
- --------------------------------------------------------------------------------------------------------------------
Net unrealized gains on
available-for-sale investment
securities 74.3 19.4 11.9 103.1
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(2) Continued
The source of investment income of the Company is as follows:
<TABLE>
<CAPTION>
Preacquisition
----------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities $ 398.5 274.4 93.1 332.8
Equity securities 7.3 8.7 4.2 10.8
Mortgage loans on real estate 48.3 41.3 13.5 49.8
Short-term investments 1.0 2.5 0.5 3.5
Other investments 22.3 12.9 3.0 13.2
- --------------------------------------------------------------------------------------------------------------
Gross investment income 477.4 339.8 114.3 410.1
Investment expenses (4.9) (5.4) (2.3) (8.0)
- --------------------------------------------------------------------------------------------------------------
Net investment income $ 472.5 334.4 112.0 402.1
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Gross realized investment gains and losses resulting from the sales of
investment securities were as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- ------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities available for sale:
Gross gains $ 8.3 0.6 0.5 12.9
Gross losses - (0.7) (1.4) (90.2)
Fixed maturities held to maturity:
Gross gains - - - 1.1
Gross losses - - - (13.8)
Equity securities 3.4 6.0 10.3 5.6
Mortgage loans on real estate (0.8) - (0.4) 2.3
Other 2.4 0.1 - 5.6
- ---------------------------------------------------------------------------------------------------
Total before tax 13.3 6.0 9.0 (76.5)
Less applicable tax (4.7) (2.3) (1.9) 26.8
- ----------------------------------------------------------------------------------------------------
Total $ 8.6 3.7 7.1 (49.7)
- ----------------------------------------------------------------------------------------------------
</TABLE>
<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
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C>
Fixed maturities:
Available for sale $ 114.0 40.5 (141.0) 298.7
Held to maturity - - - 233.7
Equity securities 10.6 10.4 (17.4) 26.1
- --------------------------------------------------------------------------------------------------------------
Net unrealized investment gains (losses) $ 124.6 50.9 (158.4) 558.5
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(3) Income Tax
Beginning April 1, 1996, Life of Virginia and its subsidiary have been
included in the life insurance company consolidated federal income tax
return of GE Capital Assurance and are also subject to a separate
tax-sharing agreement, as approved by state insurance regulators, the
provisions of which are substantially the same as the tax-sharing
agreement with GE Capital. Prior to 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.
<PAGE>
(3) Continued
Income taxes are recorded in the statements of income and directly in
stockholders' equity accounts. Income taxes for the years ending
December 31 was allocated as follows:
<TABLE>
<CAPTION>
Preacquisition
-----------------------------------
Nine months Three months
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Statement of income:
Operating income (excluding
realized investment gains
and losses) $ 47.5 29.5 5.1 53.9
Realized investment gains/losses 4.7 2.3 1.9 (26.8)
- --------------------------------------------------------------------------------------------------------
Income tax expense included
in the statement of income 52.2 31.8 7.0 27.1
Stockholders' equity:
Unrealized gains/(losses) on
securities available for sale 29.6 10.4 (49.3) 86.0
- --------------------------------------------------------------------------------------------------------
Total $ 81.8 42.2 (42.3) 113.1
- --------------------------------------------------------------------------------------------------------
</TABLE>
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
Year ended ended ended Year ended
December 31, December 31, December 31, December 31,
1997 1996 1996 1995
--------------------- --------------------- -------------------- ---------------------
<S> <C>
Statutory tax rate ..................... $ 50.1 35.0% $ 30.1 35.0% $ 6.6 35.0% $ 23.2 35.0%
Tax-exempt investment income
deductions ............................ ( 0.9) (0.7) ( 1.0) (1.2) -- (0.1) ( 0.1) (0.1)
Adjustment of prior year taxes ......... -- -- -- -- -- -- 3.5 5.3
Other-net .............................. 3.0 2.2 2.7 3.2 0.4 2.1 0.5 0.7
------- ---- ------- ---- ------ ---- ------- ----
Effective tax rate ..................... $ 52.2 36.5% $ 31.8 37.0% $ 7.0 37.0% $ 27.1 40.9%
======= ==== ======= ==== ====== ==== ======= ====
</TABLE>
Significant compnents of Life of Virginia's deffered tax liabilities and
assets are as follows (in millions):
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
-------------- -------------
<S> <C>
Deferred tax liabilities:
Present value of future profits ......... $ 79.1 89.9
Unrealized investment gains ............. 40.0 10.4
Other ................................... 2.7 6.5
------ -----
Total deferred tax liabilities ........... 121.8 106.7
------ -----
Deferred tax assets:
Insurance reserve amounts ............... 142.9 120.4
Policy acquisition costs ................ 11.8 34.3
Guaranty fund amounts ................... 9.4 10.8
Other ................................... 15.1 14.1
------ -----
Total deferred tax assets ................ 179.2 179.6
------ -----
Net deferred tax assets .................. $ 57.4 72.9
====== =====
</TABLE>
Deferred taxes are allocated to individual subsidiaries by applying the
asset and liability method of accounting for deferred income taxes.
Intercompany balances are settled annually.
<PAGE>
(3) Continued
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 (refunded) for the year ended December
31, 1997, the nine months ended December 31, 1996, three months ended
March 31, 1996, and the year ended December 31, 1995 was $64.4 million,
$38.6 million, $(2.4) million and $44.9 million, respectively.
(4) Reinsurance and Claim Reserves
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. Life of Virginia's reinsurance
consists primarily of long-duration contracts that are entered into
with 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
Year ended ended ended Year ended
December 31, December 31, March 31, December 31,
1997 1996 1996 1995
--------------- --------------- --------------- ---------------
Earned Earned Earned Earned
--------------- --------------- --------------- ---------------
<S> <C>
Direct $ 337.3 210.5 77.2 261.5
Assumed 20.7 6.6 35.0 4.3
Ceded 84.8 62.4 19.8 86.5
- -------------------------------------------------------------------------------------------------------
Net premiums 273.2 154.7 92.4 179.3
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(4) Continued
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
$72.7 million, $60.5 million, $17.2 million and $63.1 million for the
year ended December 31, 1997, the nine months ended December 31, 1996,
three months ended March 31, 1996 and the year ended December 31, 1995,
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.
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 book
value of $501.4 million and held to maturity fixed maturities with a
fair value of $81.4 million and a book value 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.
<PAGE>
(4) Continued
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 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.
<TABLE>
<CAPTION>
Millions Fair 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>
<PAGE>
(5) Employee Benefits
Savings Plan
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees participated in a General Electric contributory savings plan.
Provisions made for the savings plan were $.9 million and $.6 million
for the year ended December 31, 1997 and 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 and $.8 million for the three months ended March
31, 1996, and the year ended December 31, 1995, 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 year ended December 31, 1995
charged to Life of Virginia's operations amounted to $.1 million and
$.5 million, respectively. This plan terminated upon the acquisition of
Life of Virginia by GE Capital.
Pension Plan
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees 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 $.6 million and $.4 million expense were
incurred for the year ended December 31, 1997 and the nine months ended
December 31, 1996.
<PAGE>
(5) Continued
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
determined 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, the Company had net pension credits of $1.2 million and
$3.8 million in the three months ended March 31, 1996 and the year
ended December 31, 1995. This plan terminated upon the acquisition of
Life of Virginia by GE Capital.
Postretirement Benefits Other Than Pensions
Beginning April 1, 1996, Life of Virginia's salaried and commissioned
employees participated in a General Electric retiree health and life
insurance benefit plan. The plans principally provides 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 year ended
December 31, 1997 and the nine months ended December 31, 1996 for the
retiree health and life insurance benefit plan were $1.9 million and
$1.3 million, respectively.
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 provided medical benefits, prior to and subsequent
to Medicare eligibility, and the other provided life insurance
benefits. The postretirement health care plan was contributory, with
retiree contributions adjusted annually; the life insurance plan was
noncontributory. Both plans were funded on a pay-as-you-go basis. These
plans terminated upon the acquisition of Life of Virginia by GE
Capital.
<PAGE>
(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, 1997
are as follows:
<TABLE>
<CAPTION>
(millions) Minimum lease payments
- ------------------------------------------------------------------------
<S> <C>
1998 $ 1.1
1999 0.8
2000 0.5
2001 0.3
2002 -
Later years -
- ------------------------------------------------------------------------
Total minimum payments required $ 2.7
- ------------------------------------------------------------------------
</TABLE>
Rental expense for all operating leases for the year ended December 31,
1997, for the nine months ended December 31, 1996, the three months
ended March 31, 1996 and the year ended December 31, 1995 amounted to
$1.3 million, $2.5 million, $.8 million and $3.6 million, respectively.
(7) Related Party Transactions
Life of Virginia pays investment advisory fees and other fees to
affiliates. Amounts incurred for these items aggregated $7.6 million,
$3.2 million, $3.5 million and $5.8 million for the year ended December
31, 1997, the nine months ended December 31, 1996, the three months
ended March 31, 1996 and the year ended December 31, 1995,
respectively. Life of Virginia charges affiliates for certain services
and for the use of facilities and equipment which aggregated $4.6
million, $2.0 million, $1.0 million, and $10.0 million for the year
ended December 31, 1997, the nine months ended December 31, 1996, the
three months ended March 31, 1996, and the year ended December 31,
1995, respectively.
<PAGE>
(7) Continued
At December 31, 1997 and 1996, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6 million. Amounts
included in net investment income related to these holdings totaled
$0.1 million, $0.1 million, $0.2 million and $1.0 million for the year
ended December 31, 1997, for the nine months ended December 31, 1996,
the three months ended March 31, 1996 and the year ended December 31,
1995, respectively.
In January 1995, Life of Virginia dividend 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
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 book value of $7.5
million, common stocks with a fair value of $5.6 million and book value
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.
(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.
<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, 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 no interest rate swaps outstanding at December 31,
1997 and 1996.
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.
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.
<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, 1997 and December 31, 1996,
totaled $16.7 million and $1.7 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 Company has no derivative financial instruments as defined by SFAS
No. 119 at December 31, 1997, other than mortgage loan commitments of
$67.7 million.
