GE LIFE & ANNUITY SEPARATE ACCOUNT 4
PROSPECTUS FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED
ANNUITY POLICY
FORM P1152 1/99
Issued by: Home Office:
GE Life and Annuity Assurance Company 6610 West Broad Street
Richmond, Virginia 23230
Telephone: (804) 281-6000
This Prospectus describes a flexible premium variable deferred annuity policy
(the "Policy") for individuals and some qualified and nonqualified retirement
plans. GE Life and Annuity Assurance Company (the "Company," "we," "us," or
"our") issues the Policy.
The Policy offers you the accumulation of Account Value and the payment of
periodic annuity benefits. We may pay these benefits on a variable or fixed
basis, or a combination of both.
You may allocate your premium payments and automatic bonus credits we provide
you to Account 4, the Guarantee Account, or both. Each Investment Subdivision of
Account 4 invests in shares of the Funds. We list the Funds, and their currently
available portfolios, below.
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):
VIP Equity-Income Portfolio, VIP Overseas Portfolio, VIP Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
VIP II Asset Manager Portfolio, VIP II Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III (VIP 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, Value Equity Fund, Income Fund,
U.S. Equity Fund, Premier Growth Equity Fund
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund/VA, Oppenheimer Aggressive Growth Fund/VA,
Oppenheimer Capital Appreciation Fund/VA, Oppenheimer High Income
Fund/VA, Oppenheimer Multiple Strategies Fund/VA
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
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT):
Goldman Sachs Growth and Income Fund, Goldman Sachs Mid Cap Value Fund
SALOMON BROTHERS VARIABLE SERIES FUND INC.:
Salomon Investors Fund, Salomon Total Return Fund, Salomon Strategic Bond
Fund
Not all of these portfolios may be available in all states or in all markets.
Except for amounts in the Guarantee Account, both the value of a Policy before
the Maturity Date and the amount of monthly income afterwards will depend upon
the investment performance of the Funds you select. You bear the investment risk
of investing in the portfolios.
<PAGE>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
YOUR INVESTMENT IN THE POLICY IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT
AGENCY.
This Prospectus gives details about Account 4 and our Guarantee Account that you
should know before investing. Please read this Prospectus carefully before
investing and keep it for future reference.
A statement of additional information ("SAI"), dated May 1, 1999, concerning
Account 4 has been filed with the Securities and Exchange Commission ("SEC") and
is incorporated by reference into this Prospectus. If you would like a free
copy, call us at 1-800-352-9910. The SAI also is available on the SEC's website
at http://www.sec.gov. A table of contents for the SAI appears on the last page
of this Prospectus.
The date of this Prospectus is May 1, 1999.
<PAGE>
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
<S> <C>
Definitions ................................................... 4
Expense Table ................................................ 5
Synopsis ...................................................... 13
Investment Results ............................................ 15
Financial Statements .......................................... 15
GE Life and Annuity Assurance Company ......................... 15
Account 4 ..................................................... 15
The Guarantee Account ......................................... 22
Charges and Other Deductions .................................. 23
The Policy .................................................... 26
Transfers ..................................................... 27
Surrenders ................................................... 30
The Death Benefit ............................................. 31
Income Payments ............................................... 34
Federal Tax Matters ........................................... 36
Voting Rights ................................................. 41
Requesting Payments ........................................... 41
Distribution of the Policies .................................. 42
Additional Information ........................................ 42
Table of Contents for Statement of Additional Information ..... 44
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-3-
<PAGE>
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DEFINITIONS
- --------------------------------------------------------------------------------
We have tried to make this Prospectus as understandable as possible. However, in
explaining how the Policy works, we have had to use certain terms that have
special meanings. We define these terms below.
ACCOUNT VALUE -- The value of the Policy equal to the amount allocated to the
Investment Subdivisions of Account 4 and the Guarantee Account.
ACCOUNT 4 -- GE Life & Annuity Separate Account 4, a separate investment account
we established to receive and invest the premiums you pay under the Policies,
and other variable annuity policies we issue.
ACCUMULATION UNIT -- An accounting unit of measure we use in calculating the
Account Value in Account 4 before the Maturity Date.
ANNUITANT -- The Annuitant is the person named in the Policy upon whose age and,
where appropriate, sex, we determine monthly income benefits.
ANNUITY UNIT -- An accounting unit of measure we use in the calculation of the
amount of the second and each subsequent variable income payment.
BONUS CREDIT -- A bonus credit is the "enhanced premium amount" described in
your Policy. For qualifying Policies, it is an amount we will add to each
premium payment we receive. It is not considered a "premium payment" under the
Policy.
DEATH BENEFIT -- The benefit provided under a Policy upon the death of an
Annuitant before the Maturity Date.
DESIGNATED BENEFICIARY(IES) -- The person(s) designated in the Policy who is
alive (or in existence for non-natural entities) on the date of an Owner's,
Joint Owner's or Annuitant's death and who we will treat as the sole owner of
the Policy following such a death.
FUND -- Any open-end management investment company or any unit
investment trust in which an Investment Subdivision invests.
GENERAL ACCOUNT -- Our assets that are not segregated in any of our separate
investment accounts.
GUARANTEE ACCOUNT -- Part of our General Account that provides a guaranteed
interest rate for a specified interest rate guarantee period. This account is
not part of and does not depend on the investment performance of Account 4.
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.
MATURITY DATE -- The date stated in the Policy on which your income payments
will commence, if the Annuitant is living on that date.
OWNER -- The person or persons (in the case of Joint Owners) entitled to receive
income payments after the Maturity Date. During the lifetime of the Annuitant,
the Owner also is entitled to the ownership rights stated in the Policy and
is shown on the Policy data pages and in any application. "You" or "your" refers
to the Owner or Joint Owners.
POLICY DATE -- The date we issue your Policy and your Policy becomes effective.
Your Policy Date is shown in your Policy and we use it to determine Policy years
and anniversaries.
SURRENDER VALUE -- The Account Value (after deduction of any policy maintenance
charge) less any applicable surrender charge,
premium tax, and optional benefit charge.
VALUATION DAY -- For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Fund does not value
its shares.
VALUATION PERIOD -- The period between the close of business on a Valuation Day
and the close of business on the next succeeding Valuation Day.
4
<PAGE>
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EXPENSE TABLE
- --------------------------------------------------------------------------------
This table describes the various costs and expenses that you will pay (either
directly or indirectly) if you purchase the Policy. The table reflects expenses
both of Investment Subdivisions of Account 4 and of the portfolios. For more
complete descriptions of the various costs and expenses involved, see "Charges
and Other Deductions" in this Prospectus, and the Fund prospectuses. Premium tax
charges also may apply, although they do not appear in the table. In addition,
we reserve the right to impose a transfer charge, although we do not currently
do so.
<TABLE>
<S> <C>
OWNER TRANSACTION EXPENSES:
The maximum surrender charge (as a percentage of each premium payment
surrendered/withdrawn): 8%
</TABLE>
We reduce the surrender charge percentage over time. In general,
the later you surrender or withdraw a premium payment, the lower
the surrender charge will be on that premium payment.
<TABLE>
<S> <C>
ANNUAL EXPENSES (AS A PERCENTAGE OF ACCOUNT VALUE):
Mortality and Expense Risk Charge 1.30%
Administrative Expense Charge .25%
- ---------------------------------------------------- ----
Total Annual Expenses 1.55%
OTHER ANNUAL EXPENSES:
Annual Policy Maintenance Charge $ 25*
Maximum Guaranteed Minimum Death
Benefit Charge ("GMDB") (as a percentage
of average benefit amount) .35%**
</TABLE>
* We do not assess this charge if your Account Value at the time the charge is
due is at least $10,000.
** If the Elective Guaranteed Minimum Death Benefit applies. (This may be
referred to as the "Six Percent EstateProtector" in our marketing materials.)
5
<PAGE>
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PORTFOLIO ANNUAL EXPENSES
Annual expenses of the portfolios of the Funds for the year ended December 31,
1998 (as a percentage of each portfolio's average net assets):
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
(AFTER FEE WAIVER (AFTER REIMBURSEMENT- TOTAL ANNUAL
AS APPLICABLE) AS APPLICABLE) EXPENSES
------------------- ----------------------- -------------
<S> <C> <C> <C>
PORTFOLIO
- ------------------------------------------------
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio1 .65 .07 .72
Janus Aspen International Growth Portfolio1 .66 .20 .86
VIP Overseas Portfolio2 .74 .15 .89
GE International Equity Fund 1.00 .15 1.15
SPECIALTY
GE Real Estate Securities Fund .85 .14 .99
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA .69 .02 .71
Alger American Small Capitalization Portfolio .85 .04 .89
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio .72 .03 .75
Goldman Sachs VIT Mid Cap Value Fund*5 .80 .15 .95
MID-CAP VALUE
GE Value Equity Fund** .65 .10 .75
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio1 .65 .03 .68
Janus Aspen Capital Appreciation Portfolio1 .70 .22 .92
VIP II Contrafund Portfolio3 .59 .07 .66
VIP Growth Portfolio2 .59 .07 .66
VIP III Growth & Income Portfolio4 .49 .11 .60
Oppenheimer Capital Appreciation Fund/VA .72 .03 .75
GE Premier Growth Equity Fund .65 .17 .82
Alger American Growth Portfolio .75 .04 .79
LARGE-CAP VALUE
VIP Equity Income Portfolio2 .49 .08 .57
VIP III Growth Opportunities Portfolio4 .59 .11 .70
GE U.S. Equity Fund .55 .14 .69
GE S&P 500 Index Fund .35 .10 .45
Federated Utility Fund II8 .68 .25 .93
Federated American Leaders Fund II8 .74 .14 .88
Goldman Sachs VIT Growth and Income Fund5 .75 .15 .90
Salomon Investors Fund6 .70 .30 1.00
BALANCED
Janus Aspen Balanced Portfolio .72 .02 .74
VIP II Asset Manager Portfolio3 .54 .09 .63
Oppenheimer Multiple Strategies Fund/VA .72 .04 .76
GE Total Return Fund .50 .13 .63
Salomon Total Return Fund6 .80 .20 1.00
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
(AFTER FEE WAIVER (AFTER REIMBURSEMENT- TOTAL ANNUAL
AS APPLICABLE) AS APPLICABLE) EXPENSES
------------------- ----------------------- -------------
<S> <C> <C> <C>
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio .65 .08 .73
Oppenheimer High Income Fund/VA .74 .04 .78
Federated High Income Bond Fund II .60 .18 .78
DOMESTIC BONDS
Oppenheimer Bond Fund/VA .72 .02 .74
GE Income Fund .50 .14 .64
Salomon Strategic Bond Fund6 .75 .25 1.00
MONEY MARKET
GE Money Market Fund7 .25 .12 .37
</TABLE>
Not all portfolios may be available in all states or markets.
*These expenses are estimated due to the portfolio being in existence for less
than 10 months.
** Although past practice reflects investments within the mid cap range, the
portfolio is not restricted on the capitalizations of the companies in which
it can invest.
1 Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1998 would have been .75% for Growth Portfolio,
.95% for International Growth Portfolio, .74% for Worldwide Growth Portfolio,
and .97% for Capital Appreciation Portfolio.
2 A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. Absent these reductions and credits, the total annual
expenses of the portfolios of the Variable Insurance Products Fund during
1998 would have been .58% for VIP Equity-Income Portfolio, .91% for VIP
Overseas Portfolio and .68% for VIP Growth Portfolio.
3 A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. Absent these reductions and credits, the total annual
expenses of the portfolios of the Variable Insurance Products Fund II during
1998 would have been .64% for VIP II Asset Manager Portfolio and .70% for VIP
II Contrafund Portfolio.
4 A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. Absent these reductions and credits, the total annual
expenses of the portfolios of the Variable Insurance Products Fund III during
1998 would have been .61% for VIP III Growth & Income Portfolio and .71% for
VIP III Growth Opportunities Portfolio.
5 Goldman Sachs Asset Management has voluntarily agreed to reduce or limit
certain other expenses (excluding management fees, taxes, interest, brokerage
fees, litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.15% of each Fund's respective average daily net
assets. The investment adviser may modify or discontinue any of the
limitations set forth above in the future at its discretion. Absent
reimbursements, the total annual expenses during 1998 would have been 2.69%
for Growth and Income Fund and 4.79% for Mid Cap Value Fund.
6 Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of Salomon Brothers Variable Series Fund during 1998 would
have been 2.07% for Investors Fund, 2.90% for Total Return Fund and 1.79% for
Strategic Bond Fund.
7 GE Investment Management Incorporated currently serves as investment adviser
to GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
and has voluntarily agreed to waive a portion of the fee payable by the Fund.
Absent this fee waiver, the total annual expenses during 1998 of the GE Money
Market Fund would have been .59%.
8 Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of the Federated Insurance Series during 1998 would have been
.89% for Federated American Leaders Fund II and 1.00% for Federated Utility
Fund II.
7
<PAGE>
EXAMPLES
These examples show what your costs would be under certain hypothetical
situations. The examples do not represent past or future expenses. Your actual
expenses may be more or less than those shown. The examples are based on the
annual expenses of the portfolios of the Funds for the year ended December 31,
1998 (shown above in Portfolio Annual Expenses). The examples assume that a full
4% Bonus Credit applies (if a lower Bonus Credit applied, or if no Bonus Credit
applied, the numbers shown would be lower). The examples also assume that the
$25 policy maintenance charge is equivalent to 0.1% of Account Value
attributable to the hypothetical investment (this charge will be waived if the
Account Value is at least $10,000 at the time the charge is due). To the extent
that the examples reflect a charge for the elective Guaranteed Minimum Death
Benefit Rider, the examples assume that the maximum charge (.35% of the average
benefit amount) applies.
* * *
EXAMPLES: An Owner 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 Expense Table above:
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Without GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10
YEARS ---------- ----------- ----------- -----------
SUBDIVISION INVESTING IN:
<S> <C> <C> <C> <C>
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio ................ 96.50 139.43 176.13 280.97
Janus Aspen International Growth Portfolio ............ 97.93 143.78 183.39 295.46
VIP Overseas Portfolio ................................ 98.23 144.70 184.94 298.53
GE International Equity Fund .......................... 100.88 152.72 198.26 324.77
SPECIALTY
GE Real Estate Securities Fund ........................ 99.25 147.79 190.08 308.71
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA ................. 96.40 139.12 175.61 279.93
Alger American Small Capitalization Portfolio ......... 98.23 144.70 184.94 298.53
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio ............... 96.80 140.36 177.69 284.10
Goldman Sachs VIT Mid Cap Value Fund .................. 98.84 146.56 188.03 304.65
MID-CAP VALUE
GE Value Equity Fund .................................. 96.80 140.36 177.69 284.10
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio .......................... 96.09 138.18 174.05 276.79
Janus Aspen Capital Appreciation Portfolio ............ 98.54 145.63 186.49 301.60
VIP II Contrafund Portfolio ........................... 95.89 137.56 173.00 274.70
VIP Growth Portfolio .................................. 95.89 137.56 173.00 274.70
VIP III Growth & Income Portfolio ..................... 95.27 135.69 169.86 268.38
Oppenheimer Capital Appreciation Fund/VA .............. 96.80 140.36 177.69 284.10
GE Premier Growth Equity Fund ......................... 97.52 142.54 181.32 291.34
Alger American Growth Portfolio ....................... 97.21 141.61 179.77 288.24
LARGE-CAP VALUE
VIP Equity-Income Portfolio ........................... 94.96 134.75 168.29 265.21
VIP III Growth Opportunities Portfolio ................ 96.29 138.81 175.09 278.89
GE U.S. Equity Fund ................................... 96.19 138.50 174.57 277.84
GE S&P 500 Index Fund ................................. 93.74 131.00 161.98 252.41
Federated Utility Fund II ............................. 98.64 145.94 187.00 302.62
Federated American Leaders Fund II .................... 98.13 144.39 184.42 297.51
Goldman Sachs VIT Growth and Income Fund .............. 98.33 145.01 185.45 299.55
Salomon Investors Fund ................................ 99.35 148.10 190.60 309.72
BALANCED
Janus Aspen Balanced Portfolio ........................ 96.70 140.05 177.17 283.06
VIP II Asset Manager Portfolio ........................ 95.58 136.63 171.43 271.55
Oppenheimer Multiple Strategies Fund/VA ............... 96.91 140.67 178.21 285.13
GE Total Return Fund .................................. 95.58 136.63 171.43 271.55
Salomon Total Return Fund ............................. 99.53 148.10 190.60 309.72
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Without GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio....... 96.60 139.74 176.65 282.01
Oppenheimer High Income Fund/VA ............ 97.11 141.29 179.25 287.21
Federated High Income Bond Fund II ......... 97.11 141.29 179.25 287.21
DOMESTIC BONDS
Oppenheimer Bond Fund/VA ................... 96.70 140.05 177.17 283.06
GE Income Fund ............................. 95.68 136.94 171.96 272.60
Salomon Strategic Bond Fund ................ 99.35 148.10 190.60 309.72
MONEY MARKET
GE Money Market Fund ....................... 92.92 128.48 157.75 243.79
</TABLE>
* surrender includes annuitization over a period of less than 5 years.
2. If you annuitize at the end of the applicable period, or do not surrender*:
<TABLE>
<CAPTION>
Without GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio ................ 24.50 76.43 131.13 280.97
Janus Aspen International Growth Portfolio ............ 25.93 80.78 138.39 295.46
VIP Overseas Portfolio ................................ 26.23 81.70 139.94 298.53
GE International Equity Fund .......................... 28.88 89.72 153.26 324.77
SPECIALTY
GE Real Estate Securities Fund ........................ 27.25 84.79 149.08 308.71
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA ................. 24.40 76.12 130.61 279.93
Alger American Small Capitalization Portfolio ......... 26.23 81.70 139.94 298.53
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio ............... 24.80 77.36 132.69 284.10
Goldman Sachs VIT Mid Cap Value Fund .................. 26.84 83.56 143.03 304.65
MID-CAP VALUE
GE Value Equity Fund .................................. 24.80 77.36 132.69 284.10
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio .......................... 24.09 75.18 129.05 276.69
Janus Aspen Capital Appreciation Portfolio ............ 26.54 82.63 141.49 301.60
VIP II Contrafund Portfolio ........................... 23.89 74.56 128.00 274.70
VIP Growth Portfolio .................................. 23.89 74.56 128.00 274.70
VIP III Growth & Income Portfolio ..................... 23.27 72.69 124.86 268.38
Oppenheimer Capital Appreciation Fund/VA .............. 24.80 77.36 132.69 284.10
GE Premier Growth Equity Fund ......................... 25.52 79.54 136.32 291.34
Alger American Growth Portfolio ....................... 25.21 78.61 134.77 288.24
LARGE-CAP VALUE
VIP Equity-Income Portfolio ........................... 22.96 71.75 123.29 265.21
VIP III Growth Opportunities Portfolio ................ 24.29 75.81 130.09 278.89
GE U.S. Equity Fund ................................... 24.19 75.50 129.57 277.84
GE S&P 500 Index Fund ................................. 21.74 68.00 116.98 252.41
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Without GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Federated Utility Fund II ........................ 26.64 82.94 142.00 302.62
Federated American Leaders Fund II ............... 26.13 81.39 139.42 297.51
Goldman Sachs VIT Growth and Income Fund ......... 26.33 82.01 140.45 299.55
Salomon Investors Fund ........................... 27.35 85.10 145.60 309.72
BALANCED
Janus Aspen Balanced Portfolio ................... 24.70 77.05 132.17 283.06
VIP II Asset Manager Portfolio ................... 23.58 73.63 126.43 271.55
Oppenheimer Multiple Strategies Fund/VA .......... 24.91 77.67 133.21 285.13
GE Total Return Fund ............................. 23.58 73.63 126.43 271.55
Salomon Total Return Fund ........................ 27.35 85.10 145.60 309.72
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio ............ 24.60 76.74 131.65 282.01
Oppenheimer High Income Fund/VA .................. 25.11 78.29 134.25 287.21
Federated High Income Bond Fund II ............... 25.11 78.29 134.25 287.21
DOMESTIC BONDS
Oppenheimer Bond Fund/VA ......................... 24.70 77.05 132.17 283.06
GE Income Fund ................................... 23.68 73.94 126.96 272.60
Salomon Strategic Bond Fund ...................... 27.35 85.10 145.60 309.72
MONEY MARKET
GE Money Market Fund ............................. 20.92 65.48 112.75 243.79
</TABLE>
* surrender includes annuitization over a period of less than 5 years.
EXAMPLES: An Owner 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 Expense Table above:
3. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
With GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10
YEARS ----------- ----------- ----------- -----------
SUBDIVISION INVESTING IN:
<S> <C> <C> <C> <C>
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio ................ 100.06 150.50 195.27 323.02
Janus Aspen International Growth Portfolio ............ 101.49 154.83 202.46 337.20
VIP Overseas Portfolio ................................ 101.79 155.75 203.99 340.21
GE International Equity Fund .......................... 104.43 163.72 217.19 365.90
SPECIALTY
GE Real Estate Securities Fund ........................ 102.81 158.82 209.06 350.18
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA ................. 99.69 150.19 194.75 322.00
Alger American Small Capitalization Portfolio ......... 101.79 155.75 203.99 340.21
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio ............... 100.37 151.43 196.81 326.08
Goldman Sachs VIT Mid Cap Value Fund .................. 102.40 157.59 207.06 346.21
MID-CAP VALUE
GE Value Equity Fund .................................. 100.37 151.43 196.81 326.08
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio ....................... 99.65 149.27 193.20 318.93
Janus Aspen Capital Appreciation Portfolio ......... 102.10 156.64 205.53 343.21
VIP II Contrafund Portfolio ........................ 99.45 148.65 192.17 316.87
VIP Growth Portfolio ............................... 99.45 148.65 192.17 316.87
VIP III Growth & Income Portfolio .................. 98.84 146.78 189.06 310.69
Oppenheimer Capital Appreciation Fund/VA ........... 100.37 151.43 196.81 326.08
GE Premier Growth Equity Fund ...................... 101.08 153.59 200.41 333.17
Alger American Growth Portfolio .................... 100.77 152.67 198.87 330.14
LARGE-CAP VALUE
VIP Equity-Income Portfolio ........................ 98.53 145.85 187.50 307.58
VIP III Growth Opportunities Portfolio ............. 99.86 149.88 194.24 320.98
GE U.S. Equity Fund ................................ 99.75 149.58 193.72 319.95
GE S&P 500 Index Fund .............................. 97.30 142.12 181.25 295.05
Federated Utility Fund II .......................... 102.20 156.98 206.04 344.21
Federated American Leaders Fund II ................. 101.69 155.44 203.48 339.21
Goldman Sachs VIT Growth and Income Fund ........... 101.89 156.06 204.51 341.21
Salomon Investors Fund ............................. 102.91 159.13 209.60 351.17
BALANCED
Janus Aspen Balanced Portfolio ..................... 100.96 151.12 196.30 325.06
VIP II Asset Manager Portfolio ..................... 99.14 147.72 190.62 313.79
Oppenheimer Multiple Strategies Fund/VA ............ 100.47 151.74 197.33 327.09
GE Total Return Fund ............................... 99.14 147.72 190.62 313.79
Salomon Total Return Fund .......................... 102.91 159.13 209.60 351.17
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio .............. 100.16 150.81 195.78 324.04
Oppenheimer High Income Fund/VA .................... 100.67 152.36 198.36 329.12
Federated High Income Bond Fund II ................. 100.67 152.36 198.36 329.12
DOMESTIC BONDS
Oppenheimer Bond Fund/VA ........................... 100.26 151.12 196.30 325.06
GE Income Fund ..................................... 99.24 148.03 191.03 314.82
Salomon Strategic Bond Fund ........................ 102.91 159.13 209.60 351.17
MONEY MARKET
GE Money Market Fund ............................... 96.44 139.14 175.68 280.42
</TABLE>
* surrender includes annuitization over a period of less than 5 years.
4. If you annuitize at the end of the applicable period, or do not surrender*:
<TABLE>
<CAPTION>
With GMDB Rider
------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio ............. 28.06 87.50 150.27 323.02
Janus Aspen International Growth Portfolio ......... 29.49 91.83 157.46 337.20
VIP Overseas Portfolio ............................. 29.79 92.75 158.99 340.21
GE International Equity Fund ....................... 32.43 100.72 172.19 365.90
SPECIALTY
GE Real Estate Securities Fund ..................... 30.81 95.82 164.09 350.18
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
SUBDIVISION INVESTING IN: ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA ................. 27.96 87.19 149.75 322.00
Alger American Small Capitalization Portfolio ......... 29.79 92.75 158.99 340.21
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio ............... 28.37 88.43 151.81 326.08
Goldman Sachs VIT Mid Cap Value Fund .................. 30.40 94.59 162.06 346.21
MID-CAP VALUE
GE Value Equity Fund .................................. 28.37 88.43 151.81 326.08
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio .......................... 27.65 86.27 148.20 318.93
Janus Aspen Capital Appreciation Portfolio ............ 30.10 93.67 160.53 343.21
VIP II Contrafund Portfolio ........................... 27.45 85.65 147.17 316.87
VIP Growth Portfolio .................................. 27.45 85.65 147.17 316.87
VIP III Growth & Income Portfolio ..................... 26.84 83.78 144.06 310.69
Oppenheimer Capital Appreciation Fund/VA .............. 28.37 88.43 151.81 326.08
GE Premier Growth Equity Fund ......................... 29.08 90.59 155.41 333.17
Alger American Growth Portfolio ....................... 28.77 89.67 153.87 330.14
LARGE-CAP VALUE
VIP Equity-Income Portfolio ........................... 26.53 82.85 142.50 307.58
VIP III Growth Opportunities Portfolio ................ 27.86 86.88 149.24 320.98
GE U.S. Equity Fund ................................... 27.75 86.58 148.72 319.95
GE S&P 500 Index Fund ................................. 25.30 79.12 136.25 295.05
Federated Utility Fund II ............................. 30.20 93.28 161.04 344.21
Federated American Leaders Fund II .................... 29.69 92.44 158.48 339.21
Goldman Sachs VIT Growth and Income Fund .............. 29.89 93.06 159.51 341.21
Salomon Investors Fund ................................ 30.91 96.13 164.60 351.17
BALANCED
Janus Aspen Balanced Portfolio ........................ 28.26 88.12 151.30 325.06
VIP II Asset Manager Portfolio ........................ 27.14 84.72 145.62 313.79
Oppenheimer Multiple Strategies Fund/VA ............... 28.47 88.74 152.33 327.09
GE Total Return Fund .................................. 27.14 84.72 145.62 313.79
Salomon Total Return Fund ............................. 30.91 96.13 164.60 351.17
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio ................. 28.16 87.81 150.78 324.04
Oppenheimer High Income Fund/VA ....................... 28.67 89.36 153.36 329.12
Federated High Income Bond Fund II .................... 28.67 89.36 153.36 329.12
DOMESTIC BONDS
Oppenheimer Bond Fund/VA .............................. 28.26 88.12 151.30 325.06
GE Income Fund ........................................ 27.24 85.03 146.13 314.82
Salomon Strategic Bond Fund ........................... 30.91 96.13 164.60 351.17
MONEY MARKET
GE Money Market Fund .................................. 24.44 76.14 130.68 280.42
</TABLE>
* surrender includes annuitization over a period of less than 5 years.
12
<PAGE>
The Funds supplied all of the figures provided under the subheading Portfolio
Annual Expenses and part of the data used to produce the figures in the
examples. We have not independently verified this information. Certain portfolio
expenses are shown net of fee waivers and reimbursements. We cannot guarantee
that the fee waivers and reimbursements will continue.
OTHER POLICIES
We offer other variable annuity policies which also may invest in many of the
same portfolios of the Funds offered under the Policy. These policies have
different charges that could affect their investment subdivisions' performance,
and they offer different benefits.
- --------------------------------------------------------------------------------
SYNOPSIS
- --------------------------------------------------------------------------------
WHAT TYPE OF POLICY AM I BUYING? The Policy is an individual flexible premium
variable deferred annuity policy. We may issue it as a policy qualified
("Qualified Policy") under the Internal Revenue Code of 1986, as amended (the
"Code"), or as a policy that is not qualified under the Code ("Non-Qualified
Policy"). This Prospectus only provides disclosure about the Policy. Certain
features described in this Prospectus may vary from your Policy. SEE The Policy.
HOW DOES THE POLICY WORK? Once we approve your application, we will issue a
Policy. During the accumulation period, while you are paying in, you can use
your premium payments to buy Accumulation Units under Account 4 or interests in
the Guarantee Account. Should you decide to annuitize (that is, change your
Policy to a payout mode rather than an accumulation mode), we will convert your
Accumulation Units to Annuity Units. You can choose a fixed or
variable income payment. If you choose a variable income payment, we will base
your periodic income payment upon the number of Annuity Units to which you
became entitled at the time you decided to annuitize and on the value of each
unit on that Valuation Day. SEE The Policy.
WHAT IS A BONUS CREDIT? For qualifying Policies, it is an amount we will add to
each premium payment we receive. If the Annuitant was age 80 or younger when we
issued the Policy, we will add 4% of each premium payment to your Account Value.
For Annuitants age 81 or older at the time we issued the Policy we will not pay
Bonus Credits. Bonus Credits are not considered "premium payments" for
purposes of the Policy. SEE Bonus Credits.
WHAT IS ACCOUNT 4? It is a segregated asset account established under Virginia
insurance law, and registered with the SEC as a unit investment trust. We
allocate the assets of Account 4 to one or more Investment Subdivisions,
according to your investment choice. We do not charge those assets with
liabilities arisingout of any other business which we may conduct. SEE
Account 4.
WHAT ARE MY VARIABLE INVESTMENT CHOICES? Through its 38 Investment Subdivisions,
Account 4 uses your premium payments to purchase shares, at your direction, in
one or more of the 10 Funds. In turn, each portfolio holds securities consistent
with its own particular investment policy. Amounts you allocate to Account 4
will reflect the investment performance of the portfolios you select. You bear
the risk of investment gain or loss. SEE Account 4 -- Investment Subdivisions.
WHAT IS THE GUARANTEE ACCOUNT? We offer fixed investment choices through our
Guarantee Account. The Guarantee Account is part of our General Account and pays
interest at declared rates we guarantee for selected periods of time. We also
guarantee the principal, after deductions. Since the Guarantee Account is part
of the General Account, we assume the risk of investment gain or loss on this
amount. You may transfer value between the Guarantee Account and Account 4
subject to certain restrictions. SEE Transfers Before the Maturity Date. The
Guarantee Account may not be available in all states or all markets.
WHAT CHARGES ARE ASSOCIATED WITH THIS POLICY? Should you withdraw Account Value
before your premium payments have been in your Policy for eight years, we will
assess a surrender charge of anywhere from 0% to 8%, depending upon how many
full years those payments have been in the Policy. (Note: We do not assess this
surrender charge upon Account Value surrendered, partially surrendered or
annuitized that represents gain. You may also partially surrender up to 10% of
premium payments each Policy year without application of the surrender charge.
We do not assess the surrender charge against any Account Value annuitized under
an optional payment plan with a life contingency or a period certain
guaranteeing payments for five years or more. We may also waive this charge
under certain other conditions.) SEE Surrender Charge.
We assess annual charges in the aggregate at an effective annual rate of 1.55%
against the daily net asset value of Account 4, including that portion of the
account attributable to your premium payments. These charges consist of .25% as
an administrative expense charge and 1.30% as a mortality and expense risk
charge. Additionally, we may impose an annual Policy Maintenance Charge.
We also charge for the elective GMDB. For a complete discussion of all charges
associated with the Policy, see Charges and Other Deductions.
13
<PAGE>
If your state assesses a premium tax with respect to your Policy, then at the
time your Policy incurs the tax (or at such other time as we may choose), we
will deduct those amounts from premium payments or Account Value, as applicable.
SEE Charges and Other Deductions and Deductions for Premium Taxes.
The portfolio also have certain expenses. These include management fees and
other expenses associated with the daily operation of each portfolio. SEE
Account 4 -- Investment Subdivisions. These portfolio expenses are more fully
described in each Fund's prospectus.
HOW MUCH MUST I PAY, AND HOW OFTEN? Subject to certain minimum and maximum
payments, the amount and frequency of your premium payments are completely
flexible. SEE The Policy -- Premium Payments.
HOW WILL MY INCOME PAYMENTS BE CALCULATED? We will pay you a monthly income
beginning on the Maturity Date if the Annuitant is still living. You may also
decide to annuitize under one of the optional payment plans. We will base your
initial payment on maturity value and other factors. SEE Income Payments.
WHAT HAPPENS IF I DIE BEFORE THE MATURITY DATE? Before the Maturity Date, if an
Owner, Joint Owner, or Annuitant dies while the Policy is in force, we will
treat the Designated Beneficiary as the sole Owner of the Policy, subject to
certain distribution rules. We may pay a Death Benefit to the Designated
Beneficiary. SEE Death of the Owner or Joint Owner Before the Maturity Date.
MAY I TRANSFER ACCOUNT VALUE AMONG PORTFOLIOS? Yes, but there may be limits on
how often you may do so. The minimum transfer amount is currently $100 or the
entire balance in the Investment Subdivision if the transfer will leave a
balance of less than $100. SEE Transfers -- Transfers Before the Maturity Date
and Income Payments -- Transfers After the Maturity Date.
MAY I SURRENDER THE POLICY OR MAKE A PARTIAL SURRENDER? Yes, subject to Policy
requirements and to restrictions imposed under certain retirement plans.
If you surrender the Policy or make a partial surrender, we may assess a
surrender charge as discussed above. In addition, you may be subject to income
tax and, if you are younger than age 59 1/2 at the time of the surrender, a 10%
premature withdrawal penalty tax. A surrender or a partial surrender may also be
subject to withholding. SEE Federal Tax Matters. A partial surrender will reduce
the Death Benefit by the proportion that the partial surrender (including any
applicable surrender charge) reduces Account Value.
