As filed with the Securities and Exchange Commission on September 30, 1998
Registration No. 33-76334
Registration No. 811-5343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 13
For Registration Under the Investment Company Act of 1940
Amendment No. 33
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
Patricia L. Dysart, Esquire Copy to:
Assistant Vice President and Stephen E. Roth, Esquire
Associate General Counsel Sutherland Asbill & Brennan LLP
The Life Insurance Company of Virginia 1275 Pennsylvania Avenue, N.W.
6610 W. Broad Street Washington, D.C. 20004-2415
Richmond, Virginia 23230
(Name and address of Agent for Service)
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
X on October 11, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a) of Rule 495
___ on______________ pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered:
Interests in a Separate Account under Flexible Premium Variable Deferred
Annuity Policies
Filing Fee: None
<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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<S> <C>
Item of Form N-4........................................................Prospectus Caption
1. Cover Page.................................................................Cover Page
2. Definitions...............................................................Definitions
3. Synopsis...........................................................Summary, Fee Table
4. Condensed Financial Information.........Financial Information; Total Return and Yield
5. General
(a)Depositor...................................The Life Insurance Company of Virginia
(b)Registrant...............................................................Account 4
(c)Portfolio Company........................................................The Funds
(d)Fund Prospectus..........................................................The Funds
(e)Voting Rights............................................Voting Rights and Reports
(f)Administrators.................................................................N/A
6. Deductions and Expenses
(a)General............................................Charges and Deductions; Summary
(b)Sales Load %................................................Sales Charges; Summary
(c)Special Purchase Plan..........................................................N/A
(d)Commissions...........................................Distribution of the Policies
(e)Expenses-Registrant.............................Charges Against Account 4; Summary
(f)Fund Expenses.............................................The Funds; Other Charges
(g)Organizational Expenses........................................................N/A
7. Contracts
(a)Persons with Rights...........Summary; The Policy; Distributions Under the Policy;
....................Income Payments; Voting Rights and Reports; General Provisions
(b)(i) Allocation of Purchase Payments................Allocation of Premium Payments
(ii) Transfers.........................................Transfers; Transfer Charges
(iii)Exchanges.................................................................N/A
(c)Changes......................Additions, Deletions or Substitutions of Investments;
..............................................................Changes by the Owner
(d)Inquiries................................Cover page; Summary; (SAI) Written Notice
8. Annuity Period............Income Payments; Transfers; (SAI) Transfer of Annuity Units
9. Death Benefit....................Death Provisions; Death Benefit; Payment of Benefits
10. Purchases and Contract Value
(a)Purchases..................Purchasing the Policies; Accumulation of Account Value;
.......................................................Value of Accumulation Units
(b)Valuation..............................................Value of Accumulation Units
(c)Daily Calculation......................................Value of Accumulation Units
(d)Underwriter...........................................Distribution of the Policies
11. Redemptions
(a)- By Owners.........................................Surrenders; Partial Surrenders
- By Annuitant..............................................Optional Payment Plans
(b)Texas ORP......................Restrictions on Distributions From Certain Policies
(c)Check Delay.............................................Payment Under the Policies
(d)Lapse..........................................................................N/A
(e)Free Look.................................Examination of Policy (Refund Privilege)
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
</TABLE>
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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...................................Transfer of Annuity Units;
......................................................Distribution of the Policies
19. Purchase of Securities Being Offered........(Prospectus) Distribution of the Policies
Offering Sales Load...............................................................N/A
20. Underwriters................................(Prospectus) Distribution of the Policies
21. Calculation of Performance Data................Calculation of Total Return and Yield;
..................................................(Prospectus) Yield and Total Return
22. Annuity Payments.........................................(Prospectus) Income Payments
23. '.............................................Financial Statements
PART C -- OTHER INFORMATION
Item of Form N-4............................................................Part C Caption
24. Financial Statements and Exhibits...................Financial Statements and Exhibits
(a)Financial Statements.....................................(a) Financial Statements
(b)Exhibits.............................................................(b) Exhibits
25. Directors and Officers of the Depositor.....................Directors and Officers of
.....................................................................Life of Virginia
26. Persons Controlled By or Under Common Control with the
Depositor or Registrant...........Persons Controlled By or In Common Control with the
..............................................................Depositor or Registrant
27. Number of Contractowners.......................................Number of Policyowners
28. Indemnification.......................................................Indemnification
29. Principal Underwriters.........................................Principal Underwriters
30. Location of Accounts and Records.....................Location of Accounts and Records
31. Management Services...............................................Management Services
32. Undertakings.............................................................Undertakings
Signature Page.............................................................Signatures
</TABLE>
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
PROSPECTUS FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1150 10/98
FORM P1143 4/94
Offered by
THE LIFE INSURANCE COMPANY OF VIRGINIA
6610 West Broad
Street, Richmond, Virginia 23230
(804) 281-6000
This Prospectus describes the above-named individual flexible premium variable
deferred annuity policy ("Policy") issued by The Life Insurance Company of
Virginia ("The Company"). The Policy is designed to help individuals in
long-term financial planning and provides for the accumulation of capital on a
tax-deferred basis for retirement or other long-term purposes. The Policy may be
used in connection with retirement plans, some of which may qualify for
favorable federal income tax treatment under the Internal Revenue Code.
The Premium Payments are placed in Life of Virginia Separate Account 4 ("Account
4"). Premium payments from other flexible premium variable deferred annuity
policies issued by the Company are also placed in Account 4. The Policyowner
allocates net premiums among one or more of the 40 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 eleven 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.,the
Goldman Sachs Variable Insurance Trust and the Salomon Brothers Variable Series
Fund (collectively referred to as the "Funds"). The Funds, their investment
managers and their currently available portfolios are listed on the following
page.
Please Read This Prospectus Carefully And Retain It For Future Reference.
THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED THESE SECURITIES
OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. 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; THEY ARE SUBJECT TO
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This Prospectus details the information about the policies that you should know
before you buy a policy and make premium payments. You should also review the
prospectuses for the funds and keep all prospectuses for future reference.
A statement of additional information (SAI), dated October __, 1998 concerning
Account 4 has been filed with the SEC and its terms are made part of this
prospectus. If you would like a free copy, call us at 1-800-352-9910. The SAI
and other information about the policy are also available on the SEC's internet
site at http://www.sec.gov. The table of contents for the SAI appears on the
last page of this Prospectus.
The Date of This Prospectus is October __, 1998
<PAGE>
Janus Aspen Series:
Growth Portfolio, Aggressive Growth Portfolio, International Growth Portfolio
Worldwide Growth Portfolio, Balanced Portfolio, Flexible Income Portfolio,
Capital Appreciation Portfolio
Variable Insurance Products Fund:
VIP Equity-Income Portfolio, VIP Overseas Portfolio, VIP Growth Portfolio
Variable Insurance Products Fund II:
VIP II Asset Manager Portfolio, VIP II Contrafund Portfolio
Variable Insurance Products Fund III:
VIP III Growth & Income Portfolio, VIP III Growth Opportunities Portfolio
GE Investments Funds, Inc.:
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, U.S. Equity Fund
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Growth
Fund, Oppenheimer High Income Fund, Oppenheimer Multiple Strategies Fund
Federated Insurance Series:
Federated American Leaders Fund II, Federated Utility Fund II, Federated High
Income Bond Fund II
The Alger American Fund:
Alger American Growth Portfolio, Alger American Small Capitalization Portfolio
PBHG Insurance Series Fund, Inc.:
PBHG Growth II Portfolio, PBHG Large Cap Growth Portfolio
Goldman Sachs Variable Insurance Trust Fund:
Goldman Sachs Growth and Income Fund, Goldman Sachs Mid Cap Equity Fund
Salomon Brothers Variable Series Fund*
Salomon Investors Fund, Salomon Total Return Fund, Salomon Strategic Bond Fund
* The Salomon Investors Fund, Salomon Total Return Fund and Salomon Strategic
Bond Fund for Salomon Brothers Variable Series Fund are not available at this
time in connection with policies issued to California policyowners. Further,
these funds may not be available in all markets.
<PAGE>
TABLE OF CONTENTS
Page
----
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
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
Salomon Brothers Variable Series Fund
Resolving Material Conflicts
TOTAL RETURN AND YIELDS
THE POLICY
Purchasing the Policies
Allocation of Premium Payments
Accumulation of Account Value
Value of Accumulation Units
Transfers
Telephone Transfers
Dollar-Cost Averaging
Asset Allocation
Portfolio Rebalancing
Powers of Attorney
Examination of Policy (Refund Privilege)
DISTRIBUTIONS UNDER THE POLICY
Surrender
Systematic Withdrawals
Death Provisions
Restrictions on Distributions from Certain Policies
CHARGES AND DEDUCTIONS
Charges Against Account 4
Policy Maintenance Charge
Annual Death Benefit Charge
Sales Charges
Surrender Charge
Transfer Charges
Premium Taxes
Other Taxes
Other Charges
INCOME PAYMENTS
Monthly Income Benefit
Determination of Monthly Income Benefits
Optional Payment Plans
FEDERAL TAX MATTERS
Introduction
Non-Qualified Policies
Qualified Policies
<PAGE>
Page
-----
IRA Policies
Roth IRAs
Simplified Employee Pension Plans
SIMPLE IRAs
Section 403(b) Annuities
Deferred Compensation Plans of State and
Local Government and Tax-Exempt
Organizations
Other Qualified Retirement Plans
Legal and Tax Advice for Qualified Plans
Direct Rollover and Mandatory Withholding
Requirements
Federal Income Tax Withholding
GENERAL PROVISIONS
The Owner
The Annuitant
The Beneficiary
Changes by the Owner
Evidence of Death, Age, Sex or Survival
Joint Policy
Payment Under The Policies
DISTRIBUTION OF THE POLICIES
COMMISSIONS
VOTING RIGHTS AND REPORTS
YEAR 2000 COMPLIANCE
LEGAL PROCEEDINGS
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF CONTENTS
<PAGE>
DEFINITIONS
Account Value -- The value of the Policy equal to the Account Value allocated to
the Investment Subdivisions of Account 4.
Account 4 - Life of Virginia Separate Account 4, a separate investment account
established by the Company to receive and invest premiums paid under the
Policies, and other variable annuity policies issued by the Company.
Accumulation Unit -- An accounting unit of measure used in calculating the
Account Value prior to the Maturity Date.
Additional Premium Payment -- Any Premium Payment made after the initial Premium
Payment.
Annuitant -- The Annuitant is the person named in the Policy upon whose age and,
where appropriate, sex Monthly Income Benefits are determined.
Annuity Unit -- An accounting unit of measure used in the calculation of the
amount of the second and each subsequent Variable Income Payment.
Business Day -- Any day that the New York Stock Exchange is open for business
and any other day in which there is a material change in the value of the assets
in Account 4.
Code -- The Internal Revenue Code of 1986, as amended.
Company - The Life Insurance Company of Virginia. "We", "us" or "our" refers to
the Company.
Death Benefit -- The optional benefit provided under a Policy upon the death of
an Annuitant prior to the Maturity Date.
Designated Beneficiary(ies) -- The person(s) designated in the Policy who is
alive (or in existence for non-natural designations) on the date of an Owner's,
Joint Owner's or Annuitant's death and who will be treated as the sole owner of
the Policy following such a death.
Due Proof of Death -- Proof of death that is satisfactory to the Company. Such
proof may consist of the following if acceptable to the Company:
(a) A certified copy of the death certificate; or
(b) A certified copy of the decree of a court of competent jurisdiction as
to the finding of death.
Fixed Income Payments -- Payments made pursuant to an optional payment plan the
value of which are fixed and guaranteed by the Company.
Funds -- The mutual funds designated as eligible investments for Account 4.
General Account -- The assets of the Company that are not segregated in any of
the separate investment accounts of the Company.
Guarantee Account -- Part of our General Account that provides a Guaranteed
Interest Rate for a specified Guarantee Period. This account is not part of and
does not depend on the investment performance of Account 4. (See the Supplement
to this prospectus for more information concerning the Guarantee Account.)
Home Office -- The principal offices of The Life Insurance Company of Virginia
at 6610 West Broad Street, Richmond, Virginia 23230.
Income Payment -- One of a series of payments made under either a Monthly Income
Benefit or one of the optional payment plans.
Investment Subdivision -- A subdivision of Account 4, each of which invests
exclusively in shares of a designated portfolio of one of the Funds. All
Investment Subdivisions may not be available in all states or in all markets.
Joint Owner -- Joint Owners own the Policy equally. If one Joint Owner dies, the
surviving Joint Owner has a right of survivorship to the Policy.
IRA Policy -- An individual retirement annuity policy that receives favorable
federal income tax treatment under Section 408 of the Code.
Maturity Date -- The date stated in the Policy on which Income Payments are
scheduled to commence, if the Annuitant is living on that date.
Maturity Value -- The Surrender Value of the Policy on the date immediately
preceding the Maturity Date.
<PAGE>
Monthly Income Benefit -- The monthly amounts payable to the Owner beginning on
the Maturity Date if the Annuitant is still living.
Net Investment Factor -- An index applied to measure the investment performance
of an Investment Subdivision from one Valuation Period to the next.
Non-Qualified Policy -- Policies not sold or used in connection with retirement
plans receiving favorable federal income tax treatment under the Code.
Owner -- The person or persons (in the case of Joint Owners) entitled to receive
Income Payments after the Maturity Date. The Owner is also entitled to the
ownership rights stated in the Policy during the lifetime of the Annuitant. The
original Owner is named in the Policy.
Policy -- The variable annuity policy issued by the Company and described in
this Prospectus. The term "Policy" or "Policies" includes the Policy described
in this Prospectus, a policy application, any supplemental applications, any
endorsements and riders.
Policy Date -- Generally, the first date on which the application, if attached
to the Policy, was signed or the initial premium was received and accepted by
the Company at its Home Office.
Premium Payment(s) -- An amount paid to the Company by the Owner or on the
Owner's behalf as consideration for the benefits provided by the Policy.
Qualified Policies -- Policies used in connection with retirement plans which
receive favorable federal income tax treatment under the Code.
Surrender Value -- The Account Value (after deduction of any optional benefit
charges and policy maintenance charges) and less any applicable surrender charge
and any applicable premium tax.
Valuation Period -- The period between the close of business on a Business Day
and the close of business on the next succeeding Business Day.
Variable Income Payments -- Payments made pursuant to a payment plan and which
fluctuate based on the investment performance of Investment Subdivisions
selected by the Owner.
<PAGE>
FEE TABLE
Owner Transaction Expenses:
Sales Charge on Premium Payments none
Maximum Contingent Deferred Sales Charge
(as a percentage of premium payments) 6.00%
Other surrender fees none
Transfer charge none 1
Annual Expenses:
(as a percentage of account value)
Mortality and Expense Risk Charge 1.25%
Administrative Expense Charge .15%
-----
Total Annual Expenses 1.40%
Other Annual Expenses:
Annual Policy Maintenance Charge $25.00 2
Maximum Annual Death Benefit Charge
- -- Elective Guaranteed Minimum Death Benefit
(as a percentage of average benefit amount) 0.35%*
- -- Elective Optional Death Benefit (as a percentage of Account Value) 0.25%**
* If the Elective Guaranteed Minimum Death Benefit applies.
** If the Elective Optional Death Benefit applies.
- ----------------
1 The Company reserves the right to deduct a transfer charge after the
12th transfer in a calendar year.
2 The Annual Policy Maintenance charge is waived if Account Value exceeds
$75,000 on the date of deduction.
<PAGE>
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 Other Expenses
(after fee waiver (after reimbursement- Total Annual
Fund as applicable) as applicable) Expenses
- ---- ---------------- ---------------------- ------------
<S> <C>
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 & Income Portfolio 0.49% 0.21% 0.74%
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 Portfolio 0.85% 0.04% 0.89%
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%
Salomon Brothers Variable Series Fund:**
Investors Fund 0.70% 0.30% 1.00%
Total Return Fund 0.80% 0.20% 1.00%
Strategic Bond Fund 0.75% 0.25% 1.00%
</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.
** Based on estimated fees and expenses as these funds were not in existence as
of December 31, 1997.
<PAGE>
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 as of December 31, 1997 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, Salomon Brothers
Variable Series Fund and their investment advisers are not affiliated with the
Company. While the Company has no reason to doubt the accuracy of these figures
provided by these non-affiliated Funds, the Company 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 for Variable
Insurance Products Fund, Variable Insurance Products Fund II and Variable
Insurance Products Fund III. The Company 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 Fund, .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.
Absent certain fee waivers or reimbursements, the total annual expenses of the
portfolios of Salomon Brothers Variable Series Fund would have been 2.61% for
Investors Fund, 2.71% for Total Return Fund and 2.66% for Strategic Bond Fund.
The Other Expenses listed for these Funds are estimates provided by the Fund as
these portfolios were recently organized and have no operating history, and
actual expenses may be greater or less than those shown.
Other Policies
We offer other variable life and variable annuity insurance policies which also
invest in many of 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: A Policyowner would pay the following expense on a $1,000 investment,
assuming a 5% annual return on assets and the charges and expenses reflected in
the Fee Table above (excluding the elective optional death benefit rider and the
elective guaranteed minimum death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In; 1 Year 3 Years 5 Years 10 Years
<S> <C>
Janus Aspen Series
Balanced $ 77.61 126.74 160.53 266.60
Flexible Income 76.81 124.33 156.49 258.49
Growth 76.31 122.82 153.96 253.39
Aggressive Growth 76.91 124.63 157.00 259.51
Worldwide Growth 76.71 124.02 155.99 257.48
Capital Appreciation 81.91 139.62 181.94 308.97
International Growth 78.91 130.65 167.05 279.62
Variable Insurance Products Fund
Equity-Income 75.10 119.18 147.86 241.04
Overseas 78.51 129.45 165.05 275.63
Growth 76.21 122.51 153.46 252.37
Variable Insurance Products Fund
II
Asset Manager 75.81 121.30 151.43 248.27
Contrafund 76.41 123.12 154.47 254.42
Variable Insurance Products Fund
III
Growth and Income 76.31 122.82 153.96 253.39
Growth Opportunities 76.71 124.02 155.99 257.48
GE Investments Funds, Inc.
Income 75.20 119.48 148.37 242.08
S&P 500 Index 73.90 115.53 141.73 228.53
Total Return 75.81 121.30 151.43 248.27
International Equity 82.71 141.99 185.87 316.64
Real Estate Securities 78.81 130.35 166.55 278.62
Global Income 75.00 118.87 147.35 240.00
Value Equity 73.90 115.53 141.73 228.53
Money Market 72.49 111.25 134.52 213.73
U.S. Equity 77.31 125.84 159.02 263.57
Oppenheimer Variable Account Funds
Multiple Strategies 76.81 124.33 156.49 258.49
Aggressive Growth 76.61 123.72 155.48 256.46
Growth 76.81 124.33 156.49 258.49
High Income 77.51 126.44 160.03 265.59
Bond 77.11 125.23 158.01 261.54
Federated Insurance Series
High Income Bond II 77.31 125.84 159.02 263.57
Utility II 77.81 127.34 161.54 268.61
American Leaders II 77.81 127.34 161.54 268.61
The Alger American Fund
Growth 77.21 125.53 158.51 262.55
Small Capitalization 78.21 128.55 163.55 272.63
PBHG Insurance Series Fund, Inc.
Growth II 81.31 137.83 178.98 303.18
Large Cap Growth 80.31 134.85 174.03 293.43
Goldman Sachs Variable Insurance
Trust Fund
Growth and Income 78.31 128.85 164.05 273.63
Mid Cap Equity 78.81 130.35 166.55 278.62
Salomon Brothers Variable Series
Fund
Investors Fund 79.31 131.85 169.05 283.59
Total Return Fund 79.31 131.85 169.05 283.59
Strategic Bond Fund 79.31 131.85 169.05 283.59
* surrender includes annuitization over a period of less than 5 years.
</TABLE>
<PAGE>
2. If you annuitize at the end of the applicable period, or do not surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C>
Janus Aspen Series
Balanced $ 23.61 72.74 124.53 266.60
Flexible Income 22.81 70.33 120.49 258.49
Growth 22.31 68.82 117.96 253.39
Aggressive Growth 22.91 70.63 121.00 259.51
Worldwide Growth 22.71 70.02 119.99 257.48
Capital Appreciation 27.91 85.62 145.94 308.97
International Growth 24.91 76.65 131.05 279.62
Variable Insurance Products Fund
Equity-Income 21.10 65.18 111.86 241.04
Overseas 24.51 75.45 129.05 275.63
Growth 22.21 68.51 117.46 252.37
Variable Insurance Products Fund
II
Asset Manager 21.81 67.30 115.43 248.27
Contrafund 22.41 69.12 118.47 254.42
Variable Insurance Products Fund
III
Growth and Income 22.31 68.82 117.96 253.39
Growth Opportunities 22.71 70.02 119.99 257.48
GE Investments Funds, Inc.
Income 21.20 65.48 112.37 242.08
S&P 500 Index 19.90 61.53 105.73 228.53
Total Return 21.81 67.30 115.43 248.27
International Equity 28.71 87.99 149.87 316.64
Real Estate Securities 24.81 76.35 130.55 278.62
Global Income 21.00 64.87 111.35 240.00
Value Equity 19.90 61.53 105.73 228.53
Money Market 18.49 57.25 98.52 213.73
U.S. Equity 23.31 71.84 123.02 263.57
Oppenheimer Variable Account Funds
Multiple Strategies 22.81 70.33 120.49 258.49
Aggressive Growth 22.61 69.72 119.48 256.46
Growth 22.81 70.33 120.49 258.49
High Income 23.51 72.44 124.03 265.59
Bond 23.11 71.23 122.01 261.54
Federated Insurance Series
High Income Bond II 23.31 71.84 123.02 263.57
Utility II 23.81 73.34 125.54 268.61
American Leaders II 23.81 73.34 125.54 268.61
The Alger American Fund
Growth 23.21 71.53 122.51 262.55
Small Capitalization 24.21 74.55 127.55 272.63
PBHG Insurance Series Fund, Inc.
Growth II 27.31 83.83 142.98 303.18
Large Cap Growth 26.31 80.85 138.03 293.43
Goldman Sachs Variable Insurance
Trust Fund
Growth and Income 24.31 74.85 128.05 273.63
Mid Cap Equity 24.81 76.35 130.55 278.62
Salomon Brothers Variable Series
Fund
Investors Fund 25.31 77.85 133.05 283.59
Total Return Fund 25.31 77.85 133.05 283.59
Strategic Bond Fund 25.31 77.85 133.05 283.59
* surrender includes annuitization over a period of less than 5 years.
</TABLE>
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and expenses
reflected in the Fee Table above (including the elective optional death benefit
rider and the elective guaranteed minimum death benefit rider):
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C>
Janus Aspen Series
Balanced $ 83.67 145.29 192.07 333.07
Flexible Income 82.87 142.90 188.13 325.35
Growth 82.37 141.41 185.65 320.50
Aggressive Growth 82.97 143.20 188.62 326.32
Worldwide Growth 82.77 142.61 187.63 324.38
Capital Appreciation 87.95 157.99 213.00 373.40
International Growth 84.97 149.15 198.45 345.47
Variable Insurance Products Fund
Equity-Income 81.17 137.82 179.69 308.73
Overseas 84.57 147.96 196.49 341.67
Growth 82.27 141.11 185.16 319.52
Variable Insurance Products Fund
II
Asset Manager 81.87 139.92 183.17 315.61
Contrafund 82.47 141.71 186.15 321.47
Variable Insurance Products Fund
III
Growth & Income 82.37 141.41 185.65 320.50
Growth Opportunities 82.77 142.61 187.63 324.38
GE Investments Funds, Inc.
Income 81.27 138.12 180.19 309.72
S&P 500 Index 79.97 134.22 173.69 296.81
Total Return 81.87 139.92 183.17 315.61
International Equity 88.74 160.34 216.84 380.70
Real Estate Securities 84.87 148.85 197.96 344.52
Global Income 81.07 137.52 179.19 307.74
Value Equity 79.97 134.22 173.69 296.81
Money Market 78.52 129.52 165.24 276.43
U.S. Equity 83.37 144.39 190.59 330.18
Oppenheimer Variable Account Funds
Multiple Strategies 82.87 142.90 188.13 325.35
Aggressive Growth 82.67 142.31 187.14 323.41
Growth 82.87 142.90 188.13 325.35
High Income 83.57 144.99 191.58 332.11
Bond 83.17 143.80 189.61 328.25
Federated Insurance Series
High Income Bond II 83.37 144.39 190.59 330.18
Utility II 83.87 145.88 193.05 334.99
American Leaders II 83.87 145.88 193.05 334.99
The Alger American Fund
Growth 83.27 144.10 190.10 329.22
Small Capitalization 84.27 147.07 195.02 338.81
PBHG Insurance Series Fund, Inc.
Growth II 87.35 156.23 210.11 367.89
Large Cap Growth 86.36 153.28 205.27 358.62
Goldman Sachs Variable Insurance
Trust Fund
Growth and Income 84.37 147.37 195.51 339.77
Mid Cap Equity 84.87 148.85 197.96 344.52
Salomon Brothers Variable Series
Fund
Investors Fund 85.36 150.33 200.40 349.24
Total Return Fund 85.36 150.33 200.40 349.24
Strategic Bond Fund 85.36 150.33 200.40 349.24
</TABLE>
*surrender includes annuitization over a period of less than 5 years.
<PAGE>
2. If you annuitize at the end of the applicable period, or do not surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
<S> <C>
Janus Aspen Series
Balanced $ 29.67 91.29 156.07 333.07
Flexible Income 28.87 88.90 152.13 325.35
Growth 28.37 87.41 149.65 320.50
Aggressive Growth 28.97 89.20 152.62 326.32
Worldwide Growth 28.77 88.61 151.63 324.38
Capital Appreciation 33.95 103.99 177.00 373.40
International Growth 30.97 95.15 162.45 345.47
Variable Insurance Products Fund
Equity-Income 27.17 83.82 143.69 308.73
Overseas 30.57 93.96 160.49 341.67
Growth 28.27 87.11 149.16 319.52
Variable Insurance Products Fund
II
Asset Manager 27.87 85.92 147.17 315.61
Contrafund 28.47 87.71 150.15 321.47
Variable Insurance Products Fund
III
Growth and Income 28.37 87.41 149.65 320.50
Growth Opportunities 28.77 88.61 151.63 324.38
GE Investments Funds, Inc.
Income 27.27 84.12 144.19 309.72
S&P 500 Index 25.97 80.22 137.69 296.81
Total Return 27.87 85.92 147.17 315.61
International Equity 34.74 106.34 180.84 380.70
Real Estate Securities 30.87 94.85 161.96 344.52
Global Income 27.07 83.52 143.19 307.74
Value Equity 25.97 80.22 137.69 296.81
Money Market 24.52 75.52 129.24 276.43
U.S. Equity 29.37 90.39 154.59 330.18
Oppenheimer Variable Account Funds
Multiple Strategies 28.87 88.90 152.13 325.35
Aggressive Growth 28.67 88.31 151.14 323.41
Growth 28.87 88.90 152.13 325.35
High Income 29.57 90.99 155.58 332.11
Bond 29.17 89.80 153.61 328.25
Federated Insurance Series
High Income Bond II 29.37 90.39 154.59 330.18
Utility II 29.87 91.88 157.05 334.99
American Leaders II 29.87 91.88 157.05 334.99
The Alger American Fund
Growth 29.27 90.10 154.10 329.22
Small Capitalization 30.27 93.07 159.02 338.81
PBHG Insurance Series Fund, Inc.
Growth II 33.35 102.23 174.11 367.89
Large Cap Growth 32.36 99.28 169.27 358.62
Goldman Sachs Variable Insurance
Trust Fund
Growth and Income 30.37 93.37 159.51 339.77
Mid Cap Equity 30.87 94.85 161.96 344.52
Salomon Brothers Variable Series
Fund
Investors Fund 31.36 96.33 164.40 349.24
Total Return Fund 31.36 96.33 164.40 349.24
Strategic Bond Fund 31.36 96.33 164.40 349.24
</TABLE>
* surrender includes annuitization over a period of less than 5 years.
<PAGE>
SUMMARY
The following Summary Of Prospectus Information Should Be Read In Conjunction
With the Detailed Information Appearing Elsewhere In This Prospectus.
The Policy
The Policy allows the Owner to accumulate funds on a tax-deferred basis based on
the investment experience of the assets underlying the Policy. After the
Maturity Date, this Policy also permits Variable Income Payments to be made
based upon either the investment performance of the selected Investment
Subdivisions of Account 4 or Fixed Income Payments based upon the guarantees of
the Company. The Policy may be purchased on a non-tax qualified basis (i.e., a
Non-Qualified Policy) or it can be purchased with the proceeds from certain
retirement or savings plans qualifying for favorable federal income tax
treatment (i.e., a Qualified Policy).
The Owner can allocate premiums among up to ten Investment Subdivisions. Before
the Maturity Date, the Account Value depends on the investment experience of the
selected Investment Subdivisions; therefore, before Income Payments begin, the
Owner bears the entire investment risk under this Policy. The payee will bear
the investment risk after Income Payments begin with respect to Variable Income
Payments.
In addition, under Policies sold through certain distribution systems, Owners
can allocate premiums or transfer amounts from the Investment Subdivisions to a
Guarantee Account. Contributions and/or transfers to the Guarantee Account
become part of the General Account of the Company.
Availability of Certain Features
This prospectus describes features of Policy Form P1150 10/98. In states where
P1150 10/98 is not available, Policy Form P1143 4/94 is used. Differences
between them are described in the Appendix, together with matters pertaining to
policies issued prior to October 12, 1998.
Premium Payments
Except for certain group sales, an initial Premium Payment of at least $5,000
($2,000 for an IRA Policy) is required. Additional Premium Payments of at least
$500 for Non-Qualified Policies or $100 for Qualified Policies or $50 for IRA
Policies generally may be made any time before Income Payments begin. (See
Purchasing the Policies.)
Except as stated under Refund Privilege, Premium Payments are allocated among
the Investment Subdivisions (or, if applicable, a Guarantee Account) in
accordance with the Owner's written instructions. Premium payments may be
allocated among up to ten Investment Subdivisions at any one time (however, at
any point in time, Account Value may not be invested in more than ten Investment
Subdivisions). The minimum allocation permitted is 1% of each Premium Payment
but not less than $100.00. The Owner may, by written request or by calling the
Company's Telephone Transfer Line, change the allocation of subsequent Premium
Payments. In states that require a return of Premium Payments as a refund
privilege, initial Premium Payments will be placed in the Investment Subdivision
that invests in the Money Market Fund of the GE Investments Funds, Inc. (See
Allocation of Premium Payments.)
Transfers
Before Income Payments begin the Owner may transfer amounts among the Investment
Subdivisions that are available at the time the transfer is requested.
Currently, there is no limit on the number of transfers that may be made;
however, the Company reserves the right to impose such a limit in the future.
All transfers may be made without charge. However, the Company reserves the
right to deduct a $10 charge per transfer after the 12th transfer in a calendar
year. (See Transfers.) The Company may not honor transfers made by third parties
holding multiple powers of attorney. (See Powers of Attorney.)
After Variable Income Payments begin, the payee may transfer Annuity Units among
the available Investment Subdivisions once each calendar year. No transfer
charge will be imposed on such transfers.
Full and Partial Surrenders
Full or partial surrenders may be made any time before Income Payments begin
provided that the surrender is for at least $500 and that the surrender will not
reduce the Account Value to below $5,000. (See Surrender.) Amounts surrendered
will generally be subject to a surrender charge (also known as a contingent
deferred sales charge). (See Sales Charges.) For Policies issued after October
12, 1998, a partial surrender will reduce the minimum death benefit by the
proportion that the partial surrender (including any applicable surrender
charge) reduced the Account Value. (See "Effect of Partial Withdrawals on Death
Benefit".)
Charges and Deductions
To cover the costs of administering the Policies, the Company deducts a daily
administrative expense charge at an effective annual rate of .15% of the average
daily net assets in Account 4 attributable to the policies, and an annual policy
maintenance charge of $25 from the Account Value attributable to each Policy
(waived if Account Value exceeds $75,000 at the time of deduction). The annual
charge is made at the earlier of 1) next Policy anniversary, or 2) surrender.
<PAGE>
The Company does not deduct any sales charge from Premium Payments; however, it
may deduct a surrender charge (also referred to as a contingent deferred sales
charge). (See Sales Charges -- Surrender Charge.) A surrender charge is deducted
from full surrenders and certain partial surrenders that occur within six years
of any Premium Payments. If there is a full surrender of the Policy during the
first four years following a Premium Payment, a maximum surrender charge equal
to 6% of the amount surrendered will be imposed. Thereafter, the charge
decreases 2% per year, so that no surrender charge, or portion thereof, is ever
attributable to a Premium Payment made more than six years prior to the date of
a full surrender.
Similarly, a surrender charge may be imposed on certain partial surrenders where
the Account Value surrendered is attributable to a Premium Payment made within
the last six years. The charge is calculated by multiplying (1) the surrender
charge percentage, described above and (2) the lesser of (a) the amount
surrendered attributable to the Premium Payment and (b) the premium paid, less
the total of all surrender amounts previously deemed to reduce that Premium
Payment.
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 the Company for mortality and expense risks assumed by it. (See
Charges Against Account 4.)
The Company may deduct a charge for any premium taxes incurred. Any applicable
premium tax may be deducted from either the premium paid or from proceeds
(including benefits for surrender, maturity and death). (See Premium Taxes.)
In the event that the Owner elects to purchase a Guaranteed Minimum Death
Benefit Rider (See Elective Guaranteed Minimum Death Benefit Rider), a charge
will be made each year for expenses related to the Death Benefit under the
Rider, not exceeding .35% of the average Guaranteed Minimum Death Benefit during
the prior year. (See Annual Death Benefit Charge.)
In the event that the Owner elects to purchase an Optional Death Benefit Rider
(See Elective Optional Death Benefit Rider), a charge will be made each year for
expenses related to the Death Benefit under the Rider, not exceeding .25% of the
Account Value at time of deduction. (See Annual Death Benefit Charge.)
Income Payments
Beginning on the Maturity Date, if the Annuitant is living on that date, the
Owner may receive Monthly Income Benefits based upon either the investment
performance of the selected Investment Subdivisions or the guarantees of the
Company. The amount of the Monthly Income Benefits will depend on: (1) the
Maturity Value; (2) the amount of any applicable state and/or local premium tax;
(3) the Annuitant's sex, where appropriate, and age on the Maturity Date; and
(4) the optional payment plan chosen.
With respect to Monthly Income Benefits and any Income Payments derived from
Death Benefit or Surrender Value, the Owner may select from a number of optional
payment plans including Income Payments for the life of an Annuitant (or a
different or additional person, depending upon the benefit payable) with a
guaranteed number of Income Payments.
(See Optional Payment Plans.)
Death Provisions
Subject to a number of distribution rules, certain benefits and other Policy
options are available to certain persons on the death of an Owner, Joint Owner
or Annuitant prior to the Maturity Date while the Policy is in force. (See
Distributions Under the Policy -- Death Provisions.) Owners may also elect to
purchase a Guaranteed Minimum Death Benefit Rider. (See Elective Guaranteed
Minimum Death Benefit Rider.)