<PAGE>
(9) Continued
The carrying amount and fair value of certain of Life of Virginia's
financial instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------------------------------
Carrying Fair Carrying Fair
(millions) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Fixed maturities and
equity securities
(note 2) $ 5,774.3 5,774.3 5,308.2 5,308.2
Mortgage loans on
real estate 496.2 532.2 585.4 622.6
Policy loans 188.4 188.4 179.5 179.5
Cash, short-term
investments and
receivables 138.6 138.6 186.4 186.4
Assets held in separate accounts 4,066.4 4,066.4 2,762.7 2,762.7
- ------------------------------------------------------------------------------------------------------------
Liabilities:
Investment type
insurance contracts 3,113.8 3,100.7 3,055.0 3,027.6
Commissions and
general expenses 51.1 51.1 46.8 46.8
Liabilities related to separate accounts 4,066.4 4,066.4 2,762.7 2,762.7
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 1 regarding the method used to estimate fair values.
<PAGE>
1
(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,
1997, is $51.8 million.
Statutory net income (loss) and stockholders' equity is summarized
below:
<TABLE>
<CAPTION>
Preacquisition
------------------------------
Nine months Three months
Year ended ended ended
December 31, December 31, March 31, December 31,
(millions) 1997 1996 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Statutory net income $ 73.9 69.7 (8.3) 53.9
Statutory stockholders' equity 522.5 419.1 360.5 364.2
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The National Association of Insurance Commissioners has developed
certain Risk Based Capital (RBC) requirements to help regulators
identify life insurers that may be inadequately capitalized. 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,
1997 the Company's Total Adjusted Capital and Authorized Control Level
- RBC were above the calculated minimum regulatory thresholds.
<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. 11/
(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. 11/
(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. 11/
(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. 11/
(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.
11/
(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. 11/
(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/
(1)(j) Resolution of Board of Directors authorizing establishment of
three 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. 11/
(1)(k) Resolution of Board of Directors authorizing additional
investment subdivisions investing in shares of U.S. Equity
Fund of GE Investment Funds Inc., Growth and Income Fund of
Goldman Sachs Variable Income Trust and Mid Cap Equity Fund
of Goldman Sachs Variable Trust Income Fund. 11/
(2). Not Applicable.
(3)(a) Underwriting Agreement dated December 13, 1997 between The Life
Insurance Company of Virginia and Capital Brokerage Corporation.
11/
(b) Dealer Sales Agreement dated December 12, 1997.11/
(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. 11/
(b) By-Laws of The Life Insurance Company of Virginia. 11/
(7).. Not Applicable.
(8)(a) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance
Company of Virginia. 11/
(a)(i) Amendment to Participation Agreement Referencing Policy Form
Numbers. 11/
(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. 11/
(b)(i) Amendment to Agreement between Oppenheimer Variable Account
Funds, Oppenheimer Management Corporation, and The Life
Insurance Company of Virginia. 11/
(c) Participation Agreement among Variable Insurance Products Fund
II, Fidelity Distributors Corporation and The Life Insurance
Company of Virginia. 11/
(d) Participation Agreement between Janus Capital Corporation and
The Life Insurance Company of Virginia. 11/
(e) Participation Agreement between Insurance Management Series,
Federated Securities Corp., and The Life Insurance Company of
Virginia. 11/
(f) Participation Agreement between The Alger American Fund, Fred
Alger and Company, Inc., and The Life Insurance Company of
Virginia. 8/
(g) Participation Agreement between Goldman Sachs Variable Insurance
Trust, Goldman Sachs and Company, and The Life Insurance Company
of Virginia.
(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). Not Applicable
(14). Power of Attorney dated April 2, 1996. 9/
--------------------------
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.
11/ Incorporated herein by reference to post-effective amendment number 9
to the Registrant's registration statement on Form N-4, File No.
33-76334, filed with the Securities and Exchange Commission on May 1,
1998.
<PAGE>
Item 25. Directors and Officers of Life of Virginia
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ---- ------- ------------------------------------
<S> <C>
Ronald V. Dolan* First Colony Life Director and Chairman of the Board
700 Main Street
Lynchburg, VA 24505
Selwyn L. Flournoy, Jr.* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Linda L. Lanam* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Robert D. Chinn* Life of Virginia Director and Senior Vice President - Agency
6610 W. Broad Street
Richmond, VA 23230
Elliot Rosenthal Life of Virginia Senior Vice President - Investment Products
6610 W. Broad Street
Richmond, VA 23230
Victor C. Moses GE Financial Assurance Director
601 Union St.reet, Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Director
700 Main Street
Lynchburg, VA 23219
</TABLE>
<PAGE>
Item 25. Directors and Officers of Life of Virginia
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ---- ------- ------------------------------------
<S> <C>
Ronald V. Dolan* First Colony Life Director and Chairman of the Board
700 Main Street
Lynchburg, VA 24505
Selwyn L. Flournoy, Jr.* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Linda L. Lanam* Life of Virginia Director and Senior Vice President
6610 W. Broad Street
Richmond, VA 23230
Robert D. Chinn* Life of Virginia Director and Senior Vice President - Agency
6610 W. Broad Street
Richmond, VA 23230
Elliot Rosenthal Life of Virginia Senior Vice President - Investment Products
6610 W. Broad Street
Richmond, VA 23230
Victor C. Moses GE Financial Assurance Director
601 Union St.reet, Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Director
700 Main Street
Lynchburg, VA 23219
- ---------------------------------------------------------------------------------------------------------------------------------
</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, 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.
(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) Capital Brokerage 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, III and
V.
(b)
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ---- ------- ------------------------------------
<S> <C>
Scott A. Curtis GE Financial Assurance President and Chief Executive Officer
6610 W. Broad St.
Richmond, VA 23230
Stephen P. Joyce GE Financial Assurance Senior Vice President
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
Charles A. Kaminski GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Victor C. Moses GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Senior Vice President
700 Main St.
Lynchburg, VA 23219
Mary Catherine Yeagley GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Jeffrey I. Hugunin GE Financial Assurance Treasurer
6604 W. Broad St.
Richmond, VA 23230
John W. Attey GE Financial Assurance Vice President, Counsel & Assistant
7125 W. Jefferson Ave., Ste. 200 Secretary
Lakewood, CO 80235
Thomas W. Casey GE Financial Assurance Vice President & Chief Financial Officer
6604 W. Broad St.
Richmond, VA 23230
Stephen N. DeVos GE Financial Assurance Vice President & Controller
6604 W. Broad St.
Richmond, VA 23230
Scott A. Reeks GE Financial Assurance Vice President & Assistant Treasurer
6610 W. Broad St.
Richmond, VA 23230
Edward J. Wiles, Jr. GE Financial Assurance Vice President, Counsel & Secretary
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
</TABLE>
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules under it are maintained by Life
of Virginia at its executive offices.
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
Registration Statement.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to this
Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that
an applicant can check to request a Statement of Additional Information,
or (2) a post card or similar written communication affixed to or included
in the Prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to Life of Virginia at the address
or phone number listed in the Prospectus.
STATEMENT PURSUANT TO RULE 6c-7
Life of Virginia offers and will offer Policies to participants in the Texas
Optional Retirement Program. In connection therewith, Life of Virginia and
Account 4 rely on 17 C.F.R. Section 270.6c-7 and represent that the provisions
of paragraphs (a)-(d) of the Rule have been or will be complied with.
SECTION 403(b) REPRESENTATIONS
Life of Virginia represents that in connection with its offering of Policies
as funding vehicles for retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code of 1986, it is relying on a no-action letter
dated November 28, 1988, to the American Council of Life Insurance (Ref. No.
IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company
Act of 1940, and that paragraphs numbered (1) through (4) of that letter will be
complied with.
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.
<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, certifies that it
meets the requirements of Securities Acts of 485(b) for effectiveness of this
registration statement, and has 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 29 day of April 1998.
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 29 day of April, 1998 in the City/County
of Henrico, Commonwealth of Virginia.
/s/ Laura Deusebio
-----------------------
Notary Public
01/2000
-----------------------
My Commission Expires
<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 4/29/98
- -------------------------------
Ronald V. Dolan
SELWYN L. FLOURNOY, JR.
- ------------------------------- Director, Senior Vice President 4/29/98
Selwyn L. Flournoy, Jr.
LINDA L. LANAM Director, Senior Vice President 4/29/98
- -------------------------------
Linda L. Lanam
ROBERT D. CHINN Director, Senior Vice President 4/29/98
- -------------------------------
Robert D. Chinn
VICTOR C. MOSES Director 4/29/98
- -------------------------------
Victor C. Moses
GEOFFREY S. STIFF Director 4/29/98
- -------------------------------
Geoffrey S. Stiff
</TABLE>
By /s/ Selwyn Flournoy, Jr., pursuant to Power of Attorney executed on
April 16, 1997.
<PAGE>
Exhibit List
Page
(8)(g) Participation Agreement
(9) Opinion and Consent of Counsel
(10)(a) Consent of Counsel
(10)(b) Consent of Auditors
FORM OF PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into this __ day of May, 1998 by and
between GOLDMAN SACHS VARIABLE INSURANCE TRUST, an unincorporated business trust
formed under the laws of Delaware (the "Trust"), GOLDMAN, SACHS & CO., a New
York limited partnership (the "Distributor"), and THE LIFE INSURANCE COMPANY OF
VIRGINIA, a Virginia life insurance company (the "Company"), on its own behalf
and on behalf of each separate account of the Company identified herein.
WHEREAS, the Trust is a series-type mutual fund offering shares of
beneficial interest (the "Trust shares") consisting of one or more separate
series ("Series") of shares, each such Series representing an interest in a
particular investment portfolio of securities and other assets (a "Fund"), and
which Series may be subdivided into various classes ("Classes") with each such
Class supporting a distinct charge and expense arrangement; and
WHEREAS, the Trust was established for the purpose of serving as an
investment vehicle for insurance company separate accounts supporting variable
annuity contracts and variable life insurance policies to be offered by
insurance companies and may also be utilized by qualified retirement plans; and
WHEREAS, the Distributor has the exclusive right to distribute Trust
shares to qualifying investors; and
WHEREAS, the Company desires that the Trust serve as an investment
vehicle for a certain separate account(s) of the Company and the Distributor
desires to sell shares of certain Series and/or Class(es) to such separate
account(s);
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
the Distributor and the Company agree as follows:
ARTICLE I
Additional Definitions
1.1. "Account" -- the separate account of the Company described more
specifically in Schedule 1 to this Agreement. If more than one separate account
is described on Schedule 1, the term shall refer to each separate account so
described.