DO I GET A FREE LOOK AT THIS POLICY? Yes. You have the right to return the
Policy to us at our Home Office, and have us cancel the Policy within a certain
number of days (usually 10 days from the date you receive the Policy, but some
states require different periods).
If you exercise this right, we will cancel the Policy as of the day we receive
your request and send you a refund computed as of that date. Your refund will
equal one of the following amounts:
(i) if your Account Value has increased or has stayed the same, your refund
will equal your Account Value, MINUS any Bonus Credits, but PLUS any
mortality and expense risk charges and administrative expense charges we
deducted on or before the date we received the returned Policy;
(ii)if your Account Value has decreased, your refund will equal your Account
Value, MINUS any Bonus Credits, but PLUS any mortality and expense risk
charges and administrative expense charges we deducted on or before the
date we received the returned Policy and plus any investment loss,
including any charges made by the Funds, attributable to Bonus Credits as
of the date we received the returned Policy; or
(iii)if greater than (i) or (ii) and required by the law of your state, your
premium payments MINUS any withdrawals you previously made.
This means you receive any gains and we bear any losses attributable to the
Bonus Credits during the free look period. We do not assess a surrender charge
on your Policy refund. SEE Return Privilege.
WHEN ARE MY ALLOCATIONS EFFECTIVE? In states that require us to return your
premium payments upon exercise of your free look right, we will allocate any
amounts you allocated to Account 4 to the Investment Subdivision investing in
GE Investment Funds' Money Market Fund (the "Money Market Investment
Subdivision") until we deem the free look period to have expired.
SEE Allocation of Premium Payments.
14
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
At times, Account 4 may compare its investment results to various unmanaged
indices or other variable annuities in reports to shareholders, sales
literature, and advertisements. We will calculate the results on a total return
basis for various periods, with or without surrender charges. Results
calculated without surrender charges will be higher. Total returns include the
reinvestment of all distributions of the portfolios. Total returns reflect Fund
charges and expenses, the administrative expense charge, the mortality and
expense risk charge, the policy maintenance charge and a bonus credit. Total
returns do not reflect the optional GMDB charge. They also do not reflect
premium taxes. SEE the SAI for further information.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The condensed financial statements for The Life Insurance Company of Virginia,
now known as GE Life and Annuity Assurance Company, and Life of Virginia
Separate Account 4, now known as GE Life & Annuity Separate Account 4, are
located in the SAI. If you would like a free copy of the SAI,
call 1-800-352-9910. Otherwise, the SAI is available on the SEC's website at
http://www.sec.gov.
- --------------------------------------------------------------------------------
GE LIFE AND ANNUITY ASSURANCE COMPANY
- --------------------------------------------------------------------------------
We are a stock life insurance company operating under a charter granted by the
Commonwealth of Virginia on March 21, 1871. We are principally engaged in the
offering of life insurance and annuity policies. We are admitted to do business
in 49 states and the District of Columbia. Our principal offices are at 6610
West Broad Street, Richmond, Virginia 23230. Before January 1, 1999, our name
was The Life Insurance Company of Virginia.
General Electric Capital Assurance Company ("GE Capital Assurance"),
an indirect wholly-owned subsidiary of General Electric Capital Corporation
("GE Capital"), owns the majority of our stock. GE Financial Assurance Holdings,
Inc., a direct wholly-owned subsidiary of GE Capital, owns the remainder. 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 indirect 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).
We are a member of the Insurance Marketplace Standards Association ("IMSA"). We
may use the IMSA membership logo and language in our 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
- --------------------------------------------------------------------------------
We established Account 4 as a separate investment account on August 19, 1987.
Account 4 may invest in mutual portfolios, unit investment trusts, managed
separate accounts, and other portfolios. We use Account 4 to support the Policy
as well as for other purposes permitted by law.
Account 4 currently has 38 Investment Subdivisions available under the Policy,
but that number may change in the future. Each Investment Subdivision invests
exclusively in shares representing an interest in a separate corresponding
portfolio of a Fund described below. We allocate net premium payments in
accordance with your instructions among up to ten of the 38 Investment
Subdivisions available under the Policy.
The assets of Account 4 belong to us. Nonetheless, we do not charge the assets
in Account 4 attributable to the Policies with liabilities arising out of any
other business which we may conduct. The assets of Account 4 shall, however, be
available to cover the liabilities of our General Account to the extent that the
assets of Account 4 exceed its liabilities arising under the Policies supported
by it. Income and both realized and unrealized gains or losses from the assets
of Account 4 are credited to or charged against Account 4 without regard to the
income, gains, or losses arising out of any other business we may conduct.
15
<PAGE>
We registered Account 4 with the SEC as a unit investment trust under the
Investment Company Act of 1940 ("1940 Act"). Registration with the SEC does not
involve supervision of the management or investment practices or policies of
Account 4 by the SEC. You assume the full investment risk for all amounts you
allocate to Account 4.
THE PORTFOLIOS
There is a separate Investment Subdivision which corresponds to each portfolio
of a Fund offered in this Policy. You decide the Investment Subdivisions to
which you allocate net premium payments. You may change your allocation without
penalty or charges.
Each Fund is registered with the Securities and Exchange Commission as an
open-end management investment company under the 1940 Act. The assets of each
portfolio are separate from other portfolios of a Fund and each portfolio
has separate investment objectives and policies. As a result, each portfolio
operates as a separate portfolio and the investment performance of one
portfolio has no effect on the investment performance of any other portfolio.
Before choosing an Investment Subdivision to allocate your net premium payments
and Account Value, carefully read the prospectus for each Fund, along with this
Prospectus. We summarize the investment objectives of each portfolio below.
There is no assurance that any of the portfolios will meet these objectives.
We do not guarantee any minimum value for the amounts you allocate to Account 4.
You bear the investment risk of investing in the portfolios.
The investment objectives and policies of certain portfolios 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
portfolios, 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 portfolios 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.
16
<PAGE>
INVESTMENT SUBDIVISIONS
We offer you a choice from among 38 Investment Subdivisions, each of which
invests in an underlying portfolio of one of the Funds.
<TABLE>
<CAPTION>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE1 ADVISER, AS APPLICABLE)
- ---------------------------------- -------------------------------------------------------------- ------------------------
INTERNATIONAL AND GLOBAL EQUITY FUNDS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JANUS ASPEN SERIES Seeks long-term capital growth in a manner consistent Janus Capital
Worldwide Growth Portfolio with the preservation of capital. Pursues this objective by Corporation
investing in a diversified portfolio of common stocks of
foreign and domestic issuers of all sizes. Normally invests
in at least five different countries including the United
States.
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long-term growth of capital. Pursues this objective Janus Capital
International Growth Portfolio primarily through investments in common stocks of Corporation
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.
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks long-term growth of capital by investing at least Fidelity
PRODUCTS FUND 65% of total assets in foreign securities, primarily in Management &
VIP Overseas Portfolio common stocks. Research
Company
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital by GE Investment
International Equity Fund investing primarily in foreign equity and equity-related Management
securities which the Adviser believes have long-term Incorporated
potential for capital growth.
- -------------------------------------------------------------------------------------------------------------------------
SPECIALTY FUNDS
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing maximum total return through GE Investment
Real Estate Securities Fund current income and capital appreciation by investing Management
primarily in securities of U.S. issuers that are principally Incorporated
engaged in or related to the real estate industry including (Subadvised by
those that own significant real estate assets. The portfolio Seneca Capital
will not invest directly in real estate. Management,
L.L.C.)
- -------------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS
- -------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT Seeks to achieve capital appreciation by investing in Oppenhei-
FUNDS "growth-type" companies. merFunds, Inc.
Aggressive Growth Fund/VA
(formerly known as Aggressive
Growth Fund)
- -------------------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND Seeks long-term capital appreciation by focusing on Fred Alger
Alger American Small small, fast-growing companies that offer innovative Management,
Capitalization Portfolio products, services or technologies to a rapidly expanding Inc.
marketplace. Under normal circumstances, the portfolio
invests primarily in the equity securities of small
capitalization companies. A small capitalization company
is one that has a market capitalization within the range of
the Russell 2000 Growth Index or the S&P(R) Small Cap
600 Index.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
1 Standard and Poor's, together with the Funds, determined these categories.
17
<PAGE>
<TABLE>
<CAPTION>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE ADVISER, AS APPLICABLE)
- ---------------------------------- ------------------------------------------------------------- ------------------------
MID-CAP GROWTH
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
JANUS ASPEN SERIES Non-diversified portfolio pursuing long-term growth of Janus Capital
Aggressive Growth Portfolio capital. Pursues this objective by normally investing at Corporation
least 50% of its assets in equity securities issued by
medium-sized companies.
- -------------------------------------------------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE Seeks long-term capital appreciation, primarily through Goldman Sachs
INSURANCE TRUST (VIT) equity securities of companies with public stock market Asset
Mid Cap Value Fund capitalizations within the range of the market Management
(formerly known as Mid Cap capitalization of companies constituting the Russell
Equity Fund) Midcap Index at the time of investment (currently
between $400 million and $16 billion).
- -------------------------------------------------------------------------------------------------------------------------
MID-CAP VALUE
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long term growth of capital by GE Investment
Value Equity Fund investing primarily in common stock and other equity Management
securities of companies that the investment adviser Incorporated
believes are undervalued by the marketplace at the time (Subadvised by
of purchase and that offer the potential for above-average NWQ Investment
growth of capital. Although the current portfolio reflects Management
investments primarily within the mid cap range, the Fund Company)
is not restricted to investments within any particular
capitalization and may in the future invest a majority of
its assets in another capitalization range.
- -------------------------------------------------------------------------------------------------------------------------
LARGE-CAP GROWTH
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long-term capital growth consistent with the Janus Capital
Growth Portfolio preservation of capital and pursues its objective by Corporation
investing in common stocks of companies of any size.
Emphasizes larger, more established issuers.
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long-term growth of capital. Pursues this objective Janus Capital
Capital Appreciation Portfolio by investing primarily in common stocks of companies of Corporation
any size.
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks long-term capital appreciation by investing mainly Fidelity
PRODUCTS FUND II in common stocks and in securities of companies whose Management &
VIP II Contrafund Portfolio value is believed to have not been fully recognized by the Research
public. This fund invests in domestic and foreign issuers. Company
This fund also invests in "growth" stocks or "value"
stocks or both.
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks capital appreciation by investing primarily in Fidelity
PRODUCTS FUND common stocks of companies believed to have Management &
VIP Growth Portfolio above-average growth potential. Research
Company
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks high total return through a combination of current Fidelity
PRODUCTS FUND III income and capital appreciation by investing a majority of Management &
VIP III Growth & Income assets in common stocks with a focus on those that pay Research
Portfolio current dividends and show potential for capital Company
appreciation.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE ADVISER, AS APPLICABLE)
- ----------------------------------- ------------------------------------------------------------ ------------------------
<S> <C> <C>
OPPENHEIMER VARIABLE ACCOUNT Seeks capital appreciation from investments in securities Oppenhei-
FUNDS of well-known and established companies. Such securities merFunds, Inc.
Capital Appreciation Fund/VA generally have a history of earnings and dividends and
(formerly known as are issued by seasoned companies (having an operating
Growth Fund) history of at least five years, including predecessors).
Current income is a secondary consideration in the
selection of the Capital Appreciation Fund's portfolio
securities.
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital as GE Investment
Premier Growth Equity Fund well as future (rather than current) income by investing Management
primarily in growth-oriented equity securities. Incorporated
- -------------------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND Seeks long-term capital appreciation by focusing on Fred Alger
Alger American Growth Portfolio growing companies that generally have broad product Management,
lines, markets, financial resources and depth of Inc.
management. Under normal circumstances, the portfolio
invests primarily in the equity securities of large
companies. The portfolio considers a large company to
have a market capitalization of $1 billion or greater.
- -------------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE
- --------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks reasonable income and will consider the potential Fidelity
PRODUCTS FUND for capital appreciation. The fund also seeks a yield, Management &
VIP Equity-Income Portfolio which exceeds the composite yield on the securities Research
comprising the S&P 500 by investing primarily in Company
income-producing equity securities and by investing in
domestic and foreign issuers.
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks to provide capital growth by investing primarily in Fidelity
PRODUCTS FUND III common stock and other types of securities, including Management &
VIP III Growth Opportunities bonds, which may be lower-quality debt securities. Research
Portfolio Company
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital GE Investment
U.S. Equity Fund through investments primarily in equity securities of U.S. Management
companies. Incorporated
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing capital appreciation and GE Investment
S&P 500 Index Fund2 accumulation of income that corresponds to the Management
investment return of the Standard & Poor's 500 Incorporated
Composite Stock Price Index through investment in (Subadvised by
common stocks comprising the Index. State Street
Global Advisers)
- -------------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES Seeks high current income and moderate capital Federated
Utility Fund II appreciation by investing primarily in equity and debt Investment
securities of utility companies. Management
Company
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------
2 "Standard & Poor's," "S&P," and "S&P 500" are trademarks of The McGraw
Hill Companies, Inc. and have been licensed for use by GE Investment Management
Incorporated. The S&P 500 Index Fund is not sponsored, endorsed, sold or
promoted by Standard & Poor's, and Standard & Poor's makes no representation or
warranty, express or implied, regarding the advisability of investing in this
Fund or the Policy.
19
<PAGE>
<TABLE>
<CAPTION>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE ADVISER, AS APPLICABLE)
- ---------------------------------- --------------------------------------------------------------- ------------------------
<S> <C> <C>
FEDERATED INSURANCE SERIES Seeks long-term growth of capital with a secondary Federated
American Leaders Fund II objective of providing income. Seeks to achieve its Investment
objective by investing, under normal circumstances, at Management
least 65% of its total assets in common stock of "blue Company
chip" companies.
- -------------------------------------------------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE Seeks long-term capital growth and growth of income, Goldman Sachs
INSURANCE TRUST (VIT) primarily through equity securities that are considered to Asset
Growth and Income Fund have favorable prospects for capital appreciation and/or Management
dividend-paying ability.
- -------------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE Seeks long-term growth of capital with current income as Salomon
SERIES FUNDS a secondary objective, primarily through investments in Brothers Asset
Investors Fund common stocks of well-known companies. Management Inc
- -------------------------------------------------------------------------------------------------------------------------
BALANCED
- -------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long term growth of capital. Pursues this objective Janus Capital
Balanced Portfolio consistent with the preservation of capital and balanced Corporation
by current income. 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.
- -------------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks high total return with reduced risk over the Fidelity
PRODUCTS FUND II long-term by allocating assets among stocks, bonds and Management &
VIP II Asset Manager Portfolio short-term and money market instruments. Research
Company
- -------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT Seeks total investment return (which includes current Oppenhei-
FUNDS income and capital appreciation in the values of its merFunds, Inc.
Multiple Strategies Fund/VA shares) from investments in common stocks and other
(formerly known as Multiple equity securities, bonds and other debt securities, and
Strategies Fund) "money market" securities.
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing the highest total return, composed GE Investment
Total Return Fund of current income and capital appreciation, as is Management
consistent with prudent investment risk by investing in Incorporated
common stock, bonds and money market instruments, the
proportion of each being continuously determined by the
investment adviser.
- -------------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE Seeks to obtain above-average income by primarily Salomon
SERIES FUNDS investing in a broad variety of securities, including stocks, Brothers Asset
Total Return Fund fixed-income securities and short-term obligations. Management Inc
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE ADVISER, AS APPLICABLE)
- ---------------------------------- -------------------------------------------------------------- ------------------------
HIGH-YIELD BONDS
- --------------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks maximum total return consistent with preservation Janus Capital
Flexible Income Portfolio of capital. Total return is expected to result from a Corporation
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.
- -------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT Seeks high current income from investments in high yield Oppenhei-
FUNDS fixed income securities, including unrated securities or merFunds, Inc.
High Income Fund/VA high-risk securities in lower rating categories. These
(formerly known as High Income securities may be considered speculative. This Fund may
Fund) 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.
- -------------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES Seeks high current income by investing primarily in a Federated
High Income Bond Fund II diversified portfolio of professionally managed Advisers
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 and their high yield
potential are described in the prospectus for the Federated
Insurance Series, which should be read carefully before
investing.
- -------------------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS
- -------------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE ACCOUNT Seeks high level of current income and capital, and Oppenhei-
FUNDS growth when consistent with its primary objective. Under merFunds, Inc.
Bond Fund/VA normal conditions this fund will invest at least 65% of its
(formerly known as Bond Fund) total assets in investment grade debt securities.
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing maximum income consistent with GE Investment
Income Fund prudent investment management and preservation of Management
capital by investing primarily in income-bearing debt Incorporated
securities and other income bearing instruments.
- -------------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE Seeks high level of current income with capital Salomon
SERIES FUNDS appreciation as a secondary objective, through a globally Brothers Asset
Strategic Bond Fund diverse portfolio of fixed-income investments, including Management Inc
lower-rated fixed income securities commonly known as
junk bonds.
- -------------------------------------------------------------------------------------------------------------------------
MONEY MARKET
- -------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing highest level of current income as GE Investment
Money Market Fund is consistent with high liquidity and safety of principal by Management
investing in various types of good quality money market Incorporated
securities.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Not all of these portfolios may be available in all states or in all markets.
21
<PAGE>
We will purchase shares of the portfolios at net asset value and direct them to
the appropriate Investment Subdivisions of Account 4. We will redeem sufficient
shares of the appropriate portfolios at net asset value to pay Death Benefits
and surrender/partial surrender proceeds, to make income payments, or for other
purposes described in the Policy. We automatically reinvest all dividend and
capital gain distributions of the portfolios in shares of the distributing
portfolios at their net asset value on the date of distribution. In other words,
we do not pay portfolio dividends or portfolio distributions out to Owners as
additional units, but instead reflect them in unit values.
Shares of the portfolios are not sold directly to the general public. They are
sold to the Company and they may also be sold to other insurance companies that
issue variable annuity and variable life insurance policies. In addition, they
may be sold to retirement plans.
When a Fund sells shares in any of its portfolios both to variable annuity and
to variable life insurance separate accounts, it engages in mixed funding. When
a Fund sells shares in any of its portfolios to separate accounts of
unaffiliated life insurance companies, it engages in shared funding.
Each Fund may engage in mixed and shared funding. Therefore, due to differences
in redemption rates or tax treatment, or other considerations, the interests of
various shareholders participating in a Fund could conflict. A Fund's Board of
Directors will monitor for the existence of any material conflicts, and
determine what action, if any, should be taken. See the Prospectuses for the
Funds.
We have entered into agreements with either the investment adviser or
distributor of each of the Funds under which the adviser or distributor pays us
a fee ordinarily based upon a percentage of the average aggregate amount we have
invested on behalf of Account 4 and other separate accounts. These percentages
differ, and some investment advisers or distributors pay us a greater percentage
than other advisors or distributors. These agreements reflect administrative
services we provide.
CHANGES TO ACCOUNT 4 AND THE INVESTMENT SUBDIVISIONS
We reserve the right, within the law, to make additions, deletions and
substitutions for the Funds and/or any portfolios within the Funds in which
Account 4 participates. We may substitute shares of other portfolios for shares
already purchased, or to be purchased in the future, under the Policy. This
substitution might occur if shares of a portfolio should no longer be
available, or if investment in any portfolio's shares should become
inappropriate, in the judgment of our management, for the purposes of the
Policy. No substitution of the shares attributable to your Policy may take
place without notice to you and before approval of the SEC, in accordance
with the 1940 Act.
We also reserve the right to establish additional Investment Subdivisions, each
of which would invest in a separate portfolio of a Fund, or in shares of another
investment company, with a specified investment objective. We may also eliminate
one or more Investment Subdivisions if, in our sole discretion, marketing, tax,
or investment conditions warrant.
If permitted by law, we 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.
Further, to the extent permitted by applicable law, we may transfer the assets
of Account 4 to another separate account.
- --------------------------------------------------------------------------------
THE GUARANTEE ACCOUNT
- --------------------------------------------------------------------------------
Due to certain exemptive and exclusionary provisions of the Federal securities
laws, we have not registered interests in the Guarantee Account under the
Securities Act of 1933 (the "l933 Act"), and we have not registered either the
Guarantee Account or our General Account as an investment company under the 1940
Act. Accordingly, neither the interests in the Guarantee Account, nor our
General Account are generally subject to regulation under the 1933 Act and the
1940 Act. Disclosures relating to the interests in the Guarantee Account, and
the General Account, however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy of statements
made in a registration statement.
You may allocate some or all of your net premium payments and transfer some or
all of your Account Value to the Guarantee Account. We credit the portion of the
Account Value allocated to the Guarantee Account with interest (as described
below). Account Value in the Guarantee Account is subject to some, but not all,
of the charges we assess in connection with the Policy. SEE Charges and Other
Deductions.
Each time you allocate net premium payments or transfer Account Value to the
Guarantee Account, we establish an interest rate guarantee period. For each
interest rate guarantee period, we guarantee an interest rate for a specified
period of time.
22
<PAGE>
At the end of an interest rate guarantee period, a new interest rate will become
effective, and a new interest rate guarantee period will commence for the
remaining portion of that particular allocation.
We determine the interest rates in our sole discretion. The determination made
will be influenced by, but not necessarily correspond to, interest rates
available on fixed income investments which we may acquire with the amounts we
receive as premium payments or transfers of Account Value under the Policies.
You will have no direct or indirect interest in these investments. We also will
consider other factors in determining interest rates for a guarantee period
including, but not limited to, regulatory and tax requirements, sales
commissions, and administrative expenses borne by us, general economic trends,
and competitive factors. Amounts you allocate to the Guarantee Account will not
share in the investment performance of our General Account, or any portion
thereof. WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF INTEREST RATES IN FUTURE
GUARANTEE PERIODS. HOWEVER, THE INTEREST RATES FOR ANY INTEREST GUARANTEE PERIOD
WILL BE AT LEAST THE GUARANTEED INTEREST RATE SHOWN IN YOUR POLICY.
We will notify Owners in writing at least 10 days prior to the expiration date
of any interest rate guarantee period about the then currently available
interest rate guarantee periods and the guaranteed interest rates applicable to
such interest rate guarantee periods. A new one year interest rate guarantee
period will commence automatically unless we receive written notice prior to the
end of the 30 day period following the expiration of the interest rate guarantee
period ("30 day window") of your election of a different interest rate guarantee
period from among those being offered by us at that time, or instructions to
transfer all or a portion of the remaining amount to one or more Investment
Subdivisions subject to certain restrictions. SEE Transfers Before the Maturity
Date. During the 30 day window, the allocation will accrue interest at the new
interest rate guarantee period's interest rate.
We reserve the right to credit bonus interest on premium payments allocated to a
Guarantee Account participating in the Dollar-Cost Averaging Program. (This may
not be available to all classes of policies.)
- --------------------------------------------------------------------------------
CHARGES AND OTHER DEDUCTIONS
- --------------------------------------------------------------------------------
All of the charges described in this section apply to Account Value allocated to
Account 4. Account Value in the Guarantee Account is subject to all of the
charges described in this section except for the mortality and expense risk
charge and the administrative expense charge.
We will deduct the charges described below to cover our costs and expenses,
services provided, and risks assumed under the Policies. We incur certain costs
and expenses for the distribution and administration of the Policies and for
providing the benefits payable thereunder. Our administrative services include:
o processing applications for and issuing the Policies;
o processing purchases and redemptions of portfolio shares as required;
o maintaining records;
o administering annuity payouts;
o furnishing accounting and valuation services (including the calculation
and monitoring of daily Investment Subdivision values;
o reconciling and depositing cash receipts;
o providing Policy confirmations and periodic statements;
o providing toll-free inquiry services; and
o furnishing telephone transaction services.
The risks we assume include:
o the risk that the Death Benefits will be greater than the Surrender
Value;
o the risk that the actual life-span of persons receiving income payments
under the Policy will exceed the assumptions reflected in our guaranteed
rates (these rates are incorporated in the Policy and cannot be changed);
o the risk that more Owners than expected will qualify for waivers of the
surrender charges; and
o the risk that our costs in providing the services will exceed our
revenues from Policy charges (which cannot be changed by us).
23
<PAGE>
The amount of a charge may not necessarily correspond to the costs associated
with providing the services or benefits indicated by the designation of the
charge. For example, the surrender charge we collect may not fully cover all of
the sales and distribution expenses we actually incur. We also may realize a
profit on one or more of the charges. We may use any such profits for any
corporate purpose, including the payment of sales expenses.
- --------------------------------------------------------------------------------
TRANSACTION EXPENSES
SURRENDER CHARGE
We assess a surrender charge (except as described below) on partial and full
surrenders of premium payments. You pay this charge to compensate us for the
losses we experience on Policy distribution costs when Owners surrender or
partially surrender.
We calculate the surrender charge separately for each premium payment. For
purposes of calculating this charge, we assume that you withdraw premium
payments on a first-in, first-out basis. We deduct the surrender charge
proportionately from the Investment Subdivisions. However, if there is no
Account Value in Account 4, we will deduct the charge from the Guarantee
Account. The surrender charge is as follows:
<TABLE>
<CAPTION>
Surrender charge as a percentage
Number of full and partially completed years of the surrendered or partially
since we received the premium payment surrendered premium payment
- ---------------------------------------------- ---------------------------------
Year Percentage
---- ----------
<S> <C>
1 8%
2 8%
3 7%
4 6%
5 5%
6 4%
7 3%
8 2%
9 or more 0%
</TABLE>
We do not assess the surrender charge on surrenders:
o of amounts representing gain (as defined below);
o of free withdrawal amounts (as defined below);
o if taken under Optional Payment Plan 1, Optional Payment Plan 2 (for a
period of 5 or more years), or Optional Payment Plan 5;
o if a waiver of surrender charge provision applies; or
o if taken upon the death of the Annuitant.
You may withdraw any gain in your Policy free of any surrender charge. We
calculate gain in the Policy as: (a) plus (b) minus (c) minus (d), but not less
than zero where:
(a) is the Account Value on the date we receive your surrender request;
(b) is the total of any partial surrenders previously taken;
(c) is the total of premium payments made; and
(d) is the total of any gain previously surrendered.
In addition to any gain, you may withdraw an amount equal to 10% of your total
premium payments each Policy year without a surrender charge (the "free
withdrawal amount"). The free withdrawal amount is not cumulative from Policy
year to Policy year.
Further, we will waive the surrender charge if you annuitize under Optional
Payment Plan 1 (Life Income with Period Certain), Optional Payment Plan 2
(Income for a Fixed Period) provided that you select a fixed period of 5 years
or more, or Optional Payment Plan 5 (Joint Life and Survivor Income). SEE
Optional Payment Plans.
24
<PAGE>
We also will waive surrender charges arising from a surrender occurring before
income payments begin if, at the time we receive the surrender request, we have
received due proof that the Annuitant has a qualifying terminal illness, or has
a qualifying confinement to a state licensed or legally operated hospital or
inpatient nursing facility for a minimum period as set forth in the Policy
(provided the confinement began, or the illness was diagnosed, at least one year
after the Policy Date). If you surrender the Policy under the terminal illness
waiver, please remember that we will pay your Account Value, which could be less
than the Death Benefit otherwise available. The terms and conditions of the
waivers are set forth in your Policy.
- --------------------------------------------------------------------------------
DEDUCTIONS FROM ACCOUNT 4
We deduct from Account 4 an amount, computed daily, at an annual rate of 1.55%
of the daily net asset value. The charge consists of an administrative expense
charge at an effective annual rate of .25% and a mortality and expense risk
charge at an effective annual rate of 1.30%. These deductions from Account 4 are
reflected in your Account Value.
- --------------------------------------------------------------------------------
OTHER CHARGES
OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT CHARGE
We charge you for expenses related to the optional Guaranteed Minimum Death
Benefit ("GMDB"). We deduct this charge against the Account Value in Account 4
at each anniversary and at full surrender to compensate us for the increased
risks and expenses associated with providing the enhanced Death Benefit. We will
allocate the annual optional GMDB charge 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 we make the charge. If the Guarantee Account is available under the
Policy and the Account Value in Account 4 is not sufficient to cover the charge
for the optional GMDB, we will deduct the charge first from the Account Value in
Account 4, if any, and then from the Guarantee Account. At full surrender, we
will charge you a pro-rata portion of the annual charge.
For the optional GMDB, we guarantee that this charge will never exceed an annual
rate of 0.35% of the prior year's average Guaranteed Minimum Death Benefit.
POLICY MAINTENANCE CHARGE
We will deduct an annual charge of $25 from the Account Value of each Policy to
compensate us for certain administrative expenses incurred in connection with
the Policies. We will deduct the charge at each Policy anniversary and at full
surrender. We will waive this charge if your Account Value at the time of
deduction is at least $10,000.
We will allocate the annual policy maintenance charge 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 we make the charge. If there is insufficient Account
Value allocated to Account 4, we will deduct any remaining portion of the charge
from the Guarantee Account from the amounts that have been in the Guarantee
Account for the longest period of time. Other allocation methods may be
available upon request.
DEDUCTIONS FOR PREMIUM TAXES
We will deduct charges for any premium tax or other tax levied by any
governmental entity from Account Value when incurred or at another time of our
choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation, or by judicial action. These premium taxes
generally depend upon the law of your state of residence. The tax generally
ranges from 0.0% to 3.5%.
OTHER CHARGES AND DEDUCTIONS
Each portfolio incurs certain fees and expenses. To pay for these charges, the
portfolio makes deductions from its assets. The deductions are described more
fully in each Fund's prospectus.
In addition, we reserve the right to impose a transfer charge.
ADDITIONAL INFORMATION
We may reduce or eliminate the administrative expense and surrender charges
described previously for any particular Policy. However, we will reduce these
charges only to the extent that we anticipate lower distribution and/or
administrative expenses,
25
<PAGE>
or that we perform fewer sales or administrative services than those originally
contemplated in establishing the level of those charges. Lower distribution and
administrative expenses may be the result of economies associated with (1) the
use of mass enrollment procedures, (2) the performance of administrative or
sales functions by the employer, (3) the use by an employer of automated
techniques in submitting deposits or information related to deposits on behalf
of its employees, or (4) any other circumstances which reduce distribution or
administrative expenses. We will state the exact amount of administrative
expense and surrender charges applicable to a particular Policy in that Policy.
- --------------------------------------------------------------------------------
THE POLICY
- --------------------------------------------------------------------------------
The Policy is an individual flexible deferred variable annuity policy. We
describe your rights and benefits below and in the Policy. There may be
differences in your Policy because of requirements of the state where we issued
your Policy. We will include any such differences in your Policy.
PURCHASE OF THE POLICY
If you wish to purchase a Policy, you must apply for it through an authorized
sales representative. The sales representative will send your completed
application to us, and we will decide whether to accept or reject it. If we
accept your application, our legally authorized officers prepare and execute a
Policy. We then send the Policy to you through your sales representative. SEE
Distribution of the Policies.
If we receive a completed application and all other information necessary for
processing a purchase order, we will apply your initial premium payment no later
than two business days after we receive the order. While attempting to finish an
incomplete application, we may hold your initial premium payment for no more
than five business days. If the incomplete application cannot be completed
within those five days, we will inform you of the reasons, and will return your
premium payment immediately (unless you specifically authorize us to keep it
until the application is complete). Once you complete your application, we must
apply the initial premium payment within two business days.
To apply for a Policy, you must be of legal age in a state where we may lawfully
sell the Policies and also be eligible to participate in any of the qualified or
non-qualified plans for which we designed the Policies. The Annuitant cannot be
older than age 80, unless we approve a different age.
OWNERSHIP
As Owner, you have all rights under the Policy, subject to the rights of any
irrevocable beneficiary. According to Virginia law, the assets of Account 4 are
held for the exclusive benefit of all Owners and their Designated Beneficiaries.
Qualified Policies may not be assigned or transferred except as permitted by the
Employee Retirement Income Security Act (ERISA) of 1974 and upon written
notification to us. We assume no responsibility for the validity or effect of
any assignment. Consult your tax advisor about the tax consequences of an
assignment.
If you name a Joint Owner in the application, we will treat the Joint Owners as
having equal undivided interests in the Policy. All Owners must together
exercise any ownership rights in this Policy.
PREMIUM PAYMENTS
You may make premium payments at a frequency and in the amount you select. You
must obtain our approval before you make total premium payments for an Annuitant
age 79 or younger that exceed $2,000,000. If the Annuitant is age 80 or older at
the time of payment, the total amount not subject to prior approval is
$1,000,000. Payments may be made or, if stopped, resumed at any time until the
Maturity Date, the surrender of the Policy, or the death of the Owner (or Joint
Owner, if applicable), whichever comes first. We reserve the right to refuse to
accept a premium payment for any lawful reason.
The minimum initial premium payment is $10,000. We may accept a lower initial
premium payment in the case of certain group sales. Each additional premium
payment must be at least $1,000 for Non-Qualified Policies, $50 for IRA
Policies, and $100 for other Qualified Policies.
VALUATION DAY
We will value Accumulation and Annuity Units once daily as of the close of
trading (currently 4:00 p.m., New York time) for each day the New York Stock
Exchange is open except for days on which a Fund does not value its shares
(Valuation Day). If a Valuation Period contains more than one day, the unit
values will be the same for each day in the Valuation Period.
26
<PAGE>
ALLOCATION OF PREMIUM PAYMENTS
We place net premium payments into Account 4's Investment Subdivisions, each of
which invests in shares of a corresponding Fund, and/or the Guarantee Account,
according to your instructions. However, in those states which require that
premium payments be returned during the free look period (see Return Privilege),
we will place your initial premium payments allocated to Account 4 in the Money
Market Investment Subdivision. You may not make transfers during this period. At
the deemed end of the free look period, if we allocated any portion of your
initial premium payment to the Money Market Investment Subdivision, we will
transfer the value in the Money Market Investment Subdivision to the Investment
Subdivisions you specified in your application. Solely for the purpose of
processing transfers from the Money Market Investment Subdivision, we will deem
the free look period to end 15 days after the Policy Date. This transfer from
the Money Market Investment Subdivision to the other Investment Subdivisions
upon the expiration of the free look period does not count as a transfer for any
other purposes under the Policy.