The Owner may also elect to purchase a Guaranteed Minimum Death Benefit Rider
and/or an Optional Death Benefit Rider. (See "Elective Guaranteed Minimum Death
Benefit Rider" and "Elective Optional Death Benefit Rider.") Election must be
made at the time the policy is purchased.
Refund Privilege
The Owner has 10 days after the Policy is received to examine the Policy and
return it for a refund. Unless state law requires that Premium Payments be
returned as the refund, the amount of the refund will equal the Account Value
(without reduction of any surrender charges). If state law requires that Premium
Payments be returned, the amount of the refund will equal the greater of (1) the
Account Value (without reduction by any surrender charges) plus any amount
deducted from the Premium Payments prior to allocation to Account 4 and (2) the
Premium Payments made. In certain states the Owner may have more than 10 days to
return the policy for a refund. (See Examination of Policy (Refund Privilege).)
<PAGE>
Questions
Any questions about the Policy or the Funds in which the Investment Subdivisions
invest will be answered by the Company's Home Office. All inquiries can be
addressed to Life of Virginia, Variable Products Department, 6610 West Broad
Street, Richmond, VA 23230; if by phone, call (800) 352-9910.
FINANCIAL INFORMATION
Financial statements for Account 4 and consolidated financial statements for the
Company (as well as the auditors' reports thereon) are in the Statement of
Additional Information.
<PAGE>
Condensed Financial Information
The Accumulation Unit Values and the number of accumulation units outstanding
for each Investment Subdivision for the periods shown are as follows:
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of As of
1/02/98 12/31/97 12/31/97 1/01/96 12/31/96 12/31/96
FUNDS ------- -------- -------- ------------ ------------ ---------
<S> <C>
Variable Insurance
Products Fund
Equity-Income 36.54 36.47 10,074,173 25.62 28.87 7,041,867
Growth 38.59 38.45 3,614,598 27.93 31.58 3,026,574
Overseas 20.76 20.65 1,762,588 16.82 18.78 1,557,443
Variable Insurance
Products Fund II
Asset Manager 24.06 24.03 2,678,933 17.87 20.20 2,248,519
Contrafund 20.29 20.32 8,595,677 13.88 16.60 5,493,999
Variable Insurance
Products Fund III
Growth and Income + 12.38 12.36 976,086 - - -
Growth Opportunities + 12.35 12.28 1,049,540 - - -
GE Investments Funds,
Inc.
Money Market 14.43 14.42 4,980,487 13.35 13.88 3,893,379
Government Securities + - - - 16.60 16.59 276,196
S&P 500 Index 38.82 38.68 3,025,140 24.52 30.11 1,262,502
Total Return 28.37 28.26 928,145 22.27 24.29 659,251
International Equity 12.57 12.50 614,410 10.61 11.51 332,403
Real Estate Securities 18.28 18.34 1,478,247 11.59 15.57 428,969
Global Income + 10.24 10.24 79,290 - - -
Value Equity + 13.11 13.13 730,616 - - -
Income + 10.05 10.01 903,249 - - -
U.S. Equity + - - - - - -
Oppenheimer Variable
Account Funds
High Income 30.60 30.57 2,934,974 24.31 27.63 1,715,755
Bond 20.54 20.42 994,017 18.35 18.96 707,097
Aggressive Growth 35.33 35.64 3,176,448 27.31 32.37 2,121,294
Growth 36.75 36.72 2,462,359 23.81 29.40 1,091,602
Multiple Strategies 25.90 25.80 1,200,126 19.60 22.32 748,002
Janus Aspen Series
Growth 18.98 18.95 7,270,898 13.41 15.66 4,882,922
Aggressive Growth 19.86 20.04 3,442,667 16.95 18.04 2,662,051
Worldwide Growth 22.98 22.85 10,111,685 14.91 11.67 682,605
International Growth+ 13.65 13.63 3,001,600 - 18.97 5,146,187
Balanced 14.66 14.65 2,804,435 10.62 12.17 992,496
Flexible Income 12.49 12.45 869,089 10.48 11.29 325,169
Capital Appreciation+ 12.51 12.54 163,550 - - -
Federated Insurance
Series
Federated Utility II 16.68 16.75 1,325,701 12.20 13.41 1,130,433
Federated High Income
Bond II 15.01 15.00 1,886,887 11.86 13.37 809,989
Federated American
Leaders II + 14.45 14.42 2,056,691 - 11.05 265,832
The Alger American Fund
AA Growth 13.13 13.34 4,380,186 9.63 10.76 2,962,177
AA Small Capitalization 10.47 10.58 5,645,458 9.38 9.63 3,568,152
PBHG Insurance Series
Fund, Inc.
Growth II+ 10.52 10.65 576,010 - - -
Large Cap Growth+ 11.61 11.71 346,833 - - -
Goldman Sachs Variable
Insurance Trust Fund
Growth and Income+ - - - - - -
Mid Cap Equity+ - - - - - -
Salomon Brothers
Variable Series Fund
Investors Fund+ - - - - - -
Total Return Fund+ - - - - - -
Strategic Bond Fund+ - - - - - -
+ Unit Values are not shown for the Investment Subdivisions investing in these
portfolios, as they were not available to Account 4 Owners during the periods shown.
</TABLE>
<PAGE>
Condensed Financial Information
The Accumulation Unit Values and the number of accumulation units outstanding
for each Investment Subdivision for the periods shown are as follows:
<TABLE>
<CAPTION>
Accumulation Accumulation No. of Accumulation Accumulation No. of
Unit Values Unit Values Units Unit Values Unit Values Units
as of as of as of as of as of As of
1/03/95 12/31/95 12/31/95 7/21/94 12/31/94 12/31/94
FUNDS ------- -------- -------- ------------ ------------ ---------
<S> <C>
Variable Insurance
Products Fund
Equity-Income 19.56 25.62 3,119,975 18.71 19.23 276,392
Growth 21.27 27.93 1,525,015 19.45 20.92 141,845
Overseas 15.82 16.82 829,371 16.18 15.55 197,672
Variable Insurance
Products Fund II
Asset Manager 15.70 17.87 1,469,667 15.80 15.50 450,885
Contrafund + - 13.88 2,007,948 - - -
Variable Insurance
Products Fund III
Growth and Income + - - - - - -
Growth Opportunities + - - - - - -
GE Investments Funds,
Inc.
Money Market 13.01 13.35 1,508,360 12.61 12.79 75,600
Government Securities 14.61 16.60 153,756 14.47 14.38 889
S&P 500 Index 18.58 24.52 400,009 17.96 18.27 10,408
Total Return 17.94 22.27 252,584 17.15 17.65 12,498
International Equity + - 10.61 47,044 - - -
Real Estate Securities + - 11.59 34,477 - - -
Global Income+ - - - - - -
Value Equity+ - - - - - -
Income + - - - - - -
U.S. Equity + - - - - - -
Oppenheimer Variable
Account Funds
High Income 20.83 24.31 561,144 20.99 20.49 77,818
Bond 16.17 18.35 275,480 16.08 15.90 11,655
Aggressive Growth 21.25 27.31 582,579 19.39 20.90 68,052
Growth 17.97 23.81 423,764 16.88 17.67 12,276
Multiple Strategies 17.66 19.60 256,681 16.27 16.38 26,302
Janus Aspen Series
Growth 10.48 13.41 1,875,640 10.30 10.44 159,068
Aggressive Growth 13.53 16.95 1,251,004 11.51 13.48 169,799
Worldwide Growth 11.91 14.91 1,227,070 11.63 11.87 117,700
International Growth+ - - -
Balanced + - 10.62 73,538 - - -
Flexible Income + - 10.48 36,272 - - -
Capital Appreciation + - - - - - -
Federated Insurance
Series
Federated Utility II + - 12.20 463,476 - - -
Federated High Income
Bond II + - 11.86 123,152 - - -
Federated American
Leaders II + - - - - - -
The Alger American Fund
AA Growth + - 9.63 312,011 - - -
AA Small Capitalization + - 9.38 401,258 - - -
PBHG Insurance Series
Fund, Inc.
Growth II + - - - - - -
Large Cap Growth + - - - - - -
Goldman Sachs Variable
Insurance Trust Fund
Growth and Income + - - - - - -
Mid Cap Equity + - - - - - -
Salomon Brothers
Variable Series Fund
Investors Fund + - - - - - -
Total Return Fund + - - - - - -
Strategic Bond Fund + - - - - - -
</TABLE>
+ Unit Values are not shown for the Investment Subdivisions investing in these
portfolios, as they were not available to Account 4 Owners during the periods
shown.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
AND LIFE OF VIRGINIA SEPARATE ACCOUNT 4
The Life Insurance Company of Virginia
The Company is a stock life insurance company operating under a charter granted
by the Commonwealth of Virginia on March 21, 1871. The Company is principally
engaged in the offering of life insurance and annuity policies. The Company is
admitted to do business in 49 states and the District of Columbia. The principal
offices are at 6610 West Broad Street, Richmond, Virginia 23230.
Eighty percent of the Company's capital stock is owned by General Electric
Capital Assurance Company ("GE Capital Assurance"), which is an indirect
wholly-owned subsidiary of General Electric Capital Corporation ("GE Capital").
The remaining 20% is owned by GE Financial Assurance Holdings, Inc., a direct
wholly-owned subsidiary of General Electric Capital Corporation. GE Capital, a
New York corporation, is a diversified financial services company whose
subsidiaries consist of specialty insurance, equipment management, and
commercial and 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 electric power generation equipment.
GNA Corporation, a direct wholly-owned subsidiary of GE Financial Assurance
Holdings, Inc., directly owns the stock of Capital Brokerage Corporation (the
principal underwriter for the Policies and a broker/dealer registered with the
U.S. Securities and Exchange Commission).
The Company is a member of the Insurance Marketplace Standards Association
("IMSA"). The Company uses 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 the Company as a separate
investment account on August 19, 1987. Account 4 currently has 80 Investment
Subdivisions, 40 of which are available under the Policy. Premiums are allocated
in accordance with the instructions of the Owner among up to 10 of the 40
Investment Subdivisions available under this Policy. Each of these Investment
Subdivisions invests exclusively in an investment portfolio of one of the eleven
Funds described below.
The assets of Account 4 are the property of the Company. 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 the Company may conduct. Although
the assets in Account 4 attributable to the Policies are not chargeable with
liabilities arising out of any other business which the Company may conduct, all
obligations arising under the Policies, including the promise to make Income
Payments, are general corporate obligations of the Company. Furthermore, the
assets of Account 4 are available to cover the liabilities of the Company'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
The Company 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.
The Company also reserves the right to establish additional Investment
Subdivisions of Account 4, each of which would invest in a separate portfolio of
a Fund, or in shares of another investment company, with a specified investment
objective. One or more Investment Subdivisions may also be eliminated if, in the
sole discretion of the Company, marketing, tax, or investment conditions
warrant.
If deemed by the Company to be in the best interests of persons having voting
rights under the Policies, and, if permitted by law, the Company 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 separate accounts of the Company. To the extent permitted
by applicable law, the Company may also transfer the assets of Account 4
associated with the Policies to another separate account. In addition, the
Company may, when permitted by law, restrict or eliminate any voting rights of
Owners or other persons who have voting rights as to Account 4.
<PAGE>
THE FUNDS
Account 4 currently invests in eleven mutual funds. Each of the Funds currently
available under the Policy is a registered open-end 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 the Company. 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 the Company 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 the Company has not been
terminated. Should a Fund or a portfolio of a Fund decide not to sell its shares
to the Company, the Company will be unable to honor policyowner requests to
allocate their account values or premium payments to Investment Subdivisions
investing in shares of that Fund or portfolio.
Certain Investment Subdivisions invest in portfolios that have similar
investment objectives and/or policies; therefore, before choosing Investment
Subdivisions, carefully read the individual prospectuses for the Funds, along
with this prospectus.
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.
<PAGE>
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 nine 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.
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.
This fund is sub-advised by State Street Global Advisors.
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.
- --------------------------
1 "Standard & Poor's," "S&P," and "S&P 500" are trademarks of The 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.
<PAGE>
International Equity Fund has the investment objective of providing long-term
capital appreciation. The portfolio seeks to achieve its objective by investing
primarily in equity and equity-related securities of companies that are
organized outside of the U.S. or whose securities are principally traded outside
of the U.S.
Real Estate Securities Fund has the investment objective of providing maximum
total return through current income and capital appreciation. The portfolio
seeks to achieve its objective by investing primarily in securities of U.S.
issuers that are principally engaged in or related to the real estate industry
including those that own significant real estate assets. The portfolio will not
invest directly in real estate. This Fund is subadvised by Seneca Capital
Management, L.L.C.
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. This Fund is subadvised by GE Investments (US) Limited.
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. This Fund is
subadvised by NWQ Investment Management Company.
Income Fund has the investment objective of 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. Prior to May 1, 1998 this fund was known
as the Capital Appreciation Fund.
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
Account 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.
<PAGE>
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.
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 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 Asset Management serves as investment adviser to Goldman Sachs
Variable Insurance Trust.
Salomon Brothers Variable Series Funds, Inc.
Salomon Brothers Variable Series Fund, Inc. has three portfolios that are
available under this Policy: Investors Fund, Total Return Fund and Strategic
Bond Fund. These funds are not available in California at this time.
Additionally, these funds may not be available in all markets.
The Investors Fund's primary objective is long-term growth of capital. Current
income is a secondary objective. The Fund seeks to achieve its objectives
primarily through investments in common stocks of well-known companies.
<PAGE>
The Total Return Fund seeks to obtain above-average income. As a secondary
objective, the Fund seeks to take advantage of opportunities for growth of
capital and income and seeks to achieve its objectives primarily through
investments in a broad variety of securities, including equity securities,
fixed-income securities and short-term obligations. In addition, up to 20% of
the Fund's net assets may be invested in lower-rated fixed income securities
commonly known as junk bonds.
The Strategic Bond Fund's primary objective is to seek a high level of current
income. As a secondary objective, the Fund will seek capital appreciation. The
Fund will seek to achieve its objectives by investing in a globally diverse
portfolio of fixed-income investments, including lower-rated fixed income
securities commonly known as junk bonds.
Salomon Brothers Asset Management, Inc. serves as investment adviser to Salomon
Brothers Variable Series Fund.
THERE IS NO ASSURANCE THAT THE STATED OBJECTIVES AND
POLICIES OF ANY OF THE FUNDS WILL BE ACHIEVED.
The investment objectives and policies of certain Funds are similar to the
investment objectives and policies of other portfolios that may be managed by
the same investment adviser or manager. The investment results of the Funds,
however, may be higher or lower than the results of such other portfolios. There
can be no assurance, and no representation is made, that the investment results
of any of the Funds will be comparable to the investment results of any other
portfolio, even if the other portfolio has the same investment adviser or
manager, or if the other portfolio has a similar name.
The Company 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 the
Company. These percentage amounts, which vary by Fund, are intended to reflect
administrative and other services provided by the Company 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 or profiles for the Funds which accompany or precede this
Prospectus and in the Funds' current statements of additional information. A
current prospectus or profile for each Fund can be obtained by writing or
calling the Company at its Home Office. The prospectus or profile 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 the Company. In addition, all of the Funds
are also available to registered separate accounts of insurance companies other
than the Company 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,
Goldman Sachs Variable Insurance Trust and Salomon Brothers Variable Series
Funds 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, the Company 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.
TOTAL RETURN AND YIELDS
From time to time, the Company may advertise total return and/or yield for the
Investment Subdivisions. These figures are based on historical earnings and do
not indicate or project future performance. Each Investment Subdivision may,
from time to time, advertise performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance information appears in the
Statement of Additional Information.
Total returns and yields for the Investment Subdivisions are based on the
investment performance of the corresponding investment portfolios of the Funds.
Each portfolio's performance in part reflects its expenses. See the Prospectuses
for the Funds.
Total return for an Investment Subdivision refers to quotations made assuming
that an investment under a Policy has been held in that Investment Subdivision
for various period of time. When an Investment Subdivision has been in operation
for one, five, and ten years, respectively, the total return for these periods
will be provided.
<PAGE>
An average annual total return quotation represents the average annual
compounded rate of return that would equate a hypothetical initial investment of
$1,000 (as of the first day of the period for which the total return quotation
is provided) to the redemption value of that investment (as of the last day of
the period). Such quotations show the average annual percentage change in the
value of a hypothetical investment during the periods specified. The
standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the
Investment Subdivision (including any surrender charge that would apply if an
Owner terminated the Policy at the end of each period indicated, but excluding
charges for elective riders).
In addition to the standardized version described above, total return
performance quotations computed on non-standard bases may be used in
advertisements. For example, average annual total return information may be
presented, computed on the same basis as described above, except deductions will
not include sales or administrative charges. Average annual total returns that
exclude sales or administrative expenses, or both, will be greater than
standardized average annual total returns for comparable periods. In addition,
the Company may present historic performance data for the Investment
Subdivisions since their inception reduced by some or all of the fees and
charges under the Policy. Such adjusted historic performance includes data that
precedes the inception dates of the Investment Subdivisions. This data is
designed to show the performance that would have resulted if the Policy had been
in existence during that time. From time to time the Company may disclose
average annual and/or cumulative total return in other non-standard formats.
The yield of a "money market" Investment Subdivision refers to the income
generated by an investment in that Investment Subdivision over a specified
seven-day period, which is then annualized. Yield is calculated by assuming that
the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The effective yield is calculated similarly but
the income earned by an investment in that money market Subdivision is assumed
to be reinvested each period. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
Non-standard performance data will only be disclosed if the standard performance
data for the required periods is also disclosed. For additional information
regarding the calculation of performance data, please refer to the Statement of
Additional Information.
The yield of an Investment Subdivision (other than a "money market" Subdivision)
refers to the income generated by an investment in that Investment Subdivision
over a specified 30-day (or one-month) period. The income generated over the
period is assumed to be generated and reinvested each month for six months. The
resulting semi-annual yield is then doubled.
In advertising and sales literature, the performance of each Investment
Subdivision may be compared to the performance of other variable annuity issuers
in general or to the performance of particular types of variable annuities
investing in mutual funds, or investment portfolios of mutual funds with
investment objectives similar to each of the Investment Subdivisions. Lipper
Analytical Services, Inc. ("Lipper") and the Variable Annuity Research Data
Service ("VARDS") are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as variable
annuity issuers. VARDS rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS each rank such issuers on the
basis of total return, assuming reinvestment of distributions, but do not take
sales charges, redemption fees, or certain expense deductions at the separate
account level into consideration. In addition, VARDS prepares risk adjusted
rankings, which consider the effects of market risk on total return performance.
This type of ranking provides data as to which funds provide the highest total
return within various categories of funds defined by the degree of risk inherent
in their investment objectives.
Advertising and sales literature may also compare the performance of each
Investment Subdivision to various widely recognized indices. One such index is
the Standard & Poor's 500 Composite Stock Price Index, a measure of stock market
performance. This unmanaged index does not consider tax consequences or the
expense of operating or managing an investment portfolio, and may not consider
reinvestment of income dividends.
The Company may also report other information including the effect of
tax-deferred compounding on an Investment Subdivision's investment returns, or
returns in general, which may be illustrated by tables, graphs, or charts. All
income and capital gains derived from the Investment Subdivisions' investments
in the Funds are reinvested on a tax-deferred basis.
THE POLICY
The Policy is an individual flexible premium variable deferred annuity policy.
The rights and benefits of the Policy are described below and in the Policies.
There may be differences in your Policy because of requirements of the state
where your Policy is issued. Any such differences will be included in your
Policy.
<PAGE>
Purchasing the Policies
Individuals wishing to purchase a Policy must apply through an authorized
registered agent. The minimum initial Premium Payment required under the Policy
is $5,000 ($2,000 for an IRA Policy). However, in certain cases where Policies
are being offered to members of a group of individuals, the Company may agree to
waive the $5,000 ($2,000 for an IRA Policy) initial premium requirement.
Acceptance of a request for a Policy and acceptance of Premium Payments are
subject to the Company's rules, and the Company reserves the right to reject any
request for a Policy and any initial Premium Payment for any lawful reason and
in a manner that does not unfairly discriminate against similarly situated
purchasers.
If the Company is unable to issue a Policy due to incomplete information
regarding the applicant, the initial Premium Payment will be credited to the
Policy within two Business Days after the later of receipt of the
information needed to issue the Policy or receipt of the initial Premium Payment
by the Company at its Home Office. If the initial Premium Payment cannot be
credited within five Business Days after receipt by the Company, the Company
will contact the applicant, explain the reason for the delay, and refund the
initial Premium Payment immediately, unless the applicant specifically consents
to the Company retaining the initial Premium Payment until the required
information is made complete. If the Company retains the initial Premium
Payment, it will be credited within two Business Days after the necessary
requirements are fulfilled.
The Owner may make Additional Premium Payments at any time before the Maturity
Date. Additional Premium Payments made under Qualified Policies are limited to
proceeds from certain qualified plans. Additional Premium Payments are credited
as of the next close of business (on a Business Day) following receipt of the
payment at the Home Office. An Owner must obtain the Company's prior approval
before he or she makes total Premium Payments for an Annuitant age 79 or younger
that exceed $2,000,000. If the Annuitant is age 80 or older at time of payment,
the total amount not subject to prior approval is $1 million.
"Policy Years" for the initial Premium Payment are measured from the Policy
Date. With regard to the determination of charges attributable to Additional
Premium Payments, however, "years" are measured from the date of receipt of the
Additional Premium Payment by the Company at its Home Office. (See Sales
Charges.)
Allocation of Premium Payments
The Owner, by written instructions, allocates Premium Payments among the
Investment Subdivisions. The Owner may allocate Premium Payments totally to one
Investment Subdivision of Account 4, or partially to any one of the available
Investment Subdivisions; however, at any time, the Account Value may not be
invested in more than 10 Investment Subdivisions. Allocations of less than 1% of
any Premium Payment, or less than $100, to any one Investment Subdivision are
not permitted.
In those states which require that Premium Payments be returned during the right
to examine Policy period (See Examination of Policy (Refund Privilege)), during
an initial period commencing on the date the initial Premium Payment is credited
to the Policy, Premium Payments will be placed in the Investment Subdivision
that invests exclusively in the Money Market Fund of the GE Investments Funds.
The Premium Payments will remain in that subdivision until the earlier of 15
calendar days from the date the initial Premium Payment is credited to the
Policy or, if the Policy is not accepted by the Owner, when all amounts due are
refunded. At the end of the 15-day period, the Account Value at that time, and
all subsequent Premium Payments, will be allocated among the Investment
Subdivisions in accordance with the Owner's instructions.
The Owner may change the allocation of subsequent Premium Payments at any time,
without charge, by sending acceptable written notice to the Company at its Home
Office or by calling the Company's Telephone Transfer Line. The allocation will
apply to any Premium Payments made after the Company receives the change. The
Account Value will vary with the investment performance of the Investment
Subdivisions the Owner selects, and the Owner bears the entire investment risk
for the Account Value in any particular Investment Subdivision. The allocation
of Premium Payments will affect not only the Account Value prior to the Maturity
Date, but it may also affect the Death Benefit payable upon the Annuitant's
death. The Owner should periodically review his allocation of Account Value in
light of market conditions and overall financial planning requirements.
Accumulation of Account Value
The Policy provides for an accumulation of Account Value prior to the Maturity
Date. The Account Value equals the sum of the values of the amounts allocated
under the Policy to each Investment Subdivision. Account Value will be
determined on a daily basis and will reflect a number of factors, including
Premium Payments, partial surrenders, transfers, charges assessed in connection
with the Policy, and the investment performance of the shares purchased by the
Investment Subdivisions to which the Account Value is allocated.
There is no guaranteed minimum Account Value.
On the date the initial Premium Payment is received and accepted by the Company,
the Account Value equals the initial Premium Payment. Thereafter, prior to the
Maturity Date, the Account Value in each Investment Subdivision is determined by
multiplying the number of Accumulation Units in that Investment Subdivision
credited to the Policy by the current value of an Accumulation Unit for that
Investment Subdivision. The number of Accumulation Units is increased by any
Additional Premium Payments and any transfers into that Investment Subdivision
and decreased by the policy maintenance charge, the Annual Death Benefit Charge,
any transfers out of that Investment Subdivision, and any full or partial
surrenders.
<PAGE>
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued separately. The
value of Accumulation Units will change each Valuation Period according to the
investment performance of the shares purchased by each Investment Subdivision
and the deduction of certain charges from Account 4.
For each Investment Subdivision, the value of an Accumulation Unit for the first
Valuation Period was $10. The value of an Accumulation Unit in an Investment
Subdivision for each subsequent Valuation Period equals the value of the
Accumulation Unit as of the immediately preceding Valuation Period, multiplied
by the Net Investment Factor for that Investment Subdivision for the Valuation
Period for which the Accumulation Unit Value is being calculated. The Net
Investment Factor is a number representing the change in the value of Investment
Subdivision assets on successive Business Days due to investment income,
realized or unrealized capital gains or losses, deductions for taxes, if any,
and deductions for the mortality and expense risk charge and administrative
expense charge.
The value of an Accumulation Unit for a Valuation Period is the same for each
day in the period.
Transfers
Before Income Payments begin, the Owner may transfer amounts among 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
the Company's administrative requirements. All transfers will be effective as of
the end of the Valuation Period during which the written or telephone request is
received at the Home Office.
Currently, there is no limit to the number of transfers that may be made before
Income Payments begin; however, the Company reserves the right to limit, upon
written notice, the number of transfers to twelve each calendar year or, if it
is necessary in order that the Policy will continue to receive annuity treatment
by the Internal Revenue Service, a lower number.
All transfers may be made without charge. However, the Company reserves the
right to deduct a $10 charge per transfer after the 12th transfer in a calendar
year.
If the amount of Account Value remaining in an Investment Subdivision after the
transfer is less than $100, the Company will transfer the amount remaining in
addition to the amount requested. The Company will not allow a transfer into any
Investment Subdivision unless the Account Value of that Investment Subdivision
after the transfer is at least $100.
After Income Payments begin, if Variable Income Payments are being made, Annuity
Units may be transferred among the Investment Subdivisions at the payee's
request once each calendar year. No transfer charge will be imposed on such
transfers. The transfer will be effective as of the end of the Valuation Period
during which the Company receives written request at its Home Office. The Income
Payment amount on the date of the transfer will not be affected by the transfer,
although subsequent Variable Income Payments will reflect the investment
experience of the selected Investment Subdivisions.
If the number of Annuity Units remaining in an Investment Subdivision after a
transfer is less than 1, then this 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.
Where permitted by state law, the Company reserves the right to refuse to
execute any transfer, whether requested before or after income payments begin,
if any of the Investment Subdivisions that would be affected by the transfer are
unable to purchase or redeem shares of the mutual funds in which they invest. In
addition, the Company reserves the right to refuse to execute any transfer
requested before income payments begin if the transfer is a result of more than
one trade within a 30 day period by the Owner, or if the transfer would
adversely affect accumulation unit values (which may occur if the transfer would
affect one percent or more of the relevant Fund's total assets).
Telephone Transfers
The Company 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, the Company 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, the Company may require written authorization before
allowing Owners to make telephone transfers.
To request a telephone transfer, Owners should call the Company's Telephone
Transfer Line. The Company will record all telephone transfer requests. Transfer
requests received prior to the close of the New York Stock Exchange will be
executed that business day at that day's prices. Requests received after that
time will be executed on the next business day at that day's prices.
<PAGE>
Dollar-Cost Averaging
Owners may elect to have the Company automatically transfer specified amounts
from one of certain designated Investment Subdivisions of Account 4 to any other
available Investment Subdivision(s) on a monthly or quarterly basis. This
privilege is intended to permit Owners to utilize "Dollar-Cost Averaging," a
long-term investment method that provides for regular level investments over a
period of time. The dollar-cost averaging method of investment is designed to
reduce the risk of making purchases only when the price of units is high, but
you should carefully consider your financial ability to continue the program
over a long enough period of time to purchase Accumulation Units when their
value is low as well as when it is high. The Company makes no representations or
guarantees that Dollar-Cost Averaging will result in a profit or protect against
a loss.
Owners must complete the Dollar-Cost Averaging section of the application or a
Dollar-Cost Averaging Agreement or call the Company's Telephone Transfer Line in
order to participate in the Dollar-Cost Averaging program. Currently, the
Investment Subdivision available to allocate money for the purpose of
Dollar-Cost Averaging is the Money Market Fund of the GE Investments Funds.
Money may be allocated to this subdivision as initial premium, additional
premium or in the form of a transfer from other Investment Subdivisions within
Account 4. Any amount allocated must conform to the minimum amount and
percentage requirements. (See Purchasing the Policies, and Allocation of Premium
Payments.) The minimum transfer amount permitted by the Dollar-Cost Averaging
program is $100. A Dollar-Cost Averaging transfer will not count toward any
limit on the number of transfers or the number of free transfers available each
year, except to the extent necessary for the Policy to continue to be treated as
an annuity under applicable law.
Dollar-Cost Averaging will continue until the entire Account Value in the
Investment Subdivision designated for Dollar-Cost Averaging is depleted. Prior
to that time, the Owner may discontinue Dollar-Cost Averaging by sending the
Company a written cancellation notice or by calling the Company's Telephone
Transfer Line. Owners may initiate or make changes to their Dollar-Cost
Averaging program by calling the Company's Telephone Transfer Line. Also, the
Company reserves the right to discontinue Dollar-Cost Averaging upon 30 days
written notice to the Owner.
Asset Allocation
An Owner may select from five asset allocation model portfolios offered by the
Company, or an Owner may use a model offered by the Company as a guide to help
him or her develop his or her own asset allocation program. The models designed
by the Company are as follows:
Model Investment and Risk Profile
----- ---------------------------
1 Income
2 Enhanced Income
3 Growth & Income
4 Growth
5 Aggressive Growth
If an Owner elects to participate in the asset allocation program, all initial
and additional Premium Payments will automatically be allocated among the
Investment Subdivisions indicated by the model and the Funds within the model
the Owner selects. The models do not include allocation to the Guarantee
Account. Although an Owner may use only one model at a time, an Owner may elect
to change his or her selection as his or her tolerance for risk, needs, and/or
objectives change. An Owner may use a questionnaire that the Company offers to
determine the model that best meets the Owner's risk tolerance and time
horizons.
Because each Investment Subdivision performs differently over time, an Owner's
portfolio mix may vary from its initial allocations. An Owner may elect to have
the portfolios automatically rebalanced under the Company's portfolio
rebalancing program, described below.
From time to time, the Company will review the models and may find that
allocation percentages among the Investment Subdivisions or even some of the
Investment Subdivisions within a particular model need to be changed. The
Company will send the Owner notice that such a change has been made. The Owner
then may elect whether or not he or she will participate in the change. Unless
you elect to participate in the new allocation model, you will remain in your
current designated allocation model. This change will not be made automatically.
There is no additional charge for the Asset Allocation Program. The Company
reserves the right to discontinue offering this Program at any time and for any
reason.
<PAGE>
Portfolio Rebalancing
Owners may elect to have the Company automatically transfer amounts on a
quarterly, semi-annual or annual basis to maintain a specified percentage of
Account Value in each of two or more Investment Subdivisions designated by the
Owner. This privilege is intended to permit owners to use "Portfolio
Rebalancing," a strategy that maintains over time the Owner's desired allocation
percentage in the designated Investment Subdivisions. The percentage of Account
Value in each of the Investment Subdivisions may shift from the Premium Payment
allocation percentage due to the performance of the Investment Subdivisions. The
Company makes no representations or guarantees that Portfolio Rebalancing will
result in a profit or protect against a loss.
Owners must complete the Portfolio Rebalancing agreement to participate in the
Portfolio Rebalancing program. Owners may designate the Investment Subdivisions
and specify the rebalancing percentages in the agreement. The specified
percentages must be in whole percentages and must be at least 1%. The date that
a rebalancing transfer is effected is measured from the Policy Date, or other
date selected at the sole discretion of the Company, based on the rebalancing
frequency chosen by an Owner. Account Value must be allocated to each of the
designated Investment Subdivisions for rebalancing to become effective.
Portfolio Rebalancing is offered free of charge and will continue as long as
there is Account Value in each of the designated Investment Subdivisions. Prior
to that time, Owners may discontinue rebalancing by sending the Company a
written cancellation notice. Owners may make changes to their Portfolio
Rebalancing program by calling the Company's Telephone Transfer Line. Portfolio
Rebalancing transfers are not included for the purpose of determining any
transfer charge. Owners should consider the possible effects of electing other
automatic programs such as Dollar-Cost Averaging and Systematic Withdrawals
concurrent with Portfolio Rebalancing. The Company reserves the right to exclude
Investment Subdivisions from Portfolio Rebalancing. The Company also reserves
the right to discontinue Portfolio Rebalancing upon 30 days written notice to
the Owner.
Powers of Attorney
As a general rule and as a convenience to Owners, the Company allows the use of
powers of attorney whereby Owners give third parties the right to effect account
value transfers on behalf of the Owners. However, when the same third party
possesses powers of attorney executed by many Owners, the result can be
simultaneous transfers involving large amounts of Account Value. Such transfers
can disrupt the orderly management of the Funds, can result in higher costs to
Owners, and are generally not compatible with the long-range goals of purchasers
of the Policies. The Company 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 the Funds.
Therefore, to the extent necessary to reduce the adverse effects of simultaneous
transfers made by third parties holding multiple powers of attorney, the Company
may not honor such powers of attorney and has instituted or will institute
procedures to assure that the transfer requests that it receives have, in fact,
been made by the Owners in whose names they are submitted. However, these
procedures will not prevent Owners from making their own Account Value transfer
requests.
Examination of Policy (Refund Privilege)
The Owner may examine the Policy and return it for refund within 10 days after
it is received. Unless state law requires that Premium Payments be returned as
the refund, the amount of the refund will equal the Account Value with any
adjustments required by applicable law or regulation on the date the Company
receives the Policy. If state law requires that Premium Payments be returned,
the amount of the refund will equal the greater of (1) the Account Value
(without reduction by any surrender charges) plus any amount deducted from the
Premium Payments prior to allocation to Account 4 or (2) the Premium Payments
made. In certain states the Owner may have more than 10 days to return the
policy for a refund. An Owner wanting a refund should return the Policy to the
Company at its Home Office.
DISTRIBUTIONS UNDER THE POLICY
Surrender
The Owner may make a full or partial surrender of the Policy at any time before
Income Payments begin by sending a written request to the Company at its Home
Office.
The Company will not permit a partial surrender that is less than $500 or that
reduces the Account Value of the Policy to less than $5,000. In the event that a
partial surrender request would reduce the Account Value to less than $5,000,
the Company will surrender only that amount of Account Value that would reduce
the remaining Account Value to $5,000 and deduct any surrender charge from the
amount surrendered.
The amount payable on full surrender of the Policy is the Surrender Value at the
end of the Valuation Period during which the request is received. The Surrender
Value equals the Account Value on the date the Company receives a request for
surrender less any applicable surrender charge. (See Surrender Charge.) Any
premium tax paid by the Company which has not been previously deducted may also
be deducted from the Surrender Value, as will any applicable Annual Death
Benefit Charge and the Policy Maintenance Charge. (See Annual Death Benefit
Charge, and Policy Maintenance Charge.) The Surrender Value may be paid in a
lump sum or under one of the optional payment plans specified in the Policy.
(See Optional Payment Plans.) Proceeds will generally be paid within seven days
of receipt of a request for a surrender. Postponement of payments may occur in
certain circumstances. (See Payment Under the Policies.)