1.2. "Business Day" -- each day that the Trust is open for business as
provided in the Trust's Prospectus.
1.3. "Code" -- the Internal Revenue Code of 1986, as amended, and any
successor thereto.
1.4. "Contracts" -- the class or classes of variable annuity contracts
and/or variable life insurance policies issued by the Company and described more
specifically on Schedule 2 to this Agreement.
1.5. "Contract Owners" -- the owners of the Contracts, as distinguished
from all Product Owners.
1.6. "Participating Account" -- a separate account investing all or a
portion of its assets in the Trust, including the Account.
1.7. "Participating Insurance Company" -- any insurance company
investing in the Trust on its behalf or on behalf of a Participating Account,
including the Company.
1.8. "Participating Plan" -- any qualified retirement plan investing in
the Trust.
1.9. "Participating Investor" -- any Participating Account,
Participating Insurance Company or Participating Plan, including the Account and
the Company.
1.10. "Products" -- variable annuity contracts and variable life
insurance policies supported by Participating Accounts, including the Contracts.
1.11. "Product Owners" -- owners of Products, including Contract
Owners.
1.12. "Trust Board" -- the board of trustees of the Trust.
1.13. "Registration Statement" -- with respect to the Trust shares or a
class of Contracts, the registration statement filed with the SEC to register
such securities under the 1933 Act, or the most recently filed amendment
thereto, in either case in the form in which it was declared or became
effective. The Contracts' Registration Statement for each class of Contracts is
described more specifically on Schedule 2 to this Agreement. The Trust's
Registration Statement is filed on Form N-1A (File No. 333-35883).
1.14. "1940 Act Registration Statement" -- with respect to the Trust or
the Account, the registration statement filed with the SEC to register such
person as an investment company under the 1940 Act, or the most recently filed
amendment thereto. The Account's 1940 Act Registration Statement is described
more specifically on Schedule 2 to this Agreement. The Trust's 1940 Act
Registration Statement is filed on Form N-1A (File No.
811-08361).
1.15. "Prospectus" -- with respect to shares of a Series (or Class) of
the Trust or a class of Contracts, each version of the definitive prospectus or
supplement thereto filed with the SEC pursuant to Rule 497 under the 1933 Act.
With respect to any provision of this Agreement requiring a party to take action
in accordance with a Prospectus, such reference thereto shall be deemed to be to
the version for the applicable Series, Class or Contracts last so filed prior to
the taking of such action. For purposes of Article IX, the term "Prospectus"
shall include any statement of additional information incorporated therein.
1.16. "Statement of Additional Information" -- with respect to the
shares of the Trust or a class of Contracts, each version of the definitive
statement of additional information or supplement thereto filed with the SEC
pursuant to Rule 497 under the 1933 Act. With respect to any provision of this
Agreement requiring a party to take action in accordance with a Statement of
Additional Information, such reference thereto shall be deemed to be the last
version so filed prior to the taking of such action.
1.17. "SEC" -- the Securities and Exchange Commission.
1.18. "NASD" -- The National Association of Securities Dealers, Inc.
1.19. "1933 Act" -- the Securities Exchange Act of 1933, as amended.
1.20. "1940 Act" -- the Investment Company Act of 1940, as amended.
ARTICLE II
Sale of Trust Shares
2.1. Availability of Shares
(a) The Trust has granted to the Distributor exclusive
authority to distribute the Trust shares and to select which Series or
Classes of Trust shares shall be made available to Participating
Investors. Pursuant to such authority, and subject to Article X hereof,
the Distributor shall make available to the Company for purchase on
behalf of the Account, shares of the Series and Classes listed on
Schedule 3 to this Agreement, such purchases to be effected at net
asset value in accordance with Section 2.3 of this Agreement. Such
Series and Classes shall be made available to the Company in accordance
with the terms and provisions of this Agreement until this Agreement is
terminated pursuant to Article X or the Distributor suspends or
terminates the offering of shares of such Series or Classes in the
circumstances described in Article X.
(b) Notwithstanding clause (a) of this Section 2.1, Series or
Classes of Trust shares in existence now or that may be established in
the future will be made available to the Company only as the
Distributor may so provide, subject to the Distributor's rights set
forth in Article X to suspend or terminate the offering of shares of
any Series or Class or to terminate this Agreement.
(c) The parties acknowledge and agree that: (i) the Trust may
revoke the Distributor's authority pursuant to the terms and conditions
of its distribution agreement with the Distributor; and (ii) the Trust
reserves the right in its sole discretion to refuse to accept a request
for the purchase of Trust shares, including but not limited to requests
for purchases by persons considered by the Trust to be market timers.
2.2. Redemptions. The Trust shall redeem, at the Company's request, any
full or fractional Trust shares held by the Company on behalf of the Account,
such redemptions to be effected at net asset value in accordance with Section
2.3 of this Agreement. Notwithstanding the foregoing, (i) the Company shall not
redeem Trust shares attributable to Contract Owners except in the circumstances
permitted in Article X of this Agreement, and (ii) the Trust may delay
redemption of Trust shares of any Series or Class to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the Prospectus for
such Series or Class.
2.3. Purchase and Redemption Procedures
(a) The Trust hereby appoints the Company as an agent of the
Trust for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any Trust
shares that may be held in the general account of the Company) for
shares of those Series or Classes made available hereunder, based on
allocations of amounts to the Account or subaccounts thereof under the
Contracts, other transactions relating to the Contracts or the Account
and customary processing of the Contracts. Receipt of any such requests
(or effectuation of such transaction or processing) on any Business Day
by the Company as such limited agent of the Trust prior to the Trust's
close of business as defined from time to time in the applicable
Prospectus for such Series or Class (which as of the date of execution
of this Agreement is defined as the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m. New York Time)) shall
constitute receipt by the Trust on that same Business Day, provided
that the Company uses its best efforts to provide actual and sufficient
notice of such request to the Trust by 8:30 a.m. New York Time on the
next following Business Day and the Trust receives such notice no later
than 9:00 a.m. New York time on such Business Day. Such notice may be
communicated by telephone to the office or person designated for such
notice by the Trust as indicated on Schedule 5 to this Agreement, and
shall be confirmed by facsimile.
(b) The Company shall pay for shares of each Series or Class
on the same day that it provides actual notice to the Trust of a
purchase request for such shares. Payment for Series or Class shares
shall be made in Federal funds transmitted to the Trust by wire to be
received by the Trust by 3:30 p.m. New York Time on the day the Trust
receives actual notice of the purchase request for Series or Class
shares (unless the Trust determines and so advises the Company that
sufficient proceeds are available from redemption of shares of other
Series or Classes effected pursuant to redemption requests tendered by
the Company on behalf of the Account). In no event may proceeds from
the redemption of shares requested pursuant to an order received by the
Company after the Trust's close of business on any Business Day be
applied to the payment for shares for which a purchase order was
received prior to the Trust's close of business on such day. If the
issuance of shares is canceled because Federal funds are not timely
received, the Company shall indemnify the respective Fund and
Distributor with respect to all costs, expenses and losses relating
thereto. Upon the Trust's receipt of Federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become
the responsibility of the Trust. If Federal funds are not received on
time, such funds will be invested, and Series or Class shares purchased
thereby will be issued, as soon as practicable after actual receipt of
such funds but in any event not on the same day that the purchase order
was received.
(c) Payment for Series or Class shares redeemed by the Account
or the Company shall be made in Federal funds transmitted by wire to
the Company or any other person properly designated in writing by the
Company. The Trust shall use its best efforts to transmit such funds by
6:00 p.m. New York Time on the same Business Day after the Trust
receives actual notice of the redemption order for Series or Class
shares (unless redemption proceeds are to be applied to the purchase of
Trust shares of other Series or Classes in accordance with Section
2.3(b) of this Agreement), except that the Trust reserves the right to
redeem Series or Class shares in assets other than cash and to delay
payment of redemption proceeds to the extent permitted by the 1940 Act,
any rules or regulations or orders thereunder, or the applicable
Prospectus. The Trust shall not bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds by the
Company; the Company alone shall be responsible for such action.
(d) Any purchase or redemption request for Series or Class
shares held or to be held in the Company's general account shall be
effected at the net asset value per share next determined after the
Trust's actual receipt of such request, provided that, in the case of a
purchase request, payment for Trust shares so requested is received by
the Trust in Federal funds prior to close of business for determination
of such value, as defined from time to time in the Prospectus for such
Series or Class.
(e) Prior to the first purchase of any Trust shares hereunder,
the Company and the Trust shall provide each other with all information
necessary to effect wire transmissions of Federal funds to the other
party and all other designated persons pursuant to such protocols and
security procedures as the parties may agree upon. Should such
information change thereafter, the Trust and the Company, as
applicable, shall notify the other in writing of such changes,
observing the same protocols and security procedures, at least three
Business Days in advance of when such change is to take effect. The
Company and the Trust shall observe customary procedures to protect the
confidentiality and security of such information.
(f) The procedures set forth herein are subject to any
additional terms set forth in the applicable Prospectus for the Series
or Class or by the requirements of applicable law.
2.4. Net Asset Value. The Trust shall make the net asset value per
share for each Series or Class available to the Company on a daily basis as soon
as reasonably practicable after the net asset value per share for such Series or
Class is calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York Time each business day. The Trust will
notify the Company as soon as possible if on any Business Day it is determined
that the calculation of net asset value per share will be available after 6:30
p.m. New York Time. The Trust shall calculate such net asset value in accordance
with the Prospectus for such Series or Class.
2.5. Dividends and Distributions. The Trust shall furnish notice to the
Company as soon as reasonably practicable of any income dividends or capital
gain distributions payable on any Series or Class shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all such dividends
and distributions as are payable on any Series or Class shares in the form of
additional shares of that Series or Class. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends and capital gain distributions in cash; to be effective, such
revocation must be made in writing and received by the Trust at least three (3)
Business Days prior to a dividend or distribution date. The Trust shall notify
the Company promptly of the number of Series or Class shares so issued as
payment of such dividends and distributions.
2.6. Book Entry. Issuance and transfer of Trust shares shall be by book
entry only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Trust shares shall be recorded in an
appropriate ledger for the Account or the appropriate subaccount of the Account.