The percentage of any premium payment which you can put into any one Investment
Subdivision or Guarantee Period must be a whole percentage. Upon allocation to
the appropriate Investment Subdivision we convert net premium payments into
Accumulation Units. We determine the number of Accumulation Units credited by
dividing the amount allocated to each Investment Subdivision by the value of an
Accumulation Unit for that Investment Subdivision on the Valuation Day on which
we receive the premium payment at our Home Office if received before 4:00 p.m.,
New York time. If we receive the premium payment at or after 4:00 p.m, New York
time, we will use the Accumulation Unit value computed on the next Valuation
Day. The number of Accumulation Units determined in this way is not changed by
any subsequent change in the value of an Accumulation Unit. However, the dollar
value of an Accumulation Unit will vary depending not only upon how well the
portfolio's investments perform, but also upon the charges of Account
4 and the fees and expenses of each portfolio.
You may change the allocation of subsequent premium payments at any time,
without charge, by sending us acceptable notice in writing or by phoning us at
our Home Office. The new allocation will apply to any premium payments made
after we receive notice of the change.
BONUS CREDITS
For most Policies, we will add a Bonus Credit to each premium payment we
receive. (The Bonus Credit is referred to as an "enhanced premium amount" in
your Policy). We fund this credit from our General Account. For each premium
payment you make, we will add 4% of that premium payment to your account value,
provided the Annuitant was age 80 or younger when we issued the Policy. For
Annuitants age 81 or older at the time of issue, we will not pay any Bonus
Credits. We apply the Bonus Credits when we apply your premium payment to your
Account Value, and allocate the credits on a pro-rata basis to the investment
options you select in the same ratio as the applicable premium payment. We do
not consider Bonus Credits as "premium payments" for purposes of the Policy.
VALUATION OF ACCUMULATION UNITS
We value Accumulation Units for each Investment Subdivision separately.
Initially, we arbitrarily set the value of each Accumulation Unit at $10.00.
Thereafter, the value of an Accumulation Unit in any Investment Subdivision for
a Valuation Period equals the value of an Accumulation Unit in that Investment
Subdivision as of the preceding Valuation Period multiplied by the net
investment factor of that Investment Subdivision for the current Valuation
Period.
The net investment factor is an index used to measure the investment performance
of an Investment Subdivision from one Valuation Period to the next. The net
investment factor for any Investment Subdivision for any Valuation Period
reflects the change in the net asset value per share of the portfolio held in
the Investment Subdivision from one Valuation Period to the next, adjusted for
the daily deduction of the administrative expense and mortality and expense risk
charges from assets in the Investment Subdivision. If any "ex-dividend" date
occurs during the Valuation Period, we take into account the per share amount of
any dividend or capital gain distribution so that the unit value is not
impacted. Also, if we need to reserve money for taxes, we take into account a
per share charge or credit for any taxes reserved for which we determine to have
resulted from the operations of the Investment Subdivision.
27
<PAGE>
- --------------------------------------------------------------------------------
TRANSFERS
- --------------------------------------------------------------------------------
TRANSFERS BEFORE THE MATURITY DATE
Before the earliest of the surrender of the Policy, payment of any Death
Benefit, or the Maturity Date, you may transfer all or a portion of your
investment between and among the Investment Subdivisions of Account 4 and the
Guarantee Account, subject to certain conditions. We process transfers among the
Investment Subdivisions of Account 4 and between the Investment Subdivision and
any Guarantee Account as of the end of the Valuation Period that we receive the
transfer request at our Home Office. We may postpone transfers to, from, or
among the Investment Subdivisions of Account 4, under certain circumstances.
SEE Requesting Payments.
We restrict transfers from any particular allocation of a Guarantee Account to
an Investment Subdivision. You may make such transfers only during the 30 day
period beginning with the end of the preceding interest rate guarantee period
applicable to that particular allocation. We also may limit the amount which you
may transfer to the Investment Subdivisions. However, for any particular
allocation to the Guarantee Account, the limited amount will not be less than
any accrued interest on that allocation plus 25% of the original amount of that
allocation.
Further, we may restrict certain transfers from the Investment Subdivisions
to the Guarantee Account. We reserve the right to prohibit or limit transfers
from an Investment Subdivision to the Guarantee Account during the six month
period following the transfer of any amount from the Guarantee Account to any
Investment Subdivision.
Currently, there is no other limit on the number of transfers between and among
Investment Subdivisions of Account 4 and the Guarantee Account; however, we
reserve the right to limit the number of transfers each calendar year to twelve,
or if it is necessary for the Policy to continue to be treated as an annuity
policy by the Internal Revenue Service, a lower number. Currently, we do not
charge for transfers. However, we reserve the right to assess a fee of $10 per
transfer. The minimum transfer amount is $100 or the entire balance in the
Investment Subdivision or guarantee period if the transfer will leave a balance
of less than $100.
Sometimes, we may not honor your transfer request. We may not honor your
transfer request if:
(i) any Investment Subdivision that would be affected by the transfer is
unable to purchase or redeem shares of the Fund in which the Investment
Subdivision invests;
(ii) the transfer is a result of more than one trade involving the same
Investment Subdivision within a 30 day period;
(iii) the transfer would adversely affect Accumulation Unit values; or
(iv) the transfer would adversely affect any portfolio affected by the
transfer.
We also may not honor transfers made by third parties. See Transfers by Third
Parties.
When thinking about a transfer of Account Value, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that you will make a transfer at an inopportune time.
TELEPHONE TRANSACTIONS
We permit certain telephone transactions (including transfers) as described in
this Prospectus. We may be liable for liable for losses resulting from
unauthorized or fraudulent telephone transactions if we fail to employ
reasonable procedures to confirm that the telephone instructions that we receive
are genuine. Therefore, we 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, we will require written authorization before allowing you to make
telephone transactions. We reserve the right to limit telephone transactions.
To request a telephone transaction, you should call our Home office. We will
record all telephone transaction requests. We will execute transfer requests
received before the close of the New York Stock Exchange that Valuation Day at
that day's prices. We will execute requests received after that time on the next
Valuation Day at that day's prices.
TRANSFERS BY THIRD PARTIES
As a general rule and as a convenience to you, we allow the use of transfers by
third parties whereby you give third parties the right to effect transfers on
your behalf. However, when the same third party makes transfers for many Owners,
the result can be simultaneous transfers involving large amounts of Account
Value. Such transfers can disrupt the orderly management of the portfolios
underlying the Policy, can result in higher costs to Owners, and are generally
not compatible with the long-range goals of Owners. We believe that such
simultaneous transfers effected by such third parties are not in
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<PAGE>
the best interests of all shareholders of the Funds underlying the Policies, and
the management of the Funds share this position. Therefore, as described in your
Policy, we may limit transfers made by a third party.
DOLLAR-COST AVERAGING
The dollar-cost averaging program permits you to systematically transfer on a
monthly or quarterly basis a set dollar amount from the Money Market Investment
Subdivision and/or the Guarantee Account to any combination of other Investment
Subdivisions (as long as the total number of Investment Subdivisions used does
not exceed the maximum number allowed under the Policy). 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. Dollar-cost averaging does not assure a profit or protect
against a loss.
You may participate in the dollar-cost averaging program by selecting the
program on the application, completing a dollar-cost averaging agreement, or
calling our Home Office. To use the dollar-cost averaging program, you must
transfer at least $100 from an Investment Subdivision or a guarantee period with
each transfer. Once elected, dollar-cost averaging remains in effect from the
date we receive your request until the value of the Investment Subdivision or
the interest rate guarantee period from which transfers are being made is
depleted, or until you cancel the program by written request or by telephone if
we have your telephone authorization on file.
With regard to dollar-cost averaging from the Guarantee Account, we reserve the
right to determine the amount of each automatic transfer. We reserve the right
to transfer any remaining portion of an allocation used for dollar-cost
averaging to a Guarantee Account with a new interest rate guarantee period upon
termination of the dollar-cost averaging program for that allocation.
There is no additional charge for dollar-cost averaging. We reserve the right to
discontinue offering or to modify the dollar-cost averaging program at any time
and for any reason. We reserve the right to prohibit simultaneous dollar-cost
averaging and systematic withdrawals.
ASSET ALLOCATION
You may select from five asset allocation model portfolios, or you may use a
model as a guide to help you develop your own asset allocation program. The
models are as follows:
<TABLE>
<CAPTION>
Model Investment and Risk Profile
- ------- ----------------------------
<S> <C>
1 Income
2 Enhanced Income
3 Growth & Income
4 Growth
5 Aggressive Growth
</TABLE>
If you elect to participate in the asset allocation program, we will
automatically allocate all premium payments among the Investment Subdivisions
indicated by the model and the portfolios within the model you select. The
models do not include allocation to the Guarantee Account. Although you may use
only one model at a time, you may elect to change your selection as your
tolerance for risk, needs, and/or objectives change. You may use a
questionnaire to determine the model that best meets your risk tolerance and
time horizons. Asset allocation does not guarantee a profit or protect against
a loss.
Because each Investment Subdivision performs differently over time, your
portfolio mix may vary from its initial allocations. You may elect to have the
portfolios automatically rebalanced under our portfolio rebalancing program
described below.
From time to time, the allocation percentages among the Investment Subdivisions
or even some of the Investment Subdivisions within a particular model may need
to be changed. We will send you notice that such a change has been made. 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. We reserve the
right to discontinue offering this program at any time and for any reason.
PORTFOLIO REBALANCING PROGRAM
Once you have allocated your money among the Investment Subdivisions, the
performance of each Investment Subdivision may cause your allocation to shift.
You may instruct us to automatically rebalance (on a quarterly, semi-annual, or
annual
29
<PAGE>
basis) your Account Value among the Investment Subdivisions to return to the
percentages specified in your allocation instructions. The program does not
include allocations to the Guarantee Account. You may elect to participate in
the portfolio rebalancing program at any time by completing the portfolio
rebalancing agreement. Your percentage allocations must be in whole percentages.
Subsequent changes to your percentage allocations may be made at any time by
written or telephone instructions to the Home Office. Once elected, portfolio
rebalancing remains in effect from the date we receive your written request
until you instruct us to discontinue portfolio rebalancing. There is no
additional charge for using portfolio rebalancing, and we do not consider a
portfolio rebalancing transfer a transfer for purposes of assessing a transfer
processing fee or calculating the maximum number of transfers permitted in a
calendar year. We reserve the right to discontinue offering or to modify the
portfolio rebalancing program at any time and for any reason. We also reserve
the right to exclude Investment Subdivisions from portfolio rebalancing.
Portfolio rebalancing does not guarantee a profit or protect against a loss.
- --------------------------------------------------------------------------------
SURRENDERS
- --------------------------------------------------------------------------------
SURRENDERS AND PARTIAL SURRENDERS
Subject to the rules discussed below, we will allow the surrender of the Policy
or a withdrawal of a portion of the Account Value at any time before the
Maturity Date upon your written request.
We will not permit a partial surrender that is less than $500 or that reduces
Account Value to less than $10,000. If your partial surrender request would
reduce Account Value to less than $10,000, we will surrender only that amount of
Account Value that would reduce the remaining Account Value to $10,000 and
deduct any surrender charge from the amount you surrendered.
The amount payable on full surrender of the Policy is the Surrender Value at the
end of the Valuation Period during which we receive the request. The Surrender
Value equals the Account Value (after deduction of any policy maintenance
charge) on the date we receive a request for surrender less any applicable
surrender charge, GMDB charge, and less any applicable premium tax. We may pay
the Surrender Value in a lump sum or under one of the optional payment plans
specified in the Policy, based on your instructions.
You may indicate, in writing or by calling the Annuity Customer Service Line,
from which Investment Subdivisions or guarantee periods we are to take your
partial surrender. If you do not so specify, we will deduct the amount of the
partial surrender first from the Investment Subdivisions of Account 4 on a
pro-rata basis in proportion to the Account Value in Account 4. We then will
deduct any remaining amount from the Guarantee Account. We will take deductions
from the Guarantee Account from the amounts (including any interest credited to
such amounts) which have been in the Guarantee Account for the longest period of
time.
Please remember that a partial surrender will reduce the Death Benefit by the
proportion that the partial surrender (including any applicable surrender
charge) reduced Account Value.
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 (i) termination of employment in
the Texas public institutions of higher education, (ii) retirement, (iii) death,
or (iv) the partcipant's attainment of age 70 1/2 . Accordingly, before we
distribute any amounts from these Policies, you must furnish us proof that one
of these four events has occurred.
SYSTEMATIC WITHDRAWALS
You may elect in writing on our form to take systematic withdrawals of a
specified dollar amount (in equal installments of at least $100) on a monthly,
quarterly, semi-annual or annual basis. Payments can begin at any time after 30
days from the Policy Date. Your systematic withdrawals in a Policy year may not
exceed the amount which is not subject to a surrender charge. You may provide
specific instructions as to how we are to take the systematic withdrawals. If
you have not provided specific instructions, or if your specific instructions
cannot be carried out, we will process the withdrawals by first taking on a
pro-rata basis Accumulation Units from all of the Investment Subdivisions in
which you have an interest. To the extent that your Account Value in Account 4
is not sufficient to accomplish the withdrawal, we will take any Account Value
you have in the Guarantee Account to accomplish the withdrawal.
30
<PAGE>
After your systematic withdrawals begin, you may change the frequency and/or
amount of your payments, subject to the following:
o you may request only one such change in a calendar quarter; and
o if you did not elect the maximum amount you could withdraw under this
program at the time you elected the current series of systematic
withdrawals, then you may increase the remaining payments up to the
maximum amount.
A systematic withdrawal program will terminate automatically when a systematic
withdrawal would cause the remaining Account Value to be less than $10,000. If a
systematic withdrawal would cause the Account Value to be less than $10,000,
then we will not process that systematic withdrawal transaction. You may
discontinue systematic withdrawals at any time by notifying us in writing at our
Home Office or by telephone. You may request that we pay any remaining payments
in a lump sum.
When you consider systematic withdrawals, please remember that each systematic
withdrawal is subject to Federal income taxes on any portion considered gain for
tax purposes. In addition, you may be assessed a 10% Federal penalty tax on
systematic withdrawals if you are under age 59 1/2 at the time of the
withdrawal.
Both partial surrenders at your specific request and withdrawals under a
systematic withdrawal program will count toward the limit of the amount that you
may withdraw in any Policy year free under the free withdrawal privilege.
We reserve the right to prohibit simultaneous systematic withdrawals and
dollar-cost averaging. We also reserve the right to discontinue systematic
withdrawals upon 30 days written notice to Owners.
- --------------------------------------------------------------------------------
THE DEATH BENEFIT
- --------------------------------------------------------------------------------
DEATH BENEFIT AT DEATH OF ANNUITANT BEFORE MATURITY DATE
If the Annuitant dies before income payments begin, regardless of whether the
Annuitant is also an Owner or Joint Owner of the Policy, the amount of proceeds
available is the Death Benefit (which may be referred to in our marketing
materials as the "Annual EstateProtector"). Upon receipt of due proof of the
Annuitant's death (generally, due proof is a certified copy of the death
certificate or a certified copy of the decree of a court of competent
jurisdiction as to the finding of death), we will treat the Death Benefit in
accordance with your instructions, subject to distribution rules and termination
of contract provisions described elsewhere.
The Death Benefit equals the sum of (a) and (b) where: (a) is the Account Value
as of the date we receive due proof of death; 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 rate credited may depend on applicable
law or regulation. Otherwise, we will set it.
The unadjusted Death Benefit varies based on the Annuitant's age at the time we
issued the Policy and on the Annuitant's age at the time of death.
For a Policy issued with an Annuitant who was age 80 or younger on the Policy
Date:
1. If the Annuitant dies during the first Policy year, the unadjusted
Death Benefit is the greater of:
(i) Account Value determined as of the date of the Annuitant's death;
or
(ii) the total of premium payments made adjusted by the proportion that
any partial surrender (including applicable surrender charge) reduced
Account Value and less any applicable premium tax.
2. If the Annuitant dies after the first Policy year, but before the
Policy anniversary that the Annuitant reaches age 80, the unadjusted
Death Benefit is the greater of:
(i) Account Value determined as of the date of the Annuitant's death;
or
(ii) the Policy's unadjusted Death Benefit on the previous Policy
anniversary, plus any premium payments made since then, reduced by
any applicable premium tax and adjusted by the proportion that any
partial surrender (including any applicable surrender charge) reduced
Account Value.
3. If the Annuitant dies on or after the Policy anniversary the Annuitant
reaches age 80, the unadjusted Death Benefit is the greater of:
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<PAGE>
(i) Account Value determined as of the date of the Annuitant's death;
or
(ii) the unadjusted Death Benefit as of the Policy anniversary the
Annuitant reached age 80, plus any premium payments made since then,
reduced by any applicable premium tax and adjusted by the proportion
that any partial surrender (including any applicable surrender
charge) reduced Account Value.
For a Policy issued with an Annuitant who was age 81 or older on the Policy
Date:
The unadjusted Death Benefit is the Account Value determined as of the date
of the Annuitant's death.
Example: Assuming an Owner: (i) purchases a Policy for $100,000; (ii) makes no
additional premium payments and no partial surrenders; (iii) is not subject to
premium taxes; and (iv) the Annuitant's age is 70 on the Policy Date then:
<TABLE>
<S> <C> <C> <C>
Annuitant's End of Account Unadjusted
Age Year Value Death Benefit
- -------------- ------ -------- -------------
71 1 $103,000 $103,000
72 2 $110,000 $110,000
73 3 $ 80,000 $110,000
74 4 $120,000 $120,000
75 5 $130,000 $130,000
76 6 $150,000 $150,000
77 7 $160,000 $160,000
78 8 $130,000 $160,000
79 9 $ 90,000 $160,000
80 10 $170,000 $170,000
81 11 $140,000 $170,000
82 12 $190,000 $190,000
83 13 $150,000 $170,000
</TABLE>
The purpose of this example is to show how the unadjusted Death Benefit works
based on purely hypothetical values and is not intended to depict investment
performance of the Policy.
DEATH OF AN OWNER OR JOINT OWNER BEFORE THE MATURITY DATE
GENERAL: In certain circumstances, Federal tax law requires that distributions
be made under this Policy upon the first death of:
o an Owner or Joint Owner, or
o the Annuitant if any Owner is a non-natural entity (such as a trust or
corporation).
The discussion below describes the methods available for distributing the value
of the Policy upon death.
DESIGNATED BENEFICIARY: At the death of any Owner (or Annuitant, if any Owner is
a non-natural entity), the person or entity first listed below who is alive or
in existence on the date of that death will become the Designated Beneficiary:
(l) Owner or Joint Owners;
(2) Primary beneficiary;
(3) Contingent beneficiary; or
(4) Owner's estate.
We then will treat the Designated Beneficiary as the sole Owner of the Policy.
If there is more than one Designated Beneficiary, we will treat each one
separately in applying the tax law's rules described below.
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<PAGE>
DISTRIBUTION RULES: The distributions required by Federal tax law differ
depending on whether the Designated Beneficiary is the spouse of the deceased
Owner (or of the Annuitant, if the Policy is owned by a non-natural entity).
o SPOUSES -- If the Designated Beneficiary is the surviving spouse of the
deceased person, we will continue the Policy in force with the surviving
spouse as the new Owner. If the deceased person was the Annuitant and there
was no surviving Contingent Annuitant, the surviving spouse will automatically
become the new Annuitant. At the death of the surviving spouse, this provision
may not be used again, even if the surviving spouse remarries. In that case,
the rules for non-spouses will apply.
o NON-SPOUSES -- If the Designated Beneficiary is not the surviving spouse of
the deceased person, this Policy cannot be continued in force indefinitely.
Instead, upon the death of any Owner (or Annuitant, if any Owner is a
non-natural entity), payments must be made to (or for the benefit of) the
Designated Beneficiary under one of the following payment choices:
(1) Receive the Surrender Value in one lump sum payment upon receipt of due
proof of death.
(2) Receive the Surrender Value at any time during the five year period
following the date of death. At the end of the five year period, we will
pay in a lump sum payment any Surrender Value still remaining.
(3) Apply the Surrender Value to provide a monthly income benefit under
Optional Payment Plan 1 or 2. The first monthly income benefit payment must
be made no later than one year after the date of death. Also, the monthly
income benefit payment period must be either the lifetime of the Designated
Beneficiary or a period not exceeding the Designated Beneficiary's life
expectancy.
If no choice is made by the Designated Beneficiary within 30 days following
receipt of due proof of death, we will use payment choice 2 (payment of the
entire value of the Policy within 5 years of the date of death). Due proof of
death must be provided within 90 days of the date of death. We will not accept
any premium payments after the non-spouse's death. If the Designated Beneficiary
dies before we distributed the entire Surrender Value, we will pay in a lump sum
payment of any Surrender Value still remaining to the person named by the
Designated Beneficiary. If no person is so named, we will pay the Designated
Beneficiary's estate.
Under payment choices 1 or 2, the Policy will terminate upon payment of the
entire Surrender Value. Under payment choice 3, this Policy will terminate when
we apply the Surrender Value to provide a Monthly Income Benefit.
AMOUNT OF THE PROCEEDS: The amount of proceeds we will pay will, in part, vary
based on the person who dies. We show the amount of the proceeds we will pay
below.
<TABLE>
<CAPTION>
PERSON WHO DIED PROCEEDS PAID
<S> <C>
Owner or Joint Owner Surrender Value
(who is not the Annuitant)
Owner or Joint Owner Death Benefit
(who is the Annuitant)
Annuitant Death Benefit
</TABLE>
Upon receipt of due proof of death, the Designated Beneficiary will instruct us
how to treat the proceeds subject to the distribution rules discussed above.
DEATH OF AN OWNER, JOINT OWNER, OR ANNUITANT AFTER INCOME PAYMENTS BEGIN
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 in the Polcy.
OPTIONAL GUARANTEED MINIMUM DEATH BENEFIT RIDER
If an Annuitant dies before the Maturity Date while the optional Guaranteed
Minimum Death Benefit Rider (the "GMDB Rider") is in effect, the Designated
Beneficiary may elect the Death Benefit, described below, in lieu of the
Surrender Value. (The Death Benefit under the GMDB Rider may be referred to in
our marketing materials as the "Six Percent EstateProtector".) The optional
Guaranteed Minimum Death Benefit Rider may not be available in all states or
markets.
If the optional GMDB Rider applies, the Death Benefit will be the greater of:
(i) the Death Benefit described above under "Death Benefit at Death of
Annuitant Before Maturity Date," and (ii) the Guaranteed Minimum Death Benefit
on the date we receive due proof of the Annuitant's death, or, if later, the
date of the request. The Guaranteed Minimum Death Benefit
33
<PAGE>
is, on the Policy Date, equal to the initial premium payment. At the end of each
Valuation Period after such date, the Guaranteed Minimum Death Benefit is the
lesser of:
(A) the total of all premium payments received, multiplied by two, adjusted
by the proportion by which any partial surrenders (including applicable
surrender charges) made before or during that Valuation Period reduced
Account Value; or
(B) 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 adjusted by the
proportion by which any partial surrender (including any applicable
surrender charges) reduced Account Value during the current Valuation
Period.
We will calculate the amount of the increase for the Valuation Period 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, we determine the factor for each Valuation Period at an effective annual
rate of 6%, except that with respect to amounts invested in the Money Market
Investment Subdivision, the increase factor will be calculated as the lesser of:
(l) the net investment factor (an index applied to measure the investment
performance of an Investment Subdivision from one Valuation Period to the next)
for the Valuation Period, minus one, and (2) a factor for the Valuation Period
equivalent to an effective annual rate of 6%. With respect to amounts allocated
to the Guarantee Account, we replace Item (1) above with a factor for the
Valuation Period equivalent to the credited rate(s) applicable to such amounts.
You may only purchase the optional GMDB Rider at the time of application. The
Rider 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. We
will charge you each year for expenses related to the Death Benefit available
under the terms of the optional Guaranteed Minimum Death Benefit Rider. This
charge will not exceed .35% of the prior year's average Guaranteed Minimum Death
Benefit. See Optional Guaranteed Minimum Death Benefit Charge.
- --------------------------------------------------------------------------------
INCOME PAYMENTS
- --------------------------------------------------------------------------------
When you apply for a Policy, you may select any Maturity Date permitted by law;
however, this date can not be any later than the Policy anniversary following
the Annuitant's 90th birthday, unless we approve otherwise. (Please note the
following exception: Policies issued under qualified retirement plans provide
for income payments to start at the date and under the option specified in the
plan.)
We will pay a monthly income benefit to the Owner beginning on the Maturity Date
if the Annuitant is still living. We will pay the monthly income benefit 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 you make
another election. You may also choose to receive the maturity value (that is,
the Surrender Value of your Policy on the date immediately preceding the
Maturity Date) in one lump sum (in which case we will cancel the Policy).
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, we will discount the remaining payments for
the ten year period at the same rate used to calculate the monthly income
payment. If the remaining payments are variable income payments, we will assume
the amount of each payment that we discount equals the payment amount on the
date we receive due proof of death. We will pay this discounted amount in one
sum.
The Policy also provides optional forms of annuity payments, each of which is
payable on a fixed basis. Optional Payment Plans 1 and 5 also are available on a
variable basis. The Policy provides that all or part of the Account Value may be
used to purchase an annuity.
If you elect fixed income payments, the guaranteed amount payable will earn
interest at 3% compounded yearly. We may increase the interest rate which will
increase the amount we pay to you or the payee.
If you elect variable income payments, your income payments, after the first
payment, will reflect the investment experience of the Investment Subdivisions
to which you allocated Account Value.
We will make annuity payments monthly unless you elect quarterly, semi-annual,
or annual installments. Under the monthly income benefit and all of the optional
payment plans, if any payment made more frequently than annually would be or
becomes less than $100, we reserve 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 at maturity is less than $20, we will pay the maturity
value in
34
<PAGE>
a lump sum. Upon making such a payment, we will have no future obligation under
the Policy. Following are explanations of the optional payment plans available.
OPTIONAL PAYMENT PLANS
PLAN 1 -- LIFE INCOME WITH PERIOD CERTAIN. This option guarantees periodic
payments during a designated 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. The payee selects the designated period. If the payee dies
during the minimum period, we will discount the amount of the remaining
guaranteed payments at the same rate used in calculating income payments. We
will pay the discounted amount in one sum to the payee's estate unless otherwise
provided.
PLAN 2 -- INCOME FOR A FIXED PERIOD. This option provides for periodic payments
to be made for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly, or monthly. If the payee dies, we will discount the
amount of the remaining guaranteed payments to the date of the payee's death at
the same rate used in calculating income payments. We will pay the discounted
amount in one sum to the payee's estate unless otherwise provided.
PLAN 3 -- INCOME OF A DEFINITE ACCOUNT. This option provides periodic payments
of a definite amount to 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 the payee dies, we will
pay the amount of the remaining proceeds with earned interest in one sum to the
payee's estate unless otherwise provided.
PLAN 4 -- INTEREST INCOME. This option provides for periodic payments of
interest earned from the proceeds left with us. Payments can be annual,
semi-annual, quarterly, or monthly. If the payee dies, we will pay the amount of
remaining proceeds and any earned but unpaid interest in one sum to the payee's
estate unless otherwise provided. This plan is not available under Qualified
Policies.
PLAN 5 -- JOINT LIFE AND SURVIVOR INCOME. This option provides for us to make
monthly payments 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 both payees die before the end of the minimum
period, we will discount the amount of the remaining payments for the 10-year
period at the same rate used in calculating income payments. We will pay the
discounted amount in one sum to the survivor's estate unless otherwise provided.
If the payee is not a natural person, our consent must be obtained before
selecting an optional payment plan.
Before the Maturity Date, you may change:
o your Maturity Date to any date at least ten years after your last
premium payment (however, the Maturity Date cannot be a date later than
the Policy anniversary on which the Annuitant reaches age 90, unless we
approve a later date);
o your optional payment plan;
o the allocation of your investment among the Investment Subdivisions;
and
o the Owner, Joint Owner, primary Beneficiary, contingent
Beneficiary, and contingent Annuitant upon written notice to the Home
Office if you reserved this right and the Annuitant is living.
We must receive your request for a change in a form satisfactory to us. The
change will take effect as of the date you sign the request. The change will be
subject to any payment made before we recorded the change.
Fixed income payments will begin on the date we receive due proof of the
Annuitant's death, on surrender, or on the Policy's Maturity Date. Variable
income payments will begin within seven days after the date payments would begin
under the corresponding fixed option. Payments under Optional Payment Plan 4
(Interest Income) will begin at the end of the first interest period after the
date proceeds are otherwise payable.
VARIABLE INCOME PAYMENTS
We will determine your variable income payments using:
1. The maturity value (which is the Surrender Value of the Policy on the date
immediately preceding the Maturity Date);
2. The annuity tables contained in the Policy;
3. The optional payment plan selected; and
4. The investment performance of the Investment Subdivisions selected.
To determine the amount of payment, we make this calculation:
35
<PAGE>
1. First, we determine the dollar amount of the first income payment; then
2. we allocate that amount to the Investment Subdivisions according to your
instructions; then
3. we determine the number of Annuity Units for each Investment Subdivision by
dividing the amount allocated by the Annuity Unit Value seven days before the
income payment is due; and finally
4. we calculate the value of the Annuity Units for each Investment Subdivision
seven days before the income payment is due for each income payment
thereafter.
To calculate your variable income payments, we need to make an assumption
regarding the investment performance of the Investment Subdivisions you select.
We call this your assumed investment rate. This rate is simply the total return,
after expenses, you need to earn to keep your variable income payments level. We
assume an effective annual rate of 3%. This means that if the annualized
investment performance, after expenses, of your Investment Subdivisions is less
than 3%, then the dollar amount of your variable income payment will decrease.
Conversely, if the annualized investment performance, after expenses, of your
Investment Subdivisions is greater than 3%, then the dollar amount of your
income payments will increase.
TRANSFERS AFTER THE MATURITY DATE
If we are making variable income payments, the payee may change the Investment
Subdivisions from which we are making the payments once each calendar year. The
transfer will be effective as of the end of the Valuation Period during which we
receive written request at our Home Office. However, we reserve the right to
limit the number of transfers if necessary for the Policy to continue to be
treated as an annuity under the Code. We also reserve the right to refuse to
execute any transfer if any of the Investment Subdivisions that would be
affected by the transfer is unable to purchase or redeem shares of the Fund in
which the Investment Subdivision invests or if the transfer would adversely
affect Account Value. If the number of Annuity Units remaining in an Investment
Subdivision after a transfer is less than 1, we will transfer the remaining
balance in addition to the amount requested for the transfer.
We do not permit transfers between the Investment Subdivisions and the Guarantee
Account after the Maturity Date.
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FEDERAL TAX MATTERS
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INTRODUCTION
This part of the Prospectus discusses the Federal income tax treatment of the
Policy. The Federal income tax treatment of the Policy is complex and sometimes
uncertain. The Federal income tax rules may vary with your particular
circumstances. This discussion does not address all of the Federal income tax
rules that may affect you and your Policy. This discussion also does not address
other Federal tax consequences, or state or local tax consequences, associated
with a Policy. As a result, you should always consult a tax advisor about the
application of tax rules to your individual situation.
TAXATION OF NON-QUALIFIED POLICIES
This part of the discussion describes some of the Federal income tax rules
applicable to Non-Qualified Policies. A Non-Qualified Policy is a Policy not
issued in connection with a qualified retirement plan receiving special tax
treatment under the Code, such as an individual retirement annuity or a section
401(k) plan.
TAX DEFERRAL ON EARNINGS. The Federal income tax law does not tax any increase
in an Owner's Account Value until there is a distribution from the Policy.
However, certain requirements must be satisfied in order for this general rule
to apply, including:
o An individual must own the Policy (or the tax law must treat the Policy
as owned by an individual);
o The investments of Account 4 must be "adequately diversified" in accordance
with Internal Revenue Service ("IRS") regulations;
o The Owner's right to choose particular investments for a Policy must be
limited; and
o The Policy's Maturity Date must not occur near the end of the Annuitant's
life expectancy.
This part of the Prospectus discusses each of these requirements.
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POLICIES NOT OWNED BY AN INDIVIDUAL -- NO TAX DEFERRAL AND LOSS OF INTEREST
DEDUCTION: As a general rule, the Code does not treat a Policy that is owned by
an entity (rather than an individual) as an annuity contract for Federal income
tax purposes. The entity owning the Policy pays tax currently on the excess of
the Account Value over the premiums paid for the Policy. Policies issued to a
corporation or a trust are examples of Policies where the Owner pays current tax
on the Policy's earnings.
There are several exceptions to this rule. For example, the Code treats a Policy
as owned by an individual if the nominal owner is a trust or other entity that
holds the Policy as an agent for an individual. However, this exception does not
apply in the case of any employer that owns a Policy to provide deferred
compensation for its employees.
In the case of a Policy issued after June 8, 1997 to a taxpayer that is not an
individual, or a Policy held for the benefit of an entity, the entity will lose
its deduction for a portion of its otherwise deductible interest expenses. This
disallowance does not apply if the Owner pays tax on the annual increase in the
Account Value. Entities that are considering purchasing the Policy, or entities
that will benefit from someone else's ownership of a Policy, should consult a
tax advisor.
INVESTMENTS IN ACCOUNT 4 MUST BE DIVERSIFIED: For a Policy to be treated as an
annuity contract for Federal income tax purposes, the investments of a separate
account such as Account 4 must be "adequately diversified." The IRS has issued
regulations that prescribe standards for determining whether the investments of
Account 4 are adequately diversified. If Account 4 fails to comply with these
diversification standards, the Owner could be required to pay tax currently on
the excess of the Account Value over the premiums paid for the Policy.