<PAGE>
Upon partial surrender, the Owner may indicate, in writing, from which
Investment Subdivisions the Account Value is to be transferred. If no such
written instruction is received with the partial surrender request, the Account
Value transferred out will be transferred from the Investment Subdivisions in
the same proportion that the Account Value in each Investment Subdivision bears
to the total Account Value on the date the Company receives the written request.
A portion of the Policy's surrender charge may be assessed at the time a partial
surrender is made. Any applicable surrender charge will be deducted from the
amount surrendered. (See Surrender Charge.)
Full and partial surrenders may have federal tax consequences. (See Federal Tax
Matters.)
Effect of Partial Surrenders on the Death Benefit. For Policies issued on or
after October 12, 1998 (see Availability of Certain Features in the Summary
Section), a partial surrender will reduce the minimum death benefit by the
proportion that the partial surrender (including any applicable surrender
charge) reduced the Account Value. This means, for example, that if an Owner
with a minimum death benefit of $100,000 and an Account Value of $150,000 were
to make a partial surrender of $50,000 (or 1/3% of Account Value), the Owner's
minimum death benefit would be $66,666.67 ($100,000 x (1 - 1/3%), assuming no
surrender charge applied.
Systematic Withdrawals
The Owner may elect in writing to make a series of partial surrenders
("Systematic Withdrawals") in equal installments, adding up, in a 12 month
period beginning with the date of the first payment, to an amount not to exceed
the lesser of 10% of Account Value or the remaining free withdrawal amount as of
the effective date of that first installment for that policy year. (The "free
withdrawal amount" is described elsewhere in this prospectus and in the Policy,
and the amount depends on your Policy. (See Surrender Charge).) The commencement
date of the Systematic Withdrawal may be no sooner than 30 days after the policy
date. A surrender charge will not be imposed on Systematic Withdrawals. A
surrender charge will, however, be applied to any additional surrender(s) made
during the time Systematic Withdrawal payments are being made on amounts that
when combined with the total Systematic Withdrawal amounts, are in excess of the
amount that may be withdrawn without a surrender charge, unless all surrender
charges have expired, (See Surrender Charge). Systematic Withdrawal payments
count as partial surrenders with reduced charges. (See Reduced Charges on
Certain Surrenders).
Systematic Withdrawals will be made from any Investment Subdivisions to which
Account Value is allocated. Withdrawals will be made from each of the designated
Investment Subdivisions in the same proportion that the Account Value in each
Investment Subdivision bears to the total Account Value in all Investment
Subdivisions from which the withdrawals are to be made. At any time while
Systematic Withdrawals are being made, each of the designated Investment
Subdivisions from which withdrawals are being made must count as one of the ten
Investment Subdivisions to which the Account Value of the policy may be
allocated at any one time (See Allocation of Premium Payments).
After a series of Systematic Withdrawals has begun, the frequency and/or amount
of payments may be changed upon request by the Owner, subject to the following
rules:
1) only one such change may be requested in a calendar quarter;
2) if the maximum amount was not elected at the time the current series of
Systematic Withdrawals was initiated, the remaining payments may be
increased;
3) the total amount to be withdrawn during that 12-month period, including
amounts already paid, remains limited to the lesser of 10% of the
Account Value or the remaining free withdrawal amount at the time the
current series of Systematic Withdrawals was initiated; and
4) if the current series of Systematic Withdrawals is discontinued, any
remaining payments in the current 12-month period will be paid in a
lump sum on request.
Systematic Withdrawals may be discontinued at any time by the Owner(s) by
notifying the Company in writing or by calling the Telephone Transfer Line. The
Company reserves the right to discontinue Systematic Withdrawals upon 30 days
written notice to Owners. Otherwise, payments will continue until the earlier of
(i) the date on which a Systematic Withdrawal reduces the Account Value for the
entire policy below $5,000, or (ii) the date on which the total Account Value in
all Investment Subdivisions designated for Systematic Withdrawals is
insufficient to provide further payments on the mode in effect.
If any Systematic Withdrawal would be or becomes less than $50, the Company
reserves the right to reduce the frequency of payments to an interval that would
result in each payment being at least $50. The Company also reserves the right
to prohibit simultaneous Systematic Withdrawals and Dollar-Cost Averaging. (See
Dollar-Cost Averaging.) Additional rules regarding Systematic Withdrawals,
available payment modes, and instructions for electing this option are available
upon request.
<PAGE>
The amount of each Systematic Withdrawal should be considered as a distribution
and taxed in the same manner as a partial surrender of the Policy. However,
there is some uncertainty regarding the tax treatment of Systematic Withdrawals,
and it is possible that additional amounts may be includible in income. In
addition, a 10% penalty tax may, subject to certain exceptions, be imposed on
any amounts includible in income due to Systematic Withdrawals. It is uncertain
whether Systematic Withdrawals would qualify for an exception to this penalty
tax for a series of substantially equal periodic payments made over the life (or
life expectancy) of the recipient or the joint lives (or joint life
expectancies) of the recipient and his or her beneficiary. For more information,
See the "Federal Tax Matters" discussion of Taxation of Systematic Withdrawals.
Death Provisions
Prior to the Maturity Date, if an Owner, Joint Owner, or Annuitant dies while
the Policy is in force, the Designated Beneficiary will be treated as the sole
owner of the Policy, subject to the distribution rules set forth below. A Death
Benefit may be payable to the Designated Beneficiary upon receipt by the Company
of Due Proof of Death satisfactory to the Company. The Designated Beneficiary is
determined by identifying the first person named in the following list who is
alive or in existence on the date of death:
(1) Owner
(2) Joint Owner
(3) Beneficiary
(4) Contingent Beneficiary
(5) Owner's estate
If Joint Owners both survive, they become the Designated Beneficiary together.
In such cases, for purposes of the distribution rules discussed below, each
Designated Beneficiary will be treated separately with respect to each
Designated Beneficiary's portion of the Policy.
Even if the Designated Beneficiary is treated as the sole owner of this Policy,
the death of the Designated Beneficiary will not be treated as the death of an
Owner for purposes of the Death Benefit provisions below, nor will such death
increase the time during which any required distributions from the Policy may be
made.
After the Maturity Date (including after income payments begin), if an Owner,
Joint Owner, Annuitant, or Designated Beneficiary dies while the Policy is in
force, payments that are already being made under the Policy will be made at
least as rapidly as under the method of distribution in effect at the time of
such death, notwithstanding any other provision of the Policy.
Death Benefit at Death of Annuitant
Elective Guaranteed Minimum Death Benefit Rider. For Policies issued on or after
October 12, 1998 (otherwise please see appendix) (see Availability of Certain
Features in the Summary Section) if the death of the Annuitant occurs before
Income Payments begin, the Designated Beneficiary may surrender the Policy for
the Death Benefit. The Death Benefit will be calculated as of the date the
Company receives a request for distribution.
The Death Benefit equals the sum of (a) and (b) where: (a) is the Account Value
as of the date the Company receives the request for distribution of proceeds;
and (b) is the excess, if any, of the unadjusted death benefit (as defined
below) as of the date of the Annuitant's death over the Account Value as of the
date of the Annuitant's death, with interest credited on that excess from the
date of the Annuitant's death to the date of distribution.
The unadjusted death benefit is calculated as follows:
A. If the Annuitant was age 80 or younger on the Policy Date: during the
first six policy years, the unadjusted death benefit will be the
greater of items (1) or (2) defined below. During any subsequent
death benefit period, as shown in the Policy, the unadjusted Death
Benefit will be the greater of items (1), (2), or (3) defined below.
B. If the Annuitant was age 81 or older on the Policy Date: the
unadjusted death benefit will be the Account Value as of the
Annuitant's date of death.
As used in calculating the unadjusted death benefit, items (1), (2), and (3) are
defined as:
(1) The Account Value of the Policy as of the date of the Annuitant's
death.
<PAGE>
(2) The total of Premium Payments received reduced by any applicable
premium tax and by the proportion that any partial surrender
(including any applicable Surrender Charge) reduced the Account
Value.
(3) The greatest Death Benefit on the last day of any previous 6-year
death benefit period, plus any Premium Payments made since then,
reduced by any applicable premium tax and by the proportion that any
partial surrender (including any applicable surrender charge) reduced
the Account Value.
Example: Assuming an Owner: (i) purchases a Policy for $100,000; (ii) makes no
partial surrenders and no additional premium payments, (iii) is not subject to
premium taxes, and (iv) the Annuitant's age is 80 or younger on the Policy date
then:
Issue Year Account Value Death Benefit
---------- ------------- ------------
Issue $100,000 $100,000
1 $110,000 $110,000
2 $ 90,000 $100,000
3 $ 80,000 $100,000
4 $120,000 $120,000
5 $130,000 $130,000
6 $150,000 $150,000
7 $160,000 $160,000
8 $130,000 $150,000
9 $ 90,000 $150,000
10 $170,000 $170,000
11 $140,000 $150,000
12 $135,000 $150,000
13 $120,000 $150,000
Without regard to when a Policy is issued, if the Death Benefit is elected and
paid, the Policy will terminate and the Company will have no further obligation
under the Policy.
In lieu of payment of the Death Benefit, the Designated Beneficiary may elect to
continue the Policy after the Annuitant's death, provided that the distribution
rules (described below) do not require distribution of the entire value of the
Policy.
If the Designated Beneficiary is eligible and elects to continue the Policy, the
Account Value on the date the Company received Due Proof of Death of the
Annuitant will be set equal to the Death Benefit on that date. Any increase in
the Account Value will be allocated to the Investment Subdivisions using the
premium allocation in effect at that time. If the Policy is continued after
death of the Annuitant, any Death Benefit payable subsequently (at the death of
the new Annuitant) will be based on the new Annuitant's age on the Policy Date,
rather than the age of the previously deceased Annuitant.
If the Designated Beneficiary is not eligible to continue the Policy, the
Account Value on the date we receive Due Proof of Death of the Annuitant will be
set equal to the Death Benefit on that date and the distribution rules will
govern payment of proceeds.
Elective Guaranteed Minimum Death Benefit Rider.
For Policies issued after October 12, 1998 (otherwise please see appendix) (see
Availability of Certain Features in the Summary Section) the Designated
Beneficiary may elect the Guaranteed Minimum Death Benefit at any time after the
Annuitant's death. If this Death Benefit is paid, the Policy will terminate, and
the Company will have no further obligation under the Policy. THE GUARANTEED
MINIMUM DEATH BENEFIT RIDER MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS.
For Policies issued on or after October 12, 1998 (otherwise please see appendix)
(see Availability of Certain Features in the Summary Section) the Death Benefit
under the Guaranteed Minimum Death Benefit Rider will be the greater of: (i) the
Death Benefit described above under "Death Benefit at Death of Annuitant," and
(ii) the greater of (A) the Guaranteed Minimum Death Benefit, and (B) the
Account Value of the Policy on the date the Company receives due proof of the
Annuitant's death, or, if later, the date of the request. The Guaranteed Minimum
Death Benefit is, on the Policy Date, equal to the Premium Payment received. At
the end of each Valuation Period after such date, the Guaranteed Minimum Death
Benefit is the lesser of: (1) the total of all Premium Payments received,
multiplied by two, less the proportionate amount by which any partial surrender
(including any applicable surrender charge) made prior to or during that
Valuation Period reduced Account Value; or (2) the Guaranteed Minimum Death
Benefit at the end of the preceding Valuation Period, increased as specified
below, plus any additional Premium Payments made during the current Valuation
Period and less the proportionate amount by which any partial surrender plus its
applicable surrender charge reduced Account Value during the current Valuation
Period.
<PAGE>
The amount of the increase for the Valuation Period will be calculated by
applying a factor to the Guaranteed Minimum Death Benefit at the end of the
preceding Valuation Period. Until the anniversary on which the Annuitant attains
age 80, the factor is determined for each Valuation Period at an effective
annual rate of 6%, except that with respect to amounts invested in certain
Investment Subdivisions shown in the Policy, the increase factor will be
calculated as the lesser of: (1) the Net Investment Factor for the Valuation
Period, minus one, and (2) a factor for the Valuation Period equivalent to an
effective annual rate of 6%. Currently, these Investment Subdivisions include
only the Money Market Investment Subdivision. With respect to amounts allocated
to the Guarantee Account, Item (1) above is replaced with a factor for the
Valuation Period equivalent to the credited rate(s) applicable to such amounts.
If the Guaranteed Minimum Death Benefit Rider has been elected, it is effective
on the Policy Date and will remain in effect while the Policy is in force and
before income payments begin, or until the Policy Anniversary following the date
of receipt of the Owner's request to terminate the rider. There will be a charge
made each year for expenses related to the Death Benefit available under the
terms of the Guaranteed Minimum Death Benefit Rider. (See Annual Death Benefit
Charge). Amounts payable under the Guaranteed Minimum Death Benefit Rider are
subject to the distribution rules described below.
Elective Optional Death Benefit Rider. The elective optional death benefit rider
provides for an Annual Step-up in death benefit, as described below. For
Policies issued on or after October 12, 1998 (otherwise please see appendix)
(see Availability of Certain Features in the Summary Section) the Designated
Beneficiary may elect the Optional Death Benefit at any time after the
Annuitant's death. If this Death Benefit is paid, the Policy will terminate, and
the Company will have no further obligation under the Policy. THE OPTIONAL DEATH
BENEFIT RIDER MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS.
The Death Benefit under the Optional Death Benefit Rider is the greater of: (1)
the Death Benefit described above under "Death Benefit at Death of Annuitant,"
and (2) the minimum Death Benefit described below.
During the first Policy year, the minimum Death Benefit under the Optional Death
Benefit Rider is the total of premiums paid, adjusted for any partial
surrenders. After the first Policy year and until the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's greatest Death Benefit on any previous Policy anniversary, plus
the total Premium Payments made since that date, less adjustments for any
partial surrenders taken since that date. Beginning on the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's minimum Death Benefit on that date, plus the total Premium
Payments made since that date, less adjustments for any partial surrenders taken
since that date.
If the Optional Death Benefit Rider has been elected, it is effective on the
Policy Date (unless another effective date is shown on the Policy data pages).
It will remain in effect while the Policy is in force and before income payments
begin, or until the Policy Anniversary following the date of receipt of the
Owner's request to terminate the rider. There will be a charge made each year
for expenses related to the Death Benefit available under the terms of the
Optional Death Benefit Rider. (See "Annual Death Benefit Charge.") Amounts
payable under the Optional Death Benefit Rider are subject to the distribution
rules described below.
Distribution Rules. The Code requires that if an Owner dies before the Maturity
Date, the entire value of the Policy must generally be distributed within five
years of the date of the Owner's death. In the case of Joint Owners, this
requirement applies if either of the Joint Owners dies before the Maturity Date.
The following distribution rules are designed to comply with these Code
requirements, and are applicable upon the death of an Owner or Joint Owner,
including the death of an Annuitant who is also an Owner. These distribution
rules will not apply upon the death of an Annuitant, if the Annuitant was not
also an Owner of the Policy, all Owners of the Policy are natural persons, and a
contingent Annuitant survives. Even if no contingent Annuitant is alive on the
death of the Annuitant, if the Owner is a natural person, that Owner will be the
contingent Annuitant. Therefore, on the death of the Annuitant, the distribution
rules apply only if (1) the Annuitant was an Owner, or (2) any Owner was not a
natural person.
<PAGE>
Prior to the Maturity Date, if the Designated Beneficiary is not the surviving
spouse of the deceased Owner, Joint Owner or Annuitant, then the Surrender Value
or the applicable Death Benefit will be paid in one lump sum to, or for the
benefit of, the Designated Beneficiary. Instead of receiving a lump sum
distribution, however, the Designated Beneficiary may elect: (1) to receive the
Surrender Value at any time during the five year period following the death of
the Owner, Joint Owner, or Annuitant by partially or totally surrendering the
Policy; or (2) to apply the entire Surrender Value (or applicable Death Benefit)
under optional payment plan 1 or 2, with the first payment to the Designated
Beneficiary being made within one year after the date of death of the Owner,
Joint Owner, or Annuitant, and with payments being made over the life of the
Designated Beneficiary or over a period not exceeding the Designated
Beneficiary's life expectancy.
If the entire Surrender Value has not been paid to the Designated Beneficiary by
the end of this five year period following the date of death of the Owner, Joint
Owner, or Annuitant, and payments have not begun in accordance with (2) above,
then, in accordance with Code requirements and (1) above, the Company will
terminate the Policy at the end of that five year period and will pay the
Surrender Value to, or for the benefit of, the Designated Beneficiary. After
this, there will be no remaining value in the Policy. If the Designated
Beneficiary dies before all required payments have been made, the Company will
make any remaining payments to any person named in writing by the Designated
Beneficiary. Otherwise, the Company will pay the Designated Beneficiary's
estate.
Rather than the distribution rules described above, special rules apply if the
Designated Beneficiary is the surviving spouse of the deceased Owner, Joint
Owner, or Annuitant. In these cases, the surviving spouse may continue the
Policy as the Owner. In addition, that person will also become the Annuitant if
the deceased was the Annuitant, there is no surviving Contingent Annuitant, and
the Policy has not been surrendered for one of the Death Benefits described
above available upon the Annuitant's death. On the surviving spouse's death, the
entire interest in the Policy will be paid within five years of such spouse's
death to the Designated Beneficiary named by the surviving spouse (and if no
Designated Beneficiary has been named, such payment will be made to the
surviving spouse's estate).
Restrictions on Distributions from Certain Policies
Section 830.105 of the Texas Government Code permits participants in the Texas
Optional Retirement Program (ORP) to withdraw their interest in a variable
annuity contract issued under the ORP only upon (1) termination of employment in
the Texas public institutions of higher education, (2) retirement, (3) death, or
(4) the participant's attainment of age 70 1/2. Accordingly, before any amounts
may be distributed from the contract, proof must be furnished to the Company
that one of these four events has occurred.
Similar restrictions apply to variable annuity contracts used as funding
vehicles for Code Section 403(b) retirement plans. Section 403(b) of the Code
provides for tax-deferred retirement savings plans for employees of certain
non-profit and educational organizations. In accordance with the requirements of
section 403(b), any Policy used for a 403(b) plan will prohibit distributions of
(i) elective contributions made in years beginning after December 31, 1988, (ii)
earnings on those distributions and (iii) earnings on amounts attributable to
elective contributions held as of the end of the last year beginning before
January 1, 1989. However, distributions of such amounts will be allowed upon
death of the employee, attainment of age 59 1/2, separation from service,
disability, or financial hardship, except that income attributable to elective
contributions may not be distributed in the case of hardship.
CHARGES AND DEDUCTIONS
Charges Against Account 4
Mortality and Expense Risk Charge. A charge will be deducted from each
Investment Subdivision to compensate the Company 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. The Company guarantees that this
charge of 1.25% will never increase.
The mortality risk assumed by the Company arises from its contractual
obligation to make Income Payments to each payee regardless of how long all
payees or any individual payee may live. Although Variable Income Payments will
vary in accordance with the investment performance of the shares purchased by
each Investment Subdivision, they will not be affected by the mortality
experience of persons receiving such payments or of the general population.
This assures each payee that neither the longevity of fellow payees nor an
improvement in life expectancy generally will have an adverse effect on the
Variable Income Payments received under the Policy. Mortality risk also arises
from the possibility that the Death Benefit will be greater than the Account
Value.
The expense risk assumed is that expenses incurred in issuing and administering
the Policies will be greater than estimated and, therefore, will exceed the
expense charge limits set by the Policies. If proceeds from the mortality and
expense charge are not needed to cover mortality and expense risks, the Company
may use proceeds to finance distribution of the Policies.
Administrative Expense Charge. A charge will be deducted from each Investment
Subdivision to compensate the Company 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.
<PAGE>
Policy Maintenance Charge
A charge of $25 will be deducted annually from the Account Value of each Policy
to compensate the Company for certain administrative expenses incurred in
connection with the Policies. The charge will be deducted at each anniversary
and at surrender. The Company will waive this charge if the Account Value
exceeds $75,000 at the time the charge is due. The policy maintenance charge
will compensate Life of Virginia for issuance, processing, start-up and
on-going administration expenses. These expenses include the cost of processing
applications, establishing Policy records, premium collection, recordkeeping,
processing Death Benefit claims, full or partial surrenders, transfers, and
reporting and overhead costs. Once a Policy is issued, the amount of the Policy
Maintenance Charge is guaranteed for the life of the Policy.
The annual Policy Maintenance Charge will be allocated among the Investment
Subdivisions in the same proportion that the Policy's Account Value in each
Investment Subdivision bears to the total Account Value in all Investment
Subdivisions at the time the charge is made. Other allocation methods may be
available upon request.
Annual Death Benefit Charge
There will be separate charges made each year for expenses related to the Death
Benefit available under the terms of an elected Guaranteed Minimum Death
Benefit Rider and/or Optional Death Benefit Rider. The Company deducts these
charges against the Account Value in Account 4 at each anniversary and at
surrender to compensate it for the increased risks associated with providing
the enhanced Death Benefit(s). If the Guarantee Account is available under the
Policy and the Account Value is not sufficient to cover the charge for the
Optional Death Benefit Rider, the charge will be deducted first from the
available Account Value, if any, and then from the Guarantee Account. Each
charge at full surrender will be a pro-rata portion of the annual charge.
For the elective Guaranteed Minimum Death Benefit, the Company guarantees that
this charge will never exceed an annual rate of 0.35% of the prior year's
average Guaranteed Minimum Death Benefit. For the elective Optional Death
Benefit, the Company guarantees that this charge will never exceed an annual
rate of 0.25% of the Account Value.
Sales Charges
The Company incurs certain sales and other distribution expenses when the
Policies are issued. The majority of these expenses consist of commissions paid
for sales of these Policies; however, other distribution expenses are incurred
in connection with the printing of prospectuses, conducting seminars and other
marketing, sales, and promotional activities. To recover a portion of these
expenses, a surrender charge (also referred to as a contingent deferred sales
charge) is imposed on full and certain partial surrenders.
Set forth below is a general discussion of the amount and nature of the charge,
followed by a more technical explanation of how the charge is calculated.
Surrender Charge
Surrender charges (also referred to as a contingent deferred sales charge) will
be imposed on full and partial surrenders that occur within six years of any
Premium Payments. Surrender charges are made to cover certain expenses relating
to the sale of the Policy, including commissions to registered representatives
and other promotional expenses. Surrender charges also apply to proceeds
received upon maturity if the Maturity Date occurs within six years of receipt
of a Premium Payment.
For Policies issued on or after May 1, 1998, (otherwise please see Appendix)
(See Availability of Certain Features in the Summary Section) surrender
charges are deducted from the amount surrendered. All or part of the amount
surrendered may be subject to charge. Amounts surrendered will be deducted
first from any gain in the Policy. Surrender charges are not assessed on
amounts surrendered which represent gain. For purposes of this section, "gain"
is calculated as (a) plus (b) minus (c) minus (d), but not less than zero
where:
(1) is the Account Value on the date we receive your surrender request;
(2) is the total of any partial surrenders previously taken;
(3) is the total of premium payments made; and
(4) is the total of any gain previously surrendered.
<PAGE>
For all Policies, the charge is calculated separately for each Premium Payment
at the time it is surrendered, as specified in the table below.
Number of Full
Completed Years Between Surrender Charge as a
The Date of Receipt of Premium Percentage of Premium
Payment and Date of Surrender Payment Surrendered
------------------------------ ---------------------
Less than 1 6%
1 6%
2 6%
3 6%
4 4%
5 2%
6 or more 0%
After all Premium Payments have been surrendered, any remaining Account Value
may be surrendered. Surrender charges do not apply after all Premium Payments
have been surrendered.
Reduced Charges on Certain Surrenders. For Policies issued after May 1, 1998
(otherwise please see Appendix) (see Availability of Certain Features in the
Summary Section), in addition to any gain, an amount equal to 10% of the total
premium payments can also be withdrawn each policy year without a surrender
charge (the "10% free withdrawal amount"). The 10% free withdrawal amount is not
cumulative from policy year to policy year. Any amount surrendered in excess of
(1) the gain on the date of surrender, plus (2) 10% of the total premium
payments, will be the amount subject to a surrender charge. For purposes of
determining the applicable surrender charge, the amount subject to a surrender
charge will be deducted from premium payments on a first-in, first-out basis.
Waived Surrender Charges for Certain Payment Plans. Surrender charges otherwise
applicable will be waived if and to the extent that proceeds are not distributed
in a lump sum and are applied to optional payment plans 1, 2 (for a period of
five or more years) or 5.
Waiver of Surrender Charges. For Policies issued on or after October 12, 1998
(otherwise please see Appendix) (see Availability of Certain Features in the
Summary Section), surrender charges arising from a full surrender or one or more
partial surrenders occurring before income payments begin will be waived if, at
the time the Company receives the request for a full or partial surrender, the
Company has received due proof that the Annuitant has a qualifying terminal
illness, or has been confined continuously to a state licensed or legally
operated hospital or inpatient nursing facility for at least 90 consecutive
days, and was age 80 or younger on the Policy Date. The terms and conditions of
the waivers are set forth in the Policy.
The waivers of surrender charges in the event of terminal illness or hospital or
nursing facility confinement may not be available in all states or in all
markets.
Transfer Charges
The Owner may transfer amounts among the Investment Subdivisions. Currently,
there is no limit on the number of transfers that may be made; however, the
Company reserves the right to impose such a limit in the future before Income
Payments begin. Also, where permitted by state law, the Company 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.
All transfers may be made without charge. However, the Company reserves the
right to deduct a $10 charge per transfer after the 12th transfer in a calendar
year. No transfer charge is imposed on transfers occurring after Income Payments
begin.
<PAGE>
Premium Taxes
The Company may deduct a charge for any premium taxes incurred. The premium tax
rates incurred by the Company currently range from 0 to 3.5%. Any applicable
premium tax charge may be deducted from either the premium paid or from
proceeds, (including benefits for surrender, maturity and death).
Other Taxes
Under present laws, the Company will incur state and local taxes (other than
premium or similar taxes) in several states. At present, the Company 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, the Company 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, the Company determines that such taxes may be
incurred, it may assess a charge for those taxes from Account 4.
Other Charges
Because Account 4 purchases shares of the Funds, the net assets of each
Investment Subdivision will reflect the investment advisory fee and other
expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these charges,
read the individual Fund prospectuses.
Reduction of Charges for Group Sales
The surrender charge may be reduced for sales of the Policies to a trustee,
employer or similar entity representing a group or to members of the group where
such sales result in savings of expenses incurred by the Company in connection
with the sale of the Policies. The entitlement to such a reduction in such
charge will be determined by the Company based on the following factors:
(1) The size of the group. Generally, the sales expenses for each
individual Owner for a larger group are less than for a smaller group
because more Policies can be implemented with fewer sales contacts
and less administrative cost.
(2) The total amount of Premium Payments to be received from a group. Per
Policy sales and other expenses are generally proportionately less on
larger purchase payments than on smaller ones.
(3) The purpose for which the Policies are purchased. Certain types of
plans are more likely to be stable than others. Such stability
reduces the number of sales contacts and administrative and other
services required, reduces sales administration and results in fewer
Policy terminations. As a result, sales and other expenses can be
reduced.
(4) The nature of the group for which the Policies are being purchased.
Certain types of employee and professional groups are more likely to
continue Policy participation for longer periods than are other
groups with more mobile membership. If fewer Policies are terminated
in a given group, the Company's sales and other expenses are reduced.
(5) There may be other circumstances of which the Company is not
presently aware which could result in reduced sales expenses.
Reductions in this charge will not be unfairly discriminatory against any person
including the affected owners and all other owners of the Policies. Additional
information about charge reductions is available from the Company at its Home
Office.
INCOME PAYMENTS
Monthly Income Benefit
The Company will pay a Monthly Income Benefit to the Owner beginning on the
Maturity Date if the Annuitant is still living. The Monthly Income Benefit will
be paid in the form of Variable Income Payments similar to those described in
Optional Payment Plan 1, Life Income with 10 Years Certain (automatic payment
plan), using the sex and settlement age of the Annuitant instead of the payee,
unless another election is made by the Owner.
Under the Life Income with 10 Years Certain plan, if the Annuitant lives longer
than ten years, payments will continue for his or her life. If the Annuitant
dies before the end of ten years, the remaining payments for the ten year period
will be discounted at the same rate used to calculate the monthly income. If the
remaining payments are Variable Income Payments, the amount of each payment to
be discounted will be assumed equal to the value of the payment amount on the
date we receive Due Proof of Death. This discounted amount will be paid in one
sum. The Policy does not specify a maximum maturity age or latest maturity date
unless state law requires it.
<PAGE>
Unless a different date is requested, the Maturity Date is the Policy
anniversary that the Annuitant reaches age 90. The Owner may change the Maturity
Date to any date at least 10 years after the date of the most recent premium
payment by sending the Company written notice before the Maturity Date then in
effect. The Maturity Date cannot be a date later than the Policy anniversary on
which the Annuitant reaches age 90, unless a later date is approved by the
Company.
During the lifetime of the Annuitant and prior to the Maturity Date, however,
the Owner, or the Designated Beneficiary upon the Owner's death, may elect by
written notice to the Home Office, to receive proceeds in a lump sum or under
one of the optional payment plans described below. If the election is being made
by the Designated Beneficiary, only available plans may be chosen.
Income payments will be made monthly unless the Owner elects quarterly,
semi-annual or annual payments by written request to the Company.
Certain states prohibit the use of actuarial tables that distinguish between men
and women in determining benefits for annuity polices issued on the lives of
residents. Therefore, policies offered by this Prospectus on the lives of
residents of those states have annuity income payments which are based on
actuarial tables that do not differentiate on the basis of sex.
Determination of Monthly Income Benefits
The Maturity Value will be equal to the Surrender Value on the date immediately
preceding the Maturity Date.
The initial Monthly Income Benefit under the automatic payment plan will be
calculated by multiplying (a) times (b) divided by (c) where: (a) is the monthly
payment per $1,000, shown under the optional payment plans for Life Income with
10 Years Certain, using the sex and settlement age of the Annuitant instead of
the payee, on the Maturity Date; (b) is the Maturity Value less any premium
taxes paid by the Company that were not recouped previously by a premium tax
charge; and (c) is $1,000. (See Optional Payment Plans for information about
subsequent variable income payments.)
If at the time Income Payments begin, the Owner has not provided the Company
with a written election not to have federal income taxes withheld, the Company
must by law withhold such taxes from the taxable portion of such Income Payments
and remit that amount to the federal government. Also, in some other
circumstances, the Company may withhold taxes. (See Direct Rollover and
Mandatory Withholding Requirements, and Federal Income Tax Withholding.) In
addition, any proceeds applied under an optional payment plan are subject to the
imposition of a premium tax charge in those states which impose such a tax upon
annuitization, or deduction of the deferred premium tax in those states which
impose such a tax on the Company for premiums received. (See Premium Taxes.)
Optional Payment Plans
Proceeds payable on the Maturity Date will be paid as described in the Monthly
Income Benefit section. Death and surrender proceeds will be paid in one sum.
Subject to the rules stated below, and to the Death Benefit and distribution
rules stated above, however, any part of death or surrender proceeds can be left
with us and paid under a payment plan. (For the tax treatment of surrender
proceeds and death benefits, see Taxation of Partial and Full Surrenders, and
Taxation of Death Benefit Proceeds.) Any proceeds left with us will be applied
to calculate the amount of the income. During the Annuitant's life, the Owner
may choose a payment plan. If a Beneficiary is changed, then the payment plan
selection is no longer in effect unless a request to continue it is made. The
Designated Beneficiary can choose a plan at the death of the Annuitant if one
has not been chosen.
Optional payment plans can provide either Fixed Income Payments or Variable
Income Payments as selected by the Owner or the payee. There are currently five
optional payment plans available. Optional payment plans 1 through 5 can be used
to provide Fixed Income Payments while only optional payment plans 1 and 5 are
available to provide Variable Income Payments. A plan and the form of the Income
Payments may be designated in the application or by notifying the Company in
writing at its Home Office. If the payee is not a natural person, consent of the
Company is required prior to selecting a plan.
The effect of choosing a Fixed Income Payment is that the minimum amount of each
Income Payment will be calculated on the date the first Income Payment is made
and will not change. If Fixed Income Payments are chosen, the proceeds will be
transferred to the General Account of the Company on the date the Income
Payments begin. Fixed Income Payments will be fixed in amount and duration on
that date, based on current rates for the optional payment plan chosen and, if
applicable, the age and sex of the payee. The current rates for optional payment
plans are based on interest, mortality and expense assumptions made by the
Company. The current rates may change from time to time but will never be less
than the guaranteed minimum rate described and shown in the Policy form. For
further information, the Owner should contact the Company at its Home Office.
If the Owner, (or the Designated Beneficiary) elects to receive Variable Income
Payments under the applicable optional payment (Plan 1 or Plan 5), the proceeds
may be allocated among up to ten Investment Subdivisions. The first Variable
Income Payment is determined by the rate for the optional payment plan chosen
and the amount of proceeds applied to the plan. The dollar amount of subsequent
Income Payments will reflect the investment experience of the selected
Investment Subdivisions and is determined by means of Annuity Units.
<PAGE>
The number of Annuity Units for an Investment Subdivision will be determined
when Income Payments begin and will remain fixed unless transferred. (See
Transfers.) The number of Annuity Units for an Investment Subdivision is (a)
divided by (b) where: (a) is the portion of the first Income Payment allocated
to an Investment Subdivision; and (b) is the Annuity Unit Value for
that Investment Subdivision seven days before the first Income Payment is due.
For subsequent payments, the Income Payment amount for an Investment Subdivision
is the number of Annuity Units for that Investment Subdivision times the Annuity
Unit Value for that Investment Subdivision seven days before the payment is due.
For each Investment Subdivision, the Annuity Unit Value for the first Valuation
Period was $10. The Annuity Unit Value for each subsequent Valuation Period is
(a) times (b) times (c) where: (a) is the Net Investment Factor for that period
(See Statement of Additional Information -- Net Investment Factor.); (b) is the
Annuity Unit Value for the immediately preceding Valuation Period; and (c) is
the investment result adjustment factor.
The investment result adjustment factor recognizes an assumed interest rate of
3% per year used in determining the amounts of the Income Payments. This means
that if the net investment experience of the Investment Subdivision to which the
Annuity Units apply for a given month exceeds the monthly equivalent of 3% per
year, the monthly payment will be greater than the previous payment. If the net
investment experience for such Subdivision is less than the monthly equivalent
of 3% per year, the monthly payment will be less than the previous monthly
payment.
Payments under Plans 1, 2, 3 or 5 will begin on the date we receive proof of
death, on surrender, or on the policy's Maturity Date. Payments under Plan 4
will begin at the end of the first interest period after the date Proceeds are
otherwise payable. Plan 4 is not available under Qualified Policies.
Under all of the optional payment plans, if any payment made more frequently
than annually would be or becomes less than $100, the Company reserves the right
to reduce the frequency of payments to an interval that would result in each
payment being at least $100. If the annual payment payable is less than $20, the
Company will pay the Surrender Value in a lump sum. Upon making such a payment,
the Company will have no future obligation under the Policy.
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option.