2.7. Pricing Errors. Any material errors in the calculation of net
asset value, dividends or capital gain information shall be reported immediately
upon discovery to the Company. An error shall be deemed "material" based on the
Trust's reasonable interpretation of the SEC's position and policy with regard
to materiality, as it may be modified from time to time. Neither the Trust, any
Fund, the Distributor, nor any of their affiliates shall be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by or on behalf of the Company or any
other Participating Company to the Trust or the Distributor[; otherwise if the
Trust provides the Company with a materially incorrect share net asset value,
the Company on behalf of the Account(s) described in Schedule 1, shall be
entitled to an adjustment to the number of shares purchased or redeemed to
reflect correct net asset value.]
2.8. Limits on Purchasers. The Distributor and the Trust shall sell
Trust shares only to insurance companies and their separate accounts and to
persons or plans ("Qualified Persons") that qualify to purchase shares of the
Trust under Section 817(h) of the Code and the regulations thereunder without
impairing the ability of the Account to consider the portfolio investments of
the Trust as constituting investments of the Account for the purpose of
satisfying the diversification requirements of Section 817(h). The Distributor
and the Trust shall not sell Trust shares to any insurance company or separate
account unless an agreement complying with Article VIII of this Agreement is in
effect to govern such sales. The Company hereby represents and warrants that it
and the Account are Qualified Persons.
ARTICLE III
Representations and Warranties
3.1. Company. The Company represents and warrants that: (i) the Company
is an insurance company duly organized and in good standing under Virginia
insurance law; (ii) the Account is a validly existing separate account, duly
established and maintained in accordance with applicable law; (iii) the
Account's 1940 Act Registration Statement will be or has been filed with the SEC
in accordance with the provisions of the 1940 Act and the Account will be or is
duly registered as a unit investment trust thereunder; (iv) the Contracts'
Registration Statement has been declared effective by the SEC prior to the
issuance or sale of the Contracts; (v) the Contracts will be issued in
compliance in all material respects with all applicable Federal and state laws;
(vi) the Contracts have been filed, qualified and/or approved for sale under the
insurance laws and regulations of the states in which the Contracts will be
offered only if and to the extent required by applicable law; (vii) the Account
will maintain its registration under the 1940 Act and will comply in all
material respects with the 1940 Act; (viii) subject to Article VI hereof, the
Contracts currently are, and at the time of issuance and for so long as they are
outstanding will be, treated as annuity contracts or life insurance policies,
whichever is appropriate, under applicable provisions of the Code; and (ix) the
Company's entering into and performing its obligations under this Agreement does
not and will not violate its charter documents or by-laws, rules or regulations,
or any agreement to which it is a party. The Company will notify the Trust
promptly if for any reason it is unable to perform its obligations under this
Agreement.
3.2. Trust. The Trust represents and warrants that: (i) the Trust is an
unincorporated business trust duly formed and validly existing under the
Delaware law; (ii) the Trust's 1940 Act Registration Statement has been filed
with the SEC in accordance with the provisions of the 1940 Act and the Trust is
duly registered as an open-end management investment company thereunder; (iii)
the Trust's Registration Statement has been declared effective by the SEC; (iv)
the Trust shares will be issued in compliance in all material respects with all
applicable federal laws; (v) the Trust will remain registered under and will
comply in all material respects with the 1940 Act during the term of this
Agreement; (vi) each Fund of the Trust qualifies or will qualify as a "regulated
investment company" under Subchapter M of the Code and complies or will comply
with the diversification standards prescribed in Section 817(h) of the Code and
the regulations thereunder; and (vii) the investment policies of each Fund are
in material compliance with any investment restrictions set forth on Schedule 4
to this Agreement. The Trust, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state.
3.3. Distributor. The Distributor represents and warrants that: (i) the
Distributor is a limited partnership duly organized and in good standing under
New York law; (ii) the Distributor is registered as a broker-dealer under
federal and applicable state securities laws and is a member of the NASD; and
(iii) the Distributor is registered as an investment adviser under federal
securities laws. The Distributor further represents that it will sell and
distribute Fund shares in accordance with applicable federal and state
securities laws, including without limitation, the 1933 Act, the Securities
Exchange Act of 1934, and the 1940 Act.
3.4. Legal Authority. Each party represents and warrants that the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate, partnership or trust action, as applicable, by such party, and, when
so executed and delivered, this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its terms.
ARTICLE IV
Regulatory Requirements
4.1. Trust Filings. The Trust shall amend the Trust's Registration
Statement and the Trust's 1940 Act Registration Statement from time to time as
required in order to effect the continuous offering of Trust shares in
compliance with applicable law and to maintain the Trust's registration under
the 1940 Act for so long as Trust shares are sold.
4.2. Contracts Filings. The Company shall amend the Contracts'
Registration Statement and the Account's 1940 Act Registration Statement from
time to time as required in order to effect the continuous offering of the
Contracts in compliance with applicable law or as may otherwise be required by
applicable law, but in any event shall maintain a current effective Contracts'
Registration Statement and the Account's Registration Statement under the 1940
Act for so long as the Contracts are outstanding unless the Company (i) has
supplied the Trust with an SEC no-action letter or opinion of counsel
satisfactory to the Trust's counsel to the effect that maintaining such
Registration Statement(s) on a current basis is no longer required, or (ii) has
made a reasonable determination based on SEC no-action or interpretive positions
that maintaining such Registration Statement(s) is no longer required, provided
that this subsection (ii) shall not apply to circumstances where the Company has
determined that maintaining such registration(s) is not required pursuant to
Section 3(c)(1) or 3(c)(7) of the 1940 Act or the non-public offering exemptions
under the 1933 Act. The Company shall be responsible for filing all such
Contract forms, applications, marketing materials and other documents relating
to the Contracts and/or the Account with state insurance commissions, as
required or customary, and shall use its best efforts: (a) to obtain any and all
approvals thereof, under applicable state insurance law, of each state or other
jurisdiction in which Contracts are or may be offered for sale; and (b) to keep
such approvals in effect for so long as the Contracts are outstanding.
4.3. Voting of Trust Shares. With respect to any matter put to vote by
the holders of Trust shares ("Voting Shares"), the Company will provide
"pass-through" voting privileges to owners of Contracts registered with the SEC
as long as the 1940 Act requires such privileges in such cases. In cases in
which "pass-through" privileges apply, the Company will (i) solicit voting
instructions from Contract Owners of SEC-registered Contracts; (ii) vote Voting
Shares attributable to Contract Owners in accordance with instructions or
proxies timely received from such Contract Owners; and (iii) vote Voting Shares
held by it that are not attributable to reserves for SEC-registered Contracts or
for which it has not received timely voting instructions in the same proportion
as instructions received in a timely fashion from Owners of SEC-registered
Contracts. The Company shall be responsible for ensuring that it calculates
"pass-through" votes for the Account in a manner consistent with the provisions
set forth above and with other Participating Insurance Companies. Neither the
Company nor any of its affiliates will in any way recommend action in connection
with, or oppose or interfere with, the solicitation of proxies for the Trust
shares held for such Contract Owners, except with respect to matters as to which
the Company has the right under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote
Voting Shares without regard to voting instructions from Contract Owners.
4.4. State Insurance Restrictions. The Company acknowledges and agrees
that it is the responsibility of the Company and other Participating Insurance
Companies to determine investment restrictions and any other restrictions,
limitations or requirements under state insurance law applicable to any Fund or
the Trust or the Distributor, and that neither the Trust nor the Distributor
shall bear any responsibility to the Company, other Participating Insurance
Companies or any Product Owners for any such determination or the correctness of
such determination. Schedule 4 sets forth the investment restrictions that the
Company and/or other Participating Insurance Companies have determined are
applicable to any Fund and with which the Trust has agreed to comply as of the
date of this Agreement. The Company shall inform the Trust of any investment
restrictions imposed by state insurance law that the Company determines may
become applicable to the Trust or a Fund from time to time as a result of the
Account's investment therein, other than those set forth on Schedule 4 to this
Agreement. Upon receipt of any such information from the Company or any other
Participating Insurance Company, the Trust shall determine whether it is in the
best interests of shareholders to comply with any such restrictions. If the
Trust determines that it is not in the best interests of shareholders (it being
understood that "shareholders" for this purpose shall mean Product Owners) to
comply with a restriction determined to be applicable by the Company, the Trust
shall so inform the Company, and the Trust and the Company shall discuss
alternative accommodations in the circumstances. If the Trust determines that it
is in the best interests of shareholders to comply with such restrictions, the
Trust and the Company shall amend Schedule 4 to this Agreement to reflect such
restrictions, subject to obtaining any required shareholder approval thereof.
4.5. Drafts of Filings. The Trust and the Company shall provide to each
other copies of draft versions of any Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations for voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, prepared by or on behalf of either of them
and that mentions the other party by name. Such drafts shall be provided to the
other party sufficiently in advance of filing such materials with regulatory
authorities in order to allow such other party a reasonable opportunity to
review the materials; provided that each party shall only comment on that
portion of the draft that relates to that party or the conduct of its business.
4.6. Copies of Filings. The Trust and the Company shall provide to each
other at least one complete copy of all Registration Statements, Prospectuses,
Statements of Additional Information, periodic and other shareholder or Contract
Owner reports, proxy statements, solicitations of voting instructions,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to the Trust, the Contracts or
the Account, as the case may be, promptly after the filing by or on behalf of
each such party of such document with the SEC or other regulatory authorities
(it being understood that this provision is not intended to require the Trust to
provide to the Company copies of any such documents prepared, filed or used by
Participating Investors other than the Company and the Account).
4.7. Regulatory Responses. Each party shall promptly provide to all
other parties copies of responses to no-action requests, notices, orders and
other rulings received by such party with respect to any filing covered by
Section 4.6 of this Agreement.
4.8. Complaints and Proceedings
(a) The Trust and/or the Distributor shall immediately notify
the Company of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Trust's
Registration Statement or the Prospectus of any Series or Class; (ii)
any request by the SEC for any amendment to the Trust's Registration
Statement or the Prospectus of any Series or Class; (iii) the
initiation of any proceedings for that purpose or for any other
purposes relating to the registration or offering of the Trust shares;
or (iv) any other action or circumstances that may prevent the lawful
offer or sale of Trust shares or any Class or Series in any state or
jurisdiction, including, without limitation, any circumstance in which
(A) such shares are not registered and, in all material respects,
issued and sold in accordance with applicable state and federal law or
(B) such law precludes the use of such shares as an underlying
investment medium for the Contracts. The Trust will make every
reasonable effort to prevent the issuance of any such stop order, cease
and desist order or similar order and, if any such order is issued, to
obtain the lifting thereof at the earliest possible time.