Although we do not control the investments of all of the Funds (we only
indirectly control those of GE Investments Funds, Inc., through an affiliated
company), we expect that the Funds will comply with the IRS regulations so that
Account 4 will be considered adequately diversified.
RESTRICTIONS ON THE EXTENT TO WHICH AN OWNER CAN DIRECT THE INVESTMENT OF
ACCOUNT VALUES: Federal income tax law limits the Owner's right to choose
particular investments for the Policy. The U.S. Treasury Department stated in
1986 that it expected to issue guidance clarifying those limits, but it has not
yet done so. Thus, the nature of the limits is currently uncertain. As a result,
an Owner's right to allocate Account Values among the portfolios may exceed
those limits. If so, the Owner would be treated as the owner of the assets of
Account 4 and thus subject to current taxation on the income and gains from
those assets.
We do not know what limits the Treasury Department may set forth in any guidance
that the Treasury Department may issue or whether any such limits will apply to
existing Policies. We therefore reserve the right to modify the Policy without
the Owners' consent to attempt to prevent the tax law from considering the
Owners as the owners of the assets of Account 4.
AGE AT WHICH ANNUITY PAYOUTS MUST BEGIN: Federal income tax rules do not
expressly identify a particular age by which annuity payouts must begin.
However, those rules do require that an annuity contract provide for
amortization, through annuity payouts, of the contract's premiums paid and
earnings. If annuity payouts under the Policy begin or are scheduled to begin on
a date past the Annuitant's 85th birthday, it is possible that the tax law will
not treat the Policy as an annuity contract for Federal income tax purposes. In
that event, the Owner would be currently taxable on the excess of the Account
Value over the premiums paid for the Policy.
NO GUARANTEES REGARDING TAX TREATMENT: We make no guarantees regarding the tax
treatment of any Policy or of any transaction involving a Policy. However, the
remainder of this discussion assumes that your Policy will be treated as an
annuity contract for Federal income tax purposes and that the tax law will not
impose tax on any increase in your Account Value until there is a distribution
from your Policy.
WITHDRAWALS AND SURRENDERS. A withdrawal occurs when you receive less than the
total amount of the Policy's Surrender Value. In the case of a withdrawal, you
will pay tax on the amount you receive to the extent your Account Value before
the withdrawal exceeds your "investment in the contract." (This term is
explained below.) This income (and all other income from your Policy) is
ordinary income. The Code imposes a higher rate of tax on ordinary income than
it does on capital gains.
A surrender occurs when you receive the total amount of the Policy's Surrender
Value. In the case of a surrender, you will pay tax on the amount you receive to
the extent it exceeds your "investment in the contract."
Your "investment in the contract" generally equals the total of your premium
payments under the Policy, reduced by any amounts you previously received from
the Policy that you did not include in your income.
Your Policy imposes mortality charges relating to the Death Benefit, including
any optional GMDB Rider. It is possible that all or a portion of these charges
could be treated as withdrawals from the Policy.
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ASSIGNMENTS AND PLEDGES. The Code treats any assignment or pledge (or agreement
to assign or pledge) any portion of your Account Value as a withdrawal of such
amount or portion.
GIFTING A POLICY. If you transfer ownership of your Policy -- without receiving
a payment equal to your Policy's value -- to a person other than your spouse (or
to your former spouse incident to divorce), you will pay tax on your Account
Value to the extent it exceeds your "investment in the contract." In such a
case, the new owner's "investment in the contract" will be increased to reflect
the amount included in your income.
SYSTEMATIC WITHDRAWALS. In the case of systematic withdrawals, the amount of
each withdrawal should be considered a distribution and taxed in the same manner
as a withdrawal from the Policy. However, there is some uncertainty regarding
the tax treatment of systematic withdrawals, and it is possible that additional
amounts could be included in income.
TAXATION OF ANNUITY PAYOUTS. The Code imposes tax on a portion of each annuity
payout (at ordinary income tax rates) and treats a portion as a nontaxable
return of your "investment in the contract". The Company will notify you
annually of the taxable amount of your annuity payout.
Pursuant to IRS regulations, you will pay tax on the full amount of your annuity
payouts once you have recovered the total amount of the "investment in the
contract." If annuity payouts cease because of the death of the Annuitant and
before the total amount of the investment in the contract has been recovered,
the unrecovered amount generally will be deductible.
If proceeds are left with us (Optional Payment Plan 4), they are taxed in the
same manner as a surrender. The Owner must pay tax currently on the interest
credited on these proceeds. This treatment could also apply to Plan 3 if the
payee is at an advanced age, such as age 80 or older.
TAXATION OF DEATH BENEFITS. We may distribute amounts from your Policy because
of the death of an Owner, a Joint Owner, or an Annuitant. The tax treatment of
these amounts depends on whether the Owner, Joint Owner, or Annuitant dies
before or after the Policy's Maturity Date.
Before the Policy's Maturity Date:
o If received under an annuity payout option, death benefits are taxed in
the same manner as annuity payouts.
o If not received under an annuity payout option, death benefits are taxed
in the same manner as a withdrawal.
After the Policy's Maturity Date:
o If received in accordance with the existing annuity payout option, death
benefits are excludible from income to the extent that they do not exceed
the unrecovered "investment in the contract." All annuity payouts in
excess of the unrecovered "investment in the contract" are includible in
income.
o If received in a lump sum, the tax law imposes tax on death benefits to
the extent that they exceed the unrecovered "investment in the contract"
at that time.
PENALTY TAXES PAYABLE ON WITHDRAWALS, SURRENDERS, OR ANNUITY PAYOUTS. The Code
may impose a penalty tax equal to 10% of the amount of any payment from your
Policy that is included in your gross income. The Code does not impose the 10%
penalty tax if one of several exceptions applies. These exceptions include
withdrawals, surrenders, or annuity payouts that:
o you receive on or after you reach age 59 1/2,
o you receive because you became disabled (as defined in the tax law),
o a beneficiary receives on or after the death of the Owner, or
o you receive as a series of substantially equal periodic payments for the
life (or life expectancy) of the Owner.
It is uncertain whether systematic withdrawals will qualify for this last
exception. If they did, 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 this
exception.
SPECIAL RULES IF YOU OWN MORE THAN ONE POLICY. In certain circumstances, you
must combine some or all of the Non-Qualified Policies you own in order to
determine the amount of an annuity payout, a surrender, or a withdrawal that you
must include in income. For example:
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o If you purchase a Policy offered by this Prospectus and also purchase at
approximately the same time an immediate annuity, the IRS may treat the two
contracts as one contract.
o If you purchase two or more deferred annuity contracts from the same life
insurance company (or its affiliates) during any calendar year, the Code
treats all such contracts as one contract.
The effects of such aggregation are not clear. However, it could affect:
o the amount of a surrender, a withdrawal or an annuity payout that you must
include in income, and
o the amount that might be subject to the penalty tax described above.
QUALIFIED RETIREMENT PLANS
We also designed the Policies for use in connection with certain types of
retirement plans that receive favorable treatment under the Code. Policies
issued to or in connection with a qualified retirement plan are called
"Qualified Policies." We do not currently offer all of the types of Qualified
Policies described, and may not offer them in the future. Prospective purchasers
should contact our Home Office to learn the availability of Qualified Policies
at any given time.
The Federal income tax rules applicable to qualified plans are complex and
varied. As a result, this Prospectus makes no attempt to provide more than
general information about use of the Policy with the various types of qualified
plans. Persons intending to use the Policy in connection with a qualified plan
should obtain advice from a competent advisor.
TYPES OF QUALIFIED POLICIES. Some of the different types of Qualified Policies
include:
o Individual Retirement Accounts and Annuities ("Traditional IRAs")
o Roth IRAs
o Simplified Employee Pensions ("SEP's")
o Savings Incentive Matched Plan for Employees ("SIMPLE plans" including
"SIMPLE IRAs")
o Public school system and tax-exempt organization annuity plans ("403(b)
plans")
o Qualified corporate employee pension and profit-sharing plans ("401(a)
plans") and qualified annuity plans ("403(a) plans")
o Self-employed individual plans ("H.R. 10 plans" or "Keogh Plans")
o Deferred compensation plans of state and local governments and tax-exempt
organizations ("457 plans")
TERMS OF QUALIFIED PLANS AND QUALIFIED POLICIES. The terms of a qualified plan
may affect your rights under a Qualified Policy. When issued in connection with
a qualified plan, we will amend a Policy as generally necessary to conform to
the requirements of the type of plan. However, the rights of any person to any
benefits under qualified plans may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the Policy. In
addition, we are not bound by the terms and conditions of qualified plans to the
extent such terms and conditions contradict the Policy, unless we consent.
THE DEATH BENEFIT AND QUALIFIED POLICIES. Pursuant to IRS regulations, IRAs may
not invest in life insurance contracts. We do not believe that these regulations
prohibit the Death Benefit, including that provided by the optional GMDB Rider,
from being provided under the Policies when we issue the Policies as Traditional
IRAs, Roth IRAs or SIMPLE IRAs. However, the law is unclear and it is possible
that the presence of the Death Benefit under a Policy issued as a Traditional
IRA, a Roth IRA or a SIMPLE IRA could result in increased taxes to the Owner.
It is also possible that the 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 qualified plans, such as in connection with a 403(b) plan. 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 in connection with such plan.
TREATMENT OF QUALIFIED POLICIES COMPARED WITH NON-QUALIFIED POLICIES. Although
some of the Federal income tax rules are the same for both Qualified and
Non-Qualified Policies, many of the rules are different. For example:
o The Code generally does not impose tax on the earnings under either
Qualified or Non-Qualified Policies until received.
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o The Code does not limit the amount of premium payments and the time at
which premium payments can be made under Non-Qualified Policies. However,
the Code does limit both the amount and frequency of premium payments made
to Qualified Policies.
o The Code does not allow a deduction for premium payments made for
Non-Qualified Policies, but sometimes allows a deduction or exclusion from
income for premium payments made to a Qualified Policy.
The Federal income tax rules applicable to qualified plans and Qualified
Policies vary with the type of plan and Policy. For example:
o Federal tax rules limit the amount of premium payments that can be made,
and the tax deduction or exclusion that may be allowed for the premium
payments. These limits vary depending on the type of qualified plan and the
circumstances of the plan participant, e.g., the participant's compensation.
o Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the
Owner must begin receiving payments from the Policy in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum
distribution rules" do not apply to a Roth IRA.
AMOUNTS RECEIVED UNDER QUALIFIED POLICIES. AMOUNTS ARE GENERALLY SUBJECT TO
INCOME TAX: Federal income tax rules generally include distributions from a
Qualified Policy in your income as ordinary income. Premium payments that are
deductible or excludible from income do not create "investment in the contract."
Thus, under many Qualified Policies there will be no "investment in the
contract" and you include the total amount you receive in your income. There are
exceptions. For example, you do not include amounts received from a Roth IRA if
certain conditions are satisfied.
ADDITIONAL FEDERAL TAXES MAY BE PAYABLE IN CONNECTION WITH A QUALIFIED POLICY:
For example, failure to comply with the minimum distribution rules applicable to
certain qualified plans, such as Traditional IRAs, will result in the imposition
of an excise tax. This excise tax generally equals 50% of the amount by which a
minimum required distribution exceeds the actual distribution from the qualified
plan.
FEDERAL PENALTY TAXES PAYABLE ON DISTRIBUTIONS: The Code may impose a penalty
tax equal to 10% of the amount of any payment from your Qualified Policy that is
includible in your income. The Code does not impose the penalty tax if one of
several exceptions apply. The exceptions vary depending on the type of Qualified
Policy you purchase. For example, in the case of an IRA, exceptions provide that
the penalty tax does not apply to a withdrawal, surrender, or annuity payout:
o received on or after the Owner reaches age 59 1/2;
o received on or after the Owner's death or because of the Owner's
disability (as defined in the tax law);
o received as a series of substantially equal periodic payments for the
life (or life expectancy) of the Owner; or
o received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
MOVING MONEY FROM ONE QUALIFIED POLICY OR QUALIFIED PLAN TO ANOTHER. ROLLOVERS
AND TRANSFERS: In many circumstances you may move money between Qualified
Policies and qualified plans by means of a rollover or a transfer. Special rules
apply to such rollovers and transfers. If you do not follow the applicable
rules, you may suffer adverse Federal income tax consequences, including paying
taxes which you might not otherwise have had to pay. You should always consult a
qualified advisor before you move or attempt to move funds between any Qualified
Policy or plan and another Qualified Policy or plan.
DIRECT ROLLOVERS: The direct rollover rules apply to certain payments (called
"eligible rollover distributions") from section 401(a) plans, section 403(a) or
(b) plans, H.R. 10 plans, and Qualified Policies used in connection with these
types of plans. (The direct rollover rules do not apply to distributions from
IRAs or section 457 plans). The direct rollover rules require Federal income tax
equal to 20% of the eligible rollover distribution to be withheld from the
amount of the distribution, unless the Owner elects to have the amount directly
transferred to certain Qualified Policies or plans.
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Prior to receiving an eligible rollover distribution from the Company, we will
provide you with a notice explaining these requirements and how you can avoid
20% withholding by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a Policy unless the distributee notifies us at or before
the time of the distribution that he or she elects not to have any amounts
withheld. In certain circumstances, Federal income tax rules may require us to
withhold tax. At the time you request a withdrawal, surrender, or annuity
payout, we will send you forms that explain the withholding requirements.
TAX STATUS OF THE COMPANY
Under existing Federal income tax laws, we do not pay tax on investment income
and realized capital gains of Account 4. We do not anticipate that we will incur
any Federal income tax liability on the income and gains earned by Account 4.
The Company, therefore, does not impose a charge for Federal income taxes. If
Federal income tax law changes and we must pay tax on some or all of the income
and gains earned by Account 4, we may impose a charge against Account 4 to pay
the taxes.
CHANGES IN THE LAW
This discussion is based on the Code, IRS regulations, and interpretations
existing on the date of this Prospectus. Congress, the IRS, and the courts may
modify these authorities, however, sometimes retroactively.
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VOTING RIGHTS
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As required by law, we will vote the portfolio shares held in Account 4 at
meetings of the shareholders of the Funds. The voting will be done according to
the instructions of Owners who have interests in any Investment Subdivisions
which invest in the portfolios of the Funds. If the 1940 Act or any regulation
under it should be amended, and if as a result we determine that we are
permitted to vote the portfolios' shares in our own right, we may elect to do
so.
We will determine the number of votes which you have the right to cast by
applying your percentage interest in an Investment Subdivision to the total
number of votes attributable to the Investment Subdivision. In determining the
number of votes, we will recognize fractional shares.
We will vote portfolio shares of a class held in an Investment Subdivision for
which we received no timely instructions in proportion to the voting
instructions which we received for all Policies participating in that Investment
Subdivision. We will apply voting instructions to abstain on any item to be
voted on a pro-rata basis to reduce the number of votes eligible to be cast.
Whenever a Fund calls a shareholders meeting, each person having a voting
interest in an Investment Subdivision will receive proxy voting material,
reports and other materials relating to the relevant portfolio. Since each Fund
may engage in shared funding, other persons or entities besides the Company may
vote Fund shares. SEE Account 4 -- Investment Subdivisions.
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REQUESTING PAYMENTS
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To request a payment, you must provide us with notice in a form satisfactory to
us. We will ordinarily pay any Death Benefit, partial surrender, or surrender
proceeds within seven days after receipt at our Home Office of all the
requirements for such a payment. We will determine the amount as of the date our
Home Office receives all such requirements.
We may delay making a payment, applying Account Value to a payment plan, or
processing a transfer request if: (1) the disposal or valuation of Account 4's
assets is not reasonably practicable because the New York Stock Exchange is
closed for other than a regular holiday or weekend, trading is restricted by the
SEC, or the SEC declares that an emergency exists; or (2) the SEC, by order,
permits postponement of payment to protect our Owners. We also may defer making
payments attributable to a check that has not cleared (which may take up to 15
days), and we may defer payment of proceeds from the Guarantee Account for a
withdrawal, surrender, or transfer request for up to six months from the date we
receive the request. The amount deferred will earn interest at a rate and for a
time period not less than the minimum required in the jurisdiction in which we
issued the Policy.
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DISTRIBUTION OF THE POLICIES
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DISTRIBUTOR
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 ours, is located at 6630 W. Broad
St., Richmond, Virginia 23230. Properly licensed registered representatives of
independent broker-dealers will sell the Policies. These broker-dealers have
selling agreements with Capital Brokerage and have been licensed by state
insurance departments to represent us. Properly licensed registered
representatives of Capital Brokerage will also sell the Policies. 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"). We will offer the Policies in all states where we are
licensed to do business.
COMMISSIONS
Our writing agents will receive commissions based on a commission schedule and
rules. The agents will receive a maximum commission of 2.5% 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. Our field management
receives compensation which we may base 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 our field management and writing
agents. We do not deduct these commissions from premium payments or Account
Value; we pay these commissions.
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ADDITIONAL INFORMATION
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OWNER QUESTIONS
The obligations to Owners under the Policies are ours. Please direct your
questions and concerns to us at our Home Office.
RETURN PRIVILEGE
Within the free-look period after you receive the Policy, you may cancel it for
any reason by delivering or mailing it postage prepaid, to our Home Office,
Annuity New Business, 6610 W. Broad Street, Richmond, Virginia 23230. If
you cancel your Policy, it will be void, and we will send you a refund computed
as of that date. Your refund will equal one of the following amounts:
(i) if your Account Value has increased or has stayed the same, your refund
will equal your Account Value, MINUS any Bonus Credits, but PLUS any
mortality and expense risk charges and administrative expense charges we
deducted on or before the date we received the returned Policy;
(ii) if your Account Value has decreased, your refund will equal your Account
Value, MINUS any Bonus Credits, but PLUS any mortality and expense risk
charges and administrative expense charges we deducted on or before the
date we received the returned Policy and PLUS any investment loss,
including any charges made by the Funds, attributable to Bonus Credits as
of the date we received the returned Policy; or
(iii) if greater than (i) or (ii) and required by the law of your state, your
premium payments MINUS any withdrawals you previously made.
This means you receive any gains and we bear any losses attributable to the
Bonus Credits during the free look period. We do not assess a surrender charge
on your Policy refund.
STATE REGULATION
As a life insurance company organized and operated under the laws of the
Commonwealth of Virginia, we are subject to provisions governing life insurers
and to regulation by the Virginia Commissioner of Insurance.
Our books and accounts are subject to review and examination by the State
Corporation Commission of the Commonwealth of Virginia at all times. That
Commission conducts a full examination of our operations at least every five
years.
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RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to Account 4. At
least once each year, we will send you a report showing information about your
Policy for the period covered by the report. The report will show the Account
Value in each Investment Subdivision. The report also will show premium payments
and charges made during the statement period. We also will send you an annual
and a semi-annual report for each portfolio underlying an Investment Subdivision
to which you have allocated Account Value, as required by the 1940 Act. In
addition, when you make premium payments, transfers, or partial surrenders, you
will receive a written confirmation of these transactions.
OTHER INFORMATION
We have filed a Registration Statement with the SEC, under the Securities Act
of 1933 as amended, for the Policies being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further information
about Account 4, the Company, and the Policies offered. Statements in this
Prospectus about the content of Policies and other legal instruments are
summaries. For the complete text of those Policies and instruments, please refer
to those documents as filed with the SEC and available on the SEC's website at
http://www.sec.gov.
YEAR 2000 READINESS DISCLOSURE
Like all financial services providers, we use computer systems that may be
affected by Year 2000 date data processing issues and we rely on service
providers, including banks, custodians, administrators, and investment managers
that may also be affected. In addition, to the extent the Funds invest in
securities of issuers located in foreign countries, the Funds may be affected
not only in the United States, but also in foreign countries. (Please see the
Funds' prospectuses for more information.) Therefore, we have been engaged in a
process to evaluate and develop plans to have our computer systems and critical
applications ready to process Year 2000 date data and to correct or replace
systems and applications with Year 2000 issues. Moreover, we have confirmed that
our service providers are also so engaged, and we are monitoring these other
service providers (particularly those that are critical to our business) for
emerging Year 2000 date data issues.
We have devoted, and will continue to devote, substantial resources to this
effort. In 1998, we spent $2.4 million dollars on this effort, and we have
budgeted an additional $1.8 million dollars on this effort in 1999. Remedial and
other actions we have taken include inventorying our computer systems,
applications and interfaces, assessing ways we might be impacted by Year 2000
issues, and developing a range of solutions specific to particular situations
and implementing appropriate solutions. Most of the systems, applications and
interfaces that were identified as having Year 2000 issues have already been
replaced with different hardware or software or upgraded to new or other
releases of software which is Year 2000 ready. We have also developed a business
continuity plan and have completed testing the plan.
It is difficult to predict with precision whether the outcome of these efforts
will be completely successful. However, as of the date of this Prospectus, we do
not anticipate that you will experience negative effects on your investment, or
on the services provided in connection therewith, as a result of the Company's
Year 2000 transition implementation. We have completed our efforts with respect
to our critical applications, and therefore we believe that our critical
applications are substantially Year 2000 capable. With respect to our
non-critical applications, our goal is to be substantially Year 2000 capable on
or about June 1999. However, there can be no assurance that our efforts will be
totally successful, or that interaction with other service providers will not
impair our ability to provide uninterrupted and complete services to you.
If we are not successful in our Year 2000 transition or implementation, or if
interaction with our service providers is impaired, it is possible that we could
encounter difficulty and/or delays in calculating unit values, redeeming units,
delivering account statements and providing other information, communication and
servicing to our policyholders. In light of our past and current efforts to
address this issue, we do not consider the likelihood of this possibility to be
very high.
LEGAL MATTERS
The Company, like other life insurance companies, is involved in lawsuits,
including class action lawsuits. In some class action and other lawsuits
involving insurance companies, substantial damages have been sought and/or
material settlement payments have been made. Although the Company cannot predict
the outcome of any litigation 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 it or Account 4.
CONDENSED FINANCIAL INFORMATION
We do not include financial information for the Investment Subdivisions in this
Prospectus or in the SAI as this is a new product and such information is not
yet available.
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STATEMENT OF ADDITIONAL INFORMATION
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
The Policies
Transfer of Annuity Units
Net Investment Factor
Termination of Participation Agreements
Calculation of Performance Data
Money Market Investment Subdivisions
Other Investment Subdivisions
Federal Tax Matters
Taxation of GE Life & Annuity
IRS Required Distributions
General Provisions
Using the Policies as Collateral
Non-Participating
The Beneficiary
Misstatement of Age or Sex
Incontestability
Statement of Values
Written Notice
Distribution of the Policies
Legal Developments Regarding Employment-Related Benefit Plans
Legal Matters
Experts
Financial Statements
</TABLE>
Dated May 1, 1999
GE Life and Annuity Company
6610 West Broad Street
Richmond, Virginia 23230
44
<PAGE>
A Statement of Additional Information containing more detailed information about
the Policy and Account 4 is available free by writing us at the address below or
by calling (800) 352-9910.
- --------------------------------------------------------------------------------
To GE Life & Annuity
Annuity New Business
6610 W. Broad Street
Richmond, VA 23230
Please mail a copy of the Statement of Additional Information for Separate
Account 4, Policy Form P1152 1/99 to:
Name ---------------------------------------------------------------------------
Address -----------------------------------------------------------------------
Street
--------------------------------------------------------------------------
City State Zip
Signature of Requestor
----------------------------------------------------------------
Date
45
PART B
GE Life and Annuity Assurance Company
Separate Account 4
Statement of Additional Information
For the
Flexible Premium Variable Deferred Annuity Policy
Form P1152 1/99
Offered by
GE Life and Annuity Assurance Company
(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 GE Life and Annuity Assurance Company. You
may obtain a copy of the Prospectus dated May 1, 1999 by calling (800) 352-9910,
or by writing to GE Life and Annuity Assurance Company, 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 prospectuses for the Policy and the Funds.
Dated May 1, 1999
<PAGE>
<PAGE>
The Policies
Transfer of Annuity Units
At the Owner's request, Annuity Units may be transferred once per calendar year
from the Investment Subdivisions in which they are currently held. However,
where permitted by state law, we reserve 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 number of Annuity Units to be
transferred is (a) times (b) divided by (c) where: (a) is the number of Annuity
Units in the current Investment Subdivision desired to be transferred; (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 (however,
subsequent Variable Income Payments will reflect the investment experience of
the selected Investment Subdivisions).
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 .004271% for each day in the Valuation Period.
This corresponds to 1.30% and 0.25% per year of the net assets of that
Investment Subdivision for mortality and expense risks, and for administrative
expenses, respectively.
The values 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
available as a funding vehicle for its policies.
GE Investments Funds, 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.
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.
<PAGE>
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 payments and
are generally based on the rules of the state in which the Owner resides.
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 the 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, 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.
The effective yield of the 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.
<PAGE>
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The yield on amounts held in the 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 portfolio,
the types and quality of portfolio securities held by that portfolio,
and that portfolio's operating expenses. Because of the charges and
deductions imposed under the Policy, the yield for the Money Market Investment
Subdivision will be lower than the yield for its corresponding money market
portfolio.
Yield calculations do not take into account the Surrender Charge under the
Policy, a maximum of 8% of each Premium Payment made during the 8 years prior to
a full or partial surrender, or charges for the GMDB rider.
Other Investment Subdivisions
Total Return. Sales literature or advertisements may quote total return,
including average annual total return for one or more of the Investment
Subdivisions for various periods of time including 1 year, 5 years and 10 years,
or from inception if any of those periods are not available.
Average annual total return for a period represents the average annual
compounded rate of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
the period. The ending date for each period for which total return quotations
are provided will be for the most recent practicable, considering the type and
media of the communication, and will be stated in the communication.
For periods that begin before the Policy was available, performance data will be
based on the performance of the underlying portfolios, with the level of Account
4 and Policy charges currently in effect. 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. This charge will
be waived if the Account Value is at least $10,000 at the time the charge is
due.
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
eight years or less will therefore reflect the deduction of a surrender
charge.
4. Total return does not consider the GMDB charges.
<PAGE>
5. Total return assumes the payment of a full 4% bonus credit. The total
return figures would be lower if a reduced bonus credit applied, or if no bonus
credit applied. For Annuitants over age 80 at time of issue, we will not pay any
bonus credits.
6. 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).
Standard performance data for the available Investment Subdivisions
is not available at this time. However, non-standard adjusted historical
performance data (reflects all fees and charges including surrender charges) for
the Funds underlying the available Investment Subdivisions is as follows:
Total Return for the available Investment Subdivisions is as follows:
<TABLE>
<CAPTION>
For the For the For the For the From the Date Date of
1-year period 3-year period 5-year 10-year of Portfolio Portfolio
ended 12/31/98 ended 12/31/98 period ended period ended Inception Inception
FUNDS 12/31/98 12/31/98 to 12/31/98
<S> <C>
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio 24.67 24.88 19.83 NA NA 09/13/93
Janus Aspen International Growth
Portfolio+ 12.72 21.39 NA NA NA 05/02/94
VIP Overseas Portfolio 8.13 10.41 8.09 8.69 NA 01/28/87
GE International Equity Fund@ 12.94 10.38 NA NA NA 05/01/95
SPECIALTY
GE Real Estate Securities Fund@ -23.00 8.08 NA NA NA 05/01/95
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA 7.73 12.65 11.50 14.66 NA 08/15/86
Alger American Small Capitalization 10.97 8.11 11.53 18.34 NA 09/21/88
Portfolio@
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio 30.13 15.79 17.85 NA NA 09/13/93
Goldman Sachs VIT Mid Cap Value Fund NA NA NA NA NA 04/30/98
MID-CAP VALUE
GE Value Equity Fund+ 1.93 NA NA NA NA 05/01/97
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio 31.57 23.61 19.93 NA NA 09/13/93
Janus Aspen Capital Appreciation
Portfolio+ 54.20 NA NA NA NA 05/01/97
VIP II Contrafund Portfolio@ 25.76 23.28 NA NA NA 01/03/95
VIP Growth Portfolio 35.48 23.68 20.25 17.90 NA 10/09/86
VIP III Growth & Income Portfolio+ 25.36 NA NA NA NA 12/31/96
Oppenheimer Capital Appreciation Fund/VA 19.64 23.48 20.61 15.38 NA 04/03/85
GE Premier Growth Equity Fund 33.02 NA NA NA 35.40 12/12/97
Alger American Growth Portfolio@ 44.26 26.52 22.42 NA NA 01/09/89
LARGE-CAP VALUE
VIP Equity-Income Portfolio 6.98 15.83 17.27 14.17 NA 10/09/86
VIP III Growth Opportunities Portfolio+ 20.27 22.36 NA NA NA 01/03/95
GE U.S. Equity Fund 19.04 23.88 NA NA NA 01/02/95
GE S&P 500 Fund 23.98 25.91 21.66 16.73 NA 04/14/85
Federated Utility Fund II@ 9.36 15.22 NA NA NA 02/10/94
Federated American Leaders Fund II 13.11 21.85 NA NA NA 02/10/94
Goldman Sachs VIT Growth and Income Fund NA NA NA NA NA 01/12/98
Salomon Investors Fund NA NA NA NA 6.11 02/17/98
BALANCED
Janus Aspen Balanced Fund@ 30.16 22.13 17.60 NA NA 09/13/93
VIP II Asset Manager Portfolio 10.49 14.75 10.23 NA NA 09/06/89
Oppenheimer Multiple Strategies Fund/VA 1.90 10.95 9.85 9.82 NA 02/09/87
GE Total Return Fund 12.58 13.17 13.42 12.21 NA 07/01/85
Salomon Total Return Fund NA NA NA NA 1.27 02/17/98
GLOBAL BOND
Salomon Strategic Bond Fund NA NA NA NA 1.63 02/17/98
HIGH-YIELD BONDS
Janus Aspen Flexible Income Fund@ 4.40 7.85 8.72 NA NA 09/13/93
Oppenheimer High Income Fund/VA -4.60 6.87 6.99 11.29 NA 04/30/86
Federated High Income Bond Fund II@ -2.15 7.99 NA NA NA 03/01/94
DOMESTIC BONDS
Oppenheimer Bond Fund/VA 2.05 4.67 5.35 7.90 NA 04/03/85
GE Income Fund 3.22 4.32 NA NA NA 01/02/95
MONEY MARKET
GE Money Market Fund 0.51 3.05 3.46 3.91 NA 06/30/85
</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.
@Accumulation Unit Values as of 1/31/95 are not shown for the Investment
Subdivisions investing in these portfolios, as they were not available to
Account 4 Owners at that time.
<PAGE>
Past performance is not a guarantee of future results.
The Funds have provided the price information used to calculate the total return
of the Investment Subdivisions for periods prior to the inception of the
Investment Subdivisions. While we have no reason to doubt the accuracy of the
figures provided by the Funds, we have not independently verified such
information.
Other Performance Data
We 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.
<PAGE>
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 GE Life & Annuity
We do 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. We 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 we believe that we may
incur federal income taxes. This might become necessary if the tax treatment of
the Company is ultimately determined to be other than what we currently believe
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 we 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.
We 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 we
currently impose a charge), charges for such taxes attributable to Account 4 may
be made.
IRS Required Distributions
In order to be treated as an annuity contract for federal income tax purposes,
section 72(s) of the Code requires any Non-Qualified Policy to provide that (a)
if any Owner dies on or after the Maturity Date but prior to the time the entire
interest in the Policy has been distributed, the remaining portion of such
interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Owner's death; and (b) if any
Owner dies prior to the Maturity Date, the entire interest in the Policy will be
distributed (1) within five years after the date of that Owner's death, or (2)
as Income Payments which will begin within one year of that Owner's death and
which will be made over the life of the Owner's "designated beneficiary" or over
a period not extending beyond the life expectancy of that beneficiary. The
"designated beneficiary" generally is the person who will be treated as the sole
owner of the Policy following the death of the Owner, Joint Owner or, in certain
circumstances, the Annuitant. However, if the "designated beneficiary" is the
surviving spouse of the decedent, these distribution rules will not apply until
the surviving spouse's death (and this spousal exception will not again be
available). If any Owner is not an individual, the death of the Annuitant will
be treated as the death of an Owner for purposes of these rules.
The Non-Qualified Policies contain provisions which are intended to comply with
the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. We intend 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.
<PAGE>
Other rules may apply to Qualified Policies.
General Provisions
Using the Policies as Collateral
A Non-Qualified Policy can be assigned as collateral security. We must be
notified in writing if a Policy is assigned. Any payment made before the
assignment is recorded at our Home Office will not be affected. We are not
responsible for the validity of an assignment. Your 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.
The Beneficiary
You may select one or more primary and contingent Beneficiaries during your
lifetime upon application and by filing a written request with our Home Office.
Each change of Beneficiary revokes any previous designation.
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
We will not contest the Policy.
Statement of Values
At least once each year, we will send you 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 us at our Home Office at 6610 West Broad
Street, Richmond, Virginia 23230. The policy number and the Annuitant's full
name must be included.
We will send all notices to the Owner at the last known address on file with the
company.
Distribution of the Policies
Capital Brokerage Corporation, the principal underwriter of the Policies, is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
<PAGE>
The Policies are sold to the public through brokers licensed under the federal
securities laws and state insurance laws that have entered into agreements with
Capital Brokerage Corporation. The Policy is also sold by properly registered
representatives of Capital Brokerage Corporation. The offering is continuous and
Capital Brokerage Corporation does not anticipate discontinuing the offering of
the Policies. However, the Company does reserve the right to discontinue the
offering of the Policies.
Legal Developments Regarding Employment-Related Benefit Plans
On July 6, 1983, the Supreme Court held in Arizona Governing Committee for Tax
Deferred Annuity v. Norris, 463 U.S. 1073 (1983), that optional annuity benefits
provided under an employee's deferred compensation plan could not, under Title
VII of the Civil Rights Act of 1964, vary between men and women on the basis of
sex. The Policy contains guaranteed annuity purchase rates for certain optional
payment plans that distinguish between men and women. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris, and Title VII generally, on any employment-related insurance
or benefit program for which a Policy may be purchased.