Plan 1 -- Life Income with Period Certain. Equal monthly payments will be
made for a guaranteed minimum period. If the payee lives longer than the
minimum period, payments will continue for his or her life. The minimum
period can be 10, 15 or 20 years. Guaranteed amounts payable under this
plan will earn interest at 3% compounded yearly. The Company may increase
the interest rate and the amount of any payment. If the payee dies before
the end of the guaranteed period, the amount of remaining payments for the
minimum period will be discounted at the same rate used in calculating
Income Payments. "Discounted" means the Company will deduct the amount of
interest each remaining payment would have earned had it not been paid out
early. The discounted amounts will be paid in one sum to the payee's
estate unless otherwise provided.
Plan-2 -- Income for a Fixed Period. Equal periodic payments will be made
for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly, or monthly. Guaranteed amounts payable under this
plan will earn interest at 3% compounded yearly. The Company may increase
the interest and the amount of any payment. If the payee dies, the amount
of the remaining guaranteed payments will be discounted to the date of the
payee's death at the same rate used in calculating Income Payments. The
discounted amount will be paid in one sum to the payee's estate unless
otherwise provided.
Plan 3 -- Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual,
quarterly, or monthly. The amount paid each year must be at least $120 for
each $1,000 of proceeds. Payments will continue until the Proceeds are
exhausted. The last payment will equal the amount of any unpaid proceeds.
If Fixed Income Payments are made under this plan, unpaid Proceeds will
earn interest at 3% compounded yearly. The Company may increase the
interest rate; if the interest rate is increased, the payment period will
be extended. If the payee dies, the amount of the remaining proceeds with
earned interest will be paid in one sum to his or her estate unless
otherwise provided.
Plan 4 -- Interest Income. Periodic payments of interest earned from the
proceeds left with the Company will be paid. Payments can be annual,
semi-annual, quarterly, or monthly, and will begin at the end of the first
period chosen. Proceeds will earn interest at 3% compounded yearly. The
Company may increase the interest rate and the amount of any payment. If
the payee dies, the amount of remaining proceeds and any earned but unpaid
interest will be paid in one sum to his or her estate unless otherwise
provided. This plan is not available under Qualified Policies.
Plan 5 -- Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must
be at least 35 years old when payments begin. Payments will continue as
long as either payee is living. If Fixed Income Payments are made under
this Plan, the guaranteed amount payable under this plan will earn
interest at 3% compounded yearly. The Company may increase the interest
rate and the amount of any payment. If both payees die before the end of
the minimum period, the amount of the remaining payments for the 10-year
period will be discounted at the same rate used in calculating Income
Payments. The discounted amount will be paid in one sum to the survivor's
estate unless otherwise provided.
<PAGE>
FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax advice.
The federal income tax consequences associated with the purchase of a Policy are
complex, and the application of the pertinent tax rules to a particular person
may vary according to facts peculiar to that person.
This discussion is based on the law, regulations, and interpretations existing
on the date of this prospectus. These authorities, however, are subject to
change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address state or other local tax consequences
associated with the purchase of a Policy. In addition, THE COMPANY MAKES NO
GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL, STATE, OR LOCAL -- OF ANY
POLICY OR OF ANY TRANSACTION INVOLVING A POLICY.
Non-Qualified Policies
Premium Payments. A purchaser of a Policy that does not qualify for the special
tax treatment discussed below in connection with Policies used as individual
retirement annuities or used with other qualified retirement plans may not
deduct or exclude from gross income the amount of the premiums paid. In this
discussion, such a Policy is called a "Non-Qualified Policy".
Tax Deferral During Accumulation Period. In general, until distributions are
made or deemed to be made from a Non-Qualified Policy (as discussed below), an
Owner who is a natural person is not taxed on increases in the Account Value
resulting from the investment experience of Account 4. However, this rule
applies only if (1) the investments of Account 4 are "adequately diversified" in
accordance with Treasury Department regulations, and (2) the Company, rather
than the Owner, is considered the owner of the assets of Account 4 for federal
tax purposes.
(1) Diversification Requirements. Treasury Department regulations prescribe the
manner in which the investments of a separate account such as Account 4 are to
be "adequately diversified." Any failure of Account 4 to comply with the
requirements of these regulations would cause each Owner to be taxable currently
on the increase in the Account Value.
Account 4, through the Funds, intends to comply with the diversification
requirements prescribed by the Treasury Department regulations. Although the
Company does not control the investments of the Funds (other than the GE
Investments Funds), it has entered into agreements regarding participation in
the Funds which require the Funds to be operated in compliance with the
requirements prescribed by the Treasury Department.
(2) Ownership Treatment. In certain circumstances, variable contract owners may
be considered the owners, for federal tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
contract owners' gross income annually as earned. The Internal Revenue Service
(the "Service") has stated in published rulings that a variable contract owner
will be considered the owner of separate account assets if the owner possesses
incidents of ownership in those assets, such as the ability to exercise
investment control over the assets. The Treasury Department has announced, in
connection with the issuance of regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
[i.e. separate] account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the account." This
announcement also stated that guidance would be issued by way of regulations or
rulings on the "extent to which policyholders may direct their investments to
particular sub-accounts [of a separate account] without being treated as owners
of the underlying assets." As of the date of this prospectus, no such guidance
has been issued.
The ownership rights under the Policy are similar to, but different in certain
respects from, those addressed by the Service in rulings in which it was
determined that contract owners were not owners of separate account assets. For
example, the Owner of this Policy has the choice of more Funds to which to
allocate premiums and Account Values, and may be able to reallocate more
frequently, than in such rulings. These differences could result in an Owner
being considered, under the standard of those rulings, the owner of the assets
of Account 4. To ascertain the tax treatment of its Owners, the Company
requested, with regard to a policy similar to this Policy, a ruling from the
Service that it, and not its Owners, is the owner of the assets of the separate
account there involved for federal income tax purposes. The Service informed the
Company that it will not rule on the request until issuance of the promised
guidance referred to in the preceding paragraph. Because the Company 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, the Company has
reserved the right to modify its practices to attempt to prevent the Owner from
being considered the owner of the assets of Account 4.
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.
<PAGE>
An Owner who is not a natural person -- that is, an entity such as a corporation
or a trust -- generally is taxable currently on the annual increase in the
Account Value of a Non-Qualified Policy, unless an exception to this general
rule applies. Exceptions exist for, among other things, an Owner which is not a
natural person but which holds the Policy as an agent for a natural person. The
following discussion applies to Policies owned by natural persons.
In addition, if the Policy's Maturity Date occurs at a time when the Annuitant
is at an advanced age, such as over age 85, it is possible that the Owner will
be taxable currently on the annual increase in the Account Value.
Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon the Policy's partial or full surrender. Any amount so
distributed upon a partial surrender is includible in income to the extent that
the Account Value immediately before the partial surrender exceeds the
"investment in the contract" at that time. The amount distributed upon a full
surrender is includible in income to the extent that the Policy's Surrender
Value exceeds the investment in the contract at the time of surrender. For these
purposes, the investment in the contract at any time equals the total of the
Premium Payment made for a Policy to that time, less any amounts previously
received from the Policy which were not included in income.
If an Owner transfers a Policy without adequate consideration to a person other
than the Owner's spouse (or to a former spouse incident to divorce), the Owner
will be taxed on the difference between his or her Account Value and the
investment in the contract at the time of transfer. In such case, the
transferee's investment in the contract will be increased to reflect the
increase in the transferor's income.
In addition, the Policy provides a Death Benefit that in certain circumstances
may exceed the greater of the Premium Payments and the Account Value. As
described elsewhere in this Prospectus, the Company imposes certain charges with
respect to the Death Benefit. It is possible that some portion of those charges
could be treated for federal tax purposes as a partial surrender of the Policy.
All non-qualified annuity contracts which are issued after October 21, 1988 by
the Company or any of its affiliates with the same person designated as the
Owner within the same calendar year will be aggregated and treated as one
contract for purposes of determining any tax on distributions.
The foregoing rules will apply to amounts distributed in connection with the
waiver of surrender charges in the event of terminal illness or hospital or
nursing facility confinement.
Taxation of Annuity Payments. Amounts may be distributed from a Non-Qualified
Policy as payments under one of the five optional payment plans. In the case of
optional payment plans other than Plan 4 (Interest Income), typically a portion
of each payment is includible in income when it is distributed. Normally, the
portion of a payment includible in income equals the excess of the payment over
the exclusion amount. The exclusion amount, in the case of Variable Income
Payments under Plans 1 and 5, is the amount determined by dividing the
"investment in the contract" allocated to that plan for the Policy when the
payments begin to be made (as defined above), adjusted for any period-certain or
refund feature, by the number of payments expected to be made (determined by
Treasury Department regulations). Also, in the case of Fixed Income Payments
under Plans 1, 2, 3, and 5, the exclusion amount is the amount determined by
multiplying the payment by the ratio of such investment in the contract
allocated to that plan, adjusted for any period-certain or refund feature, to
the Policy's "expected return" (determined under Treasury Department
regulations). However, payments which are received after the investment in the
contract has been fully recovered -- i.e., after the sum of the excludable
portions of the payments equal the investment in the contract -- will be fully
includible in income. On the other hand, should the payments cease because of
the death of the Annuitant before the investment in the contract has been fully
recovered, the Annuitant (or, in certain cases, the Designated Beneficiary) is
allowed a deduction for the unrecovered amount.
If certain amounts such as the Death Benefit or Guaranteed Minimum Death Benefit
become payable in a lump sum from a Policy, it is possible that such amounts
might be viewed as constructively received and thus subject to tax, even though
not actually received. A lump sum will not be constructively received if it is
applied under an optional payment plan within 60 days after the date on which it
becomes payable. (Any optional payment plan selected must comply with applicable
minimum distribution requirements imposed by the Code.)
In the case of Plan 4, the proceeds left with the Company are considered
distributed for tax purposes at the time Plan 4 takes effect, and are taxed in
the same manner as a full surrender of the Policy, as described above. The
periodic interest payments are includible in the recipient's income when they
are paid or made available. In addition, if amounts are applied under Plan 3
when the payee is at an advanced age, such as age 80 or older, it is possible
that such amounts would be treated in a manner similar to that under Plan 4.
<PAGE>
Taxation of Systematic Withdrawals. In the case of Systematic Withdrawals,
described on page 28, the amount of each withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy,
as described above. However, there is some uncertainty regarding the tax
treatment of Systematic Withdrawals, and it is possible that additional amounts
may be includible in income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before the
Maturity Date from a Non-Qualified Policy because of the death of the Owner, a
Joint Owner, or the Annuitant. Such Death Benefit Proceeds are includible in the
income of the recipient as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a full surrender of the Policy, as described above
(substituting the Death Benefit Proceeds for the Surrender Value), or (2) if
distributed under an optional payment plan, they are taxed in the same manner as
annuity payments, as described above.
Penalty Tax on Premature Distributions. Subject to certain exceptions, a penalty
tax is also imposed on the foregoing distributions from a Non-Qualified Policy,
equal to 10 percent of the amount of the distribution that is includible in
income. The exceptions provide, however, that this penalty tax does not apply to
distributions made (1) on or after the recipient attains age 59-1/2, (2) because
the recipient has become disabled (as defined in the tax law), (3) on or after
the death of the Owner, or if such Owner is not a natural person, on or after
the death of the primary annuitant under the Policy (as defined in the tax law),
or (4) as part of a series of substantially equal periodic payments over the
life (or life expectancy) of the recipient or the joint lives (or life
expectancies) of the recipient and his or her designated beneficiary (as defined
in the tax law). In the case of Systematic Withdrawals, it is uncertain whether
such distributions will qualify for exception (4) above. If Systematic
Withdrawals did qualify for this exception, any modification of the Systematic
Withdrawals could result in certain adverse tax consequences. In addition, a
transfer between Investment Subdivisions may result in payments not qualifying
for exception (4) above.
Assignments. An assignment or pledge of (or an agreement to assign or pledge) a
Non-Qualified Policy is taxed in the same manner as a partial surrender, as
described above, to the extent of the value of the Policy so assigned or
pledged. The investment in the contract is increased by the amount includible as
income with respect to such assignment or pledge, though it is not affected by
any other amount in connection with the assignment or pledge (including its
release).
Loss of Interest Deduction Where Policies are Held by or for the Benefit of
Certain Non-Natural Persons. In the case of Policies issued after June 8, 1997
to a non-natural taxpayer (such as a corporation or a trust), or held for the
benefit of such an entity, otherwise deductible interest may no longer be
deductible by the entity, regardless of whether the interest relates to debt
used to purchase or carry the Policy. However, this interest deduction
disallowance does not affect Policies where the income on such Policies is
treated under section 72(u) of the Code as ordinary income that is received or
accrued by the Owner during the taxable year. Entities that are considering
purchasing the Policy, or entities that will be beneficiaries with respect to a
Policy, should consult a tax advisor.
Qualified Policies
The following sections describe tax considerations of Policies used as
Individual Retirement Annuities or other qualified retirement plans ("Qualified
Policies"). The Company does not currently offer all of the types of Qualified
Policies described, and may not offer them in the future. Prospective purchasers
of Qualified Policies should therefore contact the Company's Home Office to
ascertain the availability of Qualified Policies at any given time.
IRA Policies
Premium Payments. A Policy that meets certain requirements set forth in the tax
law may be used as an individual retirement annuity (i.e., an "IRA Policy").
Both the amount of the Premium Payments that may be paid, and the tax deduction
that the Owner may claim for such Premium Payments, are limited under an IRA
Policy.
In general, the Premium Payments that may be made for any IRA Policy for any
year are limited to the lesser of $2,000 or 100 percent of the individual's
earned income for the year. Also, with respect to an individual who has less
income than his or her spouse, Premium Payments may be made by that individual
to an IRA Policy to the extent of the lesser of (1) $2,000, or (2) the sum of
(i) the compensation includible in such individual's gross income for the
taxable year and (ii) the compensation includible in the gross income of the
individual's spouse for the taxable year reduced by the amount allowed as a
deduction for IRA contributions to such spouse. An excise tax is imposed on IRA
contributions that exceed the law's limits.
The deductible amount of the Premium Payments made for an IRA Policy for any
taxable year is limited to the amount of the Premium Payments that may be paid
for the Policy for that year. Furthermore, a single person who is an active
participant in a qualified retirement plan (that is, a qualified pension,
profit-sharing, or annuity plan, a simplified employee pension plan, a "SIMPLE"
retirement account, or a "section 403(b)" annuity plan, as discussed below) and
who has adjusted gross income in excess of $40,000 may not deduct Premium
Payments, and such a person with adjusted gross income between $30,000 and
$40,000 may deduct only a portion of such payments. Also, married persons who
file a joint return, one of whom is an active participant in a qualified
retirement plan, and who have adjusted gross income in excess of $60,000 may not
deduct Premium Payments, and those with adjusted gross income between $50,000
and $60,000 may deduct only a portion of such payments. Additional rules may
apply.
In applying these and other rules applicable to an IRA Policy, all individual
retirement accounts and annuities owned by an individual are treated as one
contract, and all amounts distributed during any taxable year are treated as one
distribution.
<PAGE>
Tax Deferral During Accumulation Period. Until distributions are made from an
IRA Policy, increases in the Account Value of the Policy are not taxed.
IRA Policies generally may not provide life insurance coverage, but they may
provide a death benefit that equals the greater of the premiums paid and the
contract value. The Policy provides a Death Benefit that in certain
circumstances may exceed the greater of the Premium Payments and the Account
Value. It is possible that the Policy's Death Benefit provisions could be viewed
as violating the prohibition on investment in life insurance contracts with the
result that the policy would not be viewed as satisfying the requirements of an
IRA Policy.
Taxation of Distributions and Rollovers. If all Premium Payments made to an IRA
Policy were deductible, all amounts distributed from the Policy are included in
the recipient's income when distributed. However, if nondeductible Premium
Payments were made to an IRA Policy (within the limits allowed by the tax law),
a portion of each distribution from the Policy typically is included in income
when it is distributed. In such a case, any amount distributed as an annuity
payment or in a lump sum upon death or a full surrender is taxed as described
above in connection with such a distribution from a Non-Qualified Policy,
treating as the investment in the contract the sum of the nondeductible Premium
Payments at the end of the taxable year in which the distribution commences or
is made (less any amounts previously distributed that were excluded from
income). Also in such a case, any amount distributed upon a partial surrender is
partially includible in income. The includible amount is the excess of the
distribution over the exclusion amount which in turn equals the distribution
multiplied by the ratio of the investment in the contract to the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a qualified
retirement plan to an IRA Policy (or from one individual retirement annuity or
individual retirement account to an IRA Policy) without incurring tax if certain
conditions are met. Only certain types of distributions from qualified
retirement plans or individual retirement annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also imposed on
distributions from an IRA Policy equal to 10 percent of the amount of the
distribution includible in income. (Amounts rolled over from an IRA Policy
generally are excludable from income.) The exceptions provide, however, that
this penalty tax does not apply to distributions made (1) on or after age 59
1/2, (2) on or after death or because of disability (as defined in the tax law),
or (3) as part of a series of substantially equal periodic payments over the
life (or life expectancy) of the recipient or the joint lives (or joint life
expectancies) of the recipient and his or her designated beneficiary (as defined
in the tax law). In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of 50
percent of the amount by which a minimum required distribution exceeds the
actual distribution from an IRA Policy. Under this requirement, distributions of
minimum amounts from an IRA Policy as specified in the tax law must commence by
April 1 of the calendar year following the calendar year in which the Annuitant
attains age 70 1/2, or when he or she retires, whichever is later. Further,
after 1988, such distributions generally must begin by April 1 of the calendar
year in which the employee attains age 70 1/2 regardless of whether he or she
has retired.
Roth IRAs
Recently enacted Section 408A of the Code permits eligible individuals to
contribute to a type of IRA Policy known as a "Roth IRA." Roth IRAs differ from
other IRA Policies in several respects. Among the differences is that, although
Premium Payments to a Roth IRA are not tax deductible, "qualified distributions"
from a Roth IRA will be excludable from income. Additionally, the eligibility
and mandatory distribution requirements for Roth IRAs differ from non-Roth IRA
Policies.
Premium Payments. The maximum amount of contributions allowable for any taxable
year to all Roth IRAs maintained for an individual (the "contribution limit")
generally is the lesser of $2,000 and 100% of compensation for the taxable year.
The contribution limit is reduced by the amount of any deductible and
non-deductible contributions to a non-Roth IRA Policy. For individuals who file
a joint return and receive less compensation for the taxable year than their
spouse, special rules apply.
For taxpayers with adjusted gross incomes in excess of certain limits, no
contribution (or only a reduced contribution) to a Roth IRA is allowed. For
married individuals filing a joint return, the contribution limit is phased out
for adjusted gross incomes between $150,000 and $160,000. (Special rules apply
to married individuals filing separate returns.) For single individuals, the
contribution limit is phased out for adjusted gross incomes between $95,000 and
$110,000.
Rollovers. A rollover may be made to a Roth IRA only if it is a "qualified
rollover contribution." A "qualified rollover contribution" is a rollover
contribution to a Roth IRA from another Roth IRA or from a non-Roth IRA Policy,
but only if such rollover contribution meets the rollover requirements for IRA
Policies under section 408(d)(3) of the Code. In addition, a transfer may be
made to a Roth IRA directly from another Roth IRA or from a non-Roth IRA Policy.
Persons with adjusted gross incomes in excess of $100,000 or who are married and
file a separate return are not eligible to make a qualified rollover
contribution or a transfer in a taxable year from a non-Roth IRA Policy to a
Roth IRA.
<PAGE>
In the case of a qualified rollover contribution or a transfer from a non-Roth
IRA Policy to a Roth IRA, any portion of the amount rolled over which would be
includible in gross income were it not part of a qualified rollover contribution
or a nontaxable transfer will be includible in gross income. However, the 10
percent penalty tax on premature distributions generally will not apply. If such
a rollover occurs before January 1, 1999, any portion of the amount rolled over
which is required to be included in gross income must be included ratably over
the 4-taxable year period beginning with the taxable year in which the rollover
is made.
Conversions. All or part of amounts in a non-Roth IRA Policy may be converted
into a Roth IRA. Such a conversion can be made without taking an actual
distribution from the IRA Policy. For example, an individual may make a
conversion by notifying the IRA Policy issuer or trustee, whichever is
applicable. The conversion of an IRA Policy to a Roth IRA is a special type of
qualified rollover contribution. Hence, the IRA Policy participant must be
eligible to make a qualified rollover contribution in order to convert an IRA
Policy to a Roth IRA. A conversion typically will result in the inclusion of
some or all of the IRA Policy value in gross income, as described above.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLLOVER, TRANSFER, OR
CONVERT ALL OR PART OF A NON-ROTH IRA POLICY TO A ROTH IRA. WHETHER AN OWNER
SHOULD DO SO WILL DEPEND ON THE IRA POLICY OWNER'S PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, SUCH FACTORS AS WHETHER THE OWNER
IS QUALIFIED TO MAKE SUCH A ROLLOVER, TRANSFER, OR CONVERSION, HIS OR HER
FINANCIAL SITUATION, AGE, CURRENT AND FUTURE INCOME NEEDS, YEARS TO RETIREMENT,
CURRENT AND FUTURE TAX RATES, AND ABILITY AND DESIRE TO PAY CURRENT INCOME TAXES
WITH RESPECT TO AMOUNTS ROLLED OVER, TRANSFERRED, OR CONVERTED, AND WHETHER SUCH
TAXES MIGHT NEED TO BE PAID WITH WITHDRAWALS FROM THE OWNER'S ROTH IRA (SEE
DISCUSSION BELOW OF "NONQUALIFIED DISTRIBUTIONS" AND "PENDING LEGISLATION").
PERSONS CONSIDERING A ROLLOVER, TRANSFER, OR CONVERSION SHOULD CONSULT A
QUALIFIED TAX ADVISOR.
Qualified Distributions. Any "qualified distribution" from a Roth IRA is
excludible from gross income. A "qualified distribution" is a payment or
distribution which satisfies two requirements. First, the payment or
distribution must be (a) made after the Owner attains age 59 1/2, (b) made after
the Owner's death, (c) attributable to the Owner being disabled, or (d) a
qualified first-time homebuyer distribution within the meaning of section
72(t)(2)(F) of the Code. Second, the payment or distribution must be made in a
taxable year that is at least five years after (a) the first taxable year for
which a contribution was made to any Roth IRA established for the Owner, or (b)
in the case of a payment or distribution properly allocable to a qualified
rollover contribution from a non-Roth IRA Policy (or income allocable thereto),
the taxable year in which the rollover contribution was made.
Nonqualified Distributions. A distribution from a Roth IRA which is not a
qualified distribution is generally taxed in the same manner as a distribution
from a non-Roth IRA Policy. However, such a distribution will be treated as made
first from contributions to the Roth IRA to the extent that such distribution,
when added to all previous distributions from the Roth IRA, does not exceed the
aggregate amount of contributions to the Roth IRA. Generally, all Roth IRAs are
aggregated to determine the tax treatment of distributions.
Mandatory Distributions. Distributions of minimum amounts from a Roth IRA need
not commence at age 70 1/2. However, if the Owner dies before the entire
interest in a Roth IRA is distributed, any remaining interest in the Policy must
be distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, subject to certain exceptions.
As described in "Federal Tax Matters," there is some uncertainty regarding the
proper characterization of the Policy's death benefit for purposes of the tax
rules governing IRA Policies (which include Roth IRAs). Additionally, the
foregoing discusses the federal income tax consequences surrounding Roth IRAs
and does not address any state income tax consequences that may apply. Persons
intending to use the Policy in connection with a Roth IRA should seek competent
advice regarding these issues.
Pending Legislation. Pending legislation may modify these rules retroactively to
January 1, 1998.
Simplified Employee Pension Plans
An employer may use a Policy to establish for an employee an individual
retirement annuity plan known as a "simplified employee pension plan" (or
"SEP"), if certain requirements set forth in the tax law are satisfied. Premium
Payments may be made into a Policy used in a SEP generally in accordance with
the rules applicable to individual retirement annuities, though with expanded
contribution limits. Such payments are deductible by the employer and are not
includible in the income of the employee. The taxation of distributed amounts
generally follows the rules applicable to individual retirement annuities. As
discussed above (See IRA Policies), there is some uncertainty regarding the
proper characterization of the Policy's Death Benefit provisions for purposes of
certain tax rules governing IRAs (which would include SEP IRAs). Employers
intending to use the Policy in connection with a SEP should seek competent tax
advice.
SIMPLE IRAs
Section 408(p) of the Code permits certain small employers to establish "SIMPLE
retirement accounts," including SIMPLE IRAs, for their employees. Under SIMPLE
IRAs, certain deductible contributions are made by both employees and employers.
SIMPLE IRAs are subject to various requirements, including limits on the amounts
that may be contributed, the persons who may be eligible, and the time when
distributions may commence. As discussed above (See IRA Policies), there is some
uncertainty regarding the proper characterization of the Policy's Death Benefit
provisions for purposes of certain tax rules governing IRAs (which would include
SIMPLE IRAs). Employers intending to use the Policy in connection with a SIMPLE
retirement account should seek competent tax advice.
<PAGE>
Section 403(b) Annuities
Premium Payments. Premiums paid for a Policy on behalf of an employee by a
public educational institution or certain other tax-exempt employers are not
included in the employee's income if the Policy meets certain requirements set
forth in the tax law. There are a number of limitations on contributions to a
"Section 403(b) Policy". For example, Premium Payments made as elective
deferrals through a salary reduction agreement with an employee generally are
limited to $9,500 per year (or, if greater, $7,000 per year as adjusted by the
Service for cost of living increases). (Note that contributions to certain other
qualified retirement plans, such as Section 401(k) plans or to SEP plans, by the
Owner may reduce these limits on elective deferrals.) Other limitations may be
more restrictive.
In applying these and other rules applicable to a Section 403(b) Policy, that
Policy and all similar contracts purchased by the same employer for the same
employee are treated as one contract.
Tax Deferral During Accumulation Period. Until distributions are made from a
Section 403(b) Policy, increases in the Account Value are not taxed.
Purchasers should consider that the Policy provides a Death Benefit that in
certain circumstances may exceed the greater of the Premium Payments and the
Account Value. It is possible that such Death Benefit could be characterized as
an incidental death benefit. If the Death Benefit were so characterized, this
could result in currently taxable income to purchasers. In addition, there are
limitations on the amount of incidental death benefits that may be provided
under a Section 403(b) Policy. Even if the Death Benefit under the Policy were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her Section 403(b) Policy.
Taxation of Distributions and Rollovers. If no portion of the premiums paid into
a Section 403(b) Policy were includible in the employee's income, all amounts
distributed from the Policy are included in the recipient's income when
distributed. However, if Premium Payments were made to a Section 403(b) Policy
which were includible in the employee's income, a portion of each distribution
from the Policy typically is included in income when it is distributed. In such
a case, any amount distributed as an annuity payment or in a lump sum upon death
or a full surrender is taxed as described above in connection with such a
distribution from a Non-Qualified Policy, treating as the investment in the
contract the sum of the Premium Payments made into the Policy which were not
excluded from income as of the time the distribution commences or is made (less
any amounts previously distributed that were excluded from income). Also in such
a case, any amount distributed upon a partial surrender is partially includible
in income. The includible amount is the excess of the distribution over the
exclusion amount, which in turn equals the distribution multiplied by the ratio
of the investment in the contract to the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be rolled over from a Section 403(b)
Policy (or similarly qualifying contract) to another Section 403(b) Policy (or
similarly qualifying contract) or to an individual retirement account or
individual retirement annuity without incurring tax if certain conditions are
met. Only certain types of distributions may be rolled over.
Beginning in 1989, a Section 403(b) Policy is required to prohibit distributions
of amounts attributable to elective deferrals and earnings thereon (made under a
salary reduction agreement) prior to age 59 1/2, separation from service, death
or disability. Distributions of elective deferrals (but not any income earned
thereon) may nonetheless be permitted in the case of hardship.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also imposed on
distributions from a Section 403(b) Policy equal to 10 percent of the amount of
the distribution includible in income. (Amounts rolled over from a Section
403(b) Policy generally are excludable from income, although various withholding
requirements may nonetheless apply to such amounts, as discussed below). The
exceptions provide, however, that this penalty tax does not apply to
distributions made (1) on or after age 59 1/2, (2) on or after death or because
of disability (as defined in the tax law), (3) as part of a series of
substantially equal periodic payments beginning after the employee separates
from service and made over the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary (as defined in the tax law), or (4) after separation from
service after attainment of age 55.
In addition to the foregoing, failure to comply with a minimum distribution
requirement will result in the imposition of a penalty tax of 50 percent of the
amount by which a minimum required distribution exceeds the actual distribution
from a Section 403(b) Policy. Under this requirement, distributions of minimum
amounts specified by the tax law must generally commence by April 1 of the
calendar year following the calendar year in which the employee attains age 70
1/2, or when he or she retires, whichever is later.
Deferred Compensation Plans of State and Local Governments and Tax-Exempt
Organizations
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. Generally, a Policy purchased by a state or local government
or a tax-exempt organization will not be treated as an annuity contract for
federal income tax purposes. Those who intend to use the Policies in connection
with such plans should seek competent tax advice.
<PAGE>
Other Qualified Retirement Plans
Premium Payments. Premium Payments made by an employer for a Policy used in
connection with a pension, profit-sharing, or annuity plan qualified under
section 401 or 403(a) of the Code are deductible by the employer within certain
limits. Such payments are also excludable from the income of the employee within
certain limits.
Tax Deferral and Taxation of Distributions. The deferral of taxation on Account
Value increases and the tax treatment of distributed amounts (including the
penalty tax) described above in the case of IRA Policies and Section 403(b)
Policies generally applies with respect to amounts held under or distributed
from Policies used in connection with other qualified retirement plans. For
Policies and amounts distributed therefrom to be eligible for such treatment,
certain requirements specified in the tax law must be satisfied.
The Policy provides a Death Benefit that in certain circumstances may exceed the
greater of the Premium Payments and the Account Value. It is possible that such
Death Benefit could be characterized as an incidental death benefit. There are
limitations on the amount of incidental death benefits that may be provided
under pension and profit sharing plans. In addition, the cost of providing such
benefits may be currently includible in income.
Legal and Tax Advice for Qualified Plans
The requirements of the tax law applicable to qualified retirement plans, and
the tax treatment of amounts held and distributed under such plans, are quite
complex. Accordingly, a prospective purchaser of a Policy to be used in
connection with any such plan should seek competent legal and tax advice
regarding the suitability of the Policy for the situation involved, the
applicable requirements, and the treatment of the rights and benefits under a
Policy so used.
Direct Rollover and Mandatory Withholding Requirements
If a Policy is used in connection with a pension, profit-sharing, or annuity
plan qualified under sections 401(a) or 403(a) of the Code, or is a Section
403(b) Policy, any "eligible rollover distribution" from the Policy will be
subject to direct rollover and mandatory withholding requirements. An eligible
rollover distribution generally is any taxable distribution from a qualified
pension plan under section 401(a) of the Code, qualified annuity plan under
section 403(a) of the Code, or section 403(b) annuity or custodial account,
excluding certain amounts (such as minimum distributions required under section
401(a)(9) of the Code and distributions which are part of a "series of
substantially equal periodic payments" made for the life or a specified period
of 10 years or more). Under these requirements, withholding at a rate of 20
percent will be imposed on any eligible rollover distribution received from the
Policy. Unlike withholding on certain other amounts distributed from the Policy,
discussed below, the recipient cannot elect out of withholding with respect to
an eligible rollover distribution. However, this 20 percent withholding will not
apply if, instead of receiving the eligible rollover distribution, the plan
participant elects to have it directly transferred to certain qualified
retirement plans. Prior to receiving an eligible rollover distribution, the plan
participant will receive notice (from the plan administrator or the Company)
explaining generally the direct rollover and mandatory withholding requirements
and how to avoid the 20 percent withholding by electing a direct transfer.
Federal Income Tax Withholding
Amounts distributed from a Policy, to the extent includible in income under the
federal tax laws, are subject to federal income tax withholding. The Company
will withhold and remit a portion of such amounts to the U.S. Government unless
properly notified by the Owner or other payee, at or before the time of the
distribution, that he or she chooses not to have any amounts withheld. In some
instances, however, the Company may be required to withhold amounts. (See the
discussion above regarding withholding requirements applicable to distributions
from various qualified retirement plans including Section 403(b) policies.)
GENERAL PROVISIONS
The Owner
The Owner or Joint Owners are designated in the policy. (Joint Owners own the
Policy equally with the right of survivorship.) The Owner or Joint Owners may
exercise all of the rights and privileges under the Policy, subject to the
rights of any beneficiary named irrevocably, and any assignee under an
assignment filed with the Company. Disposition of the Policy is subject to the
Policy's death provisions (See Death Provisions). If the Owner dies before the
Annuitant, the Designated Beneficiary will become the sole owner of the Policy
following such a death, subject to the distribution rules in the Policy's death
provisions. If the Owner does not name a Joint Owner or a primary beneficiary or
contingent Beneficiary, or if a Joint Owner or primary beneficiary or contingent
Beneficiary is not living (or in existence for purposes of non-natural
designations) at the Owner's death, ownership will pass to the Owner's estate.
The Designated Beneficiary, for purposes of the required distribution rules of
Section 72(s) of the Code, will receive the required distribution if the Owner
dies prior to the Maturity Date. The required distribution is more fully
described in Death Provisions.
<PAGE>
The Annuitant
The Policy names the Owner or someone else as the Annuitant. A contingent
Annuitant also may be named. If no contingent Annuitant has been named, the
Owner shall be treated as the contingent Annuitant at the death of the
Annuitant. The Company reserves the right to restrict the election of the
contingent Annuitant to conform to its administrative procedures and within the
restrictions of federal and state law. At the death of the Annuitant prior to
the Maturity Date, the contingent Annuitant, if any, may become the Annuitant in
certain circumstances (See Death Provisions).
The Beneficiary
One or more primary and contingent Beneficiary(ies) may be designated by the
Owner in an application or in a written request. If changed, the primary
beneficiary or contingent Beneficiary is as shown in the latest change filed
with the Company.
Changes By the Owner
Prior to the Maturity Date and during the Annuitant's life, the Owner or Joint
Owner may be changed by written request to the Home Office if this right is
reserved. Such changes may give rise to taxable income and a 10% penalty tax.
(See Taxation of Partial and Full Surrenders.) The primary Beneficiary,
contingent Beneficiary and contingent Annuitant may also be changed if this
right is reserved.
To make a change, a written request must be sent to the Company at its Home
Office. The request and the change must be in a form satisfactory to the Company
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 the Company.
Evidence of Death, Age, Sex or Survival
The Company will require proof of death before it acts on Policy provisions
relating to the death of the Owner or other person(s). The Company may also
require proof of the age, sex or survival of any person or persons before acting
on any applicable Policy provision.
Joint Policy
The Policy may be purchased as a Joint Policy. In making this selection, the
Owner must name an Annuitant and contingent Annuitant. The Owner must also
relinquish any right to change the contingent Annuitant. An additional
contingent Annuitant may not be named if the Annuitant or contingent Annuitant
dies before the Maturity Date.
Under a Joint Policy, if both the Annuitant and contingent Annuitant are alive
at the Maturity Date, proceeds will be paid in the form of Variable Income
Payments under Optional Payment Plan 5, Joint Life and Survivor Income, using
the sexes, if permitted, and ages nearest birthday of the Annuitant and
contingent Annuitant. If only one is surviving at the Maturity Date, then
proceeds will be paid in the form of Variable Income Payments under Optional
Payment Plan 1, Life Income with 10 Years Certain, using the sex, if permitted,
and settlement age of such survivor.