(b) The Company shall immediately notify the Trust and the
Distributor of: (i) the issuance by any court or regulatory body of any
stop order, cease and desist order, or other similar order (but not
including an order of a regulatory body exempting or approving a
proposed transaction or arrangement) with respect to the Contracts'
Registration Statement or the Contracts' Prospectus; (ii) any request
by the SEC for any amendment to the Contracts' Registration Statement
or Prospectus; (iii) the initiation of any proceedings for that purpose
or for any other purposes relating to the registration or offering of
the Contracts; or (iv) any other action or circumstances that may
prevent the lawful offer or sale of the Contracts or any class of
Contracts in any state or jurisdiction, including, without limitation,
any circumstance in which such Contracts are not registered, qualified
and approved, and, in all material respects, issued and sold in
accordance with applicable state and federal laws. The Company will
make every reasonable effort to prevent the issuance of any such stop
order, cease and desist order or similar order and, if any such order
is issued, to obtain the lifting thereof at the earliest possible time.
(c) Each party shall immediately notify the other parties when
it receives notice, or otherwise becomes aware of, the commencement of
any litigation or proceeding against such party or a person affiliated
therewith in connection with the issuance or sale of Trust shares or
the Contracts.
(d) The Company shall provide to the Trust and the Distributor
any complaints it has received from Contract Owners pertaining to the
Trust or a Fund, and the Trust and Distributor shall each provide to
the Company any complaints it has received from Contract Owners
relating to the Contracts.
4.9. Cooperation. Each party hereto shall cooperate with the other
parties and all appropriate government authorities (including without limitation
the SEC, the NASD and state securities and insurance regulators) and shall
permit such authorities reasonable access to its books and records in connection
with any investigation or inquiry by any such authority relating to this
Agreement or the transactions contemplated hereby. However, such access shall
not extend to attorney-client privileged information.
ARTICLE V
Sale, Administration and Servicing of the Contracts
[5.1. Sale of the Contracts. The Company shall be responsible for the
sale and marketing of the Contracts. Subject to Article II and Section 5.4, the
Company shall provide Contracts, the Contracts' and Trust's Prospectuses,
Contracts' and Trust's Statements of Additional Information, and all amendments
or supplements to any of the foregoing to Contract Owners and prospective
Contract Owners, all in material compliance accordance with federal and state
laws. The Company shall, consistent with industry practice, use its best efforts
to ensure that all persons offering the Contracts are duly licensed and
registered under applicable insurance and securities laws. The Company shall
ensure that procedures are in place that sales of the Contracts satisfy
applicable suitability requirements under insurance and securities laws and
regulations, including without limitation the rules of the NASD. The Company
shall adopt and implement procedures reasonably designed to ensure that
information concerning the Trust and the Distributor that is intended for use
only by brokers or agents selling the Contracts (i.e., information that is not
intended for distribution to Contract Owners or offerees) is so used.]
5.2. Administration and Servicing of the Contracts. In connection with
the offering of the Contracts, the Company shall be fully responsible for the
underwriting, issuance, service and administration of the Contracts and for the
administration of the Account, including, without limitation, the calculation of
performance information for the Contracts, the timely payment of Contract Owner
redemption requests and processing of Contract transactions, and the maintenance
of a service center. The Company shall use its best efforts to perform such
functions in all respects at a level commensurate with those standards
prevailing in the variable insurance industry. Subject to Section 5.4, the
Company shall provide to Contract Owners all Trust reports, solicitations for
voting instructions including any related Trust proxy solicitation materials,
and updated Trust Prospectuses as required under the federal securities laws.
5.3. Customer Complaints. The Company shall establish reasonable
procedures to promptly address all customer complaints and resolve such
complaints consistent with high ethical standards and principles of ethical
conduct.
5.4. Trust Prospectuses and Reports. In order to enable the Company to
fulfill its obligations under this Agreement and the federal securities laws,
the Trust shall provide the Company with a copy, in camera-ready form or form
otherwise suitable for printing or duplication of: (i) the Trust's Prospectus
for the Series and Classes listed on Schedule 3 and any supplement thereto; (ii)
each Statement of Additional Information and any supplement thereto; (iii) any
Trust proxy soliciting material for such Series or Classes; and (iv) any Trust
periodic shareholder reports or other communications with shareholders. The
Trust and the Company may agree upon alternate arrangements, but in all cases,
the Trust reserves the right to approve the printing of any such material. The
Trust shall provide the Company at least 10 days advance written notice when any
such material shall become available, provided, however, that in the case of a
supplement, the Trust shall provide the Company notice reasonable in the
circumstances, it being understood that circumstances surrounding such
supplement may not allow for advance notice. The Company may not alter any
material so provided by the Trust or the Distributor (including without
limitation presenting or delivering such material in a different medium, e.g.,
electronic or Internet) without the prior written consent of the Distributor.
5.5. Trust Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Trust or the Distributor
is named shall be used by the Company or any person directly or indirectly
authorized by the Company, including without limitation, underwriters,
distributors, and sellers of the Contracts, except with the prior written
consent of the Trust or the Distributor, as applicable, as to the form, content
and medium of such material, which consent shall not be unreasonably withheld;
provided that such prior written consent shall not be required if the Company
receives a written or facsimile acknowledgement from the Trust or the
Distributor that such material has been received by the Trust or the Distributor
for review at least 10 Business Days prior to its use, and, after the expiration
of such 10 Business Day period, the Trust or the Distributor has not commented
upon the content of such material and is therefore deemed to consent to its use.
No further changes may be made to material approved in accordance with this
Section 5.5 without obtaining the Trust's or Distributor's consent to such
changes as set forth in the preceding sentence. The Trust or Distributor may at
any time in its sole discretion revoke such consent upon reasonable
determination that such revocation is necessary, and upon notification of such
revocation, the Company shall discontinue use of the material subject to such
revocation, it being understood that the Company shall be afforded a reasonable
period of time to discontinue such use. Until further notice to the Company, the
Trust has delegated its rights and responsibilities under this provision to the
Distributor.
5.6. Contracts Advertising Material. No piece of advertising or sales
literature or other promotional material in which the Company is named shall be
used by the Trust or the Distributor, except with the prior written consent of
the Company, which consent shall not be unreasonably withheld; provided that
such prior written consent shall not be required if the Trust receives a written
or facsimile acknowledgement that such material has been received by the Company
for review at least 10 Business Days prior to its use and, after the expiration
of such 10 Business Day period, the Company has not commented upon the content
of such material and is therefore deemed to consent to its use. The Company may
at any time in its sole discretion revoke any consent upon reasonable
determination that such revocation is necessary, and upon notification of such
revocation, the Trust and the Distributor shall discontinue use of the material
subject to such revocation, it being understood that Trust and Distributor shall
be afforded a reasonable period of time to discontinue such use. The Company,
upon prior written notice to the Trust, may delegate its rights and
responsibilities under this provision to the principal underwriter for the
Contracts.
5.7. Trade Names. No party shall use any other party's names, logos,
trademarks or service marks, whether registered or unregistered, without the
prior written consent of such other party, or after written consent therefor has
been revoked, provided that separate consent is not required under this Section
5.7 to the extent that consent to use a party's name, logo, trademark or service
mark in connection with a particular piece of advertising or sales literature
has previously been given by a party under Section 5.5 or 5.6 of this Agreement.
The Company shall not use in advertising, publicity or otherwise the name of the
Trust, Distributor, or any of their affiliates nor any trade name, trademark,
trade device, service mark, symbol or any abbreviation, contraction or
simulation thereof of the Trust, Distributor, or their affiliates without the
prior written consent of the Trust or the Distributor in each instance. The
Trust and the Distributor shall not use in advertising, publicity or otherwise
the name of the Company, or any of its affiliates nor any trade name, trademark,
trade device, service mark, symbol or any abbreviation, contraction or
simulation thereof of the Company, or its affiliates without the prior written
consent of the Company in each instance.
5.8. Representations by Company. Except with the prior written consent
of the Trust, the Company shall not give any information or make any
representations or statements about the Trust or the Funds nor shall it
authorize or allow any other person to do so except information or
representations contained in the Trust's Registration Statement or the Trust's
Prospectuses or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved in writing by the Trust or its
designee in accordance with this Article V, or in published reports or
statements of the Trust in the public domain.
5.9. Representations by Trust. Except with the prior written consent of
the Company, the Trust shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts' Registration Statement or Contracts' Prospectus or in published
reports of the Account which are in the public domain or in sales literature or
other promotional material approved in writing by the Company in accordance with
this Article V.
5.10. Advertising. For purposes of this Article V, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
material constituting sales literature or advertising under the NASD rules, the
1940 Act or the 1933 Act.
5.11 Periodic Trust Information. The Trust agrees to use its best
efforts to provide to the Company, within 5 Business Days after the end of a
calendar month and shall provide no later than 10 Business Days after the end of
the calendar month, the following information with respect to each Fund of the
Trust set forth on Schedule 3, each as of the last Business Day of such calendar
month: each Fund's 10 largest portfolio holdings (based on the percentage of
each Fund's net assets); the five industry sectors in which each Fund's
investments are most heavily weighted; and year-to-date SEC standardized
performance data. In addition, the Trust agrees to use its best efforts to
provide to the Company within 10 Business Days after the end of a calendar
quarter and shall provide no later than 15 Business Days after the end of the
calendar quarter a market commentary from the portfolio manager of each Fund set
forth on Schedule 3, as of the last Business Day of such quarter. Also, the
Trust agrees to provide the Company, within 15 Business Days after a request is
submitted to the Trust by the Company, the following information with respect to
each Fund set forth on Schedule 3, each as of the date or dates specified in
such request: net asset value; net asset value per share; and such other share
information as may be agreed by the Company and the Trust from time to time. The
Trust acknowledges that such information may be furnished to the Company's
internal or independent auditors and to the insurance departments in which the
Company does business.
ARTICLE VI
Compliance with Code
6.1. Section 817(h). Each Fund of the Trust shall comply with Section
817(h) of the Code and the regulations issued thereunder to the extent
applicable to the Fund as an investment company underlying the Account, and the
Trust shall (i) notify the Company immediately upon having a reasonable basis
for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future, and (ii) take all reasonable steps to adequately
diversify a Fund to achieve compliance with the grace period afforded by
Treasury Regulation 1.817-5.