In addition, the Company is subject to the insurance laws and regulations of
other states within which it is licensed to operate. Generally, the Insurance
Department of any other state applies the laws of the state of domicile in
determining permissible investments. Presently, the Company is licensed to do
business in the District of Columbia and all states, except New York.
Legal Matters
Sutherland Asbill & Brennan LLP of Washington, D.C. has provided advice on
certain legal matters relating to federal securities laws applicable to the
issue and sale of the Policies described in this Prospectus. 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
The consolidated balance sheets of The Life Insurance Company of Virginia, now
known as GE Life and Annuity Assurance Company, and subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of income and
comprehensive income, shareholders' interest and cash flows for the years then
ended, the nine month period ended December 31, 1996 and the preacquisition
three month period ended March 31, 1996, and the statements of assets and
liabilities of Life of Virginia Separate Account 4, now known as GE Life &
Annuity Separate Account 4, as of December 31, 1998 and the related statements
of operations and changes in net assets for each of the years or lesser periods
in the three year period then ended have been included herein and in the
registration statement in reliance upon the reports of KPMG 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 LLP with respect to the consolidated financial statements of
The Life Insurance Company of Virginia, now known as GE Life and Annuity
Assurance Company, 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
<PAGE>
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.
Financial Statements
This Statement of Additional Information contains financial statements for the
Company and Life of Virginia Separate Account 4, now known as GE Life & Annuity
Separate Account 4, as of December 31, 1998, and for each of the years in
the three year period then ended.
The consolidated financial statements of The Life Insurance Company of Virginia,
now known as GE Life and Annuity Assurance Company, 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, now known as GE Life and Annuity Assurance Company, 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
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
TABLE OF CONTENTS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report ................... A-3
Financial Statements:
Statements of Assets and Liabilities .......... A-4
Statements of Operations ...................... A-11
Statements of Changes in Net Assets ........... A-22
Notes to Financial Statements .................. A-43
</TABLE>
A-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
Contractholders
Life of Virginia Separate Account 4
and
The 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,
Income and U.S. Equity 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 Fund III -- Growth &
Income and Growth Opportunities Portfolios; the Federated Investors Insurance
Series -- American Leaders, High Income Bond and Utility Funds II; the Alger
American Fund -- Small Cap and Growth Portfolios; the PBHG Insurance Series
Fund -- PBHG Large Cap Growth and PBHG Growth II Portfolios; the Janus Aspen
Series -- Aggressive Growth, Growth, Worldwide Growth, Balanced, Flexible
Income, International Growth and Capital Appreciation Portfolios; the Goldman
Sachs Variable Insurance Trust Fund -- Growth and Income and Mid Cap Equity
Funds; and the Salomon Brothers Variable Series Fund -- Strategic Bond,
Investors, and Total Return Funds) as of December 31, 1998 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 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 years or lesser periods in the three year period 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.
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, 1998,
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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
portfolios constituting Life of Virginia Separate Account 4 as of December 31,
1998 and the results of their operations and changes in their net assets for
each of the years or lesser periods in the three year period then ended in
conformity with generally accepted accounting principles.
KPMG LLP
Richmond, Virginia
February 12, 1999
A-3
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
----------------------------------
S&P 500 MONEY
INDEX MARKET
FUND FUND
ASSETS ----------------- ----------------
<S> <C> <C>
Investment in GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (12,978,221 shares;
cost -- $264,318,648)................................ $307,713,611 --
Money Market Fund (206,691,464 shares;
cost -- $206,691,474)................................ -- 206,691,464
Total Return Fund (4,513,480 shares;
cost -- $64,971,588)................................. -- --
International Equity Fund (2,342,088; shares;
cost -- $27,101,105)................................. -- --
Real Estate Securities Fund (4,024,961
shares; cost -- $55,753,342)......................... -- --
Global Income Fund (942,716 shares;
cost -- $9,713,591).................................. -- --
Value Equity Fund (2,887,264 shares;
cost -- $38,586,474)................................. -- --
Income Fund (2,792,519 shares;
cost -- $34,717,370)................................. -- --
U.S. Equity Fund (63,724 shares;
cost -- $1,980,988).................................. -- --
Receivable from affiliate .............................. -- 20,944
Receivable for units sold .............................. 1,603,821 12,193,795
------------ -----------
TOTAL ASSETS ........................................ 309,317,432 218,906,203
------------ -----------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ......... 490,032 369,262
Payable for units withdrawn: ........................... -- --
------------ -----------
TOTAL LIABILITIES ................................... 490,032 369,262
------------ -----------
Net assets ............................................. $308,827,400 218,536,941
============ ===========
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders ........... $308,827,400 218,536,941
The Life Insurance Company of Virginia .............. -- --
------------ -----------
Net assets ............................................. $308,827,400 218,536,941
============ ===========
Outstanding units attributable to
contractholders: Type I (note 2) ...................... 1,096,813 5,222,349
============ ===========
Net asset value per unit: Type I ....................... $ 50.24 15.38
============ ============
Outstanding units attributable to
contractholders: Type II (note 2) ..................... 5,187,559 9,232,947
============ ============
Net asset value per unit: Type II ...................... $ 48.91 14.97
============ ============
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------------
TOTAL INTERNATIONAL REAL ESTATE
RETURN EQUITY SECURITIES
FUND FUND FUND
ASSETS --------------- --------------- ---------------
<S> <C> <C> <C>
Investment in GE Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund (12,978,221 shares;
cost -- $264,318,648)................................ -- -- --
Money Market Fund (206,691,464 shares;
cost -- $206,691,474)................................ -- -- --
Total Return Fund (4,513,480 shares;
cost -- $64,971,588)................................. $66,167,622 -- --
International Equity Fund (2,342,088; shares;
cost -- $27,101,105)................................. -- 27,847,422 --
Real Estate Securities Fund (4,024,961
shares; cost -- $55,753,342)......................... -- -- 46,649,298
Global Income Fund (942,716 shares;
cost -- $9,713,591).................................. -- -- --
Value Equity Fund (2,887,264 shares;
cost -- $38,586,474)................................. -- -- --
Income Fund (2,792,519 shares;
cost -- $34,717,370)................................. -- -- --
U.S. Equity Fund (63,724 shares;
cost -- $1,980,988).................................. -- -- --
Receivable from affiliate .............................. -- -- --
Receivable for units sold .............................. 34,871 -- --
---------- ---------- ----------
TOTAL ASSETS ........................................ 66,202,493 27,847,422 46,649,298
---------- ---------- ----------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ......... 91,900 23,042 46,746
Payable for units withdrawn: ........................... 2,249 1,004,629 57,007
---------- ---------- ----------
TOTAL LIABILITIES ................................... 94,149 1,027,671 103,753
---------- ---------- ----------
Net assets ............................................. $66,108,344 26,819,751 46,545,545
========== ========== ==========
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders ........... $66,108,344 11,643,666 30,866,087
The Life Insurance Company of Virginia .............. -- 15,176,085 15,679,458
---------- ---------- ----------
Net assets ............................................. $66,108,344 26,819,751 46,545,545
========== ========== ==========
Outstanding units attributable to
contractholders: Type I (note 2) ...................... 584,911 161,533 316,692
========== ========== ==========
Net asset value per unit: Type I ....................... $ 33.52 14.54 15.02
=========== =========== ===========
Outstanding units attributable to
contractholders: Type II (note 2) ..................... 1,425,134 641,918 1,753,483
=========== =========== ===========
Net asset value per unit: Type II ...................... $ 32.63 14.48 14.89
=========== =========== ===========
</TABLE>
A-4
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
--------------------------------------------------------------
GLOBAL VALUE U.S.
INCOME EQUITY INCOME EQUITY
FUND FUND FUND FUND
ASSETS --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Investment in GE Investments Funds, Inc., at fair value
(note 2):
S&P 500 Index Fund (12,978,221 shares;
cost -- $264,318,648)...................................... -- -- -- --
Money Market Fund (206,691,464 shares;
cost -- $206,691,474)...................................... -- -- -- --
Total Return Fund (4,513,480 shares;
cost -- $64,971,588)....................................... -- -- -- --
International Equity Fund (2,342,088; shares;
cost -- $27,101,105)....................................... -- -- -- --
Real Estate Securities Fund (4,024,961 shares;
cost-- $55,753,342)........................................ -- -- -- --
Global Income Fund (942,716 shares;
cost -- $9,713,591)........................................ $ 9,926,798 -- -- --
Value Equity Fund (2,887,264 shares;
cost -- $38,586,474)....................................... -- 39,180,175 -- --
Income Fund (2,792,519 shares; cost -- $34,717,370).......... -- -- 34,459,679 --
U.S. Equity Fund (63,724 shares; cost -- $1,980,988)......... -- -- -- 2,134,742
Receivable from affiliate .................................... -- -- -- --
Receivable for units sold .................................... -- 23,889 1,316 74,672
----------- ---------- ---------- ---------
TOTAL ASSETS .............................................. 9,926,798 39,204,064 34,460,995 2,209,414
----------- ---------- ---------- ---------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ............... 6,646 62,695 129,260 8,434
Payable for units withdrawn: ................................. 249,428 230 7,758 --
----------- ---------- ---------- ---------
TOTAL LIABILITIES ......................................... 256,074 62,925 137,018 8,434
----------- ---------- ---------- ---------
Net assets ................................................... $ 9,670,724 39,141,139 34,323,977 2,200,980
=========== ========== ========== =========
Analysis of net assets:
Attributable to:
Variable deferred annuity contractholders ................. $ 3,810,911 34,898,557 34,323,977 2,200,980
The Life Insurance Company of Virginia .................... 5,859,813 4,242,582 -- --
----------- ---------- ---------- ---------
Net assets ................................................... $ 9,670,724 39,141,139 34,323,977 2,200,980
=========== ========== ========== =========
Outstanding units attributable to contractholders:
Type I (note 2) ............................................. 46,632 385,376 1,332,645 26,127
=========== ========== ========== =========
Net asset value per unit: Type I ............................. $ 11.50 13.87 10.68 10.68
=========== =========== =========== ==========
Outstanding units attributable to contractholders:
Type II (note 2) ............................................ 285,995 2,140,000 1,884,740 180,295
=========== =========== =========== ==========
Net asset value per unit: Type II ............................ $ 11.45 13.81 10.66 10.66
=========== =========== =========== ==========
</TABLE>
A-5
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
----------------------------------
CAPITAL
BOND APPRECIATION
FUND FUND
ASSETS ---------------- ----------------
<S> <C> <C>
Investment in Oppenheimer Variable
Account Funds, at fair value (note 2):
Bond Fund (5,079,562 shares;
cost -- $60,266,701) $ 62,580,210 --
Capital Appreciation Fund (4,869,166 shares;
cost -- $187,683,640).......................... -- 218,284,700
Growth Fund (5,178,151 shares;
cost -- $165,665,597).......................... -- --
High Income Fund (14,906,183 shares;
cost -- $166,811,528).......................... -- --
Multiple Strategies Fund (4,689,609 shares;
cost -- $71,277,962)........................... -- --
Receivable for units sold ....................... 276,761 407,058
------------ -----------
TOTAL ASSETS .................................. 62,856,971 218,691,758
------------ -----------
LIABILITIES
Increase (decrease) in net assets from capital
transactions .................................... 110,911 425,350
Payable for units withdrawn ...................... -- 239,701
------------ -----------
TOTAL LIABILITIES ............................. 110,911 665,051
------------ -----------
Net assets attributable to variable deferred
annuity contractholders ......................... $ 62,746,060 218,026,707
============ ===========
Outstanding units: Type I (note 2) ............... 915,859 2,344,528
============ ===========
Net asset value per unit: Type I ................. $ 22.09 40.56
============ ============
Outstanding units: Type II (note 2) .............. 1,976,510 3,113,007
============ ============
Net asset value per unit: Type II ................ $ 21.51 39.49
============ ============
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------
HIGH MULTIPLE
GROWTH INCOME STRATEGIES
FUND FUND FUND
ASSETS ---------------- ---------------- ---------------
<S> <C> <C> <C>
Investment in Oppenheimer Variable
Account Funds, at fair value (note 2):
Bond Fund (5,079,562 shares;
cost -- $60,266,701) -- -- --
Capital Appreciation Fund (4,869,166 shares;
cost -- $187,683,640).......................... -- -- --
Growth Fund (5,178,151 shares;
cost -- $165,665,597).......................... $189,882,808 -- --
High Income Fund (14,906,183 shares;
cost -- $166,811,528).......................... -- 164,266,132 --
Multiple Strategies Fund (4,689,609 shares;
cost -- $71,277,962)........................... -- -- 79,957,841
Receivable for units sold ....................... -- 55,163 --
----------- ----------- ----------
TOTAL ASSETS .................................. 189,882,808 164,321,295 79,957,841
----------- ----------- ----------
LIABILITIES
Increase (decrease) in net assets from capital
transactions .................................... 310,016 235,959 194,658
Payable for units withdrawn ...................... 206,098 80,754 8,622
----------- ----------- ----------
TOTAL LIABILITIES ............................. 516,114 316,713 203,280
----------- ----------- ----------
Net assets attributable to variable deferred
annuity contractholders ......................... $189,366,694 164,004,582 79,754,561
=========== =========== ==========
Outstanding units: Type I (note 2) ............... 1,173,060 1,658,434 1,344,466
=========== =========== ==========
Net asset value per unit: Type I ................. $ 46.11 31.06 27.87
============ ============ ===========
Outstanding units: Type II (note 2) .............. 3,012,849 3,720,027 1,558,580
============ ============ ===========
Net asset value per unit: Type II ................ $ 44.90 30.24 27.13
============ ============ ===========
</TABLE>
A-6
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUNDS
---------------------------------------------------
EQUITY-
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ----------------- ---------------- ----------------
<S> <C> <C> <C>
Investment in Variable Insurance
Products Fund, at fair value
(note 2):
Equity -- Income Portfolio
(27,318,250 shares;
cost -- $571,169,732)..................... $ 694,429,927 -- --
Growth Portfolio (9,326,267 shares;
cost -- $283,201,407)..................... -- 418,469,590 --
Overseas Portfolio (5,683,460
shares; cost -- $108,549,287)............. -- -- 113,953,371
Investment in Variable Insurance
Products Fund II, at fair value
(note 2):
Asset Manager Portfolio
(27,620,799 shares;
cost -- $415,474,554)..................... -- -- --
Contrafund Portfolio (14,085,035
shares; cost -- $248,124,557)............. -- -- --
Investment in Variable Insurance
Products Fund III, at fair value
(note 2):
Growth & Income Portfolio
(3,513,229 shares;
cost -- $48,367,818)...................... -- -- --
Growth Opportunities Portfolio
(2,333,781 shares; cost --
$45,525,614).............................. -- -- --
Receivable for units sold .................. -- 3,264 107,222
------------- ----------- -----------
TOTAL ASSETS ............................. 694,429,927 418,472,854 114,060,593
------------- ----------- -----------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) .................................. 971,345 674,619 336,549
Payable for units withdrawn ................ 1,226,255 231,503 10,260,769
------------- ----------- -----------
TOTAL LIABILITIES ........................ 2,197,600 906,122 10,597,318
------------- ----------- -----------
Net assets attributable to variable
deferred annuity contractholders .......... $ 692,232,327 417,566,732 103,463,275
============= =========== ===========
Outstanding units: Type I (note 2) ......... 5,753,760 3,969,421 2,813,314
============= =========== ===========
Net asset value per unit: Type I ........... $ 41.23 54.32 23.58
============= ============ ============
Outstanding units: Type II (note 2) ........ 11,335,446 3,818,261 1,616,956
============= ============ ============
Net asset value per unit: Type II .......... $ 40.14 52.89 22.96
============= ============ ============
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCTS FUND III
--------------------------------- ------------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ---------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Investment in Variable Insurance
Products Fund, at fair value
(note 2):
Equity -- Income Portfolio
(27,318,250 shares;
cost -- $571,169,732)..................... -- -- -- --
Growth Portfolio (9,326,267 shares;
cost -- $283,201,407)..................... -- -- -- --
Overseas Portfolio (5,683,460
shares; cost -- $108,549,287)............. -- -- -- --
Investment in Variable Insurance
Products Fund II, at fair value
(note 2):
Asset Manager Portfolio
(27,620,799 shares;
cost -- $415,474,554)..................... $501,593,704 -- -- --
Contrafund Portfolio (14,085,035
shares; cost -- $248,124,557)............. -- 344,238,254 -- --
Investment in Variable Insurance
Products Fund III, at fair value
(note 2):
Growth & Income Portfolio
(3,513,229 shares;
cost -- $48,367,818)...................... -- -- 56,738,647 --
Growth Opportunities Portfolio
(2,333,781 shares; cost --
$45,525,614).............................. -- -- -- 53,396,906
Receivable for units sold .................. -- 20,128 207,349 320,250
----------- ----------- ---------- ----------
TOTAL ASSETS ............................. 501,593,704 344,258,382 56,945,996 53,717,156
----------- ----------- ---------- ----------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) .................................. 758,448 481,460 98,413 73,997
Payable for units withdrawn ................ 348,104 52,956 -- 7,101
----------- ----------- ---------- ----------
TOTAL LIABILITIES ........................ 1,106,552 534,416 98,413 81,098
----------- ----------- ---------- ----------
Net assets attributable to variable
deferred annuity contractholders .......... $500,487,152 343,723,966 56,847,583 53,636,058
=========== =========== ========== ==========
Outstanding units: Type I (note 2) ......... 14,835,158 3,082,088 751,280 595,214
=========== =========== ========== ==========
Net asset value per unit: Type I ........... $ 27.90 26.31 15.86 15.15
============ ============ =========== ===========
Outstanding units: Type II (note 2) ........ 3,176,311 10,085,800 2,843,815 2,958,791
============ ============ =========== ===========
Net asset value per unit: Type II .......... $ 27.26 26.04 15.80 15.08
============ ============ =========== ===========
</TABLE>
A-7
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES
------------------------------------------------
AMERICAN HIGH
LEADERS INCOME BOND UTILITY
FUND II FUND II FUND II
---------------- --------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments in Federated Investors
Insurance Series, at fair value (note 2):
American Leaders Fund II (3,423,504
shares; cost -- $66,654,672).................. $ 74,221,563 -- --
High Income Bond Fund II (4,748,355
shares; cost -- $50,760,691).................. -- 51,852,041 --
Utility Fund II (3,001,202 shares;
cost -- $38,293,472).......................... -- -- 45,828,348
Investment in Alger American Fund, at
fair value (note 2):
Small Cap Portfolio (2,156,235 shares;
cost -- $88,492,185).......................... -- -- --
Growth Portfolio (2,467,326 shares;
cost -- $100,555,548)......................... -- -- --
PBHG Insurance Series Fund, at fair
value (note 2):
PBHG Large Cap Growth Portfolio
(778,422 shares; cost -- $9,843,865).......... -- -- --
PBHG Growth II Portfolio (942,049
shares; cost -- $10,016,297).................. -- -- --
Receivable for units sold ...................... 105,458 691,832 50,673
------------ ---------- ----------
TOTAL ASSETS ................................. 74,327,021 52,543,873 45,879,021
------------ ---------- ----------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ...................................... 111,393 77,244 65,560
Payable for units withdrawn .................... 403 -- 1,616
------------ ---------- ----------
TOTAL LIABILITIES ............................ 111,796 77,244 67,176
------------ ---------- ----------
Net assets attributable to variable deferred
annuity contractholders ....................... $ 74,215,225 52,466,629 45,811,845
============ ========== ==========
Outstanding units: Type I (note 2) ............. 480,466 471,675 478,465
============ ========== ==========
Net asset value per unit: Type I ............... $ 16.83 15.34 19.01
============ =========== ===========
Outstanding units: Type II (note 2) ............ 3,955,083 2,977,691 1,950,915
============ =========== ===========
Net asset value per unit: Type II .............. $ 16.72 15.19 18.82
============ =========== ===========
<CAPTION>
ALGER AMERICAN PBHG INSURANCE
FUND SERIES FUND
-------------------------------- -------------------------------
SMALL PBHG LARGE PBHG
CAP GROWTH CAP GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
ASSETS
Investments in Federated Investors
Insurance Series, at fair value (note 2):
American Leaders Fund II (3,423,504
shares; cost -- $66,654,672).................. -- -- -- --
High Income Bond Fund II (4,748,355
shares; cost -- $50,760,691).................. -- -- -- --
Utility Fund II (3,001,202 shares;
cost -- $38,293,472).......................... -- -- -- --
Investment in Alger American Fund, at
fair value (note 2):
Small Cap Portfolio (2,156,235 shares;
cost -- $88,492,185).......................... $94,809,637 -- -- --
Growth Portfolio (2,467,326 shares;
cost -- $100,555,548)......................... -- 131,311,079 -- --
PBHG Insurance Series Fund, at fair
value (note 2):
PBHG Large Cap Growth Portfolio
(778,422 shares; cost -- $9,843,865).......... -- -- 12,018,842 --
PBHG Growth II Portfolio (942,049
shares; cost -- $10,016,297).................. -- -- -- 10,956,027
Receivable for units sold ...................... -- 951,516 25,926 --
---------- ----------- ---------- ----------
TOTAL ASSETS ................................. 94,809,637 132,262,595 12,044,768 10,956,027
---------- ----------- ---------- ----------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ...................................... 130,000 261,324 42,299 16,704
Payable for units withdrawn .................... 325,378 -- 20,883 4,556
---------- ----------- ---------- ----------
TOTAL LIABILITIES ............................ 455,378 261,324 63,182 21,260
---------- ----------- ---------- ----------
Net assets attributable to variable deferred
annuity contractholders ....................... $94,354,259 132,001,271 11,981,586 10,934,767
========== =========== ========== ==========
Outstanding units: Type I (note 2) ............. 1,733,429 1,161,424 98,043 122,432
========== =========== ========== ==========
Net asset value per unit: Type I ............... $ 12.15 19.64 15.15 11.41
=========== ============ =========== ===========
Outstanding units: Type II (note 2) ............ 6,082,414 5,605,283 696,037 839,596
=========== ============ =========== ===========
Net asset value per unit: Type II .............. $ 12.05 19.48 15.08 11.36
=========== ============ =========== ===========
</TABLE>
A-8
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
---------------------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ----------------- ---------------- ----------------
<S> <C> <C> <C>
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(4,879,822 shares;
cost -- $94,938,397)................. $ 134,634,295 -- --
Growth Portfolio
(14,233,651 shares;
cost -- $231,936,881)................ -- 335,060,133 --
Worldwide Growth Portfolio
(17,569,116 shares;
cost -- $409,584,897)................ -- -- 511,085,584
Balanced Portfolio
(7,729,369 shares;
cost -- $140,195,868)................ -- -- --
Flexible Income Portfolio
(2,729,903 shares;
cost -- $32,556,570)................. -- -- --
International Growth Portfolio
(3,639,052 shares;
cost -- $74,093,952)................. -- -- --
Capital Appreciation Portfolio
(1,912,067 shares;
cost -- $30,581,552)................. -- -- --
Receivable for units sold ............. -- -- --
------------- ----------- -----------
TOTAL ASSETS ........................ 134,634,295 335,060,133 511,085,584
------------- ----------- -----------
LIABILITIES
Accrued expenses payable to
affiliate (note 3) ................... 211,955 647,926 762,785
Payable for units withdrawn ........... 142,845 27,385 1,506,463
------------- ----------- -----------
354,800 675,311 2,269,248
------------- ----------- -----------
Net assets attributable to variable
deferred annuity contractholders...... $ 134,279,495 334,384,822 508,816,336
============= =========== ===========
Outstanding units: Type I
(note 2) ............................. 1,551,670 4,307,429 4,894,747
============= =========== ===========
Net asset value per unit:
Type I ............................... $ 26.89 25.68 29.44
============= ============ ============
Outstanding units: Type II
(note 2) ............................. 3,488,695 8,827,221 12,554,733
============= ============ ============
Net asset value per unit:
Type II .............................. $ 26.53 25.35 29.05
============= ============ ============
<CAPTION>
JANUS ASPEN SERIES
----------------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment in Janus Aspen Series,
at fair value (note 2):
Aggressive Growth Portfolio
(4,879,822 shares;
cost -- $94,938,397)................. -- -- -- --
Growth Portfolio
(14,233,651 shares;
cost -- $231,936,881)................ -- -- -- --
Worldwide Growth Portfolio
(17,569,116 shares;
cost -- $409,584,897)................ -- -- -- --
Balanced Portfolio
(7,729,369 shares;
cost -- $140,195,868)................ $173,910,792 -- -- --
Flexible Income Portfolio
(2,729,903 shares;
cost -- $32,556,570)................. -- 32,922,626 -- --
International Growth Portfolio
(3,639,052 shares;
cost -- $74,093,952)................. -- -- 77,402,638 --
Capital Appreciation Portfolio
(1,912,067 shares;
cost -- $30,581,552)................. -- -- -- 38,126,625
Receivable for units sold ............. 915,453 170,372 194,104 1,075,836
----------- ---------- ---------- ----------
TOTAL ASSETS ........................ 174,826,245 33,092,998 77,596,742 39,202,461
----------- ---------- ---------- ----------
LIABILITIES
Accrued expenses payable to
affiliate (note 3) ................... 250,096 47,653 115,569 118,990
Payable for units withdrawn ........... -- -- -- --
----------- ---------- ---------- ----------
250,096 47,653 115,569 118,990
----------- ---------- ---------- ----------
Net assets attributable to variable
deferred annuity contractholders...... $174,576,149 33,045,345 77,481,173 39,083,471
=========== ========== ========== ==========
Outstanding units: Type I
(note 2) ............................. 2,916,033 552,225 1,053,424 506,817
=========== ========== ========== ==========
Net asset value per unit:
Type I ............................... $ 19.55 13.50 15.86 19.59
============ =========== =========== ===========
Outstanding units: Type II
(note 2) ............................. 6,060,191 1,911,151 3,856,210 1,494,358
============ =========== =========== ===========
Net asset value per unit:
Type II .............................. $ 19.40 13.39 15.76 19.51
============ =========== =========== ===========
</TABLE>
A-9
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE
INSURANCE TRUST FUND
------------------------------
GROWTH AND MID CAP
INCOME EQUITY
FUND FUND
--------------- --------------
<S> <C> <C>
ASSETS
Investment in Goldman Sachs Variable Insurance Trust Fund,
at fair value (note 2):
Growth and Income Fund (402,157 shares;
cost -- $4,162,464)......................................... $ 4,202,546 --
Mid Cap Equity Fund (428,996 shares;
cost -- $3,663,704)......................................... -- 3,676,492
Investment in Salomon Brothers
Variable Series Fund, at fair value (note 2):
Strategic Bond Fund (12,447 shares; cost -- $130,915)......... -- --
Investors Fund (994 shares; cost -- $10,626).................. -- --
Total Return Fund (32,491 shares; cost -- $340,870)........... -- --
Dividend receivable ........................................... -- --
Receivable from affiliate ..................................... 49,406 3,746
Receivable for units sold ..................................... 15,607 --
----------- ---------
TOTAL ASSETS ............................................... 4,267,559 3,680,238
----------- ---------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ................ 4,991 48,760
Payable for units withdrawn ................................... -- 8,287
----------- ---------
TOTAL LIABILITIES .......................................... 4,991 57,047
----------- ---------
Net assets attributable to variable deferred annuity
contractholders .............................................. $ 4,262,568 3,623,191
=========== =========
Outstanding units: Type I (note 2) ............................ 52,650 78,049
=========== =========
Net asset value per unit: Type I .............................. $ 8.86 8.57
=========== ==========
Outstanding units: Type II (note 2) ........................... 428,936 345,533
=========== ==========
Net asset value per unit: Type II ............................. $ 8.85 8.55
=========== ==========
<CAPTION>
SALOMON BROTHERS
VARIABLE SERIES FUND
-----------------------------------
STRATEGIC TOTAL
BOND INVESTOR RETURN
FUND FUND FUND
----------- ---------- ------------
<S> <C> <C> <C>
ASSETS
Investment in Goldman Sachs Variable Insurance Trust Fund,
at fair value (note 2):
Growth and Income Fund (402,157 shares;
cost -- $4,162,464)......................................... -- -- --
Mid Cap Equity Fund (428,996 shares;
cost -- $3,663,704)......................................... -- -- --
Investment in Salomon Brothers
Variable Series Fund, at fair value (note 2):
Strategic Bond Fund (12,447 shares; cost -- $130,915)......... $126,092 -- --
Investors Fund (994 shares; cost -- $10,626).................. -- 10,947 --
Total Return Fund (32,491 shares; cost -- $340,870)........... -- -- 337,911
Dividend receivable ........................................... 6,068 45 5,946
Receivable from affiliate ..................................... -- -- --
Receivable for units sold ..................................... -- -- --
------- ------ -------
TOTAL ASSETS ............................................... 132,160 10,992 343,857
------- ------ -------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ................ 138 5 136
Payable for units withdrawn ................................... -- -- --
------- ------ -------
TOTAL LIABILITIES .......................................... 138 5 136
------- ------ -------
Net assets attributable to variable deferred annuity
contractholders .............................................. $132,022 10,987 343,721
======= ====== =======
Outstanding units: Type I (note 2) ............................ 2,799 42 6,299
======= ====== =======
Net asset value per unit: Type I .............................. $ 10.24 12.14 10.67
======== ======= ========
Outstanding units: Type II (note 2) ........................... 10,094 863 25,915
======== ======= ========
Net asset value per unit: Type II ............................. $ 10.24 12.14 10.67
======== ======= ========
</TABLE>
See accompanying notes to financial statements.