Payment under the Policies
The Company will usually pay any amounts payable as a result of full or partial
surrender within seven days after it receives a written request at its Home
Office in a form satisfactory to it. The Company will usually pay any Death
Benefit within seven days after it receives Due Proof of Death. Amounts payable
as a result of full or partial surrender, death of the Annuitant or the Maturity
Date may be postponed whenever: (i) the New York Stock Exchange is closed other
than customary weekend and holiday closings, or trading on the New York Stock
Exchange is restricted as determined by the Commission; or (ii) the Commission
by order permits postponement for the protection of Owners; or (iii) an
emergency exists, as determined by the Commission, as the result of which
disposal of securities is not reasonably practicable or it is not reasonably
practicable to determine the value of the net assets of Account 4.
Payments under a Policy which are derived from any amount paid to the Company by
check or draft may be postponed until such time as the Company is satisfied that
the check or draft has cleared the bank upon which it is drawn.
If, at the time the Owner makes a full or partial surrender request, he or she
has not provided the Company with a written election not to have federal income
taxes withheld, the Company must by law withhold such taxes and remit that
amount to the federal government. Moreover, the Code provides that a 10% penalty
tax will be imposed on certain early surrenders. (See Federal Tax Matters.)
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 the Company, 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.
<PAGE>
DISTRIBUTION OF THE POLICIES
Capital Brokerage Corporation (doing business in Indiana, Minnesota, New Mexico,
and Texas as GE Capital Brokerage Corporation) ("Capital Brokerage") is the
distributor and principal underwriter of the Policies. Capital Brokerage, a
Washington corporation and an affiliate of the Company, is located at 6630 W.
Broad St., Richmond, Virginia 23230.
The Policies will be sold by properly licensed registered representatives of
independent broker-dealers which in turn have selling agreements with Capital
Brokerage Corporation and have been licensed by state insurance departments to
represent us. The Policy also will be sold by properly licensed registered
representatives of Capital Brokerage. Capital Brokerage is registered with the
SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member
of the National Association of Securities Dealers, Inc. (NASD). The Company will
offer Policies in all states where it is licensed to do business.
COMMISSIONS
Writing agents of the Company will receive commissions based on a commission
schedule and rules. The agents will receive a maximum commission of 3% of the
initial Premium Payment and any Additional Premium Payment.
Agents may also be eligible to receive certain bonuses and allowances, as well
as retirement plan credits, based on commissions earned. Field management of the
Company 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 the Company.
VOTING RIGHTS AND REPORTS
To the extent required by law, the Company will vote the Funds' shares held in
Account 4 at regular and special shareholder meetings of the Funds, in
accordance with instructions received from persons having voting interests in
Account 4. If, however, the 1940 Act or any regulation thereunder should be
amended or if the present interpretation thereof should change, and as a result,
the Company determines that it is permitted to vote Fund shares in its own
right, it may elect to do so.
Before Income Payments begin, the Owner exercises the voting rights under the
Policy. After Income Payments begin, the person receiving the Income Payments
has the voting interests. Before Income Payments begin, the number of votes
which each Owner has the right to instruct will be determined for a portfolio by
dividing a Policy's Account Value in the subdivision investing in that portfolio
by the net asset value per share of the portfolio. Fractional shares will be
counted. After Income Payments begin, the number of votes after the first Income
Payment is received will be determined by dividing the reserve for such Policy
allocated to the Investment Subdivision by the net asset value per share of the
corresponding portfolio. After Income Payments begin, the reserves attributable
to a Policy decrease as the reserves allocated to the Investment Subdivision
decrease. Fractional shares will be counted.
The number of votes which the Owner has the right to instruct will be determined
as of the date coincident with the date established by a particular Fund for
determining shareholders eligible to vote at the meeting of that Fund. Voting
instructions will be solicited by written communications prior to such meeting
in accordance with procedures established by that Fund.
The Funds serve as investment vehicles for variable life insurance policies sold
by the Company as well as for other variable life insurance and variable annuity
policies sold by insurers other than the Company 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. The Company will vote Fund shares held in Account 4 as to
which no timely instructions are received, and Fund shares held in Account 4
that it owns as a consequence of accrued charges under the Policies and other
variable annuity policies supported by Account 4, in proportion to the voting
instructions which are received with respect to all policies funded through
Account 4. Each person having a voting interest will receive proxy materials,
reports and other materials relating to the appropriate portfolio.
YEAR 2000 COMPLIANCE
Like all financial services providers, we utilize computer systems that may be
affected by Year 2000 date data processing issues and we also rely on service
providers, including banks, custodians, administrators, and investment managers
that also may be affected. We are engaged in a process to evaluate and develop
plans to have our computer systems and critical applications ready to process
Year 2000 date data. We also are confirming that our service providers are so
engaged. The resources that are being devoted to this effort are substantial.
Further, it is anticipated that we will spend approximately $2-5 million on this
conversion. Remedial actions include inventorying our computer systems,
applications and interfaces, assessing the impact of 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 or existing
software which are Year 2000 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 us 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 transition implementation. Our target dates
for completion of these activities depend upon the particular situation. Our
goal is to be substantially Year 2000 ready for critical applications on or
about mid-1999, but there can be no assurance that we will be successful, or
that interaction with other service providers will not impair our services at
that time.
<PAGE>
If we are not successful in our Year 2000 transition, implementation or
interaction with other service providers is impaired, it is possible that we
could encounter difficulty and/or delays in calculating unit values, redeeming
shares, delivering account statements and providing other information,
communication and servicing to our policyowners. In light of our current efforts
to address this issue, we do not consider the likelihood of such occurrences to
be very high.
<PAGE>
LEGAL PROCEEDINGS
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on Account 4 or the Company.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
The Policies................................................................ 3
Transfer of Annuity Units................................................... 3
Net Investment Factor....................................................... 3
Termination of Participation Agreements..................................... 4
Calculation of Performance Data............................................. 4
Money Market Investment Subdivisions........................................ 4
Other Investment Subdivisions............................................... 5
Federal Tax Matters......................................................... 9
Taxation of The Company..................................................... 9
IRS Required Distributions.................................................. 9
General Provisions.......................................................... 9
Using the Policies as Collateral............................................ 9
Non-Participating........................................................... 9
Misstatement of Age or Sex.................................................. 9
Incontestability............................................................ 10
Statement of Values......................................................... 10
Written Notice.............................................................. 10
Legal Developments Regarding Employment-Related Benefit Plans............... 10
Additions, Deletions, or Substitutions...................................... 10
Legal Matters............................................................... 11
Experts..................................................................... 11
Change in Auditors.......................................................... 11
Financial Statements........................................................ 11
</TABLE>
Dated October __, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
A Statement of Additional Information containing more detailed information about
the Policy and Account 4 is available free by writing the Company at the address
above or by calling (800) 352-9910.
<PAGE>
SUPPLEMENT TO PROSPECTUS
FOR LIFE OF VIRGINIA SEPARATE ACCOUNT 4
General Information
Contributions and/or transfers to a Guarantee Account, as described below,
become part of the General Account of the Company. Because of exemptive and
exclusionary provisions, interests in the General Account have not been
registered under the Securities Act of 1933 (the "1933 Act"), and the General
Account is not registered as an investment company under the Investment Company
Act of 1940 (the "1940 Act"). Accordingly, neither the General Account nor any
interests therein are subject to the provisions of the 1933 Act or the 1940 Act,
and the information in this supplement has not been reviewed by the staff of the
Securities and Exchange Commission. Disclosure regarding a Guarantee Account and
the General Account, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
The Guarantee Account
The Owner may allocate premium payments to the Guarantee Account(s) or transfer
amounts between the Guarantee Account(s) and the Investment Subdivisions of
Account 4. Upon maturity or surrender of the Policy, any amount in a Guarantee
Account is added to the Account Value in Account 4, and, after deduction of any
applicable surrender charge, is paid in a lump sum, or applied under an optional
payment plan (See Income payments).
Each time a Policyowner allocates purchase payments or transfers funds to the
Guarantee Account, the Company establishes an interest rate guarantee period.
Each interest rate guarantee period is guaranteed an interest rate for a
specified period of time (the available interest rate guarantee periods are
shown in your policy form). At the end of the interest rate guarantee period, a
new interest rate will become effective, and a new interest rate guarantee
period will commence for any remaining portion of that particular allocation.
Interest rates are determined by the Company in its sole discretion. The
determination made will be influenced by, but not necessarily correspond to,
interest rates available on fixed income investments which the Company may
acquire with the amounts it receives as premium payments or transfers of Account
Value under the Policies. A Policyowner will have no direct or indirect interest
in these investments. The Company will also consider other factors in
determining the interest rates for the interest rate guarantee period,
including, but not limited to, regulatory and tax requirements, sales
commissions, and administrative expenses borne by the Company, general economic
trends, and competitive factors. Amounts allocated to the Guarantee Account will
not share in the investment performance of the General Account of the Company,
or any portion thereof. THE COMPANY'S MANAGEMENT WILL MAKE THE FINAL
DETERMINATION OF THE INTEREST RATES IT DECLARES FOR AN INTEREST RATE GUARANTEE
PERIOD. THE COMPANY CANNOT PREDICT OR GUARANTEE THE LEVEL OF INTEREST RATES IN
FUTURE INTEREST RATE GUARANTEE PERIODS. HOWEVER, THE INTEREST RATES FOR ANY
INTEREST RATE GUARANTEE PERIOD WILL BE AT LEAST THE GUARANTEED INTEREST RATE
SHOWN IN YOUR POLICY FORM.
The Company reserves the right to credit bonus interest on premium allocated to
a Guarantee Account participating in a Dollar-Cost Averaging program. (This may
not be available to all classes of policies.)
Charges
The Mortality and Expense Risk and Administrative Expense charges are not
deducted from the Guarantee Account(s). Such charges are borne solely by the
Separate Account. The Annual Policy Maintenance Charge and the Annual Death
Benefit Charge, if applicable, will be deducted from the Guarantee Account(s) if
there is no account value in the Separate Account. If there is insufficient
account value in the Separate Account at the time the charges are deducted, the
excess of these charges over the amount deducted from the Separate Account will
be deducted from the Guarantee Account(s). (See Policy Maintenance Charge).
Surrender charges apply to account values allocated to a Guarantee Account in
the same manner in which these charges apply to account values allocated to the
Separate Account.
Transfers
The Owner may transfer amounts between a Guarantee Account and the available
Investment Subdivisions of Account 4. Transfers will be effective on the date
the Owner's transfer request is received by the Company. With respect to
transfers between a Guarantee Account and the available Investment Subdivisions,
the following restrictions may be imposed:
Transfers from any particular allocation to a Guarantee Account to an
Investment Subdivision may be made only during the 30 day period beginning
with the end of the preceding interest rate guarantee period applicable to
that particular allocation. The Company may limit the amount which may be
transferred to the Investment Subdivisions. For any particular allocation
to a Guarantee Account, the limited amount will not be less than (a) any
accrued interest on that allocation, plus (b) 25% of the original amount of
that allocation.
No transfers from an Investment Subdivision to a Guarantee Account may be
made during the six month period following the transfer of any amount from
a Guarantee Account to any Investment Subdivision.
<PAGE>
In all other respects, the rules and charges applicable to transfers between the
available Investment Subdivisions of Account 4 will apply to transfers involving
a Guarantee Account.
Dollar-Cost Averaging
As an alternative to the Dollar-Cost Averaging program described in the
prospectus (See "Dollar-Cost Averaging"), Owners may elect to have the Company
automatically transfer specified amounts from a Guarantee Account to any
available Investment Subdivision on a monthly or quarterly basis. To make the
election, Owners must complete the Dollar-Cost Averaging section of the
application or a Dollar-Cost Averaging Agreement. Money may be allocated to a
Guarantee Account as an initial or additional premium or in the form of a
transfer of Account Value from one or more Investment Subdivisions. Such
allocations must comply with all applicable minimum amount and percentage
requirements (See "Purchasing the Policies" and "Allocation of Premium
Payments") as well as the rules applicable to transfers to the Guarantee
Account(s). Apart from automatic transfers under a Dollar-Cost Averaging
program, all rules regarding transfers from the Guarantee Account(s) will apply.
Owners may designate the amount allocated to a Guarantee Account that is subject
to the Dollar-Cost Averaging program. The Company reserves the right to limit
the amount of each automatic transfer. Each automatic transfer, as described
above, will be made until the entire value of the designated amount in a
Guarantee Account is depleted. Prior to that time, an Owner may discontinue such
automatic transfers by sending the Company written notice.
The Company reserves the right to transfer any remaining portion of an
allocation used for Dollar-Cost Averaging to a Guarantee Account with a new one
year interest rate guarantee period upon termination of the Dollar-Cost
Averaging program for that allocation. The Company also reserves the right to
discontinue or modify this alternative Dollar-Cost Averaging program at any time
for any reason on 30 days written notice to the Owner.
Surrenders
Surrenders may be made from the Guarantee Account(s) in addition to the Account
4. (See "Distributions Under the Policy.") If a partial surrender is requested,
the Owner may specify the Guarantee Account(s) from which the deduction should
be made. If no Guarantee Account is specified, the amount of the partial
surrender will be deducted first from the Investment Subdivisions of the
Separate Account on a pro-rata basis, in proportion to the Account Value in the
Separate Account. Any amount remaining will be deducted from the Guarantee
Account(s). Deductions from the Guarantee Account(s) will be taken from the
amounts (including interest credited to such amounts) which have been in the
Guarantee Account(s) for the longest period of time.
Deferral of Payment
The Company may defer payment of any amount from the Guarantee Account(s) for up
to six months. Payment will not be deferred if applicable law requires earlier
payment, or if the amount payable is to be used to pay premiums on policies in
force with the Company.
THE GUARANTEE ACCOUNT MAY NOT BE AVAILABLE IN ALL STATES OR MARKETS
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, Virginia 23230
<PAGE>
APPENDIX
Policy Form P1143 4/94
The purpose of this appendix is to show certain benefits for Policies issued on
or before October 12, 1998 or after October 12, 1998 for those states where
Policy Form P1150 10/98 is not available.
Death Benefit at Death of Annuitant
For Policies issued before May 1, 1997 (unless a later date is required by
applicable state regulation), if the Annuitant was age 80 or younger on the
Policy Date, and dies prior to the Maturity Date while the Policy is in force,
the Designated Beneficiary may elect a Death Benefit within 90 days of the date
of such death.
During the first six Policy years, the Death Benefit will be the greater of: (1)
the total premiums paid, reduced by any applicable premium tax and any partial
surrenders plus their applicable surrender charge, and (2) the Account Value on
the date the Company receives Due Proof of Death. During subsequent six year
periods, the Death Benefit will be the greater of: (1) the Death Benefit on the
last day of the previous six year period, plus any premiums paid since then,
reduced by any applicable premium tax and any partial surrenders plus their
applicable surrender charges since then, and (2) the Account Value on the date
Due Proof of Death is received.
If the request for payment of the Death Benefit occurs more than 90 days after
the date of the Annuitant's death, and/or if the deceased Annuitant was age 81
or older on the Policy Date, the Surrender Value will be payable instead of the
Death Benefit.
For Policies issued on or after May 1, 1997, if the Annuitant dies before
Income Payments begin, the Designated Beneficiary may elect to surrender the
Policy for a Death Benefit by notifying the Company of such election within 90
days of the date of the Annuitant's death. (This election may not be available
in all states.) If notification occurs more than 90 days after the date of the
Annuitant's death, the Surrender Value will be payable instead of the Death
Benefit.
The Death Benefit will be the greater of (1) the minimum death benefit
(described below); or (2) the Account Value on the date the Company received Due
Proof of Death of the Annuitant. During the first six Policy Years, or if the
Annuitant was age 81 or older on the Policy Date, the minimum death benefit is
the total of premiums paid, less adjustments for any partial surrenders. During
any subsequent six year period if the Annuitant was age 80 or younger on the
Policy Date, the minimum death benefit will be the Death Benefit on the last day
of the previous six year period, plus any premiums paid since that day, less
adjustments for any partial surrenders since that day.
Surrender charges will apply if the Policy is surrendered more than 90 days
after death of the Annuitant, without regard to whether or not the Account Value
was increased.
Elective Guaranteed Minimum Death Benefit Rider
If an Annuitant dies prior to the Maturity Date while the Guaranteed Minimum
Death Benefit is in effect, the Designated Beneficiary may elect the Death
Benefit described below within 90 days of the date of such death.
The Death Benefit under the Guaranteed Minimum Death Benefit Rider will be the
greater of: (1) the Death Benefit described immediately above under "Death
Benefit at Death of Annuitant," and (2) the greater of (A) the Guaranteed
Minimum Death Benefit, and (B) the Account Value of the Policy on the date the
Company receives proof of the Annuitant's death, or, if later, the date of the
request. The Guaranteed Minimum Death Benefit is, on the Policy Date, equal to
the premium paid. At the end of each Valuation Period after such date, the
Guaranteed Minimum Death Benefit is the lesser of: (1) the total of all premiums
received, multiplied by two, less the amount of any partial surrenders made
prior to or during that Valuation Period; or (2) the Guaranteed Minimum Death
Benefit at the end of the preceding Valuation Period, increased as specified
below, plus any additional premium payments during the current Valuation Period
and less any partial surrenders plus their applicable surrender charges during
the current Valuation Period.
The amount of the increase for the Valuation Period will be calculated by
applying a factor to the Guaranteed Minimum Death Benefit at the end of the
preceding Valuation Period. Until the anniversary on which the Annuitant attains
age 80, the factor is determined for each Valuation Period at an effective
annual rate of 6%, except that with respect to amounts invested in certain
Investment Subdivisions shown in the Policy, the increase factor will be
calculated as the lesser of: (1) the Net Investment Factor for the Valuation
Period, minus one, and (2) a factor for the Valuation Period equivalent to an
effective annual rate of 6%. Currently, these Investment Subdivisions include
only the Money Market Investment Subdivision. With respect to amounts allocated
to the Guarantee Account, Item (1) above is replaced with a factor for the
Valuation Period equivalent to the credited rate(s) applicable to such amounts.
If the Guaranteed Minimum Death Benefit Rider has been elected, it is effective
on the Policy Date and will remain in effect while the Policy is in force and
before income payments begin, or until the Policy Anniversary following the date
of receipt of the Owner's request to terminate the rider. There will be a charge
made each year for expenses related to the Death Benefit available under the
terms of the Guaranteed Minimum Death Benefit Rider. (See Annual Death Benefit
Charge). Amounts payable under the Guaranteed Minimum Death Benefit Rider are
subject to the distribution rules.
Elective Optional Death Benefit Rider.
The elective optional death benefit rider provides for an Annual Step-up in
death benefit. If an Annuitant dies before the Maturity Date while the Optional
Death Benefit Rider is in effect, the Designated Beneficiary may elect the Death
Benefit described below with 90 days of the date of such death. If this Death
Benefit is not paid, the Policy will terminate, and the Company will have no
further obligation under the Policy. THE OPTIONAL DEATH BENEFIT RIDER MAY NOT BE
AVAILABLE IN ALL STATES OR MARKETS.
The Death Benefit under the Optional Death Benefit Rider is the greater of: (1)
the Death Benefit described above under "Death Benefit at Death of Annuitant,"
and (2) the minimum Death Benefit described below.
During the first Policy year, the minimum Death Benefit under the Optional Death
Benefit Rider is the total of premiums paid, adjusted for any partial
surrenders. After the first Policy year and until the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's greatest Death Benefit on any previous Policy anniversary, plus
the total Premium Payments made since that date, less adjustments for any
partial surrenders taken since that date. Beginning on the Policy anniversary
immediately preceding the Annuitant's 81st birthday, the minimum Death Benefit
is the Policy's minimum Death Benefit on that date, plus the total Premium
Payments made since that date, less adjustments for any partial surrenders taken
since that date.
If the Optional Death Benefit Rider has been elected, it is effective on the
Policy Date (unless another effective date is shown on the Policy data pages).
It will remain in effect while the Policy is in force and before income payments
begin, or until the Policy Anniversary following the date of receipt of the
Owner's request to terminate the rider. There will be a charge made each year
for expenses related to the Death Benefit available under the terms of the
Optional Death Benefit Rider. (See "Annual Death Benefit Charge.") Amounts
payable under the Optional Death Benefit Rider are subject to the distribution
rules described below.
Surrender Charge
For Policies issued prior to May 1, 1998, or until the necessary endorsement is
approved, if later, surrender charges are deducted from the amount surrendered.
All or part of the amount surrendered may be subject to charge. Any amount
subject to charge is considered a surrender of Premium Payments. Surrender
charges are determined using the assumption that Premium Payments are
surrendered on a first-in first-out basis, up to the amount surrendered. For
each such Premium Payment, the charge is a percentage of the Premium Payment (or
portion thereof) surrendered.
Reduced Charges on Certain Surrenders
For Policies issued before May 1, 1998, or until the necessary endorsement is
approved, if later, no surrender charge applies to the first surrender of the
policy year, if the amount surrendered is not more than 10% of the Account Value
at the end of the Valuation Period during which the surrender request is
received. If the first surrender of the policy year is a full surrender, or a
partial surrender of more than 10% of the Account Value, no surrender charge
will apply to a portion of the amount surrendered equal to the 10% of the
Account Value. Any remaining portion of the amount surrendered may be subject to
surrender charges, as described above. The amount subject to charge will not
exceed the amount surrendered
Waiver of Surrender Charges in the Event of Hospital or Nursing Facility
Confinement.
For Policies issued before October 12, 1998: Surrender charges arising from a
full surrender or one or more partial surrenders occurring before income
payments begin will be waived if:
An Annuitant is, or has been confined to a state licensed or legally
operated hospital or inpatient nursing facility for at least 30
consecutive days; and
Such confinement begins at least one year after the policy date; and
An Annuitant was age 80 or younger on the policy date; and
The request for the full or partial surrender, together with proof of such
confinement is received in the Home Office of the Company while the
Annuitant is confined or within 90 days after discharge from the facility.
For purposes of this provision, Annuitant means either the Annuitant, or Joint
Annuitant, whichever is applicable.
The waiver of surrender charges in the event of hospital or nursing facility
confinement may not be available in all states or all markets.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA
SEPARATE ACCOUNT 4
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
FORM P1150 10/98
FORM P1143 4/94
OFFERED BY
THE LIFE INSURANCE COMPANY OF VIRGINIA
(A Virginia Stock Corporation)
6610 W. Broad Street
Richmond, Virginia 23230
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus for the above-named Flexible Premium Variable Deferred
Annuity Policy ("Policy") offered by The Life Insurance Company of Virginia. You
may obtain a copy of the Prospectus dated October __, 1998 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 AND THE FUNDS.
Dated October __, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
The Policies........................................................................
Transfer of Annuity Units.........................................................
Net Investment Factor.............................................................
Termination of Participation Agreements.............................................
Calculation of Performance Date.....................................................
Money Market Investment Subdivisions..............................................
Other Investment Subdivisions.....................................................
Federal Tax Matters.................................................................
Taxation of The Company...........................................................
IRS Required Distributions........................................................
General Provisions..................................................................
Using the Policies as Collateral..................................................
Non-Participating.................................................................
Misstatement of Age or Sex........................................................
Incontestability..................................................................
Statement of Values...............................................................
Written Notice....................................................................
Legal Developments Regarding Employment-Related Benefit Plans.......................
Additions, Deletions, or Substitutions of Investments...............................
Legal Matters.......................................................................
Experts.............................................................................
Change in Auditors..................................................................
Financial Statements................................................................
</TABLE>
<PAGE>
THE POLICIES
Transfer of Annuity Units
Upon the Owner's request, Annuity Units may be transferred once per calendar
year from the Investment Subdivision in which they are currently held. However,
where permitted by state law, the Company reserves the right to refuse to
execute any transfer if any of the Investment Subdivisions that would be
affected by the transfer are unable to purchase or redeem shares of the mutual
funds in which the Investment Subdivisions invest. The amount of the increase in
the number of Annuity Units for the Investment Subdivision to which the transfer
is made is (a) times (b) divided by (c) where: (a) is the number of Annuity
Units for the Investment Subdivision in which the Annuity Units are currently
held; (b) is the Annuity Unit Value for the Investment Subdivision in which the
Annuity Units are currently held; and (c) is the Annuity Unit Value for the
Investment Subdivision to which the transfer is made.
If the number of Annuity Units remaining in an Investment Subdivision after the
transfer is less than 1, the Company will transfer the amount remaining in
addition to the amount requested. The Company will not transfer into any
Investment Subdivision unless the number of Annuity Units of that Investment
Subdivision after the transfer is at least 1. The amount of the Income Payment
as of the date of the transfer will not be affected by the transfer.
Net Investment Factor
The Net Investment Factor measures investment performance of the Investment
Subdivisions of Account 4 during a Valuation Period. Each Investment Subdivision
has its own Net Investment Factor for a Valuation Period. The Net Investment
Factor of an Investment Subdivision available under the policies for a Valuation
Period is (a) divided by (b) minus (c) where:
(a) is (1) the value of the net assets of that Investment Subdivision at the
end of the preceding Valuation Period, plus (2) the investment income and
capital gains, realized or unrealized, credited to the net assets of that
Investment Subdivision during the Valuation Period for which the Net
Investment Factor is being determined, minus (3) the capital losses,
realized or unrealized, charged against those assets during the Valuation
Period, minus (4) any amount charged against that Investment Subdivision for
taxes, or any amount set aside during the Valuation Period by the Company as
a provision for taxes attributable to the operation or maintenance of that
Subdivision; and
(b) is the value of the net assets of that Investment Subdivision at the end
of the preceding Valuation Period; and
(c) is a charge no greater than .003857% for each day in the Valuation Period.
This corresponds to 1.25% and 0.15% per year of the net assets of that
Investment Subdivision for mortality and expense risks, and for
administrative expenses, respectively.
The value of the assets in Account 4 will be taken at their fair market value in
accordance with generally accepted accounting practices and applicable laws and
regulations.
<PAGE>
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares to
Account 4 contain varying provisions regarding termination. The following
summarizes those provisions:
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 the
Company'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 the Company'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 the Company has suffered material adverse
changes in its business or financial condition or is the subject of material
adverse publicity, (7) at the option of the Company 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 the Company decides to make another mutual fund
vailable as a funding vehicle for its policies.
GE Investments Funds, Inc. has entered into a Stock Sale Agreement with the
Company 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.
Salomon Brothers Variable Series Fund. This agreement may be terminated at the
option of any party upon six months' written notice to the other parties,
unless a shorter time is agreed to by the parties.
CALCULATION OF PERFORMANCE DATA
From time to time, the Company may disclose total return, yield, and other
performance data for the Investment Subdivisions pertaining to the Policies.
Such performance data will be computed, or accompanied by performance data
computed, in accordance with the standards defined by the Securities and
Exchange Commission.
The calculations of yield, total return, and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Policy. Premium taxes currently range from 0% to 3.5% of premium based on the
rules of the state in which the Policy is sold.
"Money Market" Investment Subdivisions
From time to time, advertisements and sales literature may quote the yield of
one or more of the "money market" Investment Subdivisions for a seven-day
period, in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the corresponding money market
investment portfolio or on its portfolio securities. This current annualized
yield is computed by determining the net change (exclusive of unrealized gains
and losses on the sale of securities and unrealized appreciation and
depreciation and income other than investment income) at the end of the
seven-day period in the value of a hypothetical account under a Policy having a
balance of one unit in that "money market" Investment Subdivision at the
beginning of the period, dividing such net change in account value by the value
of the account at the beginning of the period to determine the base period
return, and annualizing the result on a 365-day basis. The net change in account
value reflects: 1) net income from the investment portfolio attributable to the
hypothetical account; and 2) charges and deductions imposed under the Policy
which are attributable to the hypothetical account. The charges and deductions
include the per unit charges for the policy maintenance charge, administrative
expense charge, annual death benefit charge and the mortality and expense risk
charge. For purposes of calculating current yields for a Policy, an average per
unit policy maintenance charge is used. Current Yield will be calculated
according to the following formula:
Current Yield = ((NCP - ES)/UV) X (365/7)
where:
NCP = the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income)
for the seven-day period attributable to a hypothetical account having a
balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value on the first day of the seven-day period.
<PAGE>
The current yields for the "money market" Investment Subdivisions of Account
4 available under the policy, based on the seven-day period ending June 30, 1998
were:
GE Investments Funds, Inc. 3.73%
The effective yield of a "money market" Investment Subdivision determined on a
compounded basis for the same seven-day period may also be quoted. The effective
yield is calculated by compounding the base period return according to the
following formula:
Effective Yield = (1 + ((NCP - ES)/UV))365/7 - 1
where:
NCP = the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income)
for the seven-day period attributable to a hypothetical account having a
balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
effective yields for the "money market" Investment Subdivisions of Account 4
available under the policy, based on the seven-day period ending June 30, 1998
were:
GE Investments Funds, Inc. 3.80%
The yield on amounts held in a "money market" Investment Subdivision normally
will fluctuate on a daily basis. Therefore, the disclosed yield for any given
past period is not an indication or representation of future yields or rates of
return. A "money market" Investment Subdivision's actual yield is affected by
changes in interest rates on money market securities, average portfolio maturity
of the Investment Subdivision's corresponding money market investment portfolio,
the types and quality of portfolio securities held by that investment portfolio,
and that investment portfolio's operating expenses. Because of the charges and
deductions imposed under the Policy, the yield for a "money market" Investment
Subdivision will be lower than the yield for its corresponding "money market"
investment portfolio.
Yield calculations do not take into account the Surrender Charge under the
Policy, a maximum of 6% of each Premium Payment made during the six years prior
to a full or partial surrender, or charges for the GMDB.
Other Investment Subdivisions
Total Return. Sales literature or advertisements may quote total return,
including average annual total return for one or more of the Investment
Subdivisions for various periods of time including 1 year, 5 years and 10 years,
or from inception if any of those periods are not available.
Average annual total return for a period represents the average annual
compounded rate of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
the period. The ending date for each period for which total return quotations
are provided will be for the most recent practicable, considering the type and
media of the communication, and will be stated in the communication.
<PAGE>
For periods that begin before the Policy was available, performance data will be
based on the performance of the underlying portfolios, with the level of Account
4 and policy charges currently in effect. Average annual total return will be
calculated using Investment Subdivision unit values and deductions for the
policy maintenance charge, annual death benefit charge and the surrender charge
as described below:
1. The Company calculates unit value for each Valuation Period based on the
performance of the Investment Subdivision's underlying investment
portfolio (after deductions for Fund expenses, the administrative
expense charge, and the mortality and expense risk charge).
2. The policy maintenance charge is $25 per year, deducted at the beginning
of each Policy Year after the first. For purposes of calculating average
annual total return, an average policy maintenance charge (currently
0.1% of account value attributable to the hypothetical investment) is
used.
3. The surrender charge will be determined by assuming a surrender of the
Policy at the end of the period. Average annual total return for periods
of six years or less will therefore reflect the deduction of a surrender
charge.
4. Total return does not consider the GMDB and OBD charges.
5. Total return will then be calculated according to the following formula:
TR = (ERV/P)1/N - 1
where:
TR = the average annual total return for the period.
ERV= the ending redeemable value (reflecting deductions as described above)
of the hypothetical investment at the end of the period.
P = a hypothetical single investment of $1,000.
N = the duration of the period (in years).
<PAGE>
Total return for the available Investment Subdivisions is as follows:
<TABLE>
<CAPTION>
For the 1-year For the 3-year For the 5-year From the
Subdivision period ended period ended period ended Date of Date of
6/30/98 6/30/98 6/30/98 Subaccount Subaccount
Inception to Inception
6/30/98
<S> <C>
Janus Aspen Series
Balanced 20.37% N/A N/A 20.00% 10/02/95
Flexible Income 5.98% N/A N/A 8.37% 10/02/95
Growth 21.88% 22.53% N/A 20.91% 7/21/94
Aggressive Growth 21.41% 16.40% N/A 18.68% 7/21/94
Worldwide Growth 23.12% 29.69% N/A 25.03% 7/21/94
Capital Appreciation N/A N/A N/A 47.74% 5/01/97
International Growth 15.19% N/A N/A 24.09% 5/01/96
VIPF
Equity-Income 14.43% 20.04% N/A 20.35% 7/21/94
Overseas 4.03% 12.40% N/A 9.10% 7/21/94
Growth 21.90% 19.57% N/A 23.17% 7/21/94
VIPF II
Asset Manager 11.39% 15.41% N/A 12.47% 7/21/94
Contrafund 22.48% 22.15% N/A 26.85% 1/04/95
VIPF III
Growth and Income 23.69% N/A N/A 31.74% 5/01/97
Growth Opportunities 18.03% N/A N/A 25.31% 5/01/97
GE Investments Funds, Inc.
Income Fund N/A N/A N/A -2.16% ++ 12/12/97
S&P 500 Index 22.36% 26.47% N/A 25.50% 7/21/94
Total Return 11.46% 14.34% N/A 15.32% 7/21/94
International Equity 5.43% 12.59% N/A 11.96% 5/01/95
Real Estate Securities -2.88% 16.36% N/A 17.39% 5/01/95
Global Income -1.68% N/A N/A -0.05% 5/01/97
Value Equity 23.43% N/A N/A 34.83% 5/01/97
U.S. Equity Fund N/A N/A N/A -5.82% ++ 5/01/98
Oppenheimer Variable
Account Funds
Multiple Strategies 7.89% 12.61% N/A 13.10% 7/21/94
Capital Appreciation 15.93% 19.76% N/A 20.40% 7/21/94
Growth 21.80% 25.12% N/A 25.69% 7/21/94
High Income 5.17% 10.50% N/A 9.98% 7/21/94
Bond 3.32% 4.81% N/A 5.85% 7/21/94
Federated Insurance Series
High Income Bond II 4.56% 10.30% N/A 12.10% 1/04/95
Utility II 14.70% 15.80% N/A 16.12% 1/04/95
American Leaders II 21.63% N/A N/A 23.78% 5/01/96
The Alger American Fund
Growth 29.96% N/A N/A 19.32% 10/02/95
Small Capitalization 18.14% N/A N/A 4.65% 10/02/95
PBHG Insurance Series
Fund, Inc.
Growth II 6.21% N/A N/A 9.24% 5/01/97
Large Cap Growth 23.53% N/A N/A 27.86% 5/01/97
Goldman Sachs Variable
Investment Trust
Growth & Income Fund N/A N/A N/A -9.28% ++ 5/01/98
Mid Cap Equity Fund N/A N/A N/A -11.81% ++ 5/01/98
Salomon Brothers Variable
Series Fund
Investors Fund N/A N/A N/A N/A 10/12/98
Total Return Fund N/A N/A N/A N/A 10/12/98
Strategic Bond Fund N/A N/A N/A N/A 10/12/98
</TABLE>
++ Returns for periods of less than one year are not annualized.
<PAGE>
The Funds have provided the price information for the Portfolios, including the
Portfolio price information used to calculate the total returns of the
Investment Subdivisions for periods prior to the inception of the Investment
Subdivisions. Variable Insurance Products Fund, Variable Insurance Products Fund
II, Variable Insurance Products Fund III, Oppenheimer Variable Account Funds,
Janus Aspen Series, Federated Insurance Series, The Alger American Fund, PBHG
Insurance Series Fund, Inc., Advisers Management Trust, Goldman Sachs Variable
Insurance Trust and Salomon Brothers Variable Series Fund are not affiliated
with the Company. While the Company has no reason to doubt the accuracy of the
figures provided by these nonaffiliated Funds, the Company has not independently
verified such information.