6.2. Subchapter M. Each Fund of the Trust shall maintain the
qualification of the Fund as a registered investment company (under Subchapter M
or any successor or similar provision), and the Trust shall (i) notify the
Company immediately upon having a reasonable basis for believing that a Fund has
ceased to so qualify or that it might not so qualify in the future, and (ii)
take all reasonable steps to maintain qualification or to requalify the Funds as
a registered investment company under Subchapter M.
6.3. Contracts. The Company shall ensure the continued treatment of the
Contracts as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code and shall notify the Trust
and the Distributor immediately upon having a reasonable basis for believing
that the Contracts have ceased to be so treated or that they might not be so
treated in the future.
ARTICLE VII
Expenses
7.1. Expenses. All expenses incident to each party's performance under
this Agreement (including expenses expressly assumed by such party pursuant to
this Agreement) shall be paid by such party to the extent permitted by law.
7.2. Trust Expenses. Expenses incident to the Trust's
performance of its duties and obligations under this Agreement include, but
are not limited to, the costs of:
(a) registration and qualification of the Trust shares under the
federal securities laws;
(b) preparation and filing with the SEC of the Trust's
Prospectuses, Trust's Statement of Additional Information,
Trust's Registration Statement, Trust proxy materials and
shareholder reports, and preparation of a camera-ready copy of
the foregoing;
(c) preparation of all statements and notices required by any
Federal or state securities law;
(d) printing of all materials and reports required to be provided
by the Trust to existing shareholders and Contract Owners;
(e) all taxes on the issuance or transfer of Trust shares;
(f) payment of all applicable fees relating to the Trust,
including, without limitation, all fees due under Rule 24f-2
in connection with sales of Trust shares to qualified
retirement plans, custodial, auditing, transfer agent and
advisory fees, fees for insurance coverage and Trustees' fees;
and
(g) any expenses permitted to be paid or assumed by the Trust
pursuant to a plan, if any, under Rule 12b-1 under the 1940
Act.
7.3. Company Expenses. Expenses incident to the Company's performance
of its duties and obligations under this Agreement include, but are not limited
to, the costs of:
(a) registration and qualification of the Contracts under the
federal securities laws;
(b) preparation and filing with the SEC of the Contracts'
Prospectus and Contracts' Registration Statement;
(c) the sale, marketing and distribution of the Contracts,
including printing and dissemination of Contracts' and the
Trust's Prospectuses for new sales of Contracts and
compensation for Contract sales;
(d) administration of the Contracts;
(e) distribution of and solicitation of voting instructions with
respect to Trust proxy materials to existing Contract Owners;
(f) mailing of all materials and reports required to be provided
by the Trust to existing Shareholders and Contract Owners;
(g) payment of all applicable fees relating to the Contracts,
including, without limitation, all fees due under Rule 24f-2;
(h) preparation, printing and dissemination of all statements and
notices to Contract Owners required by any Federal or state
insurance law other than those paid for by the Trust; and
(i) preparation, printing and dissemination of all marketing
materials for the Contracts and Trust (to the extent it
relates to the Contracts) except where other arrangements are
made in advance.
7.4. 12b-1 Payments. The Trust shall pay no fee or other compensation
to the Company under this Agreement, except that if the Trust or any Series or
Class adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act to
finance distribution expenses, then payments may be made to the Company in
accordance with such plan. The Trust currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940
Act or in contravention of such rule, although it may make payments pursuant to
Rule 12b-1 in the future. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1 and such formulation is required by the 1940 Act
or any rules or order thereunder, the Trust undertakes to have a Board of
Trustees, a majority of whom are not interested persons of the Trust, formulate
and approve any plan under Rule 12b-1 to finance distribution expenses.
ARTICLE VIII
Potential Conflicts
8.1. Exemptive Order. The parties to this Agreement acknowledge that
the Trust has received an order (the "Exemptive Order") granting relief from
various provisions of the 1940 Act and the rules thereunder to the extent
necessary to permit Trust shares to be sold to and held by variable annuity and
variable life insurance separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and other Qualified Persons (as defined in
Section 2.8 hereof). The Exemptive Order requires the Trust and each
Participating Insurance Company to comply with conditions and undertakings
substantially as provided in this Article VIII. The Trust will not enter into a
participation agreement with any other Participating Insurance Company unless it
imposes the same conditions and undertakings on that company as are imposed on
the Company pursuant to this Article VIII.
8.2. Company Monitoring Requirements. The Company will monitor its
operations and those of the Trust for the purpose of identifying any material
irreconcilable conflicts or potential material irreconcilable conflicts between
or among the interests of Participating Plans, Product Owners of variable life
insurance policies and Product Owners of variable annuity contracts.
8.3. Company Reporting Requirements. The Company shall report any
conflicts or potential conflicts to the Trust Board and will provide the Trust
Board, at least annually, with all information reasonably necessary for the
Trust Board to consider any issues raised by such existing or potential
conflicts or by the conditions and undertakings required by the Exemptive Order.
The Company also shall assist the Trust Board in carrying out its obligations
including, but not limited to: (a) informing the Trust Board whenever it
disregards Contract Owner voting instructions with respect to variable life
insurance policies, and (b) providing such other information and reports as the
Trust Board may reasonably request. The Company will carry out these obligations
with a view only to the interests of Contract Owners.
8.4. Trust Board Monitoring and Determination. The Trust Board shall
monitor the Trust for the existence of any material irreconcilable conflicts
between or among the interests of Participating Plans, Product Owners of
variable life insurance policies and Product Owners of variable annuity
contracts and determine what action, if any, should be taken in response to
those conflicts. A majority vote of Trustees who are not interested persons of
the Trust as defined in the 1940 Act (the "disinterested trustees") shall
represent a conclusive determination as to the existence of a material
irreconcilable conflict between or among the interests of Product Owners and
Participating Plans and as to whether any proposed action adequately remedies
any material irreconcilable conflict. The Trust Board shall give prompt written
notice to the Company and Participating Plan of any such determination.
8.5. Undertaking to Resolve Conflict. In the event that a material
irreconcilable conflict of interest arises between Product Owners of variable
life insurance policies or Product Owners of variable annuity contracts and
Participating Plans, the Company will, at its own expense, take whatever action
is necessary to remedy such conflict as it adversely affects Contract Owners up
to and including (1) establishing a new registered management investment
company, and (2) withdrawing assets from the Trust attributable to reserves for
the Contracts subject to the conflict and reinvesting such assets in a different
investment medium (including another Fund of the Trust) or submitting the
question of whether such withdrawal should be implemented to a vote of all
affected Contract Owners, and, as appropriate, segregating the assets supporting
the Contracts of any group of such owners that votes in favor of such
withdrawal, or offering to such owners the option of making such a change. The
Company will carry out the responsibility to take the foregoing action with a
view only to the interests of Contract Owners.
8.6. Withdrawal. If a material irreconcilable conflict arises because
of the Company's decision to disregard the voting instructions of Contract
Owners of variable life insurance policies and that decision represents a
minority position or would preclude a majority vote at any Fund shareholder
meeting, then, at the request of the Trust Board, the Company will redeem the
shares of the Trust to which the disregarded voting instructions relate. No
charge or penalty, however, will be imposed in connection with such a
redemption.
8.7. Expenses Associated with Remedial Action. In no event shall the
Trust be required to bear the expense of establishing a new funding medium for
any Contract. The Company shall not be required by this Article to establish a
new funding medium for any Contract if an offer to do so has been declined by
vote of a majority of the Contract Owners materially adversely affected by the
irreconcilable material conflict.
8.8. Successor Rules. If and to the extent that Rule 6e-2 and Rule
6e-3(T) are amended, or Rule 6e-3 is adopted, to provide exemptive relief from
any provisions of the 1940 Act or the rules promulgated thereunder with respect
to mixed and shared funding on terms and conditions materially different from
those contained in the Exemptive Order, then (i) the Trust and/or the Company,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, or Rule 6e-3, as adopted, as applicable, to the
extent such rules are applicable, and (ii) Sections 8.2 through 8.5 of this
Agreement shall continue in effect only to the extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s) as so
amended or adopted.
ARTICLE IX
Indemnification
9.1. Indemnification by the Company. The Company hereby agrees to, and
shall, indemnify and hold harmless the Trust, the Distributor and each person
who controls or is affiliated with the Trust or the Distributor within the
meaning of such terms under the 1933 Act or 1940 Act (but not any Participating
Insurance Companies or Qualified Persons) and any officer, trustee, partner,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature or other
promotional material for the Contracts or the Contracts
themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided
that this obligation to indemnify shall not apply if such
statement or omission was made in reliance upon and in
conformity with information furnished in writing to the
Company by the Trust or the Distributor for use in the
Contracts Registration Statement, Contracts Prospectus or in
the Contracts or sales literature or promotional material for
the Contracts (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Trust Registration Statement, any Prospectus for Series
or Classes or sales literature or other promotional material
of the Trust (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Trust or Distributor in writing
by or on behalf of the Company; or
(c) arise out of or are based upon any wrongful conduct of, or
violation of federal or state law by, the Company or persons
under its control or by any broker-dealers or agents
authorized to sell the Contracts, with respect to the sale,
marketing or distribution of the Contracts or Trust shares; or
(d) arise as a result of any failure by the Company, or persons
under its control or any third party with which the Company
has contractually delegated administration responsibilities
for the Contracts, to provide services, furnish materials or
make payments as required under this Agreement; or
(e) arise out of any material breach by the Company or persons
under its control of this Agreement (including any breach of
any warranties contained in Article III hereof); or
(f) arise out of any failure to transmit a request for redemption
or purchase of Trust shares or payment therefor on a timely
basis in accordance with the procedures set forth in Article
II, or any unauthorized use of the names or trade names of the
Trust or the Distributor.