A-10
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------------------------------------------
GOVERNMENT
S&P 500 SECURITIES
FUND FUND
---------------------------------------------- ------------------------------
PERIOD YEAR
ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 11, DECEMBER 31,
1998 1997 1996 1997 1996
-------------- -------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $11,434,493 4,001,897 23,435,279 -- 1,309,648
Expenses -- Mortality and expense
risk charges (note 3) ....................... 2,910,483 1,356,740 492,403 147,796 143,919
----------- --------- ---------- ------- ---------
Net investment income (expense) ................ 8,524,010 2,645,157 22,942,876 (147,796) 1,165,729
----------- --------- ---------- -------- ---------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ...................... 8,830,544 (899,446) 1,510,464 (242,895) (68,248)
Unrealized appreciation (depreciation)
on investments .............................. 35,731,485 21,611,136 (16,204,375) 987,049 (995,503)
----------- ---------- ----------- -------- ---------
Net realized and unrealized gain (loss) on
investments ................................... 44,562,029 20,711,690 (14,693,911) 744,154 (1,063,751)
----------- ---------- ----------- -------- ----------
Increase in net assets from operations ......... $53,086,039 23,356,847 8,248,965 596,358 101,978
=========== ========== =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
---------------------------------------------
MONEY MARKET
FUND
---------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- --------------- ---------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $9,177,451 5,626,589 5,204,323
Expenses -- Mortality and expense
risk charges (note 3) ..................... 2,260,774 1,421,044 980,270
---------- --------- ---------
Net investment income (expense) .............. 6,916,677 4,205,545 4,224,053
---------- --------- ---------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... 545,381 (4,421,730) 1,686,452
Unrealized appreciation (depreciation) on
investments ............................... (545,381) 4,383,879 (2,984,484)
---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments ................................. -- (37,851) (1,298,032)
---------- ---------- ----------
Increase in net assets from operations ....... $6,916,677 4,167,694 2,926,021
========== ========== ==========
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------
TOTAL RETURN
FUND
-------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------- ---------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $ 3,360,564 6,098,862 9,319,880
Expenses -- Mortality and expense
risk charges (note 3) ..................... 691,738 496,469 357,589
--------- --------- ---------
Net investment income (expense) .............. 2,668,826 5,602,393 8,962,291
--------- --------- ---------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... (144,205) (454,827) 614,446
Unrealized appreciation (depreciation) on
investments ............................... 5,408,858 657,828 (6,827,262)
--------- --------- ----------
Net realized and unrealized gain (loss) on
investments ................................. 5,264,653 203,001 (6,212,816)
--------- --------- ----------
Increase in net assets from operations ....... $7,933,479 5,805,394 2,749,475
========= ========= ==========
</TABLE>
A-11
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------
INTERNATIONAL
EQUITY FUND
-------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- --------------- -------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............ $1,445,436 2,686,699 1,056,063
Expenses -- Mortality
and expense risk
charges (note 3) ............. 150,854 113,987 56,953
---------- --------- ---------
Net investment income ........... 1,294,582 2,572,712 999,110
---------- --------- ---------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) ....................... 441,842 665,649 86,537
Unrealized appreciation
(depreciation) on
investments .................. 2,296,938 (1,565,382) (11,119)
---------- ---------- ---------
Net realized and
unrealized gain (loss)
on investments ................. 2,738,780 (899,733) 75,418
---------- ---------- ---------
Increase (decrease) in net
assets from operations ......... $4,033,362 1,672,979 1,074,528
========== ========== =========
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------------------------------------
REAL ESTATE GLOBAL INCOME
SECURITIES FUND FUND
-------------------------------------------- ----------------------------
PERIOD FROM
YEAR MAY 1, 1997
ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997
---------------- --------------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ............ $3,597,838 5,456,896 1,627,291 555,349 300,672
Expenses -- Mortality
and expense risk
charges (note 3) ............. 461,754 292,230 49,030 29,070 2,982
--------- --------- --------- ------- -------
Net investment income ........... 3,136,084 5,164,666 1,578,261 526,279 297,690
--------- --------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) ....................... (878,569) 2,710,582 299,159 96,320 2,417
Unrealized appreciation
(depreciation) on
investments .................. (12,908,191) (1,305,117) 4,059,521 337,555 (124,348)
----------- ---------- --------- ------- --------
Net realized and
unrealized gain (loss)
on investments ................. (13,786,760) 1,405,465 4,358,680 433,875 (121,931)
----------- ---------- --------- ------- --------
Increase (decrease) in net
assets from operations ......... $(10,650,676) 6,570,131 5,936,941 960,154 175,759
=========== ========== ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------------------------------------
VALUE EQUITY FUND INCOME FUND U.S. EQUITY FUND
----------------------------- ----------------------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR DECEMBER 12, MAY 4, 1998
ENDED 1997 TO ENDED 1997 TO TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997 1998
-------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $1,119,457 142,788 1,901,291 58,034 52,288
Expenses -- Mortality and expense risk
charges (note 3) ...................... 348,877 38,307 329,876 14,197 6,218
---------- ------- --------- ------ ------
Net investment income .................... 770,580 104,481 1,571,415 43,837 46,070
---------- ------- --------- ------ ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ................ 576,810 357,048 335,927 (6,710) 9,452
Unrealized appreciation (depreciation)
on investments ........................ (292,099) 885,799 (245,492) (12,199) 153,754
---------- ------- --------- ------- -------
Net realized and unrealized gain (loss) on
investments ............................. 284,711 1,242,847 90,435 (18,909) 163,206
---------- --------- --------- ------- -------
Increase (decrease) in net assets from
operations .............................. $1,055,291 1,347,328 1,661,850 24,928 209,276
========== ========= ========= ======= =======
</TABLE>
A-12
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENT OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------------------
MONEY FUND BOND FUND
------------------------------ ----------------------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 11, DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1998 1997 1996
-------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $110,711 175,537 1,310,262 2,260,511 1,774,226
Expenses -- Mortality and expense risk
charges (note 3) ............................ 25,908 40,663 613,418 437,693 336,825
-------- ------- --------- --------- ---------
Net investment income .......................... 84,803 134,874 696,844 1,822,818 1,437,401
-------- ------- --------- --------- ---------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ............................. -- -- 557,479 187,695 106,242
Unrealized appreciation (depreciation) on
investments ................................. -- -- 1,205,533 663,371 (442,815)
-------- ------- --------- --------- ---------
Net realized and unrealized gain (loss) on
investments ................................... -- -- 1,763,012 851,066 (336,573)
-------- ------- --------- --------- ---------
Increase in net assets from operations ......... $ 84,803 134,874 2,459,856 2,673,884 1,100,828
======== ======= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
--------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND GROWTH FUND
----------------------------------------- --------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ................. $ 5,903,722 8,221,818 6,069,096 14,489,848 4,911,400 3,110,376
Expenses -- Mortality and expense
risk charges (note 3) ............. 2,644,408 2,381,196 1,506,102 2,092,013 1,372,378 599,846
----------- --------- --------- ---------- --------- ---------
Net investment income ................ 3,259,314 5,840,622 4,562,994 12,397,835 3,539,022 2,510,530
----------- --------- --------- ---------- --------- ---------
Net realized and unrealized gain
(loss) on investments:
Net realized gain ................... 19,896,478 6,868,228 6,301,279 19,777,101 5,826,603 1,959,742
Unrealized appreciation
(depreciation) on investments ..... (396,149) 5,927,622 7,478,382 922,343 11,621,155 5,568,726
----------- --------- --------- ---------- ---------- ---------
Net realized and unrealized gain
(loss) on investments ............... 19,500,329 12,795,850 13,779,661 20,699,444 17,447,758 7,528,468
----------- ---------- ---------- ---------- ---------- ---------
Increase in net assets from
operations .......................... $22,759,643 18,636,472 18,342,655 33,097,279 20,986,780 10,038,998
=========== ========== ========== ========== ========== ==========
</TABLE>
A-13
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
---------------------------------------------------------------------------------
HIGH INCOME FUND MULTIPLE STRATEGIES FUND
---------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------------- ------------ ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $ 7,439,338 9,138,791 6,387,294 4,756,691 4,485,399 3,343,955
Expenses -- Mortality and expense risk
charges (note 3) .......................... 2,078,631 1,397,317 825,956 957,372 794,598 571,993
------------ --------- --------- --------- --------- ---------
Net investment income ........................ 5,360,707 7,741,474 5,561,338 3,799,319 3,690,801 2,771,962
------------ --------- --------- --------- --------- ---------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... (99,049) 1,298,149 763,575 1,712,582 1,435,981 701,256
Unrealized appreciation (depreciation)
on investments ............................ (7,301,468) 2,089,422 2,079,281 (1,662,556) 4,025,778 2,786,345
------------ --------- --------- ---------- --------- ---------
Net realized and unrealized gain (loss) on
investments ................................. (7,400,517) 3,387,571 2,842,856 50,026 5,461,759 3,487,601
------------ --------- --------- ---------- --------- ---------
Increase (decrease) in net assets from
operations .................................. $ (2,039,810) 11,129,045 8,404,194 3,849,345 9,152,560 6,259,563
============ ========== ========= ========== ========= =========
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-----------------------------------------------------------
MONEY MARKET PORTFOLIO HIGH INCOME PORTFOLIO
----------------------------- -----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends .......... $843,023 1,655,033 1,930,318 2,780,632
Expenses -- Mortality
and expense risk
charges (note 3) ........... 212,121 382,911 277,254 332,922
-------- --------- --------- ---------
Net investment income ......... 630,902 1,272,122 1,653,064 2,447,710
-------- --------- --------- ---------
Net realized and unrealized
gain on investments:
Net realized gain ............ -- -- 4,673,705 479,085
Unrealized appreciation
(depreciation) on
investments ................ -- -- (2,814,608) 308,688
-------- --------- ---------- ---------
Net realized and unrealized
gain on investments .......... -- -- 1,859,097 787,773
-------- --------- ---------- ---------
Increase in net assets from
operations ................... $630,902 1,272,122 3,512,161 3,235,483
======== ========= ========== =========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------------
EQUITY -- INCOME PORTFOLIO
-------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- ------------- -------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends .......... $40,199,361 42,510,440 12,605,854
Expenses -- Mortality
and expense risk
charges (note 3) ........... 8,478,683 6,650,343 4,253,036
---------- ---------- ----------
Net investment income ......... 31,720,678 35,860,097 8,352,818
---------- ---------- ----------
Net realized and unrealized
gain on investments:
Net realized gain ............ 40,058,923 15,417,526 9,394,625
Unrealized appreciation
(depreciation) on
investments ................ (9,194,909) 65,899,106 23,601,942
---------- ---------- ----------
Net realized and unrealized
gain on investments .......... 30,864,014 81,316,632 32,996,567
---------- ---------- ----------
Increase in net assets from
operations ................... $62,584,692 117,176,729 41,349,385
========== =========== ==========
</TABLE>
A-14
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND (CONTINUED)
-------------------------------------------------------------------------------------
GROWTH PORTFOLIO OVERSEAS PORTFOLIO
---------------------------------------- --------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
-------------- ------------ ------------ --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................. $ 43,602,357 9,229,913 13,903,188 8,392,807 9,303,257 2,309,161
Expenses -- Mortality and expense
risk charges (note 3) .............. 4,321,431 3,552,903 2,834,086 1,337,177 1,401,167 1,245,263
------------ --------- ---------- --------- --------- ---------
Net investment income ................. 39,280,926 5,677,010 11,069,102 7,055,630 7,902,090 1,063,898
------------ --------- ---------- --------- --------- ---------
Net realized and unrealized gain on
investments:
Net realized gain .................... 17,030,101 14,576,544 9,229,819 12,998,779 6,802,686 2,693,770
Unrealized appreciation
(depreciation) on investments ...... 58,825,099 34,536,532 6,990,625 (6,292,784) (3,387,543) 7,585,836
------------ ---------- ---------- ---------- ---------- ---------
Net realized and unrealized gain on
investments .......................... 75,855,200 49,113,076 16,220,444 6,705,995 3,415,143 10,279,606
------------ ---------- ---------- ---------- ---------- ----------
Increase in net assets from
operations ........................... $115,136,126 54,790,086 27,289,546 13,761,625 11,317,233 11,343,504
============ ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
---------------------------------------------------------------------------------
ASSET MANAGER PORTFOLIO CONTRAFUND PORTFOLIO
---------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
-------------- ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................. $ 61,032,559 52,909,448 27,801,550 14,347,723 4,672,962 634,656
Expenses -- Mortality and expense
risk charges (note 3) .............. 5,632,482 5,474,604 4,059,911 3,674,218 2,588,608 1,322,883
------------ ---------- ---------- ---------- --------- ---------
Net investment income (expense) ....... 55,400,077 47,434,844 23,741,639 10,673,505 2,084,354 (688,227)
------------ ---------- ---------- ---------- --------- ---------
Net realized and unrealized gain
(loss) on investments:
Net realized gain .................... 12,994,733 9,093,636 7,507,674 14,314,697 9,468,307 2,738,082
Unrealized appreciation
(depreciation) on investments ...... (5,404,033) 24,430,304 23,008,153 47,868,379 26,750,686 17,275,767
------------ ---------- ---------- ---------- ---------- ----------
Net realized and unrealized gain on
investments .......................... 7,590,700 33,523,940 30,515,827 62,183,076 36,218,993 20,013,849
------------ ---------- ---------- ---------- ---------- ----------
Increase in net assets from
operations ........................... $ 62,990,777 80,958,784 54,257,466 72,856,581 38,303,347 19,325,622
============ ========== ========== ========== ========== ==========
</TABLE>
A-15
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS
FUND III
----------------------------------------------------------------
GROWTH & INCOME GROWTH OPPORTUNITIES
PORTFOLIO PORTFOLIO
------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR MAY 1,
ENDED 1997 TO ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ 102,863 -- 948,628 --
Expenses -- Mortality and expense risk
charges (note 3) ............................ 420,269 53,296 450,247 69,440
---------- ------ ------- ------
Net investment income (expense) ................ (317,406) (53,296) 498,381 (69,440)
---------- ------- ------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ............................. 983,225 103,153 378,467 67,071
Unrealized appreciation (depreciation) on
investments ................................. 7,912,728 458,100 6,815,534 1,055,758
---------- ------- --------- ---------
Net realized and unrealized gain on
investments ................................... 8,895,953 561,253 7,194,001 1,122,829
---------- ------- --------- ---------
Increase in net assets from operations ......... $8,578,547 507,957 7,692,382 1,053,389
========== ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
----------------------------------------------------------------------------------------
BALANCED BOND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ----------------------------- ----------------------------
PERIOD YEAR PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ................. $ 1,992,971 5,226,886 550,544 1,231,424 903,849 1,152,528
Expenses -- Mortality and
expense risk charges (note 3) ..... 337,918 381,777 99,586 151,484 132,989 146,484
------------ --------- ------- --------- ------- ---------
Net investment income ................ 1,655,053 4,845,109 450,958 1,079,940 770,860 1,006,044
------------ --------- ------- --------- ------- ---------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ............ 5,097,861 419,822 12,018 (136,701) 2,304,768 315,046
Unrealized depreciation on
investments ....................... (2,501,835) (3,501,201) (23,525) (646,673) (880,241) (363,320)
------------ ---------- ------- --------- --------- ---------
Net realized and unrealized gain
(loss) on investments ............... 2,596,026 (3,081,379) (11,507) (783,374) 1,424,527 (48,274)
------------ ---------- ------- --------- --------- ---------
Increase in net assets from
operations .......................... $ 4,251,079 1,763,730 439,451 296,566 2,195,387 957,770
============ ========== ======= ========= ========= =========
</TABLE>
A-16
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
-------------------------------------------------------------------------------
AMERICAN LEADERS FUND II HIGH INCOME BOND FUND II
------------------------------------------ ------------------------------------
PERIOD FROM
MAY 6,
1996 TO
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
------------- ------------- -------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $2,907,843 228,362 15,977 1,241,858 1,129,533 579,337
Expenses -- Mortality and expense risk
charges (note 3) .......................... 753,675 228,448 12,003 591,059 302,211 87,381
---------- ------- ------ --------- --------- -------
Net investment income (expense) .............. 2,154,168 (86) 3,974 650,799 827,322 491,956
---------- ------- ------ --------- --------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ........................... 1,333,508 544,140 29,680 901,146 630,351 31,769
Unrealized appreciation (depreciation) on
investments ............................... 4,019,536 3,385,309 162,046 (615,798) 1,256,745 424,014
---------- --------- ------- --------- --------- -------
Net realized and unrealized gain on
investments ................................. 5,353,044 3,929,449 191,726 285,348 1,887,096 455,783
---------- --------- ------- --------- --------- -------
Increase in net assets from operations ....... $7,507,212 3,929,363 195,700 936,147 2,714,418 947,739
========== ========= ======= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
(CONTINUED)
------------------------------------------
UTILITY
FUND II
------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ----------- ------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $2,141,701 1,046,132 766,616
Expenses -- Mortality and expense risk charges (note 3) ......... 482,289 326,253 243,314
---------- --------- -------
Net investment income (expense) .................................. 1,659,412 719,879 523,302
---------- --------- -------
Net realized and unrealized gain (loss) on investments:
Net realized gain ............................................... 1,730,044 731,431 336,527
Unrealized appreciation (depreciation) on investments ........... 1,205,055 4,302,272 1,113,241
---------- --------- ---------
Net realized and unrealized gain on investments .................. 2,935,099 5,033,703 1,449,768
---------- --------- ---------
Increase in net assets from operations ........................... $4,594,511 5,753,582 1,973,070
========== ========= =========
</TABLE>
A-17
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
--------------------------------------------------------------------------------
SMALL CAP PORTFOLIO GROWTH PORTFOLIO
---------------------------------------- ---------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
-------------- ----------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $10,556,556 2,044,748 105,411 14,231,938 528,437 668,828
Expenses -- Mortality and expense
risk charges (note 3) ................. 1,053,686 799,242 414,206 1,251,175 811,338 358,846
----------- --------- ------- ---------- ------- -------
Net investment income (expense) .......... 9,502,870 1,245,506 (308,795) 12,980,763 (282,901) 309,982
----------- --------- -------- ---------- -------- -------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ................ 411,066 411,624 (122,299) 4,172,054 3,954,588 315,644
Unrealized appreciation
(depreciation) on investments ......... 2,406,527 4,016,910 (80,937) 20,408,775 8,095,163 2,224,353
----------- --------- -------- ---------- --------- ---------
Net realized and unrealized gain
(loss) on investments ................... 2,817,593 4,428,534 (203,236) 24,580,829 12,049,751 2,539,997
----------- --------- -------- ---------- ---------- ---------
Increase (decrease) in net assets from
operations .............................. $12,320,463 5,674,040 (512,031) 37,561,592 11,766,850 2,849,979
=========== ========= ======== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
PBHG INSURANCE SERIES FUND
----------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO PBHG GROWTH II PORTFOLIO
------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR MAY 1,
ENDED 1997 TO ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... -- -- -- --
Expenses -- Mortality and expense
risk charges (note 3) ................. $ 106,500 17,112 119,244 30,512
------- ------ ------- ------
Net investment income (expense) .......... (106,500) (17,112) (119,244) (30,512)
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ................ 282,909 13,525 (281,878) 7,643
Unrealized appreciation
(depreciation) on investments ......... 2,025,080 149,898 1,029,558 (89,829)
--------- ------- --------- -------
Net realized and unrealized gain
(loss) on investments ................... 2,307,989 163,423 747,680 (82,186)
--------- ------- ------- --------
Increase (decrease) in net assets from
operations .............................. $2,201,489 146,311 628,436 (112,698)
========= ======= ======= =========
</TABLE>
A-18
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
------------------------------------------------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO GROWTH PORTFOLIO
--------------------------------------------- --------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------------- --------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................... $ -- -- 755,467 17,061,080 5,821,316 3,316,849
Expenses -- Mortality and expense
risk charges (note 3) ................ 1,431,833 1,187,720 880,271 3,390,909 2,533,302 1,496,337
------------ --------- ------- ---------- --------- ---------
Net investment income (expense) ......... (1,431,833) (1,187,720) (124,804) 13,670,171 3,288,014 1,820,512
------------ ---------- -------- ---------- --------- ---------
Net realized and unrealized gain
(loss) on investments:
Net realized gain ...................... 11,413,034 6,675,700 3,422,984 11,096,226 9,346,395 4,286,543
Unrealized appreciation on
investments .......................... 24,333,274 5,540,954 109,555 56,452,101 23,212,981 11,457,707
------------ ---------- --------- ---------- ---------- ----------
Net realized and unrealized gain on
investments ............................ 35,746,308 12,216,654 3,532,539 67,548,327 32,559,376 15,744,250
------------ ---------- --------- ---------- ---------- ----------
Increase in net assets from
operations ............................. $ 34,314,475 11,028,934 3,407,735 81,218,498 35,847,390 17,564,762
============ ========== ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------
WORLDWIDE GROWTH PORTFOLIO
--------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------- ------------ ------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends .................................... $17,147,178 4,490,822 2,094,632
Expenses -- Mortality and expense risk charges
(note 3) ............................................. 5,690,337 3,656,021 1,418,611
---------- ---------- ---------
Net investment income (expense) ......................... 11,456,841 834,801 676,021
Net realized and unrealized gain (loss) on
investments:
Net realized gain ...................................... 46,111,510 11,585,008 5,069,677
Unrealized appreciation on investments ................. 41,481,543 32,530,512 18,944,795
---------- ----------- ----------
Net realized and unrealized gain on investments ......... 87,593,053 44,115,520 24,014,472
---------- ---------- ------------
Increase in net assets from operations .................. 99,049,894 44,950,321 24,690,493
========== ========== ==========
</TABLE>
A-19
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
---------------------------------------------------------------------------------
BALANCED PORTFOLIO FLEXIBLE INCOME PORTFOLIO
------------------------------------------ ------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
------------- ----------- ------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................... $ 5,350,454 1,376,630 283,521 1,625,697 699,223 288,802
Expenses -- Mortality and expense
risk charges (note 3) ................ 1,445,276 445,275 113,425 300,350 120,354 40,424
----------- --------- ------- --------- ------- -------
Net investment income (expense) ......... 3,905,178 931,355 170,096 1,325,347 578,869 248,378
----------- --------- ------- --------- ------- -------
Net realized and unrealized gain
(loss) on investments:
Net realized gain ...................... 3,053,389 1,239,519 122,576 222,001 86,470 4,524
Unrealized appreciation on
investments .......................... 28,743,051 4,013,343 920,620 30,008 269,390 68,898
----------- --------- ------- --------- ------- -------
Net realized and unrealized gain on
investments ............................ 31,796,440 5,252,862 1,043,196 252,009 355,860 73,422
----------- --------- --------- --------- ------- -------
Increase in net assets from
operations ............................. $35,701,618 6,184,217 1,213,292 1,577,356 934,729 321,800
=========== ========= ========= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
-----------------------------------------------------------------------
CAPITAL APPRECIATION
INTERNATIONAL GROWTH PORTFOLIO PORTFOLIO
------------------------------------------ ----------------------------
PERIOD FROM PERIOD FROM
MAY 3, YEAR MAY 2,
1996 TO ENDED 1997 TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997
------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ............................ $1,349,473 348,585 54,433 20,652 8,437
Expenses -- Mortality and expense risk
charges (note 3) ............................. 895,918 516,236 45,378 149,815 9,981
---------- ------- ------ ------- -----
Net investment income (expense) ................. 453,555 (167,651) 9,055 (129,163) (1,544)
---------- -------- ------ -------- ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain .............................. 7,205,182 3,329,942 187,391 336,728 31,894
Unrealized appreciation on investments ......... 1,486,427 1,235,644 586,615 7,532,890 12,182
---------- --------- ------- --------- ------
Net realized and unrealized gain on
investments .................................... 8,691,609 4,565,586 774,006 7,869,618 44,076
---------- --------- ------- --------- ------
Increase in net assets from operations .......... $9,145,164 4,397,935 783,061 7,740,455 42,532
========== ========= ======= ========= ======
</TABLE>
A-20
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF OPERATIONS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS SALOMON BROTHERS
VARIABLE INSURANCE VARIABLE SERIES
TRUST FUND FUND
------------------------------- -----------------------------------------------
GROWTH AND MID CAP STRATEGIC TOTAL
INCOME EQUITY BOND INVESTORS RETURN
FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
MAY 12, MAY 8, OCTOBER 22, NOVEMBER 27, OCTOBER 30,
1998 TO 1998 TO 1998 TO 1998 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998 1998 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $ 35,739 27,603 6,068 45 5,946
Expenses -- Mortality and expense
risk charges (note 3) ................. 15,729 15,427 211 5 148
--------- ------ ----- -- -----
Net investment income .................... 20,010 12,176 5,857 40 5,798
--------- ------ ----- -- -----
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ................ (32,043) (72,641) 322 -- 1
Unrealized appreciation
(depreciation) on investments ......... 40,081 12,789 (4,823) 321 (2,958)
--------- ------- ------ --- ------
Net realized and unrealized gain
(loss) on investments ................... 8,038 (59,852) (4,501) 321 (2,957)
--------- ------- ------ --- ------
Increase (decrease) in net assets from
operations .............................. $ 28,048 (47,676) 1,356 361 2,841
========= ======= ====== === ======
</TABLE>
See accompanying notes to financial statements.
A-21
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
------------------------------------------------------------------------------
S&P 500 GOVERNMENT
INDEX SECURITIES
FUND FUND
----------------------------------------------- ------------------------------
PERIOD YEAR
ENDED ENDED
YEAR ENDED DECEMBER 31, DECEMBER 11, DECEMBER 31,
1998 1997 1996 1997 1996
--------------- -------------- ---------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ............... $ 8,524,010 2,645,157 22,942,876 (147,796) 1,165,729
Net realized gain (loss) ...................... 8,830,544 (899,446) 1,510,464 (242,895) (68,248)
Unrealized appreciation
(depreciation) on investments ............... 35,731,485 21,611,136 (16,204,375) 987,049 (995,503)
------------- ---------- ----------- -------- ---------
Increase in net assets from operations ......... 53,086,039 23,356,847 8,248,965 596,358 101,978
------------- ---------- ----------- -------- ---------
From capital transactions:
Net premiums .................................. 53,735,217 40,575,050 18,225,715 1,053,538 3,734,757
Transfers (to) from the general
account of Life of Virginia:
Death benefits .............................. (1,018,619) (1,735,027) (77,864) (64,230) (76,802)
Surrenders .................................. (11,869,972) (3,415,596) (1,079,082) (666,510) (492,750)
Administrative expense (note 3) ............. (193,962) (102,362) (45,091) (18,501) (21,731)
Transfer gain (loss) and transfer
fees ....................................... 623,320 (4,503) 7,463 (36,688) 8,420
Transfers (to) from the Guarantee
Account (note 1) ............................ 40,155,936 14,747,561 3,139,208 827,432 135,548
Interfund transfers ........................... 20,883,117 24,135,903 5,665,381 (14,821,369) (65,339)
------------- ---------- ----------- ----------- ---------
Increase (decrease) in net assets from
capital transactions .......................... 102,315,037 74,201,026 25,835,730 (13,726,328) 3,222,103
------------- ---------- ----------- ----------- ---------
Increase (decrease) in net assets .............. 155,401,076 97,557,873 34,084,695 (13,129,970) 3,324,081
Net assets at beginning of year ................ 153,426,324 55,868,451 21,783,756 13,129,970 9,805,889
------------- ---------- ----------- ----------- ---------
Net assets at end of year ...................... $ 308,827,400 153,426,324 55,868,451 -- 13,129,970
============= =========== =========== =========== ==========
</TABLE>
A-22
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------
MONEY MARKET FUND
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ....................... $ 6,916,677 4,205,545 4,224,053
Net realized gain (loss) .......... 545,381 (4,421,730) 1,686,452
Unrealized appreciation
(depreciation) on
investments ..................... (545,381) 4,383,879 (2,984,484)
------------- ---------- ----------
Increase in net assets from
operations ........................ 6,916,677 4,167,694 2,926,021
------------- ---------- ----------
From capital transactions:
Net premiums ...................... 103,629,024 107,140,555 153,728,177
Transfers (to) from the
general account of Life of
Virginia:
Death benefits .................. (4,961,886) (1,753,311) (781,386)
Surrenders ...................... (46,255,514) (18,383,973) (8,255,412)
Administrative expense
(note 3) ....................... (222,910) (134,339) (78,769)
Transfer gain (loss) and
transfer fees .................. 6,222,666 (130,614) 28,173
Transfers (to) from the
Guarantee Account
(note 1) ........................ 24,299,736 10,195,112 4,298,099
Interfund transfers ............... 5,214,444 (67,593,593) (93,981,321)
------------- ----------- -----------
Increase (decrease) in net assets
from capital transactions ......... 87,925,560 29,339,837 54,957,561
------------- ----------- -----------
Increase (decrease) in net
assets ............................ 94,842,237 33,507,531 57,883,582
Net assets at beginning of year..... 123,694,704 90,187,173 2,200,980
------------- ----------- -----------
Net assets at end of year .......... $ 218,536,941 123,694,704 60,084,562
============= =========== ===========
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------
TOTAL RETURN FUND
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ....................... 2,668,826 5,602,393 8,962,291
Net realized gain (loss) .......... (144,205) (454,827) 614,446
Unrealized appreciation
(depreciation) on
investments ..................... 5,408,858 657,828 (6,827,262)
--------- --------- ----------
Increase in net assets from
operations ........................ 7,933,479 5,805,394 2,749,475
--------- --------- ----------
From capital transactions:
Net premiums ...................... 7,103,374 5,641,626 8,515,814
Transfers (to) from the
general account of Life of
Virginia:
Death benefits .................. (336,462) (271,179) (153,153)
Surrenders ...................... (3,264,071) (2,558,265) (946,894)
Administrative expense
(note 3) ....................... (63,853) (60,731) (51,588)
Transfer gain (loss) and
transfer fees .................. 76,515 (15,082) (69,616)
Transfers (to) from the
Guarantee Account
(note 1) ........................ 9,157,868 2,622,768 919,901
Interfund transfers ............... 974,377 (231,875) 75,151
---------- ---------- ----------
Increase (decrease) in net assets
from capital transactions ......... 13,647,748 5,127,262 8,289,615
---------- ---------- ----------
Increase (decrease) in net
assets ............................ 21,581,227 10,932,656 11,039,090
Net assets at beginning of year..... 44,527,117 33,594,461 22,555,371
---------- ---------- ----------
Net assets at end of year .......... 66,108,344 44,527,117 33,594,461
========== ========== ==========
</TABLE>
A-23
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND REAL ESTATE SECURITIES FUND
--------------------------------------------- --------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997
--------------- --------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .................. $ 1,294,582 2,572,712 999,110 3,136,084 5,164,666
Net realized gain (loss) ............... 441,842 665,649 86,537 (878,569) 2,710,582
Unrealized appreciation
(depreciation) on
investments .......................... 2,296,938 (1,565,382) (11,119) (12,908,191) (1,305,117)
------------ ---------- ------- ----------- ----------
Increase (decrease) in net assets
from operations ........................ 4,033,362 1,672,979 1,074,528 (10,650,676) 6,570,131
------------ ---------- --------- ----------- ----------
Net premiums ........................... 985,487 1,854,537 2,563,735 5,008,291 10,679,221
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (49,268) (2,360) (3,522) (182,572) (18,462)
Surrenders ........................... (558,600) (349,063) (103,501) (1,142,178) (654,786)
Administrative expense
(note 3) ............................ (13,254) (10,458) (6,060) (30,467) (19,846)
Transfer gain and transfer
fees ................................ (258,988) 49,348 (92,027) (443,138) 122,915
Capital contribution ................. -- -- 10,925,561 -- --
Transfers from the Guarantee
Account (note 1) ..................... 1,469,927 1,095,648 557,466 6,836,059 4,443,497
Interfund transfers .................... (1,665,448) 664,758 1,263,184 (5,533,571) 5,849,780
------------ ---------- ---------- ----------- ----------
Increase (decrease) in net assets
from capital transactions .............. (90,144) 3,302,410 15,104,836 4,512,424 20,402,319
------------ ---------- ---------- ----------- ----------
Increase (decrease) in net assets ....... 3,943,218 4,975,389 16,179,364 (6,138,252) 26,972,450
Net assets at beginning of
period ................................. 22,876,533 17,901,144 1,721,780 52,683,797 25,711,347
------------ ---------- ---------- ----------- ----------
Net assets at end of period ............. $ 26,819,751 22,876,533 17,901,144 46,545,545 52,683,797
============ ========== ========== =========== ==========
<CAPTION>
REAL ESTATE
SECURITIES
FUND
--------------
YEAR ENDED
DECEMBER 31,
1996
--------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income .................. 1,578,261
Net realized gain (loss) ............... 299,159
Unrealized appreciation
(depreciation) on
investments .......................... 4,059,521
---------
Increase (decrease) in net assets
from operations ........................ 5,936,941
---------
Net premiums ........................... 2,949,990
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... --
Surrenders ........................... (41,760)
Administrative expense
(note 3) ............................ (3,136)
Transfer gain and transfer
fees ................................ (107,856)
Capital contribution ................. --
Transfers from the Guarantee
Account (note 1) ..................... 539,647
Interfund transfers .................... 4,063,439
---------
Increase (decrease) in net assets
from capital transactions .............. 7,400,324
---------
Increase (decrease) in net assets ....... 13,337,265
Net assets at beginning of
period ................................. 12,374,082
----------
Net assets at end of period ............. 25,711,347
==========
</TABLE>
A-24
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------------------
GLOBAL INCOME FUND VALUE EQUITY FUND
----------------------------- -----------------------------
PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR MAY 1,
ENDED 1997 TO ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............. $ 526,279 $ 297,690 770,580 104,481
Net realized gain (loss) ........... 96,320 2,417 576,810 357,048
Unrealized appreciation
(depreciation) on
investments ...................... 337,555 (124,348) (292,099) 885,799
---------- ----------- -------- -------
Increase (decrease) in net assets
from operations .................... 960,154 175,759 1,055,291 1,347,328
---------- ----------- --------- ---------
Net premiums ....................... 600,772 198,123 9,579,320 3,244,942
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... -- -- (25,562) (1,960)
Surrenders ....................... (63,958) (5,701) (1,731,724) (75,503)
Administrative expense
(note 3) ........................ -- (209) (18,611) (1,938)
Transfer gain and transfer
fees ............................ (1,623) (472) 1,014,745 15,109
Capital contribution ............. 45,130 5,000,000 -- 3,000,000
Transfers from the Guarantee
Account (note 1) ................. 986,575 234,749 8,817,658 2,034,025
Interfund transfers ................ 1,028,376 513,049 4,550,014 6,338,005
---------- ----------- ---------- ---------
Increase (decrease) in net assets
from capital transactions .......... 2,595,272 5,939,539 22,185,840 14,552,680
---------- ----------- ---------- ----------
Increase (decrease) in net
assets ............................. 3,555,426 6,115,298 23,241,131 15,900,008
Net assets at beginning of
period ............................. 6,115,298 -- 15,900,008 --
---------- ----------- ---------- ----------
Net assets at end of period ......... $9,670,724 6,115,298 39,141,139 15,900,008
========== =========== ========== ==========
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------
U.S.