Other Performance Data
The Company may disclose cumulative total return in conjunction with the
standard format described above. The cumulative total return will be calculated
using the following formula:
CTR = (ERV/P) - 1
where:
CTR = the cumulative total return for the period.
ERV = the ending redeemable value (reflecting
deductions as described above) of the
hypothetical investment at the end of the
period.
P = a hypothetical single investment of $1,000.
Sales literature may also quote cumulative and/or average annual total return
that does not reflect the surrender charge. This is calculated in exactly the
same way as average annual total return, except that the ending redeemable value
of the hypothetical investment is replaced with an ending value for the period
that does not take into account any charges on withdrawn amounts.
Other non-standard quotations of Investment Subdivision performance may also be
used in sales literature. Such quotations will be accompanied by a description
of how they were calculated.
FEDERAL TAX MATTERS
Taxation of The Company
The Company 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 section of the
prospectus.) Based upon these expectations, no charge is being made currently to
Account 4 for federal income taxes which may be attributable to the Account. The
Company 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 the Company believes that it may incur federal income taxes. This might
become necessary if the tax treatment of the Company is ultimately determined to
be other than what the Company 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 the Company's tax status. In the event that the Company
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.
The Company 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 the
Company currently imposes a charge), charges for such taxes attributable to
Account 4 may be made.
IRS Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any Non-Qualified Policy to provide that (a)
if any Owner dies on or after the Maturity Date but prior to the time the entire
interest in the Policy has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Owner's death; and (b) if any
Owner dies prior to the Maturity Date, the entire interest in the Policy will be
distributed (1) within five years after the date of that Owner's death, or (2)
as Income Payments which will begin within one year of that Owner's death and
which will be made over the life of the Owner's "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary. The
"designated beneficiary" generally is the person who will be treated as the sole
owner of the Policy following the death of the Owner, Joint Owner or, in certain
circumstances, the Annuitant. However, if the "designated beneficiary" is the
surviving spouse of the decedent, these distribution rules will not apply until
the surviving spouse's death (and this spousal exception will not again be
available). If any Owner is not an individual, the death of the Annuitant will
be treated as the death of an Owner for purposes of these rules.
<PAGE>
The Non-Qualified Policies contain provisions which are intended to comply with
the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Policies.
GENERAL PROVISIONS
Using the Policies as Collateral
A Non-Qualified Policy can be assigned as collateral security. The Company must
be notified in writing if a Policy is assigned. Any payment made before the
assignment is recorded at the Company's Home Office will not be affected. The
Company is not responsible for the validity of an assignment. An Owner's rights
and the rights of a Beneficiary may be affected by an assignment.
A Qualified Policy may not be sold, assigned, transferred, discounted, pledged
or otherwise transferred except under such conditions as may be allowed under
applicable law.
The basic benefits of the Policy are assignable. Additional benefits added by
rider may or may not be available/eligible for assignments.
Non-Participating
The Policy is non-participating. No dividends are payable.
Misstatement of Age or Sex
If an Annuitant's age or sex was misstated on the policy data page, any policy
benefits or proceeds, or availability thereof, will be determined using the
correct age and sex.
Incontestability
The Company will not contest the Policy.
Statement of Values
At least once each year, the Company 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 the Company at its Home Office at 6610 West
Broad Street, Richmond, Virginia 23230. The policy number and the Annuitant's
full name must be included.
The Company will send all notices to the Owner at the last known address on file
with the company.
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.
<PAGE>
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
The Company reserves the right, subject to compliance with applicable law, to
make additions to, deletions from, or substitutions for the shares of the Fund
portfolios that are held by Account 4 or that Account 4 may purchase. If the
shares of a portfolio are no longer available for investment or if in its
judgment further investment in any portfolio should become inappropriate in view
of the purposes of Account 4, the Company reserves the right to eliminate the
shares of any of the portfolios of the Funds and to substitute shares of another
portfolio or of another open-end, registered investment company. The Company
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.
The Company also reserves the right to establish additional Investment
Subdivisions of Account 4, each of which would invest in a separate portfolio of
a Fund, or in shares of another investment company, with a specified investment
objective. New Investment Subdivisions may be established when, in the sole
discretion of the Company, 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 the Company. One or more Investment Subdivisions may
also be eliminated if, in the sole discretion of the Company, marketing, tax, or
investment conditions warrant.
In the event of any such substitution or change, the Company 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 the Company
to be in the best interests of persons having voting rights under the Policies,
and, if permitted by law, the Company 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 separate accounts
of the Company. To the extent permitted by applicable law, the Company may also
transfer the assets of Account 4 associated with the Policies to another
separate account. In addition, the Company may, when permitted by law, restrict
or eliminate any voting rights of Owners or other persons who have voting rights
as to Account 4.
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. Patricia L. Dysart,
Assistant Vice President and Associate General Counsel of the Company, has
provided advice on certain legal matters pertaining to the Policy, including the
validity of the Policy and the Company'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, nine months ended December 31, 1996 and the preacquisition
three months period ended March 31, 1996, and the statement of assets and
liabilities of the Company's 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 that 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, stockholder's 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.
<PAGE>
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 contains any adverse opinion or a disclaimer of opinion, or
were 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, and for each of the
years in the three year period then ended.
The consolidated financial statements of The Life Insurance Company of Virginia
and subsidiary included herein should be distinguished from the financial
statements of Account 4 and should be considered only as bearing on the ability
of the Company to meet its obligations under the Policy.
Such consolidated financial statements of The Life Insurance Company of Virginia
and subsidiary 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>
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>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Table of Contents
For the six months ended June 30, 1998
- ------------------------------------------------------------------------------
Page
Financial Statements:
(Unaudited)
Statements of Assets and Liabilities..................................1
Statements of Operations..............................................6
Statements of Changes in Net Assets..................................11
Notes to Financial Statements............................................16
(Unaudited)
- ------------------------------------------------------------------------------
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES
As of June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
---------------------------------------------------------------
S&P 500 Money Total International
Index Market Return Equity
Assets Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment in GE Investments Funds, Inc., at
fair value (note 2):
S&P 500 Index Fund (10,284,007 shares;
cost - $198,174,450) $ 232,418,549 - - -
Money Market Fund (154,109,227 shares;
cost - $154,100,833) - 154,109,227 - -
Total Return Portolio (3,693,287 shares;
cost - $53,201,733) - - 54,143,581 -
International Equity Fund (2,126,245 shares;
cost - $24,653,464) - - - 27,258,457
Real Estate Securities Fund (3,814,516 shares;
cost - $54,504,205) - - - -
Global Income Fund (698,009 shares; cost - $7,016,256) - - - -
Value Equity Fund (2,288,523 shares; cost - $30,674,282) - - - -
Income Fund (1,967,316 shares; cost $23,916,240) - - - -
U.S. Equity Fund (4,601 shares; cost $145,444) - - - -
Receivable from affiliate (note 3) 152,808 - 42,899 12,531
Receivable for units sold 489,768 19,902,737 134,869 25,354
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 233,061,125 174,011,964 54,321,349 27,296,342
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 631,052 934,185 140,684 32,813
Payable for units withdrawn - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 631,052 934,185 140,684 32,813
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $ 232,430,073 173,077,779 54,180,665 27,263,529
- -----------------------------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders 232,430,073 173,077,779 54,180,665 11,752,485
The Life Insurance Company of Virginia - - - 15,511,044
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets 232,430,073 173,077,779 54,180,665 27,263,529
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,018,776 5,392,814 597,294 1,188,615
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 46.31 15.08 31.95 14.95
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 4,103,912 6,241,778 1,126,714 637,164
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 45.14 14.70 31.15 14.90
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-----------------------------------------------------------------------
Real Estate Global Value U.S.
Securities Income Equity Income Equity
Assets Fund Fund Fund Fund Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment in GE Investments Funds, Inc., at
fair value (note 2):
S&P 500 Index Fund (10,284,007 shares;
cost - $198,174,450) - - - - -
Money Market Fund (154,109,227 shares;
cost - $154,100,833) - - - - -
Total Return Portolio (3,693,287 shares;
cost - $53,201,733) - - - - -
International Equity Fund (2,126,245 shares;
cost - $24,653,464) - - - - -
Real Estate Securities Fund (3,814,516 shares;
cost - $54,504,205) 55,119,760 - - - -
Global Income Fund (698,009 shares;
cost - $7,016,256) - 7,133,648 - - -
Value Equity Fund (2,288,523 shares;
cost - $30,674,282) - - 33,893,029 - -
Income Fund (1,967,316 shares; cost $23,916,240) - - - 24,768,507 -
U.S. Equity Fund (4,601 shares; cost $145,444) - - - - 146,996
Receivable from affiliate (note 3) 22,513 6 - - -
Receivable for units sold - 387 75,106 11,162 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets 55,142,273 7,134,041 33,968,135 24,779,669 146,996
- ----------------------------------------------------------------------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 100,037 4,771 120,786 141,000 122
Payable for units withdrawn 111,499 13 121 18,386 -
- ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 211,536 4,784 120,907 159,386 122
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets 54,930,737 7,129,257 33,847,228 24,620,283 146,874
- ----------------------------------------------------------------------------------------------------------------------------------
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders 36,917,350 1,764,530 29,354,875 24,620,283 146,874
The Life Insurance Company of Virginia 18,013,387 5,364,727 4,492,353 - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net Assets 54,930,737 7,129,257 33,847,228 24,620,283 146,874
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,379,501 547,462 628,730 1,189,687 6,891
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 17.36 10.59 14.77 10.35 9.97
- ----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 1,798,177 126,102 1,667,406 1,191,387 7,840
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 17.23 10.56 14.73 10.33 9.97
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
As of June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
-----------------------------------------------------------
Capital High
Bond Appreciation Growth Income
Assets Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds,
at fair value (note 2):
Bond Fund (3,834,120 shares;
cost - $44,732,748) $ 45,971,096 - - -
Capital Appreciation Fund (5,237,638 shares;
cost - $194,545,786) - 245,330,981 - -
Growth Fund (5,139,329 shares;
cost - $166,456,187) - - 177,872,191 -
High Income Fund (15,175,352 shares;
cost - $170,665,507) - - - 174,668,302
Multiple Strategies Fund (4,760,476 shares;
cost - $71,808,660) - - - -
Investment in Goldmans Sachs Variable
Insurance Trust, at fair value (note 2):
Growth & Income Fund (42,099 shares;
cost - $473,335) - - - -
Mid Cap Equity Fund (76,259 shares;
cost - $715,310) - - - -
Receivable from affiliate (note 3) - 31,280 - 64,666
Receivable for units sold 510 40,783 143,564 -
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $ 45,971,606 245,403,044 178,015,755 174,732,968
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 134,848 1,151,400 520,844 422,594
Payable for units withdrawn 41,370 5,201,476 20,263 73,130
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 176,218 6,352,876 541,107 495,724
- -------------------------------------------------------------------------------------------------------------------------------
Net assets $ 45,795,388 239,050,168 177,474,648 174,237,244
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 847,356 2,409,508 1,298,234 1,826,157
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 21.62 42.63 43.78 32.63
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 1,303,395 3,281,176 2,826,569 3,605,338
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 21.08 41.55 42.68 31.80
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Goldman Sachs Variable
Account Funds Insurance Trust
------------------ ------------------------
Multiple Growth & Mid Cap
Strategies Income Equity
Assets Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Oppenheimer Variable Account Funds,
at fair value (note 2):
Bond Fund (3,834,120 shares;
cost - $44,732,748) - - -
Capital Appreciation Fund (5,237,638 shares;
cost - $194,545,786) - - -
Growth Fund (5,139,329 shares;
cost - $166,456,187) - - -
High Income Fund (15,175,352 shares;
cost - $170,665,507) - - -
Multiple Strategies Fund (4,760,476 shares;
cost - $71,808,660) 81,499,341 - -
Investment in Goldmans Sachs Variable
Insurance Trust, at fair value (note 2):
Growth & Income Fund (42,099 shares;
cost - $473,335) - 479,507 -
Mid Cap Equity Fund (76,259 shares;
cost - $715,310) - - 716,839
Receivable from affiliate (note 3) 8,982 - 1
Receivable for units sold 37,150 35,470 15,602
- ------------------------------------------------------------------------------------------------------------
Total assets 81,545,473 514,977 732,442
- ------------------------------------------------------------------------------------------------------------
Liabilities
- ------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 280,115 227 338
Payable for units withdrawn 554 - -
- ------------------------------------------------------------------------------------------------------------
Total liabilities 280,669 227 338
- ------------------------------------------------------------------------------------------------------------
Net assets 81,264,804 514,750 732,104
- ------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,485,705 2,352 35,124
- ------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 28.14 9.63 9.37
- ------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 1,437,940 51,154 43,009
- ------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 27.44 9.62 9.37
- ------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
As of June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
-----------------------------------------
Equity
Income Growth Overseas
ASSETS Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products Fund, at
fair value (note 2):
Equity-Income Portfolio (28,190,536 shares;
cost - $581,114,195) $ 709,555,798 - -
Growth Portfolio (9,510,696 shares;
cost - $280,228,383) - 364,449,852 -
Overseas Portfolio (5,889,452 shares;
cost - $111,459,299) - - 121,440,494
Investment in Variable Insurance Products
Fund II, at fair value (note 2):
Asset Manager Portfolio (29,510,263 shares;
cost - $441,480,405) - - -
Contrafund Portfolio (13,540,360 shares;
cost - $228,024,310) - - -
Investment in Variable Insurance Products
Fund III, at fair value (note 2):
Growth & Income Portfolio (2,178,458 shares;
cost - $28,432,998) - - -
Growth Opportunities Portfolio
(1,724,635 shares; cost - $32,802,718) - - -
Receivable from affiliate (note 3) - 51,003 -
Receivable for units sold 198,130 97,207 -
- -------------------------------------------------------------------------------------------------------
Total assets $ 709,753,928 364,598,062 121,440,494
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,760,460 1,129,895 414,251
Payable for units withdrawn 144,020 - 5,081,275
- -------------------------------------------------------------------------------------------------------
Total liabilities 1,904,480 1,129,895 5,495,526
- -------------------------------------------------------------------------------------------------------
Net assets $ 707,849,448 363,468,167 115,944,968
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 6,369,885 4,191,895 3,096,726
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 41.06 46.66 24.40
- -------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 11,149,187 3,690,357 1,698,269
- -------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 40.03 45.49 23.78
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Variable Insurance Variable Insurance
Products Fund II Product Fund III
-----------------------------------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
ASSETS Portfolio Portfolio Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Variable Insurance Products Fund, at
fair value (note 2):
Equity-Income Portfolio (28,190,536 shares;
cost - $581,114,195) - - - -
Growth Portfolio (9,510,696 shares;
cost - $280,228,383) - - - -
Overseas Portfolio (5,889,452 shares;
cost - $111,459,299) - - - -
Investment in Variable Insurance Products
Fund II, at fair value (note 2):
Asset Manager Portfolio (29,510,263 shares;
cost - $441,480,405) 509,052,045 - - -
Contrafund Portfolio (13,540,360 shares;
cost - $228,024,310) - 297,210,895 - -
Investment in Variable Insurance Products
Fund III, at fair value (note 2):
Growth & Income Portfolio (2,178,458 shares;
cost - $28,432,998) - - 31,740,131 -
Growth Opportunities Portfolio
(1,724,635 shares; cost - $32,802,718) - - - 35,251,546
Receivable from affiliate (note 3) - 115,237 - 4,620
Receivable for units sold 71,314 135,981 253,089 26,164
- ------------------------------------------------------------------------------------------------------------------
Total assets 509,123,359 297,462,113 31,993,220 35,282,330
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 2,370,132 755,204 119,728 89,388
Payable for units withdrawn 36,686 38,368 - -
- ------------------------------------------------------------------------------------------------------------------
Total liabilities 2,406,818 793,572 119,728 89,388
- ------------------------------------------------------------------------------------------------------------------
Net assets 506,716,541 296,668,541 31,873,492 35,192,942
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 16,116,483 3,125,603 503,768 494,681
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 26.65 23.76 14.40 13.61
- ------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 2,960,593 9,439,907 1,715,626 2,097,298
- ------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 26.08 23.56 14.35 13.57
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
As of June 30, 1998
(Unaudited)
<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 (2,895,623 shares;
cost - $55,513,186) $ 61,358,255 - -
High Income Bond Fund II (3,715,623 shares;
cost - $39,891,248) - 41,094,792 -
Utility Fund II (2,568,120 shares;
cost - $31,061,632) - - 36,107,766
Investment in Alger American,
at fair value (note 2):
Small Capitalization Portfolio (2,143,358 shares;
cost - $90,117,571) - - -
Growth Portfolio (2,209,972 shares;
cost - $86,613,619) - - -
Investment in PBHG Insurance Series
Fund Inc., at fair value (note 2):
PBHG Large Cap Portfolio (599,967 shares;
cost - $7,352,658) - - -
PBHG Growth II Portfolio (844,253 shares;
cost - $9,333,596) - - -
Receivable from affiliate (note 3) 26,297 7,024 17,672
Receivable for units sold 221,837 56,412 30,860
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 61,606,389 41,158,228 36,156,298
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 160,146 121,663 98,808
Payable for units withdrawn - 20,570 14,649
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 160,146 142,233 113,457
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $ 61,446,243 41,015,995 36,042,841
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 494,538 446,850 496,027
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 16.55 15.63 17.60
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,235,823 2,195,596 1,565,201
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 16.46 15.50 17.45
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Alger American Fund
---------------------------------------------------
Small
Capitalization Growth
ASSETS Portfolio Portfolio
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors Insurance Series,
at fair value (note 2):
American Leaders Fund II (2,895,623 shares;
cost - $55,513,186) - -
High Income Bond Fund II (3,715,623 shares;
cost - $39,891,248) - -
Utility Fund II (2,568,120 shares;
cost - $31,061,632) - -
Investment in Alger American,
at fair value (note 2):
Small Capitalization Portfolio (2,143,358 shares;
cost - $90,117,571) 92,443,031 -
Growth Portfolio (2,209,972 shares;
cost - $86,613,619) - 100,907,314
Investment in PBHG Insurance Series
Fund Inc., at fair value (note 2):
PBHG Large Cap Portfolio (599,967 shares;
cost - $7,352,658) - -
PBHG Growth II Portfolio (844,253 shares;
cost - $9,333,596) - -
Receivable from affiliate (note 3) 15,521 -
Receivable for units sold 3,893 140,974
- --------------------------------------------------------------------------------------------------------------
Total assets 92,462,445 101,048,288
- --------------------------------------------------------------------------------------------------------------
LIABILITIES
- --------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 246,273 382,386
Payable for units withdrawn 5,038,071 -
- --------------------------------------------------------------------------------------------------------------
Total liabilities 5,284,344 382,386
- --------------------------------------------------------------------------------------------------------------
Net assets 87,178,101 100,665,902
- --------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,351,221 1,045,232
- --------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 11.99 16.95
- --------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 5,964,451 4,928,653
- --------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 11.90 16.83
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PBHG Insurance Series Fund
--------------------------------------------------
PBHG PBHG
Large Cap Growth II
ASSETS Portfolio Portfolio
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Investments in Federated Investors Insurance Series,
at fair value (note 2):
American Leaders Fund II (2,895,623 shares;
cost - $55,513,186) - -
High Income Bond Fund II (3,715,623 shares;
cost - $39,891,248) - -
Utility Fund II (2,568,120 shares;
cost - $31,061,632) - -
Investment in Alger American,
at fair value (note 2):
Small Capitalization Portfolio (2,143,358 shares;
cost - $90,117,571) - -
Growth Portfolio (2,209,972 shares;
cost - $86,613,619) - -
Investment in PBHG Insurance Series
Fund Inc., at fair value (note 2):
PBHG Large Cap Portfolio (599,967 shares;
cost - $7,352,658) 8,465,536 -
PBHG Growth II Portfolio (844,253 shares;
cost - $9,333,596) - 9,995,952
Receivable from affiliate (note 3) 22,408 234
Receivable for units sold 42,487 22,096
- ----------------------------------------------------------------------------------------------------------
Total assets 8,530,431 10,018,282
- ----------------------------------------------------------------------------------------------------------
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 44,521 26,654
Payable for units withdrawn 54,734 48
- ----------------------------------------------------------------------------------------------------------
Total liabilities 99,255 26,702
- ----------------------------------------------------------------------------------------------------------
Net assets 8,431,176 9,991,580
- ----------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 80,376 94,164
- ----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 13.92 11.68
- ----------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 526,826 763,240
- ----------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 13.88 11.65
- ----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
As of June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
--------------------------------------------
Aggressive
Growth Growth
Portfolio Portfolio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio (5,020,260 shares;
cost - $94,736,287) $ 120,988,261 -
Growth Portfolio (13,494,555 shares;
cost - $211,860,422) - 279,337,284
Worldwide Growth Portfolio (16,938,164 shares;
cost - $368,486,861) - -
Balanced Portfolio (5,765,970 shares;
cost - $99,395,986) - -
Flexible Income Portfolio (1,808,980 shares;
cost - $21,277,398) - -
International Growth Portfolio (3,349,679 shares;
cost - $69,348,497) - -
Capital Appreciation Portfolio (556,160 shares;
cost - $7,942,180) - -
Receivable from affiliate (note 3) 46,819 -
Receivable for units sold 37,435 100,218
- -----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 121,072,515 279,437,502
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 339,611 864,350
Payable for units withdrawn 40,248 -
- -----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 379,859 864,350
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets $ 120,692,656 278,573,152
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 1,695,321 4,386,140
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 23.62 22.71
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 3,455,406 7,975,219
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 23.34 22.44
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
-------------------------------------------------------------
Worldwide
Growth Balanced
Portfolio Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio (5,020,260 shares;
cost - $94,736,287) - -
Growth Portfolio (13,494,555 shares;
cost - $211,860,422) - -
Worldwide Growth Portfolio (16,938,164 shares;
cost - $368,486,861) 486,125,302 -
Balanced Portfolio (5,765,970 shares;
cost - $99,395,986) - 114,742,799
Flexible Income Portfolio (1,808,980 shares;
cost - $21,277,398) - -
International Growth Portfolio (3,349,679 shares;
cost - $69,348,497) - -
Capital Appreciation Portfolio (556,160 shares;
cost - $7,942,180) - -
Receivable from affiliate (note 3) 151,488 14,353
Receivable for units sold 420,076 230,329
- -------------------------------------------------------------------------------------------------------------------------------
Total assets 486,696,866 114,987,481
- -------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 1,270,718 287,590
Payable for units withdrawn 4,941,008 139,111
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities 6,211,726 426,701
- -------------------------------------------------------------------------------------------------------------------------------
Net assets 480,485,140 114,560,780
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 5,017,635 2,589,523
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 29.17 17.20
- -------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 11,593,363 4,097,191
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 28.82 17.09
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
---------------------------------------------------------------
Flexible International Capital
Income Growth Appreciation
Portfolio Portfolio Portfolio
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment in Janus Aspen Series, at fair value (note 2):
Aggressive Growth Portfolio (5,020,260 shares;
cost - $94,736,287) - - -
Growth Portfolio (13,494,555 shares;
cost - $211,860,422) - - -
Worldwide Growth Portfolio (16,938,164 shares;
cost - $368,486,861) - - -
Balanced Portfolio (5,765,970 shares;
cost - $99,395,986) - - -
Flexible Income Portfolio (1,808,980 shares;
cost - $21,277,398) 21,635,404 - -
International Growth Portfolio (3,349,679 shares;
cost - $69,348,497) - 74,329,384 -
Capital Appreciation Portfolio (556,160 shares;
cost - $7,942,180) - - 9,198,889
Receivable from affiliate (note 3) 1,446 35,718 6,881
Receivable for units sold 20,819 149,395 310,662
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 21,657,669 74,514,497 9,516,432
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------------------------------
Accrued expenses payable to affiliate (note 3) 56,050 194,315 51,299
Payable for units withdrawn 49,100 - -
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 105,150 194,315 51,299
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets 21,552,519 74,320,182 9,465,133
- ---------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type I (note 2) 375,074 1,089,015 164,686
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type I 13.14 16.63 16.37
- ---------------------------------------------------------------------------------------------------------------------------------
Outstanding units: Type II (note 2) 1,273,873 3,398,420 414,527
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value per unit: Type II 13.05 16.54 16.33
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-----------------------------------------------
S&P 500 Money
Index Market
Fund Fund
-----------------------------------------------
Six Months Six Months
Ended 6/30/98 Ended 6/30/98
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - 3,762,031
Expenses - Mortality and expense
risk charges (note 3) 1,255,257 896,016
- -----------------------------------------------------------------------------------------------------------------
Net investment income (expense) (1,255,257) 2,866,015
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 3,446,026 536,978
Unrealized appreciation (depreciation)
on investments 26,580,620 (536,978)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 30,026,646 -
- -----------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations $ 28,771,389 2,866,015
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-------------------------------------------------------------------------
Total International Real Estate
Return Equity Securities
Fund Fund Fund
-------------------------------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - - -
Expenses - Mortality and expense
risk charges (note 3) 317,949 75,353 244,048
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (317,949) (75,353) (244,048)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (91,239) 466,960 149,810
Unrealized appreciation (depreciation)
on investments 5,154,672 4,155,615 (3,188,593)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 5,063,433 4,622,575 (3,038,783)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 4,745,484 4,547,222 (3,282,831)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-------------------------------------------------
Global Value
Income Equity
Fund Fund
-------------------------------------------------
Six Months Six Months
Ended 6/30/98 Ended 6/30/98
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - -
Expenses - Mortality and expense
risk charges (note 3) 8,918 143,280
- -----------------------------------------------------------------------------------------------------------
Net investment income (expense) (8,918) (143,280)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) (2,186) 662,287
Unrealized appreciation (depreciation)
on investments 241,739 2,332,947
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 239,553 2,995,234
- -----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 230,635 2,851,954
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-----------------------------------------
U.S.
Income Equity
Fund Fund
-----------------------------------------
Six Months Period from
Ended 6/30/98 5/04-6/30/98
- ---------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends - -
Expenses - Mortality and expense
risk charges (note 3) 142,977 120
- ---------------------------------------------------------------------------------------------------
Net investment income (expense) (142,977) (120)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 48,519 320
Unrealized appreciation (depreciation)
on investments 864,466 1,552
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 912,985 1,872
- ---------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 770,008 1,752
- ---------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
-----------------------------------------------------------------------
Capital High
Bond Appreciation Growth Income
Fund Fund Fund Fund
-----------------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 1,310,262 5,903,722 14,489,848 7,439,338
Expenses - Mortality and expense
risk charges (note 3) 263,249 1,365,867 1,008,531 1,008,733
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 1,047,013 4,537,855 13,481,317 6,430,605
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 200,519 10,744,265 22,390,934 628,089
Unrealized appreciation (depreciation)
on investments 130,372 19,787,986 (11,878,864) (753,277)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 330,891 30,532,251 10,512,070 (125,188)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 1,377,904 35,070,106 23,993,387 6,305,417
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Goldman Sachs Variable
Account Funds Insurance Trust
-------------------- -----------------------------
Multiple Growth & Mid Cap
Strategies Income Equity
Fund Fund Fund
--------------------------------------------------
Six Months Period from Period from
Ended 6/30/98 05/12-6/30/98 05/08-6/30/98
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 4,756,691 - -
Expenses - Mortality and expense
risk charges (note 3) 471,593 223 338
- -------------------------------------------------------------------------------------------------------------
Net investment income (expense) 4,285,098 (223) (338)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) 1,133,086 121 (119)
Unrealized appreciation (depreciation)
on investments (651,754) 6,172 1,528
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 481,332 6,293 1,409
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 4,766,430 6,070 1,071
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
--------------------------------------------------
Equity
Income Growth Overseas
Portfolio Portfolio Portfolio
--------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 40,199,361 43,602,357 8,392,807
Expenses - Mortality and expense
risk charges (note 3) 4,221,917 2,042,229 685,087
- ----------------------------------------------------------------------------------------------------------------
Net investment income (expense) 35,977,444 41,560,128 7,707,720
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 30,166,068 7,851,875 10,665,189
Unrealized appreciation (depreciation)
on investments (4,013,502) 7,778,385 (1,715,674)
- ----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 26,152,566 15,630,260 8,949,515
- ----------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 62,130,010 57,190,388 16,657,235
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Variable Insurance
Products Fund II Variable Insurance Product Fund III
---------------------------------- -----------------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
----------------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 61,032,559 14,347,723 102,863 948,628
Expenses - Mortality and expense
risk charges (note 3) 2,814,642 1,729,773 153,790 174,408
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 58,217,917 12,617,950 (50,927) 774,220
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 7,318,237 6,218,461 655,612 184,574
Unrealized appreciation (depreciation)
on investments (23,951,543) 20,941,267 2,849,033 1,393,070
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (16,633,306) 27,159,728 3,504,645 1,577,644
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 41,584,611 39,777,678 3,453,718 2,351,864
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Federated Investors Insurance Series
--------------------------------------------
American High
Leaders Income Bond Utility
Fund II Fund II Fund II
--------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- --------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ 2,907,843 1,241,858 2,141,701
Expenses - Mortality and expense
risk charges (note 3) 324,681 278,223 220,974
- --------------------------------------------------------------------------------------------------------
Net investment income (expense) 2,583,162 963,635 1,920,727
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 932,146 809,224 765,621
Unrealized appreciation (depreciation)
on investments 2,297,713 (503,603) (1,283,686)
- --------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 3,229,859 305,621 (518,065)
- --------------------------------------------------------------------------------------------------------
Increase in net assets from operations $ 5,813,021 1,269,256 1,402,662
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Alger American PBHG Insurance Series Fund
----------------------------------- ----------------------------
Small PBHG PBHG
Capitalization Growth Large Cap Growth II
Portfolio Portfolio Portfolio Portfolio
------------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 10,556,556 14,231,938 - -
Expenses - Mortality and expense
risk charges (note 3) 521,134 550,835 42,528 56,320
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) 10,035,422 13,681,103 (42,528) (56,320)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 1,410,110 2,230,568 191,900 67,461
Unrealized appreciation (depreciation)
on investments (1,585,465) 3,946,938 962,980 752,185
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (175,355) 6,177,506 1,154,880 819,646
- ---------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 9,860,067 19,858,609 1,112,352 763,326
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
--------------------------------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Portfolio Portfolio Portfolio Portfolio
--------------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends $ - 16,918,805 16,445,382 3,439,526
Expenses - Mortality and expense
risk charges (note 3) 717,616 1,618,554 2,708,131 605,640
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (expense) (717,616) 15,300,251 13,737,251 2,833,886
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 7,253,385 6,298,570 23,050,199 1,391,937
Unrealized appreciation on investments 10,889,349 20,805,711 57,619,298 10,374,940
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 18,142,734 27,104,281 80,669,497 11,766,877
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations $17,425,118 42,404,532 94,406,748 14,600,763
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Janus Aspen Series
--------------------------------------------------
Flexible International Capital
Income Growth Appreciation
Portfolio Portfolio Portfolio
--------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Investment income:
Income - Dividends 826,620 1,294,926 1,541
Expenses - Mortality and expense
risk charges (note 3) 118,717 423,413 34,463
- -------------------------------------------------------------------------------------------------------------
Net investment income (expense) 707,903 871,513 (32,922)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments:
Net realized gain 97,034 8,307,092 192,282
Unrealized appreciation on investments 21,957 3,158,627 1,244,526
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 118,991 11,465,719 1,436,808
- -------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 826,894 12,337,232 1,403,886
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
--------------------------------------------------------------
S&P 500 Money Total International
Index Market Return Equity
Fund Fund Fund Fund
--------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (1,255,257) 2,866,015 (317,949) (75,353)
Net realized gain (loss) 3,446,026 536,978 (91,239) 466,960
Unrealized appreciation (depreciation)
on investments 26,580,620 (536,978) 5,154,672 4,155,615
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 28,771,389 2,866,015 4,745,484 4,547,222
- ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 28,590,174 58,772,216 3,391,119 522,215
Loan interest - - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (316,328) (1,562,309) (148,331) (44,755)
Surrenders (4,582,934) (17,483,486) (1,840,445) (386,565)
Loans - - - -
Cost of insurance and administrative expense (note 3) (89,286) (102,700) (34,421) (7,587)
Transfer gain (loss) and transfer fees (21,129) 2,712 (717) (6,659)
Transfers (to) from the Guarantee Account (note 1) 16,300,404 13,034,725 3,566,182 736,639
Interfund transfers 10,351,459 (6,144,098) (25,323) (973,514)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 50,232,360 46,517,060 4,908,064 (160,226)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 79,003,749 49,383,075 9,653,548 4,386,996
Net assets at beginning of year 153,426,324 123,694,704 44,527,117 22,876,533
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 232,430,073 173,077,779 54,180,665 27,263,529
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-------------------------------------------------
Real Estate Global Value
Securities Income Equity
Fund Fund Fund
-------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (244,048) (8,918) (143,280)
Net realized gain (loss) 149,810 (2,186) 662,287
Unrealized appreciation (depreciation)
on investments (3,188,593) 241,739 2,332,947
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (3,282,831) 230,635 2,851,954
- --------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 4,022,270 191,016 6,866,186
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (160,236) - (18,904)
Surrenders (663,907) (40,134) (523,345)
Loans - - -
Cost of insurance and administrative expense (note 3) (17,510) (260) (7,224)
Transfer gain (loss) and transfer fees (7,534) (4) (101,318)
Transfers (to) from the Guarantee Account (note 1) 3,925,507 313,027 3,611,840
Interfund transfers (1,568,819) 319,679 5,268,031
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 5,529,771 783,324 15,095,266
- --------------------------------------------------------------------------------------------------------------------
Increase in net assets 2,246,940 1,013,959 17,947,220
Net assets at beginning of year 52,683,797 6,115,298 15,900,008
- --------------------------------------------------------------------------------------------------------------------
Net assets at end of year 54,930,737 7,129,257 33,847,228
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
GE Investments Funds, Inc.
-------------------------------
U.S.