This indemnification is in addition to any liability that the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
9.2. Indemnification by the Trust. The Trust hereby agrees to, and
shall, indemnify and hold harmless the Company and each person who controls or
is affiliated with the Company within the meaning of such terms under the 1933
Act or 1940 Act and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or the Distributor for use in the Trust Registration
Statement, Trust Prospectus or sales literature or promotional
material for the Trust (or any amendment or supplement to any
of the foregoing) or otherwise for use in connection with the
sale of the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Trust to the Company; or
(c) arise out of or are based upon wrongful conduct of or
violation of federal or state law by the Trust or its Trustees
or officers or persons under its control with respect to the
sale of Trust shares; or
(d) arise as a result of any failure by the Trust or its Trustees
or officers or persons under its control to provide services,
furnish materials or make payments as required under the terms
of this Agreement;
(e) arise out of any material breach by the Trust of this
Agreement or persons under its control (including any breach
of Section 6.1 of this Agreement and any warranties contained
in Article III hereof);
(f) arise out of any unauthorized use of the names or trade names
of the Company; or
[(g) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value
per share or dividend or capital gain distribution rate,
provided the foregoing shall not apply where such
miscalculation or report is the result of (i) incorrect
information supplied by or on behalf of the Company or any
other Participating Company to the Trust or the Distributor,
or (ii) circumstances outside the Trust's or the Distributor's
control.]
it being understood that in no way shall the Trust be liable to the Company with
respect to any violation of insurance law, compliance with which is a
responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Trust in accordance with Section 4.4 hereof.
This indemnification is in addition to any liability that the Trust may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is caused by the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
9.3. Indemnification by the Distributor. The Distributor hereby agrees
to, and shall, indemnify and hold harmless the Company and each person who
controls or is affiliated with the Company within the meaning of such terms
under the 1933 Act or 1940 Act and any officer, director, employee or agent of
the foregoing, against any and all losses, claims, damages or liabilities, joint
or several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement of any
material fact contained in the Trust Registration Statement,
any Prospectus for Series or Classes or sales literature or
other promotional material of the Trust (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Trust
or Distributor for use in the Trust Registration Statement,
Trust Prospectus or sales literature or promotional material
for the Trust (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Contracts or Trust shares; or
(b) arise out of any untrue statement of a material fact contained
in the Contracts Registration Statement, Contracts Prospectus
or sales literature or other promotional material for the
Contracts (or any amendment or supplement to any of the
foregoing), or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Distributor to the Company; or
(c) arise out of or are based upon wrongful conduct of or
violation of federal or state law by the Distributor or
persons under its control with respect to the sale of Trust
shares; or
(d) arise as a result of any failure by the Distributor or persons
under its control to provide services, furnish materials or
make payments as required under the terms of this Agreement;
(e) arise out of any material breach by the Distributor or persons
under its control of this Agreement (including any breach of
Section 6.1 of this Agreement and any warranties contained in
Article III hereof); or
(f) arise out of any unauthorized use of the names or trade names
of the Company;
it being understood that in no way shall the Distributor be liable to the
Company with respect to any violation of insurance law, compliance with which is
a responsibility of the Company under this Agreement or otherwise or as to which
the Company failed to inform the Distributor in accordance with Section 4.4
hereof. This indemnification is in addition to any liability that the
Distributor may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is caused
by the wilful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
9.4. Rule of Construction. It is the parties' intention that, in the
event of an occurrence for which the Trust has agreed to indemnify the Company,
the Company shall seek indemnification from the Trust only in circumstances in
which the Trust is entitled to seek indemnification from a third party with
respect to the same event or cause thereof.
9.5. Indemnification Procedures. After receipt by a party entitled to
indemnification ("indemnified party") under this Article IX of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article IX ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article IX, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the reasonable fees and disbursements
of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such consent
or if there be a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX. The
indemnification provisions contained in this Article IX shall survive any
termination of this Agreement.
ARTICLE X
Relationship of the Parties; Termination
10.1. Non-Exclusivity and Non-Interference. The parties hereto
acknowledge that the arrangement contemplated by this Agreement is not
exclusive; the Trust shares may be sold to other insurance companies and
investors (subject to Section 2.8 hereof) and the cash value of the Contracts
may be invested in other investment companies, provided, however, that until
this Agreement is terminated pursuant to this Article X:
(a) the Company shall promote the Trust and the Funds made
available hereunder on a substantially similar basis as other
funding vehicles available under the Contracts;
(b) the Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action
to operate the Account as a management investment company
under the 1940 Act;
(c) the Company shall not, without the prior written consent of
the Distributor, which consent shall not be unreasonably
withheld, solicit, induce or encourage Contract Owners to
change or modify the Trust, or to change the Trust's
distributor or investment adviser (unless otherwise required
by applicable law);
(d) the Company shall not solicit, induce or encourage Contract
Owners to transfer or withdraw Contract Values allocated to a
Fund or to exchange their Contracts for contracts not allowing
for investment in the Trust, except with 60 days prior written
notice to the Distributor under circumstances where the
Company has determined such solicitation, inducement or
encouragement to be in the best interests of Contract Owners
(unless otherwise required by applicable law), provided that
the foregoing shall not apply in connection with the
implementation and operation of an asset allocation program by
the Company;
(e) the Company shall not substitute another investment company
for one or more Funds without providing written notice to the
Distributor at least [30] days in advance of effecting any
such substitution; and
(f) the Company shall not withdraw the Account's investment in the
Trust or a Fund of the Trust except as necessary to facilitate
Contract Owner requests and routine Contract processing.
10.2. Termination of Agreement. This Agreement shall not terminate
until (i) the Trust is dissolved, liquidated, or merged into another entity, or
(ii) as to any Fund that has been made available hereunder, the Account no
longer invests in that Fund and the Company has confirmed in writing to the
Distributor, if so requested by the Distributor, that it no longer intends to
invest in such Fund. However, certain obligations of, or restrictions on, the
parties to this Agreement may terminate as provided in Sections 10.3 through
10.5 and the Company may be required to redeem Trust shares pursuant to Section
10.6 or in the circumstances contemplated by Article VIII. Article IX and
Sections 5.7 and 10.7 shall survive any termination of this Agreement.
10.3. Termination of Offering of Trust Shares. The obligation of the
Trust and the Distributor to make Trust shares available to the Company for
purchase pursuant to Article II of this Agreement shall terminate at the option
of the Distributor upon written notice to the Company as provided below:
(a) upon institution of formal proceedings against the Company, or
the Distributor's reasonable determination that institution of
such proceedings is being considered by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account,
the administration of the Contracts or the purchase of Trust
shares, or an expected or anticipated ruling, judgment or
outcome which would, in the Distributor's reasonable judgment
exercised in good faith, materially impair the Company's or
Trust's ability to meet and perform the Company's or Trust's
obligations and duties hereunder, such termination effective
upon 15 days prior written notice;
(b) subject to the Trust's compliance with Article VI, in the
event any of the Contracts are not registered, issued or sold
in accordance with applicable federal and/or state law, such
termination effective immediately upon receipt of written
notice;
(c) if the Distributor shall determine, in its sole judgment
exercised in good faith, that either (1) the Company shall
have suffered a material adverse change in its business or
financial condition or (2) the Company shall have been the
subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of
either the Trust or the Distributor, such termination
effective upon 30 days prior written notice;
(d) if the Distributor suspends or terminates the offering of
Trust shares of any Series or Class to all Participating
Investors or only designated Participating Investors, if such
action is required by law or by regulatory authorities having
jurisdiction or if, in the sole discretion of the Distributor
acting in good faith, suspension or termination is necessary
in the best interests of the shareholders of any Series or
Class (it being understood that "shareholders" for this
purpose shall mean Product Owners), such notice effective
immediately upon receipt of written notice, it being
understood that a lack of Participating Investor interest in a
Series or Class may be grounds for a suspension or termination
as to such Series or Class and that a suspension or
termination shall apply only to the specified Series or Class;
(e) upon the Company's assignment of this Agreement (including,
without limitation, any transfer of the Contracts or the
Account to another insurance company pursuant to an assumption
reinsurance agreement) unless the Trust consents thereto, such
termination effective upon 30 days prior written notice;
(f) if the Company is in material breach of any provision of this
Agreement, which breach has not been cured to the satisfaction
of the Trust within 10 days after written notice of such
breach has been delivered to the Company, such termination
effective upon expiration of such 10-day period;
(g) upon (i) the determination of the Trust's Board to dissolve,
liquidate or merge the Trust as contemplated by Section
10.2(i), in connection with which the Trust and the
Distributor undertake to provide the Company with advance
notice of any such meeting at which dissolution, liquidation
or merger of the Trust is considered, (ii) termination of the
Agreement pursuant to Section 10.2(ii), or (iii) notice from
the Company pursuant to Section 10.4 or 10.5, such termination
pursuant hereto to be effective upon 15 days prior written
notice; or
(h) at any time upon six months prior notice.
Except in the case of an option exercised under clause (b), (d) or (g), the
obligations shall terminate only as to new Contracts and the Distributor shall
continue to make Trust shares available to the extent necessary to permit owners
of Contracts in effect on the effective date of such termination (hereinafter
referred to as "Existing Contracts") to reallocate investments in the Trust,
redeem investments in the Trust and/or invest in the Trust upon the making of
additional purchase payments under the Existing Contracts.
10.4. Termination of Investment in a Fund. The Company may elect to
cease investing in a Fund, promoting a Fund as an investment option under the
Contracts, or withdraw its investment or the Account's investment in a Fund,
subject to compliance with applicable law, upon written notice to the Trust of
any of the following events (unless provided otherwise below, effective as soon
as reasonably practicable but in no event later than 10 days after the
occurrence of the event):
(a) if the Trust informs the Company pursuant to Section 4.4 that
it will not cause such Fund to comply with investment
restrictions as requested by the Company and the Trust and the
Company are unable to agree upon any reasonable alternative
accommodations;
(b) if shares in such Fund are not reasonably available to meet
the requirements of the Contracts as determined by the Company
(including any non-availability as a result of notice given by
the Distributor pursuant to Section 10.3(d)), and the
Distributor, after receiving written notice from the Company
of such non-availability, fails to make available, within 5
Business Days after receipt of such notice, a sufficient
number of shares in such Fund to meet the requirements of the
Contracts; or
(c) if such Fund fails to meet the diversification requirements
specified in Section 817(h) of the Code and any regulations
thereunder and the Trust, upon written request, fails to
provide reasonable assurance that it will take action to cure
or correct such failure;
(d) if the Company determines in its sole judgement, exercised in
good faith, that either the Investment Adviser or the
Distributor has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement, or is the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Company, such
termination effective upon 30 days prior written notice;
(e) upon the Trust's or the Distributor's assignment of this
Agreement, unless the Company consents thereto, such
termination effective upon 30 days prior written notice; or
(f) at any time upon 6 months prior notice.