EQUITY
INCOME FUND FUND
----------------------------- -------------
PERIOD FROM PERIOD FROM
YEAR DECEMBER 12, MAY 4,
ENDED 1997 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............. $ 1,571,415 43,837 46,070
Net realized gain (loss) ........... 335,927 (6,710) 9,452
Unrealized appreciation
(depreciation) on
investments ...................... (245,492) (12,199) 153,754
--------- ------- -------
Increase (decrease) in net assets
from operations .................... 1,661,850 24,928 209,276
--------- ------- -------
Net premiums ....................... 1,921,255 19,521 864,801
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (145,003) -- --
Surrenders ....................... (1,961,475) (59,137) (8,236)
Administrative expense
(note 3) ........................ (34,884) (2,414) (374)
Transfer gain and transfer
fees ............................ (172,635) (467) 4,703
Capital contribution ............. -- -- --
Transfers from the Guarantee
Account (note 1) ................. 4,132,905 52,096 500,876
Interfund transfers ................ 6,911,104 21,976,333 629,934
---------- ---------- -------
Increase (decrease) in net assets
from capital transactions .......... 10,651,267 21,985,932 1,991,704
---------- ---------- ---------
Increase (decrease) in net
assets ............................. 12,313,117 22,010,860 2,200,980
Net assets at beginning of
period ............................. 22,010,860 -- --
---------- ---------- ---------
Net assets at end of period ......... 34,323,977 22,010,860 2,200,980
========== ========== =========
</TABLE>
A-25
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
------------------------------------------------------------------------------
MONEY FUND BOND FUND
------------------------------ -----------------------------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 11, DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1998 1997 1996
-------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ......................... $ 84,803 134,874 696,844 1,822,818 1,437,401
Net realized gain ............................. -- -- 557,479 187,695 106,242
Unrealized appreciation
(depreciation) on investments ............... -- -- 1,205,533 663,371 (442,815)
------------ ------- --------- --------- ---------
Increase in net assets from operations ......... 84,803 134,874 9,138,791 2,673,884 1,100,828
------------ ------- --------- --------- ---------
From capital transactions:
Net premiums .................................. 440 1,000 6,231,291 3,472,666 6,447,661
Transfers (to) from the general
account of Life of Virginia:
Death benefits .............................. -- (25,650) (410,382) (234,610) (255,232)
Surrenders .................................. -- (248,877) (4,432,337) (2,350,488) (1,174,644)
Administrative expense (note 3) ............. -- (7,741) (55,996) (53,814) (47,633)
Transfer gain (loss) and transfer
fees ....................................... (4,611) (6,711) (86,859) (12,509) 15,212
Transfers (to) from the Guarantee
Account (note 1) ............................ (9,897) (72,686) 8,638,887 3,535,189 1,424,034
Interfund transfers ........................... (2,736,806) (1,858,335) 10,655,917 1,076,424 1,248,636
------------ ---------- ---------- ---------- ----------
Increase (decrease) in net assets from
capital transactions .......................... (2,750,874) (2,219,000) 20,540,521 5,432,858 7,658,034
------------ ---------- ---------- ---------- ----------
Increase (decrease) in net assets .............. (2,666,071) (2,084,126) 29,679,312 8,106,742 8,758,862
Net assets at beginning of year ................ 2,750,676 4,834,802 39,745,683 31,638,941 22,880,079
------------ ---------- ---------- ---------- ----------
Net assets at end of year ...................... $ -- 2,750,676 69,424,995 39,745,683 31,638,941
============ ========== ========== ========== ==========
</TABLE>
A-26
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
--------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND GROWTH FUND
---------------------------------------------- ---------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
---------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............. $ 3,259,314 5,840,622 4,562,994 12,397,835 3,539,022 2,510,530
Net realized gain .................. 19,896,478 6,868,228 6,301,279 19,777,101 5,826,603 1,959,742
Unrealized appreciation
(depreciation) on
investments ...................... (396,149) 5,927,622 7,478,382 922,343 11,621,155 5,568,726
------------- --------- --------- ---------- ---------- ---------
Increase in net assets from
operations ......................... 22,759,643 18,636,472 18,342,655 33,097,279 20,986,780 10,038,998
------------- ---------- ---------- ---------- ---------- ----------
From capital transactions:
Net premiums ....................... 9,377,106 25,418,900 35,523,585 17,725,498 31,719,458 15,322,231
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (796,601) (450,528) (577,949) (894,216) (350,617) (246,052)
Surrenders ....................... (11,332,990) (7,755,383) (5,679,609) (9,299,680) (5,238,134) (1,802,707)
Administrative expense
(note 3) ........................ (280,687) (291,649) (237,053) (184,119) (138,883) (79,593)
Transfer gain (loss) and
transfer fees ................... (1,028,582) (53,714) (234,268) (3,882) (28,403) (9,390)
Transfers (to) from the
Guarantee Account
(note 1) ......................... 11,708,764 13,461,161 5,093,547 17,267,813 12,928,357 2,323,647
Interfund transfers ................ (20,227,182) 37,796 16,982,928 (7,357,815) 11,277,889 8,265,699
------------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets
from capital transactions .......... (12,580,172) 30,366,583 50,871,181 17,253,599 50,169,667 23,773,835
------------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net
assets ............................. 10,179,471 49,003,055 69,213,836 50,350,878 71,156,447 33,812,833
Net assets at beginning
of year ............................ 207,847,236 158,844,181 89,630,345 139,015,816 67,859,369 34,046,536
------------- ----------- ---------- ----------- ---------- ----------
Net assets at end of year ........... $ 218,026,707 207,847,236 158,844,181 189,366,694 139,015,816 67,859,369
============= =========== =========== =========== =========== ==========
</TABLE>
A-27
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
----------------------------------------------
HIGH INCOME FUND
---------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ................... $ 5,360,707 7,741,474 5,561,338
Net realized gain (loss) ................ (99,049) 1,298,149 763,575
Unrealized appreciation
(depreciation) on investments ......... (7,301,468) 2,089,422 2,079,281
------------- --------- ---------
Increase (decrease) in net assets from
operations .............................. (2,039,810) 11,129,045 8,404,194
------------- ---------- ---------
From capital transactions:
Net premiums ............................ 13,886,757 21,931,355 22,356,655
Transfers (to) from the general
account of Life of Virginia:
Death benefits ........................ (1,060,654) (689,590) (693,092)
Surrenders ............................ (10,775,891) (5,920,831) (2,655,530)
Administrative expense (note 3) ....... (189,819) (139,006) (100,320)
Transfer gain (loss) and transfer
fees ................................. (612,294) (112,330) (25,953)
Transfers (to) from the Guarantee
Account (note 1) ...................... 20,861,727 12,750,648 3,777,050
Interfund transfers ..................... (4,351,060) 23,573,698 9,730,803
------------- ---------- ----------
Increase in net assets from capital
transactions ............................ 17,758,766 51,393,944 32,389,613
------------- ---------- ----------
Increase in net assets ................... 15,718,956 62,522,989 40,793,807
Net assets at beginning of year .......... 148,285,626 85,762,637 44,968,830
------------- ---------- ----------
Net assets at end of year ................ $ 164,004,582 148,285,626 85,762,637
============= =========== ==========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
-----------------------------------------------
MULTIPLE STRATEGIES FUND
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ................... 3,799,319 3,690,801 2,771,962
Net realized gain (loss) ................ 1,712,582 1,435,981 701,256
Unrealized appreciation
(depreciation) on investments ......... (1,662,556) 4,025,778 2,786,345
---------- --------- ---------
Increase (decrease) in net assets from
operations .............................. 3,849,345 9,152,560 6,259,563
---------- --------- ---------
From capital transactions:
Net premiums ............................ 5,911,134 9,089,218 8,520,761
Transfers (to) from the general
account of Life of Virginia:
Death benefits ........................ (527,685) (332,263) (389,751)
Surrenders ............................ (6,115,145) (4,493,985) (2,097,537)
Administrative expense (note 3) ....... (118,214) (119,442) (104,392)
Transfer gain (loss) and transfer
fees ................................. (298,427) (8,995) (27,395)
Transfers (to) from the Guarantee
Account (note 1) ...................... 8,281,940 4,101,390 1,507,791
Interfund transfers ..................... (3,251,940) 516,158 198,943
---------- ---------- ----------
Increase in net assets from capital
transactions ............................ 3,881,663 8,752,081 7,608,420
---------- ---------- ----------
Increase in net assets ................... 7,731,008 17,904,641 13,867,983
Net assets at beginning of year .......... 72,023,553 54,118,912 40,250,929
---------- ---------- ----------
Net assets at end of year ................ 79,754,561 72,023,553 54,118,912
========== ========== ==========
</TABLE>
A-28
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------------------------------------------
MONEY MARKET PORTFOLIO HIGH INCOME PORTFOLIO
----------------------------------- ----------------------------------
PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ............................ $ 630,902 1,272,122 1,653,064 2,447,710
Net realized gain ................................ -- -- 4,673,705 479,085
Unrealized appreciation (depreciation) on
investments .................................... -- -- (2,814,608) 308,688
------------- --------- ---------- ---------
Increase in net assets from operations ............ 630,902 1,272,122 3,512,161 3,235,483
------------- --------- ---------- ---------
From capital transactions:
Net premiums ..................................... (28,472) 117,921 8,207 (248,987)
Transfers (to) from the general account of
Life of Virginia:
Death benefits ................................. (193,170) (458,667) (66,792) (33,131)
Surrenders ..................................... (1,206,916) (2,213,343) (2,281,288) (1,859,776)
Administrative expense (note 3) ................ (39,130) (65,257) (46,012) (54,571)
Transfer gain (loss) and transfer fees ......... 86,971 (204,381) (18,007) (14,545)
Transfers (to) from the Guarantee Account
(note 1) ....................................... (27,901) (661,457) (23,044) (109,624)
Interfund transfers .............................. (21,205,932) (23,959,305) (25,886,326) (7,008,575)
------------- ----------- ----------- ----------
Increase (decrease) in net assets from capital
transactions ..................................... (22,614,550) (27,444,489) (28,313,262) (9,329,209)
------------- ----------- ----------- ----------
Increase (decrease) in net assets ................. (21,983,648) (26,172,367) (24,801,101) (6,093,726)
Net assets at beginning of year ................... 21,983,648 48,156,015 24,801,101 30,894,827
------------- ----------- ----------- ----------
Net assets at end of year ......................... $ -- 21,983,648 -- 24,801,101
============= =========== =========== ==========
</TABLE>
A-29
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND (CONTINUED)
-------------------------------------------------
EQUITY-INCOME PORTFOLIO
-------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
---------------- ---------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............. $ 31,720,678 $ 35,860,097 8,352,818
Net realized gain .................. 40,058,923 15,417,526 9,394,625
Unrealized appreciation
(depreciation) on
investments ...................... (9,194,909) 65,899,106 23,601,942
------------- -------------- ----------
Increase in net assets from
operations ......................... 62,584,692 117,176,729 41,349,385
------------- -------------- ----------
From capital transactions:
Net premiums ....................... 46,774,052 78,673,490 91,217,558
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (3,800,272) (3,144,602) (2,317,929)
Surrenders ....................... (39,388,010) (22,544,378) (12,923,609)
Administrative expense
(note 3) ........................ (787,804) (744,663) (565,181)
Transfer gain (loss) and
transfer fees ................... (4,002,591) (156,609) (81,577)
Transfers (to) from the
Guarantee Account
(note 1) ......................... 49,734,168 34,236,802 14,669,920
Interfund transfers ................ (32,464,680) 4,787,401 12,688,430
------------- -------------- -----------
Increase (decrease) in net assets
from capital transactions .......... 16,064,863 91,107,441 102,687,612
------------- -------------- -----------
Increase (decrease) in net
assets ............................. 78,649,555 208,284,170 144,036,997
Net assets at beginning
of year ............................ 613,582,772 405,298,602 261,261,605
------------- -------------- -----------
Net assets at end of year ........... $ 692,232,327 613,582,772 405,298,602
============= ============== ===========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND (CONTINUED)
-----------------------------------------------
GROWTH PORTFOLIO
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............. 39,280,926 5,677,010 11,069,102
Net realized gain .................. 17,030,101 14,576,544 9,229,819
Unrealized appreciation
(depreciation) on
investments ...................... 58,825,099 34,536,532 6,990,625
---------- ---------- ----------
Increase in net assets from
operations ......................... 115,136,126 54,790,086 27,289,546
----------- ---------- ----------
From capital transactions:
Net premiums ....................... 15,214,848 19,742,111 40,351,417
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (2,191,698) (1,127,415) (1,395,457)
Surrenders ....................... (23,927,419) (15,488,583) (8,362,725)
Administrative expense
(note 3) ........................ (510,394) (502,085) (441,506)
Transfer gain (loss) and
transfer fees ................... (1,467,259) (84,076) (243,398)
Transfers (to) from the
Guarantee Account
(note 1) ......................... 9,000,692 9,277,787 7,334,280
Interfund transfers ................ (8,701,771) (3,139,585) (3,259,632)
----------- ----------- ----------
Increase (decrease) in net assets
from capital transactions .......... (12,583,001) 8,678,154 33,982,979
----------- ----------- ----------
Increase (decrease) in net
assets ............................. 102,553,125 63,468,240 61,272,525
Net assets at beginning
of year ............................ 315,013,607 251,545,367 190,272,842
----------- ----------- -----------
Net assets at end of year ........... 417,566,732 315,013,607 251,545,367
=========== =========== ===========
</TABLE>
A-30
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND (CONTINUED)
----------------------------------------------
OVERSEAS PORTFOLIO
----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) .......................... $ 7,055,630 7,902,090 1,063,898
Net realized gain ................... 12,998,779 6,802,686 2,693,770
Unrealized appreciation
(depreciation) on investments....... (6,292,784) (3,387,543) 7,585,836
------------- ---------- ---------
Increase in net assets from
operations .......................... 13,761,625 11,317,233 11,343,504
------------- ---------- ----------
From capital transactions:
Net premiums ........................ 1,843,855 5,009,263 11,020,984
Transfers (to) from the general
account of Life of Virginia:
Death benefits ..................... (439,740) (527,674) (528,522)
Surrenders ......................... (6,306,537) (5,102,924) (3,972,175)
Administrative expense
(note 3) ......................... (183,116) (220,173) (214,759)
Transfer gain (loss) and
transfer fees .................... (1,416,329) (38,435) (85,300)
Transfers (to) from Guarantee
Account (note 1) .................. 2,209,192 3,378,950 3,116,987
Interfund transfers ................. (14,310,296) (12,846,872) (4,620,473)
------------- ----------- ----------
Increase (decrease) in net assets
from capital transactions ........... (18,602,971) (10,347,865) 4,716,742
------------- ----------- ----------
Increase (decrease) in net assets .... (4,841,346) 969,368 16,060,246
Net assets at beginning of period .... 108,304,621 107,335,253 91,275,007
------------- ----------- ----------
Net assets at end of period .......... $ 103,463,275 108,304,621 107,335,253
============= =========== ===========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
-----------------------------------------------
ASSET MANAGER PORTFOLIO
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) .......................... 55,400,077 47,434,844 23,741,639
Net realized gain ................... 12,994,733 9,093,636 7,507,674
Unrealized appreciation
(depreciation) on investments....... (5,404,033) 24,430,304 23,008,153
---------- ---------- ----------
Increase in net assets from
operations .......................... 62,990,777 80,958,784 54,257,466
---------- ---------- ----------
From capital transactions:
Net premiums ........................ 10,264,331 12,956,133 15,580,792
Transfers (to) from the general
account of Life of Virginia:
Death benefits ..................... (2,712,196) (2,389,147) (3,090,108)
Surrenders ......................... (43,729,546) (26,860,066) (23,863,347)
Administrative expense
(note 3) ......................... (1,091,339) (1,170,300) (1,159,170)
Transfer gain (loss) and
transfer fees .................... (6,077,325) (5,281,252) (2,150,299)
Transfers (to) from Guarantee
Account (note 1) .................... 9,427,060 4,580,560 2,112,849
Interfund transfers ................. (12,459,422) (14,758,069) (31,512,425)
----------- ----------- -----------
Increase (decrease) in net assets
from capital transactions ........... (46,378,437) (32,922,141) (44,081,708)
----------- ----------- -----------
Increase (decrease) in net assets .... 16,612,340 48,036,643 10,175,758
Net assets at beginning of period .... 483,874,812 435,838,169 425,662,411
----------- ----------- -----------
Net assets at end of period .......... 500,487,152 483,874,812 435,838,169
=========== =========== ===========
</TABLE>
A-31
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND II (CONTINUED)
----------------------------------------------
CONTRAFUND PORTFOLIO
----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
---------------- -------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................... $ 10,673,505 2,084,354 (688,227)
Net realized gain .................... 14,314,697 9,468,307 2,738,082
Unrealized appreciation
(depreciation) on
investments ......................... 47,868,379 26,750,686 17,275,767
------------- ---------- ----------
Increase in net assets from
operations ........................... 72,856,581 38,303,347 19,325,622
------------- ---------- ----------
From capital transactions:
Net premiums ......................... 25,285,801 39,049,020 41,520,289
Transfers (to) from the general
account of Life of Virginia:
Death benefits ...................... (1,246,412) (778,781) (569,391)
Surrenders .......................... (13,148,361) (7,578,528) (3,409,236)
Administrative expense
(note 3) .......................... (296,892) (239,385) (139,550)
Transfer gain (loss) and
transfer fees ..................... (122,549) (1,813) (6,491)
Transfers (to) from Guarantee
Account (note 1) .................... 25,805,412 20,874,655 8,894,897
Interfund transfers .................. (7,547,010) 9,642,188 15,486,630
------------- ---------- ----------
Increase (decrease) in net assets
from capital transactions ............ 28,729,989 60,967,356 61,777,148
------------- ---------- ----------
Increase (decrease) in net assets ..... 101,586,570 99,270,703 81,102,770
Net assets at beginning
of period ............................ 242,137,396 142,866,693 61,763,923
------------- ----------- ----------
Net assets at end of period ........... $ 343,723,966 242,137,396 142,866,693
============= =========== ===========
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND II (CONTINUED)
----------------------------------------------------------
GROWTH & GROWTH
INCOME PORTFOLIO OPPORTUNITIES PORTFOLIO
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR MAY 1,
ENDED 1997 TO ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................... (317,406) (53,296) 498,381 (69,440)
Net realized gain .................... 983,225 103,153 378,467 67,071
Unrealized appreciation
(depreciation) on
investments ......................... 7,912,728 458,100 6,815,534 1,055,758
--------- ------- --------- ---------
Increase in net assets from
operations ........................... 8,578,547 507,957 7,692,382 1,053,389
--------- ------- --------- ---------
From capital transactions:
Net premiums ......................... 13,303,380 5,782,503 10,151,968 6,759,512
Transfers (to) from the general
account of Life of Virginia:
Death benefits ...................... (688,026) (2,062) (104,398) (11,218)
Surrenders .......................... (1,264,908) (116,741) (1,515,091) (178,411)
Administrative expense
(note 3) .......................... (29,641) (3,046) (29,463) (4,370)
Transfer gain (loss) and
transfer fees ..................... 732,615 358,955 483,076 734
Transfers (to) from Guarantee
Account (note 1) .................... 10,185,026 2,665,501 10,705,328 2,684,605
Interfund transfers .................. 10,322,368 6,515,155 9,164,481 6,783,534
---------- --------- ---------- ---------
Increase (decrease) in net assets
from capital transactions ............ 32,560,814 15,200,265 28,855,901 16,034,386
---------- ---------- ---------- ----------
Increase (decrease) in net assets ..... 41,139,361 15,708,222 36,548,283 17,087,775
Net assets at beginning
of period ............................ 15,708,222 -- 17,087,775 --
---------- ---------- ---------- ----------
Net assets at end of period ........... 56,847,583 15,708,222 53,636,058 17,087,775
========== ========== ========== ==========
</TABLE>
A-32
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
-------------------------------
BALANCED PORTFOLIO
-------------------------------
PERIOD YEAR
ENDED ENDED
DECEMBER 11, DECEMBER 31,
1997 1996
---------------- --------------
<S> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ..................... $ 1,655,053 4,845,109
Net realized gain (loss) .................. 5,097,861 419,822
Unrealized (depreciation) on
investments ............................. (2,501,835) (3,501,201)
-------------- ----------
Increase in net assets from operations ..... 4,251,079 1,763,730
-------------- ----------
From capital transactions:
Net premiums .............................. (6,001) --
Transfers (to) from the general
account of Life of Virginia:
Death benefits .......................... (126,435) (191,199)
Surrenders .............................. (2,675,228) (2,074,244)
Administrative expense (note 3) ......... (71,576) (82,124)
Transfer gain (loss) and transfer
fees ................................... (78,959) (12,205)
Capital contribution .................... (629,209) --
Transfers (to) from the Guarantee
Account (note 1) ........................ (185,078) (37,694)
Interfund transfers ....................... (31,241,057) (3,810,712)
-------------- ----------
Decrease in net assets from capital
transactions .............................. (35,013,543) (6,208,178)
-------------- ----------
Decrease in net assets ..................... (30,762,464) (4,444,448)
Net assets at beginning of year ............ 30,762,464 35,206,912
-------------- ----------
Net assets at end of year .................. $ -- 30,762,464
============== ==========
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
----------------------------------------------------------------
BOND PORTFOLIO GROWTH PORTFOLIO
------------------------------- --------------------------------
PERIOD YEAR PERIOD YEAR
ENDED ENDED ENDED ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996
---------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ..................... 450,958 1,079,940 770,860 1,006,044
Net realized gain (loss) .................. 12,018 (136,701) 2,304,768 315,046
Unrealized (depreciation) on
investments ............................. (23,525) (646,673) (880,241) (363,320)
------- --------- --------- ---------
Increase in net assets from operations ..... 439,451 296,566 2,195,387 957,770
------- --------- --------- ---------
From capital transactions:
Net premiums .............................. 1,800 -- 6,456 4,370
Transfers (to) from the general
account of Life of Virginia:
Death benefits .......................... (196,037) (225,838) (58,098) (56,431)
Surrenders .............................. (508,821) (366,908) (247,815) (415,296)
Administrative expense (note 3) ......... (15,911) (24,278) (22,353) (25,172)
Transfer gain (loss) and transfer
fees ................................... (11,476) (9,665) (2,057) (10,420)
Capital contribution .................... -- -- -- --
Transfers (to) from the Guarantee
Account (note 1) ........................ (86,454) (92,797) -- (14,970)
Interfund transfers ....................... (9,344,589) (5,700,964) (12,373,616) (3,652,818)
---------- ---------- ----------- ----------
Decrease in net assets from capital
transactions .............................. (10,161,488) (6,420,450) (12,697,483) (4,170,737)
----------- ---------- ----------- ----------
Decrease in net assets ..................... (9,722,037) (6,123,884) (10,502,096) (3,212,967)
Net assets at beginning of year ............ 9,722,037 15,845,921 10,502,096 13,715,063
----------- ---------- ----------- ----------
Net assets at end of year .................. -- 9,722,037 -- 10,502,096
=========== ========== =========== ==========
</TABLE>
A-33
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
------------------------------------------------------------------------------------------
AMERICAN LEADERS FUND II HIGH INCOMEBOND FUND II
-------------------------------------------- ---------------------------------------------
PERIOD FROM
MAY 6,
1996 TO
YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------------- -------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................ $ 2,154,168 (86) 3,974 650,799 827,322 491,956
Net realized gain .................. 1,333,508 544,140 29,680 901,146 630,351 31,769
Unrealized appreciation
(depreciation) on
investments ...................... 4,019,536 3,385,309 162,046 (615,798) 1,256,745 424,014
------------ --------- ------- -------- --------- -------
Increase in net assets from
operations ......................... 7,507,212 3,929,363 195,700 936,147 2,714,418 947,739
------------ --------- ------- -------- --------- -------
From capital transactions:
Net premiums ....................... 17,174,298 13,540,849 2,249,062 7,609,375 9,254,617 4,468,263
Transfers (to) from the
general account of
Life of Virginia:
Death benefits ................... (702,585) (91,917) -- (420,052) (120,443) (42,084)
Surrenders ....................... (2,256,129) (423,567) (28,376) (3,031,255) (861,128) (428,701)
Administrative expense
(note 3) ........................ (47,545) (11,789) (522) (34,940) (18,435) (5,233)
Transfer gain (loss) and
transfer fees ................... 404,576 791 4,221 650,014 (2,424) (43)
Transfers from the Guarantee
Account (note 1) ................. 15,132,233 4,966,466 146,563 12,815,682 4,882,888 670,397
Interfund transfers ................ 2,109,439 9,208,512 1,208,370 (1,253,689) 5,675,771 6,113,878
------------ ---------- --------- ---------- --------- ---------
Increase in net assets from
capital transactions ............... 31,814,287 27,189,345 3,579,318 16,335,135 18,810,846 10,776,477
------------ ---------- --------- ---------- ---------- ----------
Increase in net assets .............. 39,321,499 31,118,708 3,775,018 17,271,282 21,525,264 11,724,216
Net assets at beginning of
period ............................. 34,893,726 3,775,018 -- 35,195,347 13,670,083 1,945,867
------------ ---------- --------- ---------- ---------- ----------
Net assets at end of period ......... $ 74,215,225 34,893,726 3,775,018 52,466,629 35,195,347 13,670,083
============ ========== ========= ========== ========== ==========
</TABLE>
A-34
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES (CONTINUED)
UTILITY FUND II
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ............................... $ 1,659,412 719,879 523,302
Net realized gain ............................................. 1,730,044 731,431 336,527
Unrealized appreciation (depreciation) on investments ......... 1,205,055 4,302,272 1,113,241
Increase in net assets from operations ......................... 4,594,511 5,753,582 1,973,070
From capital transactions:
Net premiums .................................................. 5,300,423 3,510,754 7,032,730
Transfers (to) from the general account of Life of Virginia:
Death benefits .............................................. (295,533) (63,646) (172,666)
Surrenders .................................................. (1,872,219) (1,420,075) (708,499)
Administrative expense (note 3) ............................. (36,851) (32,050) (25,376)
Transfer gain (loss) and transfer fees ...................... (738,016) (1,043) 11,752
Transfers from the Guarantee Account (note 1) ................. 5,791,377 1,540,929 1,313,211
Interfund transfers ........................................... 2,670,259 (1,399,267) 830,436
Increase in net assets from capital transactions ............... 10,819,440 2,135,602 8,281,588
Increase in net assets ......................................... 15,413,951 7,889,184 10,254,658
Net assets at beginning of period .............................. 30,397,894 22,508,710 12,254,052
Net assets at end of period .................................... $45,811,845 30,397,894 22,508,710
</TABLE>
A-35
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALGER AMERICAN
-------------------------------------------------------------------------------------------
SMALL CAP PORTFOLIO GROWTH PORTFOLIO
--------------------------------------------- ---------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------------- -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................ $ 9,502,870 1,245,506 (308,795) 12,980,763 (282,901) 309,982
Net realized gain (loss) ........... 411,066 411,624 (122,299) 4,172,054 3,954,588 315,644
Unrealized appreciation
(depreciation) on
investments ...................... 2,406,527 4,016,910 (80,937) 20,408,775 8,095,163 2,224,353
------------ --------- -------- ---------- --------- ---------
Increase (decrease) in net assets
from operations .................... 12,320,463 5,674,040 (512,031) 37,561,592 11,766,850 2,849,979
------------ --------- -------- ---------- ---------- ---------
From capital transactions:
Net premiums ....................... 6,622,636 12,048,925 25,934,981 11,725,922 13,470,987 21,518,317
Transfers (to) from the
general account of
Life of Virginia:
Death benefits ................... (459,998) (296,448) (167,439) (663,235) (317,671) (22,815)
Surrenders ....................... (3,709,013) (1,974,869) (837,016) (5,345,156) (2,065,182) (539,265)
Administrative expense
(note 3) ........................ (83,804) (69,752) (32,819) (89,422) (68,206) (26,996)
Transfer gain (loss) and
transfer fees ................... 246,716 20,656 (18,410) (10,013) (390,379) (32,858)
Transfers from the Guarantee
Account (note 1) ................. 8,384,117 9,339,897 5,067,731 9,961,009 6,594,835 3,628,084
Interfund transfers ................ (2,794,548) 1,782,889 10,297,239 6,706,761 (1,557,814) 11,823,073
------------ ---------- ---------- ---------- ---------- ----------
Increase in net assets from
capital transactions ............... 8,206,106 20,851,298 40,244,267 22,285,866 15,666,570 36,347,540
------------ ---------- ---------- ---------- ---------- ----------
Increase in net assets .............. 20,526,569 26,525,338 39,732,236 59,847,458 27,433,420 39,197,519
Net assets at beginning of
period ............................. 73,827,690 47,302,352 7,570,116 72,153,813 44,720,393 5,522,874
------------ ---------- ---------- ---------- ---------- ----------
Net assets at end of period ......... $ 94,354,259 73,827,690 47,302,352 132,001,271 72,153,813 44,720,393
============ ========== ========== =========== ========== ==========
</TABLE>
A-36
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PBHG INSURANCE SERIES FUND
----------------------------------------------------------------
PBHG LARGE CAP PORTFOLIO PBHG GROWTH II PORTFOLIO
------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
YEAR MAY 1, YEAR MAY 1,
ENDED 1997 TO ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .......................... $ (106,500) (17,112) (119,244) (30,512)
Net realized gain (loss) ................................. 282,909 13,525 (281,878) 7,643
Unrealized appreciation (depreciation) on
investments ............................................ 2,025,080 149,898 1,029,558 (89,829)
--------- ------- --------- -------
Increase (decrease) in net assets from operations ......... 2,201,489 146,311 628,436 (112,698)
--------- ------- --------- --------
From capital transactions:
Net premiums ............................................. 2,342,871 1,239,113 1,855,144 3,502,382
Transfers (to) from the general account of
Life of Virginia:
Death benefits ......................................... (42,994) (715) (117,890) --
Surrenders ............................................. (588,848) (12,383) (409,105) (53,142)
Administrative expense (note 3) ........................ (7,464) (684) (8,868) (1,455)
Transfer gain (loss) and transfer fees ................. 40,495 865 27,528 787
Transfers from the Guarantee Account
(note 1) ............................................... 2,026,921 610,146 2,485,422 1,108,447
Interfund transfers ...................................... 1,290,849 2,735,614 (477,840) 2,507,619
--------- --------- --------- ---------
Increase in net assets from capital transactions .......... 5,061,830 4,571,956 3,354,391 7,064,638
--------- --------- --------- ---------
Increase in net assets .................................... 7,263,319 4,718,267 3,982,827 6,951,940
Net assets at beginning of period ......................... 4,718,267 -- 6,951,940 --
--------- --------- --------- ---------
Net assets at end of period ............................... $11,981,586 4,718,267 10,934,767 6,951,940
========== ========= ========== =========
</TABLE>
A-37
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------------------
AGGRESSIVE GROWTH PORTFOLIO
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
---------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................ $ (1,431,833) (1,187,720) (124,804)
Net realized gain .................. 11,413,034 6,675,700 3,422,984
Unrealized appreciation on
investments ...................... 24,333,274 5,540,954 109,555
------------ ---------- ---------
Increase in net assets from
operations ....................... 34,314,475 11,028,934 3,407,735
------------ ---------- ---------
Increase in net assets from
operations .........................
From capital transactions:
Net premiums ....................... 4,886,885 11,681,150 17,880,226
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (815,476) (427,386) (394,284)
Surrenders ....................... (5,681,643) (2,997,601) (2,851,517)
Administrative expense
(note 3) ........................ (120,730) (120,078) (112,813)
Transfer gain (loss) and
transfer fees ................... (352,260) (19,458) (40,003)
Transfers (to) from the
Guarantee Account
(note 1) ......................... 4,693,626 4,987,441 3,328,781
Interfund transfers ................ (8,460,504) (2,281,417) 8,025,078
------------ ---------- ----------
Increase (decrease) in net assets
from capital transactions .......... (5,850,102) 10,822,651 25,835,468
------------ ---------- ----------
Increase in net assets .............. 28,464,373 21,851,585 29,243,203
Net assets at beginning of year...... 105,815,122 83,963,537 54,720,334
------------ ---------- ----------
Net assets at end of year ........... $134,279,495 105,815,122 83,963,537
============ =========== ==========
<CAPTION>
JANUS ASPEN SERIES
----------------------------------------------
GROWTH PORTFOLIO
----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income
(expense) ........................ 13,670,171 3,288,014 1,820,512
Net realized gain .................. 11,096,226 9,346,395 4,286,543
Unrealized appreciation on
investments ...................... 56,452,101 23,212,981 11,457,707
---------- ---------- ----------
Increase in net assets from
operations ....................... 81,218,498 35,847,390 17,564,762
---------- ---------- ----------
Increase in net assets from
operations .........................
From capital transactions:
Net premiums ....................... 19,968,429 30,338,859 35,456,497
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (1,360,596) (1,849,634) (483,092)
Surrenders ....................... (11,799,421) (9,041,380) (3,747,509)
Administrative expense
(note 3) ........................ (317,146) (280,500) (199,595)
Transfer gain (loss) and
transfer fees ................... (691,664) (152,642) (208,664)
Transfers (to) from the
Guarantee Account
(note 1) ......................... 19,406,972 16,216,500 7,027,293
Interfund transfers ................ 3,890,833 1,293,752 11,381,396
----------- ---------- ----------
Increase (decrease) in net assets
from capital transactions .......... 29,097,407 36,524,955 49,226,326
----------- ---------- ----------
Increase in net assets .............. 110,315,905 72,372,345 66,791,088
Net assets at beginning of year...... 224,068,917 151,696,572 84,905,484
----------- ----------- ----------
Net assets at end of year ........... 334,384,822 224,068,917 151,696,572
=========== =========== ===========
</TABLE>
A-38
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------------
WORLDWIDE GROWTH PORTFOLIO
--------------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .................................... 11,456,841 834,801 676,021
Net realized gain .................................................. 46,111,510 11,585,008 5,069,677
Unrealized appreciation on investments ............................. 41,481,543 32,530,512 18,944,795
---------- ---------- ----------
Increase in net assets from operations ........................... 99,049,894 44,950,321 24,690,493
---------- ---------- ----------
Increase in net assets from operations ..............................