Income Equity
Fund Fund
-------------------------------
Six Months Period from
Ended 6/30/98 5/04-6/30/98
- -------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) (142,977) (120)
Net realized gain (loss) 48,519 320
Unrealized appreciation (depreciation)
on investments 864,466 1,552
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 770,008 1,752
- -------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 612,598 45,286
Loan interest - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (92,434) -
Surrenders (977,817) -
Loans - -
Cost of insurance and administrative expense (note 3) (17,462) (25)
Transfer gain (loss) and transfer fees 3,383 1,112
Transfers (to) from the Guarantee Account (note 1) 1,306,845 -
Interfund transfers 1,004,302 98,749
- -------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 1,839,415 145,122
- -------------------------------------------------------------------------------------------------
Increase in net assets 2,609,423 146,874
Net assets at beginning of year 22,010,860 -
- -------------------------------------------------------------------------------------------------
Net assets at end of year 24,620,283 146,874
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
---------------------------------------------------------
Capital
Bond Appreciation Growth
Fund Fund Fund
------------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income $ 1,047,013 4,537,855 13,481,317
Net realized gain 200,519 10,744,265 22,390,934
Unrealized appreciation (depreciation) on investments 130,372 19,787,986 (11,878,864)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 1,377,904 35,070,106 23,993,387
- ---------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 2,893,280 5,890,077 11,057,720
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (217,284) (464,227) (424,800)
Surrenders (1,973,876) (6,074,076) (5,280,678)
Loans - - -
Cost of insurance and administrative expense (note 3) (29,089) (162,613) (100,334)
Transfer gain (loss) and transfer fees (10,670) (155,551) (109,100)
Transfers (to) from the Guarantee Account (note 1) 3,980,115 6,284,290 8,943,561
Interfund transfers 29,325 (9,185,074) 379,076
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 4,671,801 (3,867,174) 14,465,445
- ---------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 6,049,705 31,202,932 38,458,832
Net assets at beginning of period 39,745,683 207,847,236 139,015,816
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 45,795,388 239,050,168 177,474,648
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Goldman Sachs Variable
Account Funds Insurance Trust
--------------------------------- -----------------------------
High Multiple Growth & Mid Cap
Income Strategies Income Equity
Fund Fund Fund Fund
-----------------------------------------------------------------
Six Months Six Months Period from Period from
Ended 6/30/98 Ended 6/30/98 05/12-6/30/98 05/08-6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income 6,430,605 4,285,098 (223) (338)
Net realized gain 628,089 1,133,086 121 (119)
Unrealized appreciation (depreciation) on investments (753,277) (651,754) 6,172 1,528
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 6,305,417 4,766,430 6,070 1,071
- -----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 8,239,323 3,951,695 217,519 192,700
Loan interest - - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (369,601) (342,067) - -
Surrenders (5,133,235) (3,501,793) (102) (32)
Loans - - - -
Cost of insurance and administrative expense (note 3) (103,206) (67,238) (45) (5)
Transfer gain (loss) and transfer fees (34,420) (29,319) 889 (592)
Transfers (to) from the Guarantee Account (note 1) 9,686,281 4,519,650 91,199 39,795
Interfund transfers 7,361,059 (56,107) 199,220 499,167
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 19,646,201 4,474,821 508,680 731,033
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 25,951,618 9,241,251 514,750 732,104
Net assets at beginning of period 148,285,626 72,023,553 - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period 174,237,244 81,264,804 514,750 732,104
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Fund
----------------------------------------------------
Equity
Income Growth Overseas
Portfolio Portfolio Portfolio
----------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 35,977,444 41,560,128 7,707,720
Net realized gain 30,166,068 7,851,875 10,665,189
Unrealized appreciation (depreciation) on investments (4,013,502) 7,778,385 (1,715,674)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 62,130,010 57,190,388 16,657,235
- -----------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 32,122,103 8,184,252 1,123,295
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,842,947) (1,034,887) (196,033)
Surrenders (18,412,703) (12,080,121) (3,238,165)
Loans - - -
Cost of insurance and administrative expense (note 3) (457,093) (282,272) (106,717)
Transfer gain (loss) and transfer fees (715,503) (168,994) (61,814)
Transfers (to) from the Guarantee Account (note 1) 25,706,630 4,020,969 1,217,384
Interfund transfers (4,263,821) (7,374,775) (7,754,838)
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 32,136,666 (8,735,828) (9,016,888)
- -----------------------------------------------------------------------------------------------------------------------------
Increase in net assets 94,266,676 48,454,560 7,640,347
Net assets at beginning of year 613,582,772 315,013,607 108,304,621
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $ 707,849,448 363,468,167 115,944,968
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Variable Insurance Products Variable Insurance Product
Fund II Fund III
-------------------------------- -----------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 58,217,917 12,617,950 (50,927) 774,220
Net realized gain 7,318,237 6,218,461 655,612 184,574
Unrealized appreciation (depreciation) on investments (23,951,543) 20,941,267 2,849,033 1,393,070
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from operations 41,584,611 39,777,678 3,453,718 2,351,864
- ----------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 6,410,390 14,108,947 6,323,142 5,885,680
Loan interest - - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (1,623,640) (937,965) (553,075) (10,931)
Surrenders (19,928,963) (6,377,843) (533,667) (598,347)
Loans - - - -
Cost of insurance and administrative expense (note 3) (615,568) (158,468) (10,114) (9,572)
Transfer gain (loss) and transfer fees (2,500,324) (65,849) (75,330) 7,056
Transfers (to) from the Guarantee Account (note 1) 4,404,930 12,707,391 3,809,693 4,548,368
Interfund transfers (4,889,707) (4,522,746) 3,750,903 5,931,049
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (18,742,882) 14,753,467 12,711,552 15,753,303
- ----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 22,841,729 54,531,145 16,165,270 18,105,167
Net assets at beginning of year 483,874,812 242,137,396 15,708,222 17,087,775
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 506,716,541 296,668,541 31,873,492 35,192,942
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Federated Investors Insurance Series
-----------------------------------------------
American High
Leaders Income Bond Utility
Fund II Fund II Fund II
-----------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ 2,583,162 963,635 1,920,727
Net realized gain (loss) 932,146 809,224 765,621
Unrealized appreciation (depreciation) on investments 2,297,713 (503,603) (1,283,686)
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 5,813,021 1,269,256 1,402,662
- ------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 11,247,662 4,989,462 2,595,196
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (101,940) (94,093) (119,919)
Surrenders (1,083,321) (1,395,991) (956,863)
Loans - - -
Cost of insurance and administrative expense (note 3) (21,099) (15,745) (19,613)
Transfer gain (loss) and transfer fees (note 3) 14,686 (493) 930
Transfers (to) from the Guarantee Account (note 1) 6,832,605 6,614,508 2,306,189
Interfund transfers 3,850,903 (5,546,256) 436,365
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 20,739,496 4,551,392 4,242,285
- ------------------------------------------------------------------------------------------------------------------------
Increase in net assets 26,552,517 5,820,648 5,644,947
Net assets at beginning of year 34,893,726 35,195,347 30,397,894
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $61,446,243 41,015,995 36,042,841
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Alger American PBHG Insurance Series Fund
---------------------------------------------------------------
Small PBHG PBHG
Capitalization Growth Large Cap Growth II
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 10,035,422 13,681,103 (42,528) (56,320)
Net realized gain (loss) 1,410,110 2,230,568 191,900 67,461
Unrealized appreciation (depreciation) on investments (1,585,465) 3,946,938 962,980 752,185
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 9,860,067 19,858,609 1,112,352 763,326
- ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 3,706,446 4,937,082 1,238,450 1,169,059
Loan interest - - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (164,600) (296,457) (31,834) (94,280)
Surrenders (1,418,178) (2,030,910) (243,498) (83,888)
Loans - - - -
Cost of insurance and administrative expense (note 3) (43,674) (42,616) (3,020) (2,866)
Transfer gain (loss) and transfer fees (note 3) (79,765) (86,773) (16,965) (1,202)
Transfers (to) from the Guarantee Account (note 1) 4,217,409 4,208,521 867,202 1,348,885
Interfund transfers (2,727,294) 1,964,633 790,222 (59,394)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital transactions 3,490,344 8,653,480 2,600,557 2,276,314
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in net assets 13,350,411 28,512,089 3,712,909 3,039,640
Net assets at beginning of year 73,827,690 72,153,813 4,718,267 6,951,940
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year 87,178,101 100,665,902 8,431,176 9,991,580
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
For the period ended June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
---------------------------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Portfolio Portfolio Portfolio Portfolio
---------------------------------------------------------------
Six Months Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) $ (717,616) 15,300,251 13,737,251 2,833,886
Net realized gain (loss) 7,253,385 6,298,570 23,050,199 1,391,937
Unrealized appreciation (depreciation) on investments 10,889,349 20,805,711 57,619,298 10,374,940
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 17,425,118 42,404,532 94,406,748 14,600,763
- ------------------------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 2,769,551 11,383,893 23,787,183 10,827,413
Loan interest - - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (463,086) (669,795) (631,613) (444,360)
Surrenders (3,134,761) (6,006,934) (8,639,577) (3,958,879)
Loans - - - -
Cost of insurance and administrative expense (note 3) (70,260) (170,241) (252,123) (71,646)
Transfer gain (loss) and transfer fees (24,241) (183,049) (33,432) (13,649)
Transfers (to) from the Guarantee Account (note 1) 2,234,219 9,703,006 19,063,122 9,162,887
Interfund transfers (3,859,006) (1,957,177) 7,658,750 6,820,016
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions (2,547,584) 12,099,703 40,952,310 22,321,782
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 14,877,534 54,504,235 135,359,058 36,922,545
Net assets at beginning of period 105,815,122 224,068,917 345,126,082 77,638,235
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 120,692,656 278,573,152 480,485,140 114,560,780
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Janus Aspen Series
---------------------------------------------------
Flexible International Capital
Income Growth Appreciation
Portfolio Portfolio Portfolio
---------------------------------------------------
Six Months Six Months Six Months
Ended 6/30/98 Ended 6/30/98 Ended 6/30/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Increase (decrease) in net assets From operations:
Net investment income (expense) 707,903 871,513 (32,922)
Net realized gain (loss) 97,034 8,307,092 192,282
Unrealized appreciation (depreciation) on investments 21,957 3,158,627 1,244,526
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 826,894 12,337,232 1,403,886
- ---------------------------------------------------------------------------------------------------------------------
From capital transactions:
Net premiums 1,935,808 4,601,172 1,829,687
Loan interest - - -
Transfers (to) from the general account of Life of Virginia:
Death benefits (22,188) (210,620) (10,982)
Surrenders (407,772) (1,104,506) (206,613)
Loans - - -
Cost of insurance and administrative expense (note 3) (9,976) (34,385) (2,486)
Transfer gain (loss) and transfer fees (3,569) 626 (14,390)
Transfers (to) from the Guarantee Account (note 1) 2,779,754 4,898,203 884,966
Interfund transfers 2,116,817 (833,266) 2,911,490
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital transactions 6,388,874 7,317,224 5,391,672
- ---------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets 7,215,768 19,654,456 6,795,558
Net assets at beginning of period 14,336,751 54,665,726 2,669,575
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period 21,552,519 74,320,182 9,465,133
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to unaudited financial statements.
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
June 30, 1998
(Unaudited)
- ------------------------------------------------------------------------------
(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 1998, three new investment subdivisions were added to the Account,
for both Type I and Type II policies. The U.S. Equity Portfolio invests
solely in a designated portfolio of the GE Investments Funds, Inc. The Mid
Cap Equity Portfolio and Growth & Income Portfolio each invest solely in a
designated portfolio of the Goldman Sachs Variable Insurance Trust. All
designated portfolios described above are series type mutual funds.
Policyowners may transfer cash values between the Account's portfolios and
the Guarantee Account that is part of the general account of Life of
Virginia. Amounts transferred to the Guarantee Account earn interest at
the interest rate in effect at the time of such transfer and remain in
effect for one year, after which a new rate may be declared.
(Continued)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
Notes to Financial Statements
June 30, 1998
(Unaudited)
(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.
The aggregate cost of investments acquired and the aggregate proceeds of
investments sold, for the six months ended June 30, 1998 were:
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- --------------------------------------------------------------------------
GE Investment Funds, Inc.:
S&P 500 Index $ 77,825,387 $ 28,820,022
Money Market 640,337,774 604,565,123
Total Return 9,568,527 5,008,617
International Equity 8,584,591 8,922,318
Real Estate Securities 13,623,474 8,219,797
Global Income 1,122,913 255,387
Value Equity 22,548,333 7,378,286
Income 4,700,750 3,195,735
U.S. Equity 165,683 20,559
<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>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
June 30, 1998
(in millions)
- -----------------------------------------------------------------------
Assets 1998
- -----------------------------------------------------------------------
Investments:
Fixed maturities:
Available for sale - at fair value (amortized cost:
June 30, 1998 - $5,600.0) $ 5,772.5
Equity securities - at fair value
Common stocks (cost: June 30, 1998 - $81.9) 93.2
Preferred stocks (cost: June 30, 1998 - $70.1) 80.0
Mortgage loans on real estate (net of reserve for losses:
June 30, 1998 - $17.8) 538.2
Real estate (net) 11.7
Policy loans 192.2
- -----------------------------------------------------------------------
Total investments 6,687.8
- -----------------------------------------------------------------------
Cash 5.8
Receivables:
Premiums and other 14.1
Reinsurance recoverable 13.3
Accrued investment income 123.9
- -----------------------------------------------------------------------
Total receivables 151.3
- -----------------------------------------------------------------------
Deferred policy acquisition costs 196.1
Goodwill (net of accumulated amortization: June 30, 1998 - $14.2) 111.9
Present value of future profits (net) 311.3
Property and equipment at cost (net) 3.2
Deferred income taxes 50.7
Other assets 17.6
Assets held in separate accounts 4,877.7
- -----------------------------------------------------------------------
Total assets $ 12,413.4
- -----------------------------------------------------------------------
1
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Balance Sheets, Continued
(Unaudited)
June 30, 1998
(in millions, except share data)
- -----------------------------------------------------------------------
Liabilities and Stockholders' Equity 1998
- -----------------------------------------------------------------------
Policy liabilities:
Future policy benefits $ 524.0
Policy and contract claims 105.8
Unearned and advance premiums 0.2
Other policyholder funds 5,440.9
- -----------------------------------------------------------------------
Total policy liabilities 6,070.9
- -----------------------------------------------------------------------
General liabilities:
Payable to affiliate, net 39.9
Commissions and general expenses 63.9
Current income taxes 50.1
Other liabilities 109.7
Liabilities related to separate accounts 4,877.7
- -----------------------------------------------------------------------
Total liabilities 11,212.2
- -----------------------------------------------------------------------
Commitments and Contingent Liabilities
- -----------------------------------------------------------------------
Stockholders' equity:
Common stock - $1,000 par value:
Authorized, issued and outstanding: 4,000 shares 4.0
Additional paid-in capital 925.9
Net unrealized investment gains 85.5
Retained earnings 185.8
- -----------------------------------------------------------------------
Total stockholders' equity 1,201.2
- -----------------------------------------------------------------------
Total liabilities and stockholders' equity $ 12,413.4
- -----------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
2
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
For the six months ended June 30, 1998
(in millions)
- ---------------------------------------------------
Six Months
Ended
June 30, 1998
- ---------------------------------------------------
Revenue
Premiums and policy fees $ 130.6
Separate account fees 28.9
Net investment income 243.4
Realized investment gains (losses) (0.7)
Other income 1.2
- ---------------------------------------------------
Total revenue earned 403.4
- ---------------------------------------------------
Benefits and Expenses
Benefits to policyholders 251.6
Commissions and general expenses 48.9
Amortization of intangibles 26.6
Amortization of deferred policy acquisition
costs 12.1
- ---------------------------------------------------
Total benefits and expenses 339.2
Income Before Income Tax 64.2
Provision for income tax
Current expense (benefit) 22.0
Deferred expense (benefit) 1.5
- ---------------------------------------------------
23.5
- ---------------------------------------------------
Net income $ 40.7
- ---------------------------------------------------
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Unaudited)
For the six months ended June 30, 1998 (in millions)
- ------------------------------------------------------
Six Months
Ended
June 30, 1998
- ------------------------------------------------------
Common stock
$1,000 par value common stock, authorized,
issued and outstanding 4,000 in 1998
- ------------------------------------------------------
Balance at beginning and end of period $ 4.0
- ------------------------------------------------------
Additional Paid-in Capital
Balance at beginning and end of period 925.9
- ------------------------------------------------------
Net Unrealized Investment Gains (Losses)
Balance at beginning of period 74.3
Net unrealized investment gains (losses) 11.2
- ------------------------------------------------------
Balance at end of period 85.5
- ------------------------------------------------------
Retained Earnings (Deficit)
Balance at beginning of period 145.1
Net income 40.7
Balance at end of period 185.8
- ------------------------------------------------------
Stockholders' equity at end of period $ 1,201.2
- ------------------------------------------------------
See accompanying notes to consolidated financial statements.
4
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the six months ended June 30, 1998
(in millions)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Six Months
Ended
June 30, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities:
Net income $ 40.7
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Change in policy liabilities 143.4
Change in accrued investment income (0.8)
Deferred policy acquisition costs (50.8)
Amortization of deferred policy acquisition costs 18.5
Amortization of intangibles 26.6
Other amortization and depreciation 1.7
Premiums and operating receivables, commissions and general
expenses, income taxes and other 76.5
Realized investment (gains) losses 0.7
- ----------------------------------------------------------------------------------------------------
Cash provided by (used in) operating activities 256.5
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Sale or maturity of investments
Fixed maturities - available for sale
Sales 395.3
All other investments 80.8
Purchase of investments:
Fixed maturities - available for sale (532.0)
All other investments (147.7)
Purchase of property and equipment (0.3)
- ----------------------------------------------------------------------------------------------------
Cash provided by (used in) investing activities (203.9)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in cash overdrafts (1.4)
Interest sensitive life, annuity and investment contract deposits 954.6
Interest sensitive life, annuity and investment contract withdrawals (1,000.2)
- ----------------------------------------------------------------------------------------------------
Cash provided by (used in) financing activities (47.0)
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash 5.6
Cash at beginning of period 0.2
- ----------------------------------------------------------------------------------------------------
Cash at end of period $ 5.8
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Notes to Unaudited Consolidated Financial Statements
(1) Summary of Significant Accounting Principles and Practices
The financial results included in this report are stated in conformity
with generally accepted accounting principles and are unaudited but include
normal recurring adjusttments considered necessary for a fair presentation
of the results for such periods. These interim figures are not necessarily
indicative of results for a full year.
Refer to the consolidated financial statements and notes in the audited
financial statements for the year ended December 31, 1997 for additional
details of Life of Virginia's financial position, as well as a description
of the accounting policies which have continued without change. The details
included in notes have not changed except as a result of normal
transactions in the interim.
<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. 12/
(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. 12/
(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. 12/
(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 Fidelity Variable Insurance Products
Fund; Asset Manager Portfolio of the Fidelity Variable Insurance
Products Fund II; Money Market Portfolio, Government Securities
Portfolio, Common Stock Index Portfolio, Total Return Portfolio of
the Life of Virginia Series Fund, Inc.; Limited Maturity Bond
Portfolio, Growth Portfolio and Balanced Portfolio of the
Neuberger & Berman Advisers Management Trust; Growth Portfolio,
Aggressive Growth Portfolio, and Worldwide Growth Portfolio of the
Janus Aspen Series; Money Fund, High Income Fund, Bond Fund,
Capital Appreciation Fund, Growth Fund, Multiple Strategies Fund
of the Oppenheimer Variable Account Funds. 12/
(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.
12/
(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. 12/
(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)(i) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twelve additional investment subdivisions of
Separate Account 4, investing in shares of the Growth & Income
Portfolio and Growth opportunities Portfolio of Variable Insurance
Products Fund III; Growth II Portfolio and Large Cap Growth
Portfolio of the PBHG Insurance Series Fund, Inc.; Global Income
Fund and Value Equity Fund of GE Investments Funds, Inc.11/
(1)(j) 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 Capital
Appreciation Portfolio of the Janus Aspen Series. 11/
<PAGE>
(1)(k) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of six additional investment subdivisions of
Separate Account 4, investing in shares of the U.S. Equity Fund of
the GE Investments Funds, Inc., Growth and Income Fund of the
Goldman Sachs Variable Insurance Trust Fund and Mid Cap Equity
Fund of Goldman Sachs Variable Insurance Trust. Further a name
change for Oppenheimer Variable Account Fund Capital Appreciation
fund to Oppenheimer Variable Account Fund Aggressive Growth Fund.
12/
(1) (l) 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 Salomon Brothers
Variable Series Funds, Inc. 14/
(2) Not Applicable.
(3)(a) Underwriting Agreement dated December 12, 1997 between The Life
Insurance Company of Virginia and Capital Brokerage Corporation.
(b) Dealer Sales Agreement dated December 13, 1997.
(4)(a) Form of Policy
(i) Policy Form P1143 4/94 12/
(ii) Policy Form P1150 10/98 13/
(b) Endorsements to Policy.
(i) IRA Endorsement 12/
(ii) Pension Endorsement 12/
(iii) Section 403(b) Endorsement 12/
(iv) Guaranteed Minimum Death Benefit Rider 13/
(v) Optional Death Benefit at Death of Annuitant Endorsement 12/
(vi) Endorsement for Waiver of Surrender Charges 13/
(5)(a) Form of Application. 12/
(6)(a) Certificate of Incorporation of The Life Insurance Company of
Virginia. 12/
(b) By-Laws of The Life Insurance Company of Virginia. 12/
(7). Not Applicable.
(8)(a) Stock Sale Agreement between The Life Insurance Company of
Virginia and The Life of Virginia Series Fund, Inc. 12/
(b) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance Company
of Virginia. 12/
(b)(i) Amendment to Participation Agreement Referencing Policy Form
Numbers. 12/
(b)(ii) Amendment to Participation Agreement among Variable Insurance
Products Fund II, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
(b)(iii)Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
(c) Agreement between Oppenheimer Variable Account Funds, Oppenheimer
Management Corporation, and The Life Insurance Company of
Virginia. 12/
(c)(i) Amendment to Agreement between Oppenheimer Variable Account Funds,
Oppenheimer Management Corporation, and The Life Insurance Company
of Virginia. 12/
(d) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and The Life Insurance Company
of Virginia. 12/
(e) Participation Agreement between Janus Capital Corporation and The
Life Insurance Company of Virginia. 12/
(f) Participation Agreement between Insurance Management Series,
Federated Securities Corp., and The Life Insurance Company of
Virginia. 12/
<PAGE>
(g) Participation Agreement between The Alger American Fund, Fred
Alger and Company, Inc., and The Life Insurance Company of
Virginia. 8/
(h) Participation Agreement between Variable Insurance Products Fund
III and The Life Insurance Company of Virginia. 11/
(i) Participation Agreement between PBHG Insurance Series Fund, Inc
and The Life Insurance Company of Virginia.11/
(j) Participation Agreement between Goldman Sachs Variable Insurance
Trust Insurance and The Life Insurance Company of Virginia.14/
(k) Form of Participation Agreement between Salomon Brothers Variable
Series Funds and The Life Insurance Company of Virginia.14/
(9) Opinion and Consent of Counsel.14/
(10)(a) Consent of Counsel.14/
(b) Consent of Independent Auditors.14/
(11) Not Applicable.
(12) Not Applicable.
(13) Schedule showing computation for Performance Data 12/
(14) Power of Attorney dated April 16, 1997.11/
--------------------------
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 6 to the
Registrant's registration statement on Form N-4, File No. 33-76334, filed
with the Securities and Exchange Commission on March 24, 1997.
11/Incorporated herein by reference to post-effective amendment number 7 to the
Registrant's registration statement on Form N-4, File No. 33-76334 filed with
the Securities and Exchange Commission on May 1, 1997.
12/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.
13/Incorporated herein by reference to post-effective amendment number 11 to
the Registrant's registration statement on Form N-4, File No. 33-76334 filed
with the Securities and Exchange Commission on July 17, 1998.
14/ Incorporated herein.
<PAGE>
Item 25. Directors and Officers of Life of Virginia
Positions and Offices with
Name Address Depositor
Ronald V. Dolan First Colony Life
700 Main Street Director and Chairman of the
Lynchburg, VA 24505 Board
Pamela S. Schutz Life of Virginia
6610 W. Broad Street
Richmond, VA 23230 Director and President
Selwyn L. Flournoy, Jr. Life of Virginia
6610 W. Broad Street Director and Senior Vice
Richmond, VA 23230 President
Linda L. Lanam Life of Virginia
6610 W. Broad Street Director and Senior Vice
Richmond, VA 23230 President
Robert D. Chinn Life of Virginia
6610 W. Broad Street Director and Senior Vice
Richmond, VA 23230 President - Agency
Elliot Rosenthal Life of Virginia
6610 W. Broad Street Senior Vice President -
Richmond, VA 23230 Investment Products
Victor C. Moses GE Financial Assurance
601 Union St.reet, Ste.
5600
Seattle, WA 98101 Director
Geoffrey S. Stiff Life of Virginia
6610 W. Broad Street
Richmond, VA 23230e Director
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
ORGANIZATIONAL CHART
--------------GENERAL ELECTRIC
| COMPANY
Other Subsidiaries |
(100%)
|
GENERAL ELECTRIC
CAPITAL SERVICES, INC.
|
(100%)
|
GENERAL ELECTRIC
CAPITAL CORPORATION
|
(100%)
|
GE FINANCIAL ASSURANCE------------------
HOLDINGS, INC. |
| |
GNA CORPORATION |
| |
GENERAL ELECTRIC 20%
CAPITAL ASSURANCE COMPANY |
| |
THE LIFE INSURANCE |
COMPANY OF |
VIRGINIA ------------------------
<PAGE>
Item 27. Number of Policyowners
For the period ended September 22, 1998, there were 53,216 Policyowners.
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.
<PAGE>
(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.
<PAGE>
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>
Positions and Offices with
Name Address Depositor
<S> <C>
Scott A. Curtis GE Financial Assurance
6610 W. Broad St. President and Chief Executive
Richmond, VA 23230 Officer
Charles A. Kaminski GE Financial Assurance
601 Union St., Ste. 5600
Seattle, WA 98101 Senior Vice President
Victor C. Moses GE Financial Assurance
601 Union St., Ste. 5600
Seattle, WA 98101 Senior Vice President
Geoffrey S. Stiff Life of Virginia
6610 W. Broad Street
Richmond, VA 23230 Senior Vice President
Mary Catherine Yeagley GE Financial Assurance
601 Union St., Ste. 5600
Seattle, WA 98101 Senior Vice President
Jeffrey I. Hugunin GE Financial Assurance
6604 W. Broad St.
Richmond, VA 23230 Treasurer
John W. Attey GE Financial Assurance
7125 W. Jefferson Ave., Ste.
200 Vice President, Counsel &
Lakewood, CO 80235 Assistant Secretary
Thomas W. Casey GE Financial Assurance
6604 W. Broad St. Vice President & Chief
Richmond, VA 23230 Financial Officer
Stephen N. DeVos GE Financial Assurance
6604 W. Broad St.
Richmond, VA 23230 Vice President & Controller
Scott A. Reeks GE Financial Assurance
6610 W. Broad St. Vice President & Assistant
Richmond, VA 23230 Treasurer
Edward J. Wiles, Jr. GE Financial Assurance
777 Long Ridge Rd., Bldg. "B" Vice President, Counsel &
Stamford, CT 06927 Secretary
</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.
<PAGE>
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
The Company offers and will offer Policies to participants in the Texas
Optional Retirement Program. In connection therewith, the Company 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
The Company 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
The Company 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 the Company.
<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 Act Rule 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 September 29, 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 September, 1998 in the City/County of
Henrico, Commonwealth of Virginia.
/s/ Laura C. Deusebio
- ---------------------------------
Laura C. Deusebio - Notary Public
My Commission Expires January 31, 2000
<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.
Signature Title Date
- --------- ------ -----
RONALD V. DOLAN Director, Chairman of the Board 9/28/98
- -------------------------
Ronald V. Dolan
PAMELA S. SCHUTZ Director and President 9/28/98
- --------------------------
Pamela S. Schutz
/s/ Selwyn L. Flournoy, Jr.
- -------------------------- Director, Senior Vice President 9/28/98
Selwyn L. Flournoy, Jr.
LINDA L. LANAM Director, Senior Vice President 9/28/98
- --------------------------
Linda L. Lanam
ROBERT D. CHINN Director, Senior Vice President 9/28/98
- --------------------------
Robert D. Chinn
VICTOR C. MOSES Director 9/28/98
- --------------------------
Victor C. Moses
GEOFFREY S. STIFF Director 9/28/98
- ---------------------------
Geoffrey S. Stiff
By /s/ Selwyn L. Flournoy, Jr., pursuant to Power of Attorney executed on
April 16, 1997.
<PAGE>
LIST OF EXHIBITS
(1)(l) Board Resolution
(8)(j) Form of Participation Agreement between Goldman Sachs Variable
Insurance Trust and The Life Insurance Company of Virginia
(8)(k) Form of Participation Agreement between Salomon Brothers Variable
Series Funds and The Life Insurance Company of Virginia
(9) Opinion and Consent of Counsel
(10)(a) Consent of Counsel
(10)(b) Consent of Independent Auditors
UNANIMOUS WRITTEN CONSENT OF
THE BOARD OF DIRECTORS OF
THE LIFE INSURANCE COMPANY OF VIRGINIA
The undersigned, being all of the members of the Board of Directors of The Life
Insurance Company of Virginia, a Virginia corporation, in lien of a meeting held
for the purpose and pursuant to the provisions of Section 13.1-685 of the Code
of Virginia do hereby approve the following resolutions:
WHEREAS, The Board of Directors of the Company, pursuant to the Provisions of
Section 38.2-3113 of the Code of Virginia, adopted resolutions establishing Life
of Virginia Separate Account 4 ("Separate Account 4") on August 19, 1987; and
WHEREAS, The Company wishes to establish 15 additional investment subdivisions
of Separate Account 4 which will invest in shares of the Salomon Brothers
Variable Investors Fund, Salomon Brothers Variable Total Return Fund and Salomon
Brothers Strategic Bond Fund of Salomon Brothers Variable Series Funds Inc.
NOW, THEREFORE, BE IT RESOLVED, That the Executive Committee of the Board of
Directors of the Company does hereby establish and create one additional
investment subdivision of each of the aforementioned separate accounts. The new
subdivisions shall invest in shares of a single mutual fund portfolio as set
forth below:
<TABLE>
<CAPTION>
INVESTMENT SUBDIVISIONS: TO BE INVESTED IN:
<S> <C>
Salomon Brothers Variable Series Funds, Inc.
---------------------------------------------
SAL Investors Salomon Brothers Variable Investors Fund
SAL Investors - B Salomon Brothers Variable Investors Fund - B
SAL Investors - C Salomon Brothers Variable Investors Fund - C
SAL Investors - D Salomon Brothers Variable Investors Fund - D
SAL Investors - E Salomon Brothers Variable Investors Fund - E
SAL Total Return Salomon Brothers Variable Total Return Fund
SAL Total Return - B Salomon Brothers Variable Total Return Fund - B
SAL Total Return - C Salomon Brothers Variable Total Return Fund - C
SAL Total Return - D Salomon Brothers Variable Total Return Fund - D
SAL Total Return - E Salomon Brothers Variable Total Return Fund - E
SAL Strategic Bond Salomon Brothers Variable Strategic Bond Fund
SAL Strategic Bond - B Salomon Brothers Variable Strategic Bond Fund - B
SAL Strategic Bond - C Salomon Brothers Variable Strategic Bond Fund - C
SAL Strategic Bond - D Salomon Brothers Variable Strategic Bond Fund - D
SAL Strategic Bond - E Salomon Brothers Variable Strategic Bond Fund - E
</TABLE>
FURTHER RESOLVED, That the President, or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute whatever agreement or agreements may be necessary or appropriate to
enable such investments to be made, and the Board of Directors hereby ratifies
of any such officer in executing any such agreement prior to the date of these
resolutions; and
FURTHER RESOLVED, That the President or any Senior Vice President, and each of
them, with full power to act without the others, are hereby severally authorized
to execute and deliver such other documents and do such acts and things as each
or any of them may deem necessary or desirable to carry out the foregoing
resolutions and the intent and purposes thereof.
FURTHER RESOLVED, That these resolutions shall take effect as of October 1,
1998.
/s/ ROBERT D. CHINN /s/ RONALD V. DOLAN
- ------------------------------ ------------------------------
ROBERT D. CHINN RONALD V. DOLAN
/s/ SELWYN L. FLOURNOY, JR. /s/ LINDA L. LANAM
- ------------------------------ -------------------------------
SELWYN L. FLOURNOY, JR. LINDA L. LANAM
/s/ VICTOR C. MOSES /s/ PAMELA S. SCHUTZ
- ------------------------------ -------------------------------
VICTOR C. MOSES PAMELA S. SCHUTZ
/s/ GEOFFREY S. STIFF
- ------------------------------
GEOFFREY S. STIFF
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:
- --------------------------------------------------------------------------------
Date Established
by
Board of Type of Product
Name of Account and Directors of the SEC 1940 Act Supported by
Subaccounts Company Registration Number Account
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
[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:
- --------------------------------------------------------------------------------
Date Established
by
Board of Type of Product
Name of Account and Directors of the SEC 1940 Act Supported by
Subaccounts Company Registration Number Account
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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:
- --------------------------------------------------------------------------------
Date Established
by
Board of Type of Product
Name of Account and Directors of the SEC 1940 Act Supported by
Subaccounts Company Registration Number Account
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
[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:
- --------------------------------------------------------------------------------
Date Established
by
Board of Type of Product
Name of Account and Directors of the SEC 1940 Act Supported by
Subaccounts Company Registration Number Account
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of __________, 1998
("Agreement"), by and among Salomon Brothers Variable Series Funds Inc, a
Maryland corporation (the "Fund"), Salomon Brothers Asset Management Inc, a
Delaware Corporation (the "Adviser") and ____________________________________,a
[STATE) life insurance company ("LIFE COMPANY"), on behalf of itself and each of
its segregated asset accounts listed in Schedule A hereto, as the parties hereto
may amend from time to time (each, an "Account," and collectively, the
"Accounts").
WITNESSETH THAT:
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is available to the extent set forth herein to act
as the investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements with the Fund and
("Participating Insurance Companies");
WHEREAS, the Fund currently consists of seven separate investment
portfolios, shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the Fund will make Shares of each investment portfolio of
the Fund listed on Schedule A hereto (each, a "Portfolio" and collectively, the
"Portfolios") as the Parties hereto may amend from time to time available for
purchase by the Accounts;
WHEREAS, the Fund has applied for an order (the "Order") from the
SEC to permit Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies;
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance policies (collectively, the "Contracts")
as set forth on Schedule A hereto, as the Parties hereto may amend from time to
time, which Contracts, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, LIFE COMPANY will, to the extent set forth herein, fund the
variable life insurance policies and variable annuity contracts through the
Accounts, each of which may be divided into two or more subaccounts
("Subaccounts"; reference herein to an "Account" includes reference to each
Subaccount thereof to the extent the context requires);
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts,
each of which is registered as a unit investment trust under the 1940 Act (or
exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom);
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the
Portfolios on behalf of the Accounts to fund the Contracts; and
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Portfolios
1.1 Available Portfolios
The Fund will make Shares of each Portfolio listed on Schedule A
available to LIFE COMPANY for purchase and redemption at net asset value next
computed after the Fund's receipt of a purchase or redemption order and with no
sales charges, in accordance with the Fund's then current prospectus and subject
to the terms and conditions of this Agreement. The Board of Directors of the
Fund may refuse to sell Shares of any Portfolio to any person, or suspend or
terminate the offering of Shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Directors acting in good faith and in light of their fiduciary
duties under federal and any applicable state laws, such action is deemed in the
best interests of the shareholders of such Portfolio.
1.2 Addition, Deletion or Modification of Portfolios.
The Parties hereto may agree, from time to time, to add other
Portfolios to provide additional funding alternatives for the Contracts, or to
delete or modify existing Portfolios, by amending Schedule A hereto. Upon such
amendment to Schedule A, any applicable reference to a Portfolio, the Fund, or
its Shares herein shall include a reference to all Portfolios set forth on
Schedule A as then amended. Schedule A, as amended from time to time, is
incorporated herein by reference and is a part hereof.