Such termination shall apply only as to the affected Fund and shall not apply to
any other Fund in which the Company or the Account invests.
10.5. Termination of Investment by the Company. The Company may elect
to cease investing in all Series or Classes of the Trust made available
hereunder, promoting the Trust as an investment option under the Contracts, or
withdraw its investment or the Account s investment in the Trust, subject to
compliance with applicable law, upon written notice to the Trust within 15 days
of the occurrence of any of the following events (unless provided otherwise
below):
(a) upon institution of formal proceedings against the Trust or
the Distributor (but only with regard to the Trust) by the
NASD, the SEC or any state securities or insurance commission
or any other regulatory body;
(b) if, with respect to the Trust or a Fund, the Trust or the Fund
ceases to qualify as a regulated investment company under
Subchapter M of the Code, as defined therein, or any successor
or similar provision, or if the Company reasonably believes
that the Trust may fail to so qualify, and the Trust, upon
written request, fails to provide reasonable assurance that it
will take action to cure or correct such failure within 30
days;
(c) if the Trust or Distributor is in material breach of a
provision of this Agreement, which breach has not been cured
to the satisfaction of the Company within 10 days after
written notice of such breach has been delivered to the Trust
or the Distributor, as the case may be, such termination
effective upon expiration of such 10-day "cure" period;
(d) if the Company determines in its sole judgement, exercised in
good faith, that either the Investment Adviser or the
Distributor has suffered a material adverse change in its
business, operations or financial condition since the date of
this Agreement, or is the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Company, such
termination effective upon 30 days prior written notice;
(e) upon the Trust's or the Distributor's assignment of this
Agreement, unless the Company consents thereto, such
termination effective upon 30 days prior written notice; or
(f) at any time upon 6 months prior notice.
10.6. Company Required to Redeem. The parties understand and
acknowledge that it is essential for compliance with Section 817(h) of the Code
that the Contracts qualify as annuity contracts or life insurance policies, as
applicable, under the Code. Accordingly, if any of the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Trust reasonably believes that any such Contracts may fail
to so qualify, the Trust shall have the right to require the Company to redeem
Trust shares attributable to such Contracts upon notice to the Company and the
Company shall so redeem such Trust shares in order to ensure that the Trust
complies with the provisions of Section 817(h) of the Code applicable to
ownership of Trust shares. Notice to the Company shall specify the period of
time the Company has to redeem the Trust shares or to make other arrangements
satisfactory to the Trust and its counsel, such period of time to be determined
with reference to the requirements of Section 817(h) of the Code. In addition,
the Company may be required to redeem Trust shares pursuant to action taken or
request made by the Trust Board in accordance with the Exemptive Order described
in Article VIII or any conditions or undertakings set forth or referenced
therein, or other SEC rule, regulation or order that may be adopted after the
date hereof. The Company agrees to redeem shares in the circumstances described
herein and to comply with applicable terms and provisions. Also, in the event
that the Distributor suspends or terminates the offering of a Series or Class
pursuant to Section 10.3(d) of this Agreement, the Company, upon request by the
Distributor, will cooperate in taking appropriate action to withdraw the
Account's investment in the respective Fund.
10.7. Confidentiality. A party will keep confidential any information
acquired as a result of this Agreement regarding the business and affairs of the
other parties to this Agreement and their affiliates.
ARTICLE XI
Applicability to New Accounts and New Contracts
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect, as appropriate, changes in or relating to the
Contracts, any Series or Class, additions of new classes of Contracts to be
issued by the Company and separate accounts therefor investing in the Trust.
Such amendments may be made effective by executing the form of amendment
included on each schedule attached hereto. The provisions of this Agreement
shall be equally applicable to each such class of Contracts, Series, Class or
separate account, as applicable, effective as of the date of amendment of such
Schedule, unless the context otherwise requires. The parties to this Agreement
may amend this Agreement from time to time by written agreement signed by all of
the parties.
ARTICLE XII
Notice, Request or Consent
Any notice, request or consent to be provided pursuant to this
Agreement is to be made in writing and shall be given:
If to the Trust:
Douglas C. Grip
President
Goldman Sachs Variable Insurance Trust
One New York Plaza
New York, NY 10004
If to the Distributor:
Douglas C. Grip
Vice President
Goldman Sachs & Co.
One New York Plaza
New York, NY 10004
If to the Company:
______________________________[Name]
______________________________[Title]
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
or at such other address as such party may from time to time specify in writing
to the other party. Each such notice, request or consent to a party shall be
sent by registered or certified United States mail with return receipt requested
or by overnight delivery with a nationally recognized courier, and shall be
effective upon receipt. Notices pursuant to the provisions of Article II may be
sent by facsimile to the person designated in writing for such notices.
ARTICLE XIII
Miscellaneous
13.1. Interpretation. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws of the state
of Delaware, without giving effect to the principles of conflicts of laws,
subject to the following rules:
(a) This Agreement shall be subject to the provisions of the 1933
Act, 1940 Act and Securities Exchange Act of 1934, as amended,
and the rules, regulations and rulings thereunder, including
such exemptions from those statutes, rules, and regulations as
the SEC may grant, and the terms hereof shall be limited,
interpreted and construed in accordance therewith.
(b) The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
(d) The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which
the parties hereto are entitled to under state and federal
laws.
13.2. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which together shall constitute one and the
same instrument.
13.3. No Assignment. Neither this Agreement nor any of the rights and
obligations hereunder may be assigned by the Company, the Distributor or the
Trust without the prior written consent of the other parties.
13.4. Declaration of Trust. A copy of the Declaration of Trust of the
Trust is on file with the Secretary of State of the state of Delaware, and
notice is hereby given that this instrument is executed on behalf of the
Trustees of the Trust as trustees, and is not binding upon any of the Trustees,
officers or shareholders of the Trust individually, but binding only upon the
assets and property of the Trust. No Series of the Trust shall be liable for the
obligations of any other Series of the Trust.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
GOLDMAN SACHS VARIABLE INSURANCE TRUST
(Trust)
Date:_______________ By:___________________________________
Name:
Title:
GOLDMAN, SACHS & CO.
(Distributor)
Date:_______________ By:___________________________________
Name:
Title:
THE LIFE INSURANCE COMPANY OF VIRGINIA
(Company)
Date:_______________ By:___________________________________
Name:
Title:
<PAGE>
Schedule 1
Accounts of the Company
Investing in the Trust
Effective as of the date the Agreement was executed, the following separate
accounts of the Company are subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
[Form of Amendment to Schedule 1]
Effective as of , the following separate accounts of the Company are hereby
added to this Schedule 1 and made subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 1 in accordance with Article XI of the Agreement.
- ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- ---------------------------------- ------------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 2
Classes of Contracts
Supported by Separate Accounts
Listed on Schedule 1
Effective as of the date the Agreement was executed, the following classes of
Contracts are subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
[Form of Amendment to Schedule 2]
Effective as of _______, the following classes of Contracts are hereby added to
this Schedule 2 and made subject to the Agreement:
<TABLE>
<CAPTION>
Date Established by
Name of Account and Board of Directors of SEC 1940 Act Type of Product Supported
Subaccounts the Company Registration Number by Account
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
<S> <C>
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 2 in accordance with Article XI of the Agreement.
- ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- ---------------------------------- ------------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 3
Trust Classes and Series
Available Under
Each Class of Contracts
Effective as of the date the Agreement was executed, the following Trust Classes
and Series are available under the Contracts:
Contracts Marketing Name Trust Classes and Series
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
[Form of Amendment to Schedule 3]
Effective as of __________________, this Schedule 3 is hereby amended to reflect
the following changes in Trust Classes and Series:
Contracts Marketing Name Trust Classes and Series
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
-------------------------------------- --------------------------------------
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 3 in accordance with Article XI of the Agreement.
- ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- ---------------------------------- -----------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 4
Investment Restrictions
Applicable to the Trust
Effective as of the date the Agreement was executed, the following investment
restrictions are applicable to the Trust:
- ------------------------------------------------------------------------------
[Form of Amendment to Schedule 4]
Effective as of ___________________, this Schedule 4 is hereby amended to
reflect the following changes:
IN WITNESS WHEREOF, the Trust, the Distributor and the Company hereby amend this
Schedule 4 in accordance with Article XI of the Agreement.
- ---------------------------------- ------------------------------------
Goldman Sachs Variable Insurance Trust The Life Insurance Company of Virginia
- ---------------------------------- -----------------------------------
Goldman, Sachs & Co.
<PAGE>
Schedule 5
Notice Provided Pursuant to Section 2.3(a)
Notice provided to the Trust by the Company concerning purchases and redemption
orders pursuant to Section 2.3(a) of this Agreement shall be made to:
Goldman Sachs Asset Management
Shareholder Services (Chicago)
(9)
Opinion and Consent of Counsel
<PAGE>
[Letterhead of Life of Virginia]
April 23, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Post-Effective Amendment No. 1 to Form N-4 (File Number
333-21031) 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. 1 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
(10)(a)
Consent of Counsel
<PAGE>
[Letterhead of Sutherland, Asbill & Brennan]
- --------------
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
Post-Effective Amendment No. 1 to the Registration Statement on Form N-4 filed
by Life of Virginia Separate Account 4 for certain variable annuity policies
(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/STEPHEN E. ROTH
------------------------------------
Stephen E. Roth
Consent of Independent Auditors
<PAGE>
[letterhead of KPMG Independent Auditors]
Consent of Independent Auditors
The Board of Directors
The Life Insurance Company of Virginia:
We consent to the use of our reports for The Life Insurance Company of Virginia
and Life of Virginia Separate Account 4 included in the Statement of Additional
Information incorporated herein by reference (post-effective amendment no. 1 to
Form N-4 of registration no. 333-21031) and to the references to our firm under
the caption "Experts" in the prospectus.
Our report with respect to The Life Insurance Company of Virginia dated January
6, 1998, contains an explanatory paragraph that states 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.
KPMG Peat Marwick LLP
Richmond, Virginia
April 29, 1998
<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 Life of
Virginia Separate Account 4, in the Post-Effective Amendment No. 1 to the
Registration Statement (Form N-4 no. 333-21031) and related Prospectus of Life
of Virginia of Separate Account 4 for the registration of an indefinite amount
of securities.
ERNST & YOUNG LLP
---------------------------------
/s/ERNST & YOUNG
Richmond, Virginia
April 27, 1998