1.3 No Sales to the General Public.
The Fund represents that shares of the Portfolios will be sold only
to Participating Insurance Companies, their separate accounts and qualified
pension and retirement plans ("Plans") and that no Shares of any Portfolio have
been or will be sold to the general public.
Section 2. Processing Transactions
2.1 Placing Orders.
(a) The Fund or its designated agent will use its best effort to
provide LIFE COMPANY with the net asset value per Share for each Portfolio by
6:30 p.m. Eastern Time on each Business Day. As used herein, "Business Day"
shall mean any day on which (i) the New York Stock Exchange is open for regular
trading, and (ii) the Fund calculates the Portfolios' net asset value.
(b) LIFE COMPANY will use the data provided by the Fund each
Business Day pursuant to paragraph (a) immediately above to calculate Account
unit values and to process transactions that receive that same Business Day's
Account unit values. LIFE COMPANY will perform such Account processing the same
Business Day, and will place corresponding orders to purchase or redeem Shares
with the Fund by 9:00 a.m. Eastern Time the following Business Day.
(c) With respect to payment of the purchase price by LIFE COMPANY
and of redemption proceeds by the Fund, LIFE COMPANY and the Fund shall net
purchase and redemption orders with respect to each Portfolio and shall transmit
one net payment per Portfolio in accordance with Section 2.2, below.
(d) If the Fund provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 Payments
(a) LIFE COMPANY shall pay for Shares of each Portfolio on the same
day that it notifies the Fund of a purchase request for such Shares. Payment for
Shares shall be made in federal funds transmitted to the Fund by wire to be
received by the Fund by 1:00 P.M. Eastern Time on the day the Fund is notified
of the purchase request for Shares. If payment in federal funds for any purchase
is not received, or is received by the Fund after 1:00 p.m. Eastern Time on such
Business Day, LIFE COMPANY shall promptly, upon the Fund's request in writing,
reimburse the Fund for any charges, costs, fees, interest or other expenses
incurred by the Fund in connection with any advances to, or borrowings or
overdrafts by, the Fund, or any similar expenses incurred by the Fund, as a
result of non-payment or late payment.
(b) The Fund will wire payment in federal funds for net redemptions
to an account designated by LIFE COMPANY by 1:00 p.m. Eastern Time on the
business day succeeding the day the order is placed, to the extent practicable,
but in any event within five (5) calendar days after the date the order is
placed in order to enable LIFE COMPANY to pay redemption proceeds within the
time specified in Section 22(e) of the 1940 Act. The Fund shall not bear any
responsibility whatsoever for the proper disbursement or crediting of redemption
proceeds by LIFE COMPANY.
2.3 Applicable Price
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate
Portfolios next computed after receipt by the Fund or its designated agent of
the orders. For purposes of this Section 2.3(a), LIFE COMPANY shall be the
designated agent of the Fund for receipt of orders relating to Contract
transactions on each Business Day and receipt by such designated agent shall
constitute receipt by the Fund; provided that the Fund receives notice of such
orders by 9:00 a.m. Eastern Time on the following Business Day.
(b) All other Share purchases and redemptions by LIFE COMPANY will
be effected at the net asset values of the appropriate Portfolios next computed
after receipt by the Fund or its designated agent of the order therefor, and
such orders will be irrevocable.
2.4 Dividends and Distributions
The Fund will furnish notice by wire or telephone (followed by
written confirmation) on or prior to the payment date to LIFE COMPANY of any
income dividends or capital gain distributions payable on the Shares of any
Portfolio. LIFE COMPANY hereby elects to reinvest all dividends and capital
gains distributions in additional Shares of the corresponding Portfolio at the
ex-dividend date net asset values until LIFE COMPANY otherwise notifies the Fund
in writing, it being agreed by the Parties that the ex-dividend date and the
payment date with respect to any dividend or distribution will be the same
Business Day. LIFE COMPANY reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. Any
such revocation will take effect with respect to the next income dividend or
capital gain distribution following receipt by the Fund of such notification
from LIFE COMPANY.
2.5 Book Entry
Issuance and transfer of Portfolio Shares will be by book entry
only. Stock certificates will not be issued to LIFE COMPANY. Shares ordered from
the Fund will be recorded in an appropriate title for LIFE COMPANY, on behalf of
its Accounts.
Section 3. Costs and Expenses
3.1 General
(a) Except as otherwise specifically provided herein, each party
will bear all expenses incident to its performance under this Agreement.
(b) The Fund shall pay no fee or other compensation to the LIFE
COMPANY under this agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution expenses,
then the Fund may make payments to the LIFE COMPANY or to the underwriter for
the Contracts if and in amounts agreed to by the Fund in writing. Presently, no
such payments are contemplated.
3.2 Registration
(a) The Fund will bear the cost of its registering as a management
investment company under the 1940 Act and registering its Shares under the 1933
Act, and keeping such registrations current and effective; including, without
limitation, the preparation of and filing with the SEC of Forms N-SAR and Rule
24f-2 Notices with respect to the Fund and its Shares and payment of all
applicable registration or filing fees with respect to any of the foregoing.
(b) LIFE COMPANY will bear the cost of registering, to the extent
required, each Account as a unit investment trust under the 1940 Act and
registering units of interest under the Contracts under the 1933 Act and keeping
such registrations current and effective; including, without limitation, the
preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with
respect to each Account and its units of interest and payment of all applicable
registration or filing fees with respect to any of the foregoing.
3.3 Distribution Expenses
LIFE COMPANY will bear the expenses of distribution. These expenses
would include by way of illustration, but are not limited to, the costs of
distributing to Contract owners, annuitants, insureds or participants (as
appropriate) under the Contracts (collectively, "Participants") the following
documents, whether they relate to the Account or the Fund: prospectuses,
statements of additional information, proxy materials and periodic reports.
These costs would also include the costs of preparing, printing, and
distributing sales literature and advertising relating to the Portfolios (all of
which require the prior written consent of the Fund) to the extent such
materials are distributed in connection with the Contracts, as well as filing
such materials with, and obtaining approval from, the SEC, NASD, any state
insurance regulatory authority, and any other appropriate regulatory authority,
to the extent required by law.
3.4 Other Expenses
(a) The Fund will bear, or arrange for others to bear, the costs of
preparing, filing with the SEC and setting for printing the Fund's prospectus,
statement of additional information and any amendments or supplements thereto
(collectively, the "Fund Prospectus"), periodic reports to shareholders, the
Fund proxy material and other shareholder communications to the extent required
by law or as deemed appropriate by the Fund.
(b) LIFE COMPANY will bear the costs of preparing, filing with the
SEC and printing each Account's prospectus, statement of additional information
and any amendments or supplements thereto (collectively, the "Account
Prospectus"), any periodic reports to Participants, voting instruction
solicitation material and the Fund prospectus, and other Participant
communications to the extent required by law or as deemed appropriate by LIFE
COMPANY.
(c) LIFE COMPANY will, to the extent required by law, print in
quantity and deliver to existing Participants the documents described in Section
3.4(b) above and will deliver to such Participants the prospectuses as provided
by the Fund. LIFE COMPANY may elect to receive such prospectuses in camera ready
or computer diskette format. The Fund will print the Fund statement of
additional information, proxy materials relating to the Fund and periodic
reports of the Fund.
3.5 Parties To Cooperate
Each party agrees to cooperate with the other, in arranging to
print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of the Fund and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws
(a) The Fund represents and warrants that it will elect to be
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will qualify and maintain its qualification as a RIC and to comply with the
diversification requirements set forth in Section 817(h) of the Code and the
regulations thereunder. The Fund will notify LIFE COMPANY immediately upon
having a reasonable basis for believing that it has ceased to so qualify or so
comply, or that it might not so qualify or so comply in the future.
(b) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will maintain such
treatment; LIFE COMPANY will notify the Fund immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
(c) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will continue to meet such definitional
requirements, and it will notify the Fund immediately upon having a reasonable
basis for believing that such requirements have ceased to be met or that they
might not be met in the future.
4.2 Insurance and Certain Other Laws
(a) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under all
applicable laws and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under all applicable laws and regulations,
and (iii) the Contracts comply in all material respects with all applicable
federal and state laws and regulations.
(b) The Fund represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full corporate power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement. Notwithstanding the foregoing, the Fund, makes no representations 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.
(c) The Adviser represents that it is and warrants that it shall
remain duly registered as an investment adviser under all applicable federal and
state securities laws and agrees that it shall perform its obligations to the
Fund in accordance in all material respects with such laws.
(d) LIFE COMPANY acknowledges and agrees that it is the
responsibility of LIFE COMPANY and other Participating Insurance Companies to
determine investment restrictions under state insurance law applicable to any
Portfolio, and that the Fund shall bear no responsibility to LIFE COMPANY, for
any such determination or the correctness of such determination. LIFE COMPANY
has determined that the investment restrictions set forth in the current Fund
Prospectus are sufficient to comply with all investment restrictions under state
insurance laws that are currently applicable to the Portfolios as a result of
the Accounts' investment therein. LIFE COMPANY shall inform the Fund of any
additional investment restrictions imposed by state insurance law after the date
of this agreement that may become applicable to the Fund or any Portfolio from
time to time as a result of the Accounts' investment therein. Upon receipt of
any such information from LIFE COMPANY or any other Participating Insurance
Company, the Fund shall determine whether it is in the best interests of
shareholders to comply with any such restrictions. If the Fund determines that
it is not in the best interests of shareholders to comply with a restriction
determined to be applicable by the LIFE COMPANY, the Fund shall so inform LIFE
COMPANY, and the Fund and LIFE COMPANY shall discuss alternative accommodations
in the circumstances.
4.3 Securities Laws
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
applicable state law, (iii) each Account is and will remain registered under the
1940 Act, to the extent required by the 1940 Act, (iv) each Account does and
will comply in all material respects with the requirements of the 1940 Act and
the rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, (vii) each Account Prospectus will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (viii) all of its directors, officers, employees, investment
advisers, and other individuals/entities having access to the funds and/or
securities of any Portfolio are and continue to be at all times covered by a
blanket fidelity bond or similar coverage covering such risks and in such amount
as is customary for companies engaged in similar businesses in similar
industries. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
(b) The Fund represents and warrants that (i) Shares sold pursuant
to this Agreement will be registered under the 1933 Act to the extent required
by the 1933 Act and will be duly authorized for issuance and sold in compliance
with Maryland law, (ii) the Fund is and will remain registered under the 1940
Act to the extent required by the 1940 Act, (iii) the Fund will amend the
registration statement under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) the Fund
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) the Fund's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, (vi) the
Fund's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder and (vii) all of its
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of any
Portfolio are and continue to be at all times covered by a blanket fidelity bond
or similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company.
(c) The Fund will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by the Fund.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) The Fund will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or the Fund Prospectus that may affect
the offering of Shares of any Portfolio, (iii) the initiation of any proceedings
for that purpose or for any other purpose relating to the registration or
offering of Shares of any Portfolio, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of Shares of any Portfolio in any
state or jurisdiction, including, without limitation, any circumstances in which
such Shares are not registered and are not, in all material respects, issued and
sold in accordance with applicable state and federal law. The Fund 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) LIFE COMPANY will immediately notify the Fund of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of any
Portfolio, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of each Account's
interests pursuant to the Contracts, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of said interests in any state or
jurisdiction, including, without limitation, any circumstances in which said
interests are not registered and are not, in all material respects, issued and
sold in accordance with applicable state and federal law. LIFE 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.
<PAGE>
4.5 Documents Provided by LIFE COMPANY; Information About the
Fund.
(a) LIFE COMPANY will provide to the Fund or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to the Fund or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which any Portfolio, the Fund or any of its affiliates
is named, at least ten (10) Business Days prior to its use or such shorter
period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if the Fund or its designated agent objects to such use
within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
any Portfolio, the Fund or its affiliates in connection with the sale of the
Contracts other than (i) the information or representations contained in the
then current registration statement, including the Fund Prospectus contained
therein, relating to Shares, as such registration statement and the Fund
Prospectus may be amended from time to time; (ii) in reports or proxy materials
for the Fund; (iii) in published reports for the Fund that are in the public
domain and approved by the Fund for distribution by LIFE COMPANY; or (iv) in
sales literature or other promotional material approved by the Fund for use by
LIFE COMPANY, except with the express written permission of the Fund.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning the Fund and its affiliates that
is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither the Fund nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media
(e.g., on-line networks such as the Internet or other electronic messages)),
sales literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 Documents Provided by Fund; Information About LIFE COMPANY.
(a) The Fund will provide to LIFE COMPANY at least one (1) complete
copy of all SEC registration statements, Fund Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to the
Fund or the Shares of a Portfolio, contemporaneously with the filing of such
document with the SEC or other regulatory authorities.
(b) The Fund will provide to LIFE COMPANY copies of all Fund
prospectuses, and printed copies of all statements of additional information,
proxy materials, periodic reports to shareholders and other materials required
by law to be sent to Participants who have allocated any Contract value to a
Portfolio. The Fund will provide such copies to LIFE COMPANY in a timely manner
so as to enable LIFE COMPANY to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) The Fund will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least ten (10) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent reasonably objects to such use within ten (10) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon.
(d) Neither the Fund nor any of its affiliates will give any
information or make any representations or statements on behalf of or concerning
LIFE COMPANY, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended from time to time; (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) The Fund shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that information concerning
LIFE COMPANY, and its respective affiliates that is intended for use only by
brokers or agents selling the Contracts (i.e., information that is not intended
for distribution to Participants) ("broker only materials") is so used, and
neither LIFE COMPANY, nor any of its respective affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such broker only
materials.
(f) For purposes of this Section 4.6, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media (i.e., any
written communication distributed or made generally available to customers or
the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and any other
material constituting sales literature or advertising under the NASD rules, the
1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
LIFE COMPANY acknowledges that the Fund has filed an application
with the SEC to request an order granting relief from various provisions of the
1940 Act and the rules thereunder to the extent necessary to permit Fund shares
to be sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance Companies,
as well as by Plans. Any conditions or undertakings that may be imposed on LIFE
COMPANY and the Fund by virtue of such order shall be incorporated herein by
reference, as of the date such order is granted, as though set forth herein in
full, and the parties to this Agreement shall comply with such conditions and
undertakings to the extent applicable to each such party.
Section 6. Termination
6.1 Events of Termination
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
(a) at the option of any party, with or without cause, upon one (1)
year advance written notice to the other parties; or
(b) at the option of LIFE Company if shares of a Portfolio are not
reasonably available to meet the requirements of the Contracts as determined by
LIFE COMPANY provided, however, that such a termination shall apply only to the
Portfolio(s) not available. Prompt written notice of the election to terminate
for such cause shall be furnished by LIFE COMPANY to the Fund;
(c) at the option of the Fund upon institution of formal processing
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, the Fund reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Portfolio with respect to which the Agreement is to be terminated; or
(d) at the option of LIFE COMPANY upon institution of formal
proceedings against the Fund, its principal underwriter, or its investment
adviser by the NASD, the SEC, or any state insurance regulator or any other
regulatory body regarding the Fund's obligations under this Agreement or related
to the operation or management of the applicable Portfolio or the purchase of
the applicable Portfolios, if, in each case, LIFE COMPANY reasonably determines
that such proceedings, or the facts on which such proceedings would be based,
have a material likelihood of imposing material adverse consequences on LIFE
COMPANY, or the Subaccount corresponding to the Portfolio with respect to which
the Agreement is to be terminated; or
(e) at the option of any party in the event that (i) a Portfolio's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law precludes
the use of such Shares as an underlying investment medium of the Contracts
issued or to be issued by LIFE COMPANY; or
(f) at the option of LIFE COMPANY if the applicable Portfolio ceases
to qualify as a RIC under Subchapter M of the Code or under successor or similar
provisions or fails to comply with the diversification requirements of Section
817(h) of the Code or such requirements under successor or similar provisions or
if Life Company reasonably believes the applicable Portfolio may so cease to
qualify or comply and, in each case, the Fund upon written request fails to
provide reasonable assurance that it will take action to cure or correct such
failure; or
(g) at the option of the Fund if the Contracts issued by LIFE
COMPANY cease to qualify as annuity contracts or life insurance contracts under
the Code or if Fund reasonably believes the applicable Contracts may so cease to
qualify, or if interests in an Account under the Contracts are not registered,
where required, and, in all material respects, are not issued or sold in
accordance with any applicable federal or state law and, in each case, LIFE
COMPANY upon written request fails to provide reasonable assurance that it will
take action to cure or correct such failure; or
(h) at the option of the Fund by written notice to LIFE COMPANY, if
the Fund shall determine in its sole judgment exercised in good faith, that LIFE
COMPANY and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(i) at the option of LIFE COMPANY by written notice to the Fund, if
LIFE COMPANY shall determine in its sole judgment exercised in good faith, that
the Fund and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity; or
(j) at the option of LIFE COMPANY by written notice to the Fund, if
LIFE COMPANY shall determine in its sole judgment exercised in good faith, that
the Adviser and/or its affiliated companies has suffered a material adverse
change in its business operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
(k) at the option of either party upon a determination by a majority
of the Fund's Board of Directors, or a majority of the Fund's disinterested
directors, that an irreconcilable material conflict exists among the interests
of: (1) all contract owners of variable insurance products of all separate
accounts; or (2) the interests of the Participating Insurance Companies
investing in the Fund; or
(l) at the option of any party upon another party's material breach
of any provision of this Agreement; or
(m) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) or upon the
receipt of a substitution order by the SEC to substitute the shares of another
investment company for the corresponding Fund shares in accordance with the
terms of the Contracts for which those Fund shares had been selected to serve as
the underlying investment media. LIFE COMPANY will give at least 30 days' prior
written notice to the Fund of the date of any proposed vote to replace the
Fund's shares; or
(n) at the option of the Fund if it suspends or terminates the
offering of Shares of the applicable Portfolio to all Participating Insurance
Companies or only designated Participating Insurance Companies, if such action
is required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Fund acting in good faith, suspension or termination
is necessary in the best interests of the shareholders of the applicable
Portfolio (it being understood that "shareholders" for this purpose shall mean
Participants), such notice effective immediately upon receipt of written notice,
it being understood that a lack Participating Insurance Companies interest in
the applicable Portfolio may be grounds for a suspension or termination as to
such Portfolio.
6.2 Notice Requirement for Termination
No termination of this Agreement will be effective unless and until
the party terminating this Agreement gives prior written notice to the other
party to this Agreement of its intent to terminate, and such notice shall set
forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions
of Section 6.1(a) hereof, such prior written notice shall be given at least one
(1) year in advance of the effective date of termination unless a shorter time
is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions
of Section 6.1(b), 6.1(c), 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h), 6.1(i),
6.1(j), 6.1(k), 6.1(l), 6.1(m), or 6.1(n) hereof, such prior written notice
shall be given at least 30 days in advance of the effective date of termination
unless a shorter time is agreed to by the Parties hereto; and
6.3 Fund To Remain Available
Notwithstanding any termination of this Agreement, the Fund will, at
the option of LIFE COMPANY, continue to make available additional shares of a
Portfolio pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts will be permitted to reallocate
investments in Portfolios of the Fund (as in effect on such date), redeem
investments in Portfolios of the Fund and/or invest in Portfolios of the Fund
upon the making of additional purchase payments under the Existing Contracts.
Notwithstanding any termination of this Agreement, LIFE COMPANY agrees to
distribute to holders of Existing Contracts all materials required by law to be
distributed to such holders (including, without limitation, prospectuses,
statements of additional information, proxy materials and periodic reports). The
parties agree that this Section 6.3 will not apply to any terminations under the
conditions of the Order and the effect of such terminations will be governed by
the Order.
6.4 Survival of Warranties and Indemnifications
All warranties and indemnifications will survive the termination of
this Agreement.
Section 7. Parties To Cooperate Respecting Termination
Subject to the provisions of Section 6.3 hereof, the Parties hereto
agree to cooperate and give reasonable assistance to one another in taking all
necessary and appropriate steps for the purpose of ensuring that an Account owns
no Shares of the applicable Portfolio after the Final Termination Date with
respect thereto, or, in the case of a termination pursuant to Section 6.1(a),
the termination date specified in the notice of termination. Such steps may
include combining the affected Account with another Account, substituting other
mutual fund shares for those of the affected Portfolio, or otherwise terminating
participation by the Contracts in such Portfolio.
Section 8. Assignment
This Agreement may not be assigned by any party, except with the
prior written consent of all the Parties.
Section 9. Notices
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the party receiving such
notices or communications may subsequently direct in writing:
<PAGE>
[Name of LIFE COMPANY]
Street Address
City, State Zip Code
Facsimile:
Attn.:
Salomon Brothers Variable Series Inc.
7 World Trade Center
New York, New York 10048
Facsimile: (212) 783-3357
Attn.: Mitch Schulman
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by the Fund to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE 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
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in the manner required by the Order obtained
by the Fund. The Fund will notify LIFE COMPANY of any amendments to the Order it
has obtained.
Section 11. Indemnification
11.1 Of the Fund by LIFE COMPANY
(a) Except to the extent provided in Sections 11.1(b) and 11.1(c),
below, LIFE COMPANY agrees to indemnify and hold harmless the Fund, its
affiliates, and each person, if any, who controls the Fund or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers (collectively, the "Indemnified Parties" for purposes of
this Section 11.1) against any and all losses, claims, damages, costs, expenses,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY)or actions in respect thereof (including, to the extent reasonable,
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise insofar as such
losses, claims, damages, costs, expenses, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (or
any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading; provided, that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or
such alleged statement or omission was made in
reliance upon and in conformity with written
information furnished to LIFE COMPANY by or on behalf
of the Fund for use in any Account's 1933 Act
registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in the Fund's 1933 Act
registration statement, the Fund Prospectus, sales
literature or advertising of the Fund, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of LIFE
COMPANY, or its affiliates and on which such persons
have reasonably relied) or the negligent, illegal or
fraudulent conduct of LIFE COMPANY, or its respective
affiliates or persons under their control (including,
without limitation, their employees and "Associated
Persons," as that term is defined in paragraph (m) of
Article I of the NASD's By-Laws) or subject to its
authorization, including without limitation,
broker-dealers or agents authorized to sell the
Contracts, in connection with the sale, marketing or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Fund's 1933 Act registration
statement, the Fund Prospectus, sales literature or
advertising of the Fund, or any amendment or
supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statements therein not misleading if such a
statement or omission was made in reliance upon and
in conformity with information furnished to the Fund
or its affiliates by or on behalf of LIFE COMPANY or
its affiliates for use in the Fund's 1933 Act
registration statement, the Fund Prospectus, sales
literature or advertising of the Fund, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or
persons under its control (or subject to its
authorization) to perform the obligations, provide
the services and furnish the materials required under
the terms of this Agreement, or any material breach
of any representation and/or warranty made by LIFE
COMPANY in this Agreement or arise out of or result
from any other material breach of this Agreement by
LIFE COMPANY or persons under its control (or subject
to its authorization); or
(v) arise as a result of failure to transmit a request for
purchase or redemption of Shares or payment therefor
within the time period specified herein and otherwise in
accordance with the procedures set forth in this
Agreement; or
(vi) arise as a result of any unauthorized use of the trade
names of the Fund to the extent such use is not required
by applicable law or regulation.
(b) This indemnification is in addition to any liability that LIFE
COMPANY may otherwise have. LIFE COMPANY shall not be liable under this Section
11.1 with respect to any losses, claims, damages, costs, expenses, liabilities
or actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
the Fund.
(c) LIFE COMPANY shall not be liable under this Section 11.1 with
respect to any action against an Indemnified Party unless the Fund shall have
notified LIFE COMPANY in writing promptly after the summons or other first legal
process giving information of the nature of the action shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but LIFE COMPANY shall be
relieved of liability under this Section 11.1 only to the extent the
indemnifying party is damaged solely by reason of such party's failure to so
notify and failure to notify LIFE COMPANY of any such action shall not relieve
LIFE COMPANY from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
11.1. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate, at
its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof, with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume
the defense thereof, the Indemnified Party will cooperate fully with LIFE
COMPANY and shall bear the fees and expenses of any additional counsel retained
by it, and LIFE COMPANY will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
11.2 Of LIFE COMPANY by the Fund
(a) Except to the extent provided in Sections 11.2(b), 11.2(c) and
11.2(d), below, the Fund agrees to indemnify and hold harmless LIFE COMPANY, its
affiliates, and each person, if any, who controls LIFE COMPANY or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers (collectively, the "Indemnified Parties" for purposes of
this Section 11.2) against any and all losses, claims, damages, costs, expenses,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law, or otherwise; insofar as such
losses, claims, damages, costs, expenses, liabilities or actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Fund's 1933 Act registration
statement, Prospectus or sales literature or
advertising of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading; provided, that this agreement
to indemnify shall not apply to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Fund or its affiliates by or on behalf of LIFE
COMPANY or its affiliates for use in the Fund's 1933
Act registration statement, the Fund Prospectus, or
in sales literature or advertising or otherwise for
use in connection with the sale of Contracts or
Shares (or any amendment or supplement to any of the
foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of the Fund
or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or
fraudulent conduct of the Fund or its affiliates or
persons under its control (including, without
limitation, their employees and "Associated Persons"
as that Term is defined in Section (n) of Article 1
of the NASD By-Laws), in connection with the sale,
marketing or distribution of Fund Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with written
information furnished to LIFE COMPANY, or its
affiliates by or on behalf of the Fund for use in any
Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or
supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Fund to
perform the obligations, provide the services and
furnish the materials required of it under the terms
of this Agreement, including, without limitation, any
failure of the Fund or its designated agent to inform
LIFE COMPANY of the correct net asset values per
share for each Portfolio on a timely basis sufficient
to ensure the timely execution of all purchase and
redemption orders at the correct net asset value per
share, or any material breach of any representation
and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach
of this Agreement by the Fund.
(b) This indemnification is in addition to any liability that the
Fund may otherwise have. The Fund shall not be liable under this Section 11.2
with respect to any losses, claims, damages, costs, expenses, liabilities or
actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to LIFE COMPANY, each Account or Participants.
(c) The Fund shall not be liable under this Section 11.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified the Fund in writing promptly after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but the Fund
shall be relieved of liability under this Section 11.2 only to the extent the
indemnifying party is damaged solely by reason of such party's failure to so
notify and failure to notify the Fund of any such action shall not relieve the
Fund from any liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 11.2. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, the Fund will be entitled to participate, at its own expense,
in the defense of such action and also shall be entitled to assume the defense
thereof (which shall include, without limitation, the conduct of any ruling
request and closing agreement or other settlement proceeding with the IRS), with
counsel approved by the Indemnified Party named in the action, which approval
shall not be unreasonably withheld. After notice from the Fund to such
Indemnified Party of the Fund's election to assume the defense thereof, the
Indemnified Party will cooperate fully with the Fund and shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
11.3 Of LIFE COMPANY by the Adviser
(a) Except to the extent provided in Sections 11.3(b), 11.3(c) and
1.3(d), below, the Adviser agrees to indemnify and hold harmless LIFE COMPANY,
its affiliates, and each person, if any, who controls LIFE COMPANY or its
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers (collectively, the "Indemnified Parties" for
purposes of this Section 11.2) against any and all losses, claims, damages,
costs, expenses, liabilities (including amounts paid in settlement with the
written consent of the Fund) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law, or otherwise;
insofar as such losses, claims, damages, costs, expenses, liabilities or
actions:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in the Fund's 1933 Act registration
statement, Prospectus or sales literature or
advertising of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading; provided, that this agreement
to indemnify shall not apply to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and
in conformity with written information furnished to
the Adviser, the Fund or their affiliates by or on
behalf of LIFE COMPANY or its affiliates for use in
the Fund's 1933 Act registration statement, the Fund
Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
(ii) arise out of or as a result of any other statements
or representations (other than statements or
representations contained in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising for the Contracts, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of the
Adviser, the Fund or their affiliates and on which
such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of the
Adviser, the Fund or their affiliates or persons
under their control (including, without limitation,
their employees and "Associated Persons" as that Term
is defined in Section (n) of Article 1 of the NASD
By-Laws), in connection with the sale, marketing or
distribution of Fund Shares; or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading, if such statement or omission was made in
reliance upon and in conformity with written
information furnished to LIFE COMPANY, or its
affiliates by or on behalf of the Adviser or the Fund
for use in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature
or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by the Adviser or
the Fund to perform the obligations, provide the
services and furnish the materials required of it
under the terms of this Agreement, including, without
limitation, any failure of the Fund or its designated
agent to inform LIFE COMPANY of the correct net asset
values per share for each Portfolio on a timely basis
sufficient to ensure the timely execution of all
purchase and redemption orders at the correct net
asset value per share, or any material breach of any
representation and/or warranty made by the Adviser or
the Fund in this Agreement or arise out of or result
from any other material breach of this Agreement by
the Adviser.
(b) This indemnification is in addition to any liability that the
Adviser may otherwise have. The Adviser shall not be liable under this Section
11.3 with respect to any losses, claims, damages, costs, expenses, liabilities
or actions to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to LIFE COMPANY, each Account or Participants.
(c) The Adviser shall not be liable under this Section 11.3 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified the Adviser in writing promptly after the summons or other
first legal process giving information of the nature of the action shall have
been served upon such Indemnified Party (or after such Indemnified Party shall
have received notice of such service on any designated agent), but the Adviser
shall be relieved of liability under this Section 11.3 only to the extent the
indemnifying party is damaged solely by reason of such party's failure to so
notify and failure to notify the Adviser of any such action shall not relieve
the Adviser from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
11.3. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, the Adviser will be entitled to participate, at
its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from the Adviser
to such Indemnified Party of the Adviser's election to assume the defense
thereof, the Indemnified Party will cooperate fully with the Fund and shall bear
the fees and expenses of any additional counsel retained by it, and the Adviser
will not be liable to such Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
11.4 Effect of Notice
Any notice given by the indemnifying party to an Indemnified Party
referred to in Sections 11.1(c), 11.2(c) or 11.3(c) above of participation in or
control of any action by the indemnifying party will in no event be deemed to be
an admission by the indemnifying party of liability, culpability or
responsibility, and the indemnifying party will remain free to contest liability
with respect to the claim among the Parties or otherwise.
11.5 Successors
A successor by law of any party shall be entitled to the benefits of
the indemnification contained in this Section 11.
11.6 Obligations of the Fund.
All persons dealing with the Fund must look solely to the property
of the applicable Portfolio for the enforcement of any claims against the Fund
as neither the Board, Officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
Section 12. Applicable Law
(a) This Agreement will be construed and the provisions hereof
interpreted under and in accordance with New York law, without regard for that
state's principles of conflict of laws.
(b) This Agreement shall be subject to the provisions of the 1933
Act, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Order) and the terms hereof shall
be interpreted and construed in accordance therewith.
Section 13. Execution in Counterparts
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together with constitute one and the same
instrument.
Section 14. Severability
If any provision of this Agreement is held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement will
not be affected thereby.
Section 15. Rights Cumulative
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, that the Parties are entitled to under federal and state
laws.
Section 16. Headings
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
Section 17. Confidentiality
Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of customers of the other party and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not, without the express written consent of the affected
party, disclose, disseminate or utilize such names and addresses and other
confidential information until such time as it may come into the public domain.
Section 18. Trademarks and Fund Names
(a) Salomon Brothers Asset Management Inc, the adviser to the Fund
and its affiliates, own all right, title and interest in and to the names,
trademarks and service marks "Salomon" and "Salomon Brothers" and such other
tradenames, trademarks and service marks as may be identified to LIFE COMPANY
from time to time (the "Salomon licensed marks"). Upon termination of this
Agreement LIFE COMPANY and its affiliates shall cease to use the Salomon
licensed marks, except to the extent required by law or regulation.
(b) Name of LIFE COMPANY and its affiliates, own all right, title
and interest in and to the names, trademarks and service marks "__________" and
such other tradenames, trademarks and service marks as may be identified to the
Adviser and/or the Fund from time to time (the "__________" licensed marks).
Upon termination of this Agreement the Fund, the Adviser and their affiliates
shall cease to use the __________ licensed marks, except to the extent required
by law or regulation.
Section 19. Parties to Cooperate
Each party to this Agreement will cooperate with each other party
and all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
SALOMON BROTHERS VARIABLE SERIES
FUNDS INC
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
SALOMON BROTHERS ASSET
MANAGEMENT INC
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
[Name OF LIFE COMPANY]
on behalf of itself and its separate
accounts
Attest: __________________ By: ________________________
Name: __________________ Name: ________________________
Title: __________________ Title:________________________
<PAGE>
SCHEDULE A
PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
[Name of LIFE COMPANY]
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
SALOMON BROTHERS ASSET MANAGEMENT INC
AND
SALOMON BROTHERS VARIABLE SERIES FUNDS INC
September 28, 1998
The Life Insurance Company of Virginia
6610 West Broad Street
Richmond, VA 23230
Gentlemen:
With reference to Post-Effective Amendment No. 13 to Form N-4 (File Number
33-76334) filed by The Life Insurance Company of Virginia and Life of Virginia
Separate Account 4 with the Securities and Exchange Commission covering flexible
premium variable deferred annuity policies, I have examined such documents and
such law as I considered necessary and appropriate, and on the basis of such
examination, it is my opinion that:
1. The Life Insurance Company of Virginia is duly organized and validly existing
under the laws of the Commonwealth of Virginia and has been duly authorized
to issue individual flexible premium variable deferred annuity policies by
the Bureau of Insurance of the State Corporation Commission of the
Commonwealth of Virginia.
2. Life of Virginia Separate Account 4 is a duly authorized and existing
separate account established pursuant to the provisions of Section 38.2-3113
of the Code of Virginia.
3. The flexible premium variable deferred annuity policies, when issued as
contemplated by said Form N-4 Registration Statement, will constitute legal,
validly issued and binding obligations of The Life Insurance Company of
Virginia.
I hereby consent to the use of this letter, or copy thereof, as an exhibit to
Post Effective Amendment No. 13 to the Registration Statement on Form N-4 (File
Number 33-76334) and the reference to me under the caption "Legal Matters" in
the Statement of Additional Information contained in said Post-Effective
Amendment.
Sincerely,
/s/ Patricia L. Dysart
Patricia L. Dysart
Assistant Vice President and
Associate General Counsel
Law Department
[SUTHERLAND ASBILL & BRENNAN LLP LETTERHEAD]
September 28, 1998
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 the
Post-Effective Amendment No. 13 to the Registration Statement on Form N-4
filed by Life of Virginia Separate Account 4 for certain variable annuity
policies (File No. 33-76334). 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 LLP
By: /s/ Stephen E. Roth
-----------------------
Stephen E. Roth
EXHIBIT 10(b)
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. 13 to the
Registration Statement (Form N-4 No. 33-76334) and related Prospectus of Life of
Virginia Separate Account 4 for the registration of an indefinite amount of
securities.
/s/ ERNST & YOUNG LLP
Richmond, Virginia
September 28, 1998
<PAGE>
Independent Auditors" Consent
The Board of Directors
The Life Insurance Company of Virginia
Life of Virginia Separate Account 4:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Statement of Additional Information.
Our report dated January 6, 1998, contains an explanatory paragraph that states
that 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
acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.
/s/ KPMG Peat Marwick LLP
Richmond, VA
September 28, 1998