From capital transactions:
Net premiums ....................................................... 44,526,187 77,908,754 45,862,046
Transfers (to) from the general account of
Life of Virginia:
Death benefits ................................................... (1,373,901) (916,155) (407,146)
Surrenders ....................................................... (19,617,340) (9,754,795) (2,394,900)
Administrative expense (note 3) .................................. (469,515) (346,218) (172,873)
Transfer gain (loss) and transfer fees ........................... 125,152 (116,774) (183,599)
Transfers (to) from the Guarantee Account (note 1) ................. 41,574,483 30,845,279 8,313,366
Interfund transfers ................................................ (124,706) 25,144,972 42,049,450
----------- ---------- ----------
Increase (decrease) in net assets from capital transactions ......... 64,640,360 122,765,063 93,066,344
----------- ----------- ----------
Increase in net assets .............................................. 163,690,254 167,715,384 117,756,837
Net assets at beginning of year ..................................... 345,126,082 177,410,698 59,653,861
----------- ----------- -----------
Net assets at end of year ........................................... $ 508,816,336 345,126,082 177,410,698
============= =========== ===========
</TABLE>
A-39
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
---------------------------------------------
BALANCED PORTFOLIO
---------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .......... $ 3,905,178 931,355 170,096
Net realized gain ........................ 3,053,389 1,239,519 122,576
Unrealized appreciation on
investments ............................ 28,743,051 4,013,343 920,620
------------ --------- -------
Increase in net assets from operations..... 35,701,618 6,184,217 1,213,292
------------ --------- ---------
Net premiums ............................. 24,644,401 15,654,806 8,643,527
Transfers (to) from the general
account of Life of Virginia:
Death benefits ......................... (857,556) (98,529) (37,496)
Surrenders ............................. (9,165,787) (1,560,191) (271,087)
Administrative expense (note 3) ........ (138,515) (34,113) (7,301)
Transfer gain (loss) and transfer
fees .................................. 1,031,515 (11,920) 5,413
Transfer (to) from the Guarantee
Account (note 1) ....................... 24,485,481 6,551,408 1,091,622
Interfund transfers ...................... 21,236,757 34,492,843 3,850,513
------------ ---------- ---------
Increase in net assets from capital
transactions ............................. 61,236,296 54,994,304 13,275,191
------------ ---------- ----------
Increase in net assets .................... 96,937,914 61,178,521 14,488,483
Net assets at beginning of period ......... 77,638,235 16,459,714 1,971,231
------------ ---------- ----------
$174,576,149 77,638,235 16,459,714
============ ========== ==========
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
------------------------------------------
FLEXIBLE INCOME PORTFOLIO
------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------- -------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .......... 1,325,347 578,869 248,378
Net realized gain ........................ 222,001 86,470 4,524
Unrealized appreciation on
investments ............................ 30,008 269,390 68,898
--------- ------- -------
Increase in net assets from operations..... 1,577,356 934,729 321,800
--------- ------- -------
Net premiums ............................. 4,066,867 3,465,715 2,591,080
Transfers (to) from the general
account of Life of Virginia:
Death benefits ......................... (36,188) (55,866) --
Surrenders ............................. (813,459) (425,891) (29,518)
Administrative expense (note 3) ........ (21,644) (8,897) (2,717)
Transfer gain (loss) and transfer
fees .................................. 453,024 1,786 (413)
Transfer (to) from the Guarantee
Account (note 1) ....................... 7,043,148 3,010,637 345,536
Interfund transfers ...................... 6,439,490 2,406,219 992,086
--------- --------- ---------
Increase in net assets from capital
transactions ............................. 17,131,238 8,393,703 3,896,054
---------- --------- ---------
Increase in net assets .................... 18,708,594 9,328,432 4,217,854
Net assets at beginning of period ......... 14,336,751 5,008,319 790,465
---------- --------- ---------
33,045,345 14,336,751 5,008,319
========== ========== =========
</TABLE>
A-40
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------------------------------------
CAPITAL
INTERNATIONAL GROWTH PORTFOLIO APPRECIATION PORTFOLIO
--------------------------------------------- ----------------------------
PERIOD FROM PERIOD FROM
MAY 3, YEAR MAY 2,
1996 TO ENDED 1997 TO
YEAR ENDED DECEMBER 31 DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997
--------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .................... $ 453,555 (167,651) 9,055 (129,163) (1,544)
Net realized gain .................................. 7,205,182 3,329,942 187,391 336,728 31,894
Unrealized appreciation on investments ............. 1,486,427 1,235,644 586,615 7,532,890 12,182
------------ --------- ------- --------- ------
Increase in net assets from operations ............. 9,145,164 4,397,935 783,061 7,740,455 42,532
------------ --------- ------- --------- ------
Net premiums ....................................... 7,538,624 19,031,016 4,654,797 8,764,540 720,613
Transfers (to) from the general account of
Life of Virginia:
Death benefits ................................... (372,667) (197,552) -- (52,380) --
Surrenders ....................................... (2,368,354) (1,293,141) (51,116) (765,563) (37,177)
Administrative expense (note 3) .................. (70,684) (39,068) (3,441) (11,745) (826)
Transfer gain (loss) and transfer fees ........... 74,891 24,476 3,766 485,206 (33,752)
Transfer (to) from the Guarantee Account
(note 1) ......................................... 10,288,178 8,279,728 935,954 4,797,081 446,414
Interfund transfers ................................ (1,419,705) 10,950,154 7,189,157 15,456,302 1,531,771
------------ ---------- --------- ---------- ---------
Increase in net assets from capital transactions .... 13,670,283 36,755,613 12,729,117 28,673,441 2,627,043
------------ ---------- ---------- ---------- ---------
Increase in net assets .............................. 22,815,447 41,153,548 13,512,178 36,413,896 2,669,575
Net assets at beginning of period ................... 54,665,726 13,512,178 -- 2,669,575 --
------------ ---------- ---------- ---------- ---------
$ 77,481,173 54,665,726 13,512,178 39,083,471 2,669,575
============ ========== ========== ========== =========
</TABLE>
A-41
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS SALOMON BROTHERS
VARIABLE INSURANCE VARIABLE SERIES
TRUST FUND FUND
----------------------------- -------------------------------------------
GROWTH AND MID CAP STRATEGIC TOTAL
INCOME EQUITY BOND INVESTORS RETURN
FUND FUND FUND FUND FUND
-------------- -------------- -------------- -------------- -------------
PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM PERIOD FROM
MAY 12, MAY 8, OCTOBER 22, NOVEMBER 27, OCTOBER 30,
1998 TO 1998 TO 1998 TO 1998 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998 1998 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ............................... $ 20,010 12,176 5,857 40 5,798
Net realized gain (loss) ............................ (32,043) (72,641) 322 -- 1
Unrealized appreciation (depreciation) on
investments ....................................... 40,081 12,789 (4,823) 321 (2,958)
---------- ------- ------ ---- ------
Increase (decrease) in net assets from operations..... 28,048 (47,676) 1,356 361 2,841
---------- ------- ------ ---- ------
From capital transactions:
Net premiums ........................................ 1,873,044 1,653,452 19,355 9,900 168,401
Transfers (to) from the general account of
Life of Virginia:
Death benefits ....................................
Surrenders ........................................ (42,593) (42,773) -- -- (16)
Administrative expense (note 3) ................... (447) (527) (17) (3) --
Transfer gain (loss) and transfer fees ............ 89,687 (48,872) (48) 123 140
Transfer (to) from the Guarantee Account
(note 1) .......................................... 1,085,095 1,327,515 14,903 606 14,269
Interfund transfers ................................. 1,229,734 782,072 96,473 -- 158,086
---------- --------- ------ ------- -------
Increase in net assets from capital transactions ..... 4,234,520 3,670,867 130,666 10,626 340,880
---------- --------- ------- ------- -------
Increase in net assets ............................... 4,262,568 3,623,191 132,022 10,987 343,721
Net assets at beginning of period .................... -- -- -- -- --
---------- --------- ------- ------- -------
Net assets at end of period .......................... $4,262,568 3,623,191 132,022 10,987 343,721
========== ========= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
A-42
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) DESCRIPTION OF ENTITY
Life of Virginia Separate Account 4 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 Company. The remaining 20% is owned by GE Financial Assurance
Holdings, Inc. General Electric Capital Assurance Company and GE Financial
Assurance Holdings, Inc. are indirect, 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 October 1998, three new investment subdivisions were added to the
Account for both Type I and Type II policies (see note 2). The Investors Fund,
Strategic Bond Fund, and the Total Return Fund each invest solely in a
designated portfolio of the Salomon Brothers Variable Series Fund. All
designated portfolios described above are series type mutual funds.
In May 1998, three new investment subdivisions were added to the Account,
for both Type I and Type II policies. The U.S. Equity Fund invests solely in a
designated portfolio of the GE Investments Funds, Inc. The Mid Cap Equity and
Growth and Income Funds each invest solely in a designated portfolio of the
Goldman Sachs Variable Insurance Trust Fund. All designated portfolios
described above are series type mutual funds.
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.
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:
<TABLE>
<CAPTION>
BEFORE THE SUBSTITUTION AFTER THE SUBSTITUTION
<S> <C>
Shares of Money Market Portfolio -- Variable Shares of Money Market Fund -- GE Investments
Insurance Products Fund Funds, Inc.
Shares of Money Fund -- Oppenheimer Variable Shares of Money Market Fund -- GE Investments
Account Funds Funds, Inc.
Shares of Bond Portfolio -- Neuberger & Berman Shares of Income Fund -- GE Investments Funds, Inc.
Advisers Management Trust
Shares of High Income Portfolio -- Variable Shares of High Income Fund -- Oppenheimer Variable
Insurance Products Fund Account Funds
Shares of Growth Portfolio -- Neuberger & Berman Shares of Growth Portfolio -- Variable Insurance
Advisers Management Trust Products Fund
Shares of Balanced Portfolio -- Neuberger & Shares of Balanced Portfolio -- Janus Aspen Series
Berman Advisers Management Trust
</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.
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
A-43
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(1) DESCRIPTION OF ENTITY -- Continued
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.
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.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) 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.
Effective on or after February 2, 1999 Type III units will be sold under policy
form P1152.
(B) 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 year or period ended December 31, 1998 were:
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- ------------------------------------- ---------------- ----------------
<S> <C> <C>
GE Investment Funds, Inc.:
S&P 500 Index ..................... $ 193,261,666 83,496,621
Money Market ...................... 1,701,557,815 1,613,202,928
Total Return ...................... 26,506,347 10,123,616
International Equity .............. 18,787,547 16,652,515
Real Estate Securities ............ 23,523,854 15,842,661
Global Income ..................... 5,328,295 1,861,939
Value Equity ...................... 36,535,340 13,367,625
Income ............................ 22,275,922 10,257,184
U.S. Equity ....................... 2,590,882 619,346
Oppenheimer Variable Account Funds:
Bond .............................. 39,193,414 18,132,323
Capital Appreciation .............. 210,297,462 219,809,641
Growth ............................ 181,186,893 150,922,416
High Income ....................... 83,189,744 59,635,187
Multiple Strategies ............... 26,261,850 18,472,877
Variable Insurance Products Fund:
Equity-Income ..................... 313,726,699 264,067,806
Growth ............................ 108,443,495 81,040,342
Overseas .......................... 438,953,070 443,302,750
Variable Insurance Products Fund II:
Asset Manager ..................... 113,236,992 104,285,552
Contrafund ........................ 117,285,371 77,197,982
</TABLE>
A-44
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- --------------------------------------------- -------------- --------------
<S> <C> <C>
Variable Insurance Products Fund III:
Growth & Income ........................... $ 50,925,747 18,711,891
Growth Opportunities ...................... 37,316,604 8,146,041
Federated Insurance Series:
American Leaders Fund II .................. 54,772,449 20,590,197
High Income Bond Fund II .................. 58,149,198 41,800,853
Utility Fund II ........................... 24,432,674 11,930,573
The Alger American Fund:
Small Cap ................................. 201,507,490 183,477,163
Growth .................................... 71,107,311 36,713,398
PBHG Insurance Series Fund, Inc.:
PBHG Large Cap Growth ..................... 9,540,607 4,578,565
PBHG Growth II ............................ 9,729,001 6,287,519
Janus Aspen Series:
Aggressive Growth ......................... 84,770,544 91,715,895
Growth .................................... 93,618,465 50,237,631
Worldwide Growth .......................... 300,106,080 221,933,327
Balanced .................................. 93,484,668 29,012,283
Flexible Income ........................... 27,608,056 9,290,765
International Growth ...................... 173,185,303 162,321,859
Capital Appreciation ...................... 38,542,550 10,997,547
Goldman Sachs Variable Insurance Trust Fund:
Growth and Income ......................... 4,676,147 481,640
Mid Cap Equity ............................ 5,145,437 1,409,093
Salomon Brothers Variable Series Fund:
Strategic Bond ............................ 210,700 80,107
Investors ................................. 10,629 3
Total Return .............................. 341,040 171
</TABLE>
A-45
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(C) 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, 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------------------------------------
S&P 500 GOVERNMENT MONEY TOTAL INTERNATIONAL
INDEX SECURITIES MARKET RETURN EQUITY
FUND FUND FUND FUND FUND
TYPE I UNITS ------------- ------------ --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1995 .................... 479,021 428,950 893,974 745,501 115,562
------- ------- ------- ------- -------
Net premiums ............................................. 34,082 36,100 706,581 33,745 22,527
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)
Administrative expenses ................................ (1,347) (1,204) (4,925) (2,175) (446)
Transfers (to)/from the Guarantee Account ................ 37,400 4,534 358,505 1,905 22,249
Interfund transfers ...................................... 54,702 62,264 1,023,952 (32,962) 52,528
------- ------- --------- ------- -------
Net increase (decrease) in units from capital transactions 101,236 75,647 1,655,185 (37,436) 91,850
------- ------- --------- ------- -------
Units outstanding at December 31, 1996 .................... 580,257 504,597 2,549,159 708,065 207,412
------- ------- --------- ------- -------
Net premiums ............................................. 43,467 2,027 273,183 24,404 3,946
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) (12,742)
Administrative expenses ................................ (1,886) (938) (6,382) (1,805) (522)
Transfers (to)/from the Guarantee Account ................ 41,669 9,540 304,035 5,882 18,965
Interfund transfers ...................................... 292,720 (484,051) 1,254,694 (42,593) (35,529)
------- -------- --------- ------- -------
Net increase (decrease) in units from capital transactions 338,590 (504,597) 963,101 (76,237) (25,882)
------- -------- --------- ------- -------
Units outstanding at December 31, 1997 .................... 918,847 -- 3,512,260 631,828 181,530
------- -------- --------- ------- -------
Net premiums ............................................. 43,692 -- 3,088,601 8,156 37,608
Transfers (to) from the general account of Life
of Virginia:
Death benefits ......................................... (4,853) -- (89,832) (2,466) (463)
Surrenders ............................................. (75,788) -- (2,689,646) (56,739) (24,253)
Cost of insurance ...................................... (2,222) -- (13,914) (1,299) (767)
Transfers (to) from the Guarantee Account ................ 44,702 -- 269,329 8,553 14,103
Interfund transfers ...................................... 172,435 -- 1,145,551 (3,122) (46,225)
------- -------- ---------- ------- -------
Net increase (decrease) in units from capital transactions 177,966 -- 1,710,089 (46,917) (19,997)
------- -------- ---------- ------- -------
Units outstanding at December 31, 1998 .................... 1,096,813 -- 5,222,349 584,911 161,533
========= ======== ========== ======= =======
</TABLE>
A-46
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
---------------------------------------------------------------
REAL ESTATE GLOBAL U.S.
SECURITIES INCOME VALUE EQUITY INCOME EQUITY
FUND FUND FUND FUND FUND
TYPE I UNITS ------------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1995 ...................... 23,643 -- -- -- --
------ -- -- -- --
Net premiums ............................................... 14,587 -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... (1,361) -- -- -- --
Administrative expenses .................................. (192) -- -- -- --
Transfers (to)/from the Guarantee Account .................. 21,124 -- -- -- --
Interfund transfers ........................................ 147,118 -- -- -- --
------- -- -- -- --
Net increase (decrease) in units from capital transactions .. 181,276 -- -- -- --
------- -- -- -- --
Units outstanding at December 31, 1996 ...................... 204,919 -- -- -- --
------- -- -- -- --
Net premiums ............................................... 27,070 392 11,097 595 --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... (14,199) (72) (731) (5,500) --
Administrative expenses .................................. (719) (12) (128) (199) --
Transfers (to)/from the Guarantee Account .................. 26,266 3,303 12,467 -- --
Interfund transfers ........................................ 110,113 9,339 154,506 1,300,742 --
------- ----- ------- --------- --
Net increase (decrease) in units from capital transactions .. 148,531 12,950 177,211 1,295,638 --
------- ------ ------- --------- --
Units outstanding at December 31, 1997 ...................... 353,450 12,950 177,211 1,295,638 --
------- ------ ------- --------- --
Net premiums ............................................... 139,356 3,542 73,340 14,672 2,951
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (1,816) -- (261) (5,419) --
Surrenders ............................................... (85,757) (3,547) (33,659) (93,554) (67)
Cost of insurance ........................................ (3,200) (80) (1,036) (1,780) (24)
Transfers (to) from the Guarantee Account .................. 112,800 8,901 54,595 34,085 660
Interfund transfers ........................................ (198,141) 24,866 115,186 89,003 22,607
-------- ------ ------- --------- ------
Net increase (decrease) in units from capital transactions .. (36,758) 33,682 208,165 37,007 26,127
-------- ------ ------- --------- ------
Units outstanding at December 31, 1998 ...................... 316,692 46,632 385,376 1,332,645 26,127
======== ====== ======= ========= ======
</TABLE>
A-47
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
----------------------------------------
CAPITAL
MONEY BOND APPRECIATION
FUND FUND FUND
TYPE I UNITS ------------ ------------ --------------
<S> <C> <C> <C>
Units outstanding at December 31, 1995 .......... 282,462 952,700 2,647,993
------- ------- ---------
Net premiums ................................... -- (4,744) (181,755)
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (1,782) 2,016 44,441
Surrenders ................................... (16,283) 7,728 332,700
Administrative expenses ...................... (531) 407 14,718
Transfers (to)/from the Guarantee Account ...... (4,896) (7,110) (185,173)
Interfund transfers ............................ (96,465) (9,728) 53,131
------- ------- ---------
Net increase (decrease) in units from capital
transactions ................................... (119,957) (11,431) 78,062
-------- ------- ---------
Units outstanding at December 31, 1996 .......... 162,505 941,269 2,726,055
-------- ------- ---------
Net premiums ................................... -- 12,729 48,378
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... -- (4,708) (2,476)
Surrenders ................................... -- (114,775) (146,760)
Administrative expenses ...................... (298) (2,868) (6,721)
Transfers (to)/from the Guarantee Account ...... -- 30,993 33,837
Interfund transfers ............................ (156,841) 66,990 (60,894)
-------- -------- ---------
Net increase (decrease) in units from capital
transactions ................................... (157,139) (11,639) (134,636)
-------- -------- ---------
Units outstanding at December 31, 1997 .......... -- 929,630 2,591,419
-------- -------- ---------
Net premiums ................................... 74,703 19,338
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... -- (15,395) (5,238)
Surrenders ................................... -- (407,204) (170,429)
Cost of insurance ............................ -- (5,618) (5,190)
Transfers (to) from the Guarantee Account ...... -- 81,767 15,924
Interfund transfers ............................ -- 257,976 (101,296)
-------- -------- ---------
Net increase (decrease) in units from capital
transactions ................................... -- (13,771) (246,891)
-------- -------- ---------
Units outstanding at December 31, 1998 .......... -- 915,859 2,344,528
======== ======== =========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------
HIGH MULTIPLE
GROWTH INCOME STRATEGIES
FUND FUND FUND
TYPE I UNITS ------------- ------------- -------------
<S> <C> <C> <C>
Units outstanding at December 31, 1995 .......... 986,685 1,263,712 1,762,762
------- --------- ---------
Net premiums ................................... 267,359 15,693 26,028
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (29,174) (411) (15,299)
Surrenders ................................... (364,042) (23,047) (88,160)
Administrative expenses ...................... (16,121) (1,163) (4,615)
Transfers (to)/from the Guarantee Account ...... 105,286 13,792 26,304
Interfund transfers ............................ 240,629 89,651 (66,358)
-------- --------- ---------
Net increase (decrease) in units from capital
transactions ................................... 203,937 94,515 (122,100)
-------- --------- ---------
Units outstanding at December 31, 1996 .......... 1,190,622 1,358,227 1,640,662
--------- --------- ---------
Net premiums ................................... 50,650 44,846 26,455
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (1,990) (6,846) (7,589)
Surrenders ................................... (99,247) (87,976) (127,118)
Administrative expenses ...................... (2,955) (3,299) (4,137)
Transfers (to)/from the Guarantee Account ...... 40,477 54,141 17,555
Interfund transfers ............................ 114,256 510,750 7,721
--------- --------- ---------
Net increase (decrease) in units from capital
transactions ................................... 101,191 511,616 (87,113)
--------- --------- ---------
Units outstanding at December 31, 1997 .......... 1,291,813 1,869,843 1,553,549
--------- --------- ---------
Net premiums ................................... 34,584 31,959 40,822
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (2,748) (10,837) (8,380)
Surrenders ................................... (110,751) (182,095) (161,263)
Cost of insurance ............................ (2,659) (4,385) (3,584)
Transfers (to) from the Guarantee Account ...... 19,698 51,660 19,533
Interfund transfers ............................ (56,877) (97,711) (96,211)
--------- --------- ---------
Net increase (decrease) in units from capital
transactions ................................... (118,753) (211,409) (209,083)
--------- --------- ---------
Units outstanding at December 31, 1998 .......... 1,173,060 1,658,434 1,344,466
========= ========= =========
</TABLE>
A-48
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------------------------------------------
MONEY HIGH
MARKET INCOME EQUITY-INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
TYPE I UNITS --------------- ------------- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1995 ................ 2,433,065 958,295 6,942,107 5,187,186 4,508,746
--------- ------- --------- --------- ---------
Net premiums ......................................... 8,114 (11,013) 209,607 133,676 102,472
Transfers (to) from the general account of Life of
Virginia:
Death benefits ..................................... (26,867) -- (39,084) (25,152) (17,537)
Surrenders ......................................... (136,342) (64,247) (314,228) (232,300) (188,428)
Administrative expenses ............................ (4,247) (2,193) (16,695) (13,593) (11,116)
Transfers (to)/from the Guarantee Account ............ (46,251) (1,584) 129,570 60,757 48,453
Interfund transfers .................................. (1,024,299) (147,328) (63,823) (278,909) (373,467)
---------- -------- --------- --------- ---------
Net increase (decrease) in units from capital
transactions ......................................... (1,229,892) (226,365) (94,653) (355,521) (439,623)
---------- -------- --------- --------- ---------
Units outstanding at December 31, 1996 ................ 1,203,173 731,930 6,847,454 4,831,665 4,069,123
---------- -------- --------- --------- ---------
Net premiums ......................................... (2,769) -- 132,909 46,481 33,637
Transfers (to) from the general account of Life of
Virginia:
Death benefits ..................................... (3,458) (2,224) (25,251) (14,556) (15,035)
Surrenders ......................................... (72,594) (65,456) (376,813) (325,620) (189,716)
Administrative expenses ............................ (2,380) (1,503) (17,119) (12,146) (9,227)
Transfers (to)/from the Guarantee Account ............ (1,822) (257) 81,689 26,348 10,283
Interfund transfers .................................. (1,110,150) (662,490) (53,531) (84,347) (500,805)
---------- -------- --------- --------- ---------
Net increase (decrease) in units from capital
transactions ......................................... (1,193,173) (731,930) (258,116) (363,840) (670,863)
---------- -------- --------- --------- ---------
Units outstanding at December 31, 1997 ................ -- -- 6,589,338 4,467,825 3,398,260
---------- -------- --------- --------- ---------
Net premiums ......................................... -- -- 92,608 28,017 20,092
Transfers (to) from the general account of Life of
Virginia:
Death benefits ..................................... -- -- (21,942) (20,703) (8,411)
Surrenders ......................................... -- -- (584,254) (406,572) (201,390)
Cost of insurance .................................. -- -- (14,640) (9,624) (6,558)
Transfers (to) from the Guarantee Account ............ -- -- 51,832 6,585 16,016
Interfund transfers .................................. -- -- (359,182) (96,107) (404,695)
---------- -------- --------- --------- ---------
Net increase (decrease) in units from capital
transactions ......................................... -- -- (835,578) (498,404) (584,946)
---------- -------- --------- --------- ---------
Units outstanding at December 31, 1998 ................ -- -- 5,753,760 3,969,421 2,813,314
========== ======== ========= ========= =========
</TABLE>
A-49
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS VARIABLE INSURANCE PRODUCTS
FUND II FUND III
------------------------------- ----------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
TYPE I UNITS --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Units outstanding at December 31, 1995 ............. 21,993,362 2,434,885 -- --
---------- --------- -- --
Net premiums ...................................... 164,394 191,853 -- --
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (142,857) (14,740) -- --
Surrenders ...................................... (1,189,857) (156,723) -- --
Administrative expenses ......................... (60,017) (7,215) -- --
Transfers (to)/from the Guarantee Account ......... (9,338) 168,994 -- --
Interfund transfers ............................... (1,775,712) 480,447 -- --
---------- --------- -- --
Net increase (decrease) in units from capital
transactions ...................................... (3,013,387) 662,616 -- --
---------- --------- -- --
Units outstanding at December 31, 1996 ............. 18,979,975 3,097,501 -- --
---------- --------- -- --
Net premiums ...................................... 152,156 110,477 41,831 30,072
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (89,850) (9,932) -- --
Surrenders ...................................... (1,096,143) (211,184) (813) (5,989)
Administrative expenses ......................... (52,182) (7,854) (183) (318)
Transfers (to)/from the Guarantee Account ......... 25,895 101,581 19,562 24,545
Interfund transfers ............................... (818,341) 215,612 233,932 293,107
---------- --------- ------- -------
Net increase (decrease) in units from capital
transactions ...................................... (1,878,465) 198,700 294,329 341,417
---------- --------- ------- -------
Units outstanding at December 31, 1997 ............. 17,101,510 3,296,201 294,329 341,417
---------- --------- ------- -------
Net premiums ...................................... 71,298 74,775 36,361 51,350
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (86,711) (3,720)
Surrenders ...................................... (1,581,072) (275,339) (33,956) (51,341)
Cost of insurance ............................... (41,759) (6,747) (1,229) (1,181)
Transfers (to) from the Guarantee Account ......... 16,975 48,507 44,357 39,391
Interfund transfers ............................... (645,083) (51,589) 411,418 215,578
---------- --------- ------- -------
Net increase (decrease) in units from capital
transactions ...................................... (2,266,352) (214,113) 456,951 253,797
---------- --------- ------- -------
Units outstanding at December 31, 1998 ............. 14,835,158 3,082,088 751,280 595,214
========== ========= ======= =======
</TABLE>
A-50
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
ADVISERS
MANAGEMENT TRUST (CONTINUED)
-------------------------------------------
BALANCED BOND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
TYPE I UNITS --------------- ------------- -------------
<S> <C> <C> <C>
Units outstanding at December 31, 1995 ......... 2,025,936 939,243 756,501
--------- ------- -------
Net premiums .................................. -- 692 --
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. (13,542) (625) (7,106)
Surrenders .................................. (19,441) (46,729) (82,100)
Administrative expenses ..................... (1,491) (2,782) (3,304)
Transfers (to)/from the Guarantee
Account ..................................... (6,661) (1,863) (1,563)
Interfund transfers ........................... (300,225) (348,334) (131,122)
-------- --------
Net increase (decrease) in units from
capital transactions .......................... (341,360) (399,641) (225,195)
-------- --------
Units outstanding at December 31, 1996 ......... 1,684,576 539,602 531,306
--------- -------- --------
Net premiums .................................. (343) 141 348
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. (4,573) (13,722) (3,133)
Surrenders .................................. (131,590) (27,704) (10,160)
Administrative expenses ..................... (3,702) (1,043) (1,125)
Transfers (to)/from the Guarantee
Account ..................................... (9,256) (144) --
Interfund transfers ........................... 1,535,112) (497,130) (517,236)
-------- --------
Net increase (decrease) in units from
capital transactions .......................... (1,684,576) (539,602) (531,306)
-------- --------
Units outstanding at December 31, 1997 ......... -- -- --
---------- -------- --------
Net premiums .................................. -- -- --
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. -- -- --
Surrenders .................................. -- -- --
Cost of insurance ........................... -- -- --
Transfers (to) from the Guarantee
Account ..................................... -- -- --
Interfund transfers ........................... -- -- --
---------- -------- --------
Net increase (decrease) in units from
capital transactions .......................... -- -- --
---------- -------- --------
Units outstanding at December 31, 1998 ......... -- -- --
========== ======== ========
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES
----------------------------------------
AMERICAN
LEADERS HIGH
PORTFOLIO INCOME UTILITY
FUND II BONDS FUND II FUND II
TYPE I UNITS ----------- --------------- ------------
<S> <C> <C> <C>
Units outstanding at December 31, 1995 ......... -- 40,814 539,628
-- ------ -------
Net premiums .................................. 6,132 11,997 34,892
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. -- (1,489) (13,689)
Surrenders .................................. (234) (8,472) (35,752)
Administrative expenses ..................... (47) (273) (1,868)
Transfers (to)/from the Guarantee
Account ..................................... 1,547 23,451 31,866
Interfund transfers ........................... 68,264 145,478 (9,854)
------ ------- -------
Net increase (decrease) in units from
capital transactions .......................... 75,662 170,692 5,595
------ ------- -------
Units outstanding at December 31, 1996 ......... 75,662 211,506 545,223
------ ------- -------
Net premiums .................................. 35,396 49,848 7,670
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. -- (469) (853)
Surrenders .................................. (1,961) (14,353) (38,555)
Administrative expenses ..................... (502) (718) (1,375)
Transfers (to)/from the Guarantee
Account ..................................... 24,074 50,940 9,699
Interfund transfers ........................... 228,950 159,370 (36,477)
------- ------- -------
Net increase (decrease) in units from
capital transactions .......................... 285,957 244,618 (59,891)
------- ------- -------
Units outstanding at December 31, 1997 ......... 361,619 456,124 485,332
------- ------- -------
Net premiums .................................. 49,226 (16,663) (2,080)
Transfers (to) from the general account
of Life of Virginia:
Death benefits .............................. -- 1,444 816
Surrenders .................................. (38,733) 22,376 6,445
Cost of insurance ........................... (1,089) 466 179
Transfers (to) from the Guarantee
Account ..................................... 23,362 (25,648) (2,909)
Interfund transfers ........................... 86,081 33,576 (9,318)
------- ------- -------
Net increase (decrease) in units from
capital transactions .......................... 118,847 15,551 (6,867)
------- ------- -------
Units outstanding at December 31, 1998 ......... 480,466 471,675 478,465
======= ======= =======
</TABLE>
A-51
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
ALGER AMERICAN
-----------------------------
SMALL CAP GROWTH
PORTFOLIO PORTFOLIO
TYPE I UNITS --------------- -------------
<S> <C> <C>
Units outstanding at December 31, 1995 ......... 405,791 261,225
------- -------
Net premiums .................................. 260,309 140,387
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. (10,458) --
Surrenders .................................. (35,446) (31,027)
Administrative expenses ..................... (2,659) (2,129)
Transfers (to)/from the Guarantee Account ..... 150,713 122,150
Interfund transfers ........................... 571,403 700,068
------- -------
Net increase (decrease) in units from capital
transactions .................................. 933,862 929,449
------- -------
Units outstanding at December 31, 1996 ......... 1,339,653 1,190,674
--------- ---------
Net premiums .................................. 694,521 66,490
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. (42,319) (2,907)
Surrenders .................................. (1,148,701) (80,029)
Administrative expenses ..................... (36,907) (3,546)
Transfers (to)/from the Guarantee Account ..... 749,029 2,066
Interfund transfers ........................... (230,206) (150,234)
---------- ---------
Net increase (decrease) in units from capital
transactions .................................. (14,583) (168,160)
---------- ---------
Units outstanding at December 31, 1997 ......... 1,325,070 1,022,514
---------- ---------
Net premiums .................................. 429,477 25,796
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. (384) (6,748)
Surrenders .................................. (28,813) (101,948)
Cost of insurance ........................... (1,249) (2,260)
Transfers (to) from the Guarantee Account ..... 27,106 20,996
Interfund transfers ........................... (17,778) 203,074
---------- ---------
Net increase (decrease) in units from capital
transactions .................................. 408,359 138,910
---------- ---------
Units outstanding at December 31, 1998 ......... 1,733,429 1,161,424
========== =========
<CAPTION>
PBHG INSURANCE
SERIES FUND JANUS ASPEN SERIES
----------------------- -----------------------------
LARGE CAP AGGRESSIVE
GROWTH GROWTH II GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
TYPE I UNITS ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Units outstanding at December 31, 1995 ......... -- -- 1,965,737 4,432,726
-- -- --------- ---------
Net premiums .................................. -- -- 1,581 1,661,740
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. -- -- -- (181,059)
Surrenders .................................. -- -- (429) (2,320,448)
Administrative expenses ..................... -- -- (22) (113,310)
Transfers (to)/from the Guarantee Account ..... -- -- 1,256 1,066,999
Interfund transfers ........................... -- -- 7,695 217,761
-- -- --------- ----------
Net increase (decrease) in units from capital
transactions .................................. -- -- 10,081 331,683
-- -- --------- ----------
Units outstanding at December 31, 1996 ......... -- -- 1,975,818 4,764,409
-- -- --------- ----------
Net premiums .................................. 1,019 17,111 55,368 109,351
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. -- -- (1,972) (66,404)
Surrenders .................................. (92) (49) (87,614) (321,901)
Administrative expenses ..................... (32) (101) (4,772) (11,195)
Transfers (to)/from the Guarantee Account ..... 2,432 1,623 29,407 64,006
Interfund transfers ........................... 52,670 58,027 (148,659) (32,501)
------ ------ --------- ----------
Net increase (decrease) in units from capital
transactions .................................. 55,997 76,611 (158,242) (258,644)
------ ------ --------- ----------
Units outstanding at December 31, 1997 ......... 55,997 76,611 1,817,576 4,505,765
------ ------ --------- ----------
Net premiums .................................. 12,832 43,391 16,545 85,570
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. -- -- (8,425) (16,960)
Surrenders .................................. (13,525) (2,223) (137,584) (306,115)
Cost of insurance ........................... (192) (222) (3,687) (10,854)
Transfers (to) from the Guarantee Account ..... 8,053 7,385 13,161 60,329
Interfund transfers ........................... 34,878 (2,510) (145,916) (10,306)
------- ------ --------- ----------
Net increase (decrease) in units from capital
transactions .................................. 42,046 45,821 (265,906) (198,336)
------- ------ --------- ----------
Units outstanding at December 31, 1998 ......... 98,043 122,432 1,551,670 4,307,429
======= ======= ========= ==========
</TABLE>
A-52
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
---------------------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
WORLDWIDE BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
TYPE I UNITS ------------- ------------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1995 ............. 2,757,216 111,972 39,079 -- --
--------- ------- ------ -- --
Net premiums ...................................... 880,684 49,343 4,021 34,924 --
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (51,566) (2,953) -- -- --
Surrenders ...................................... (739,842) (15,986) (1,075) (1,689) --
Administrative expenses ......................... (48,025) (1,541) (194) (301) --
Transfers (to)/from the Guarantee Account ......... 455,640 26,519 11,223 37,626 --
Interfund transfers ............................... 916,700 191,453 64,966 403,878 --
--------- ------- ------ ------- --
Net increase (decrease) in units from capital
transactions ...................................... 1,413,591 246,835 78,941 474,438 --
--------- ------- ------ ------- --
Units outstanding at December 31, 1996 ............. 4,170,807 358,807 118,020 474,438 --
--------- ------- ------- ------- --
Net premiums ...................................... 257,478 32,492 8,506 99,898 2,452
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (7,323) -- -- -- --
Surrenders ...................................... (229,991) (34,024) (17,779) (40,170) (1,327)
Administrative expenses ......................... (12,079) (1,430) (403) (2,200) (58)
Transfers (to)/from the Guarantee Account ......... 148,276 55,427 78,205 64,693 344
Interfund transfers ............................... 611,104 2,070,280 94,329 408,010 47,846
--------- --------- ------- ------- ------
Net increase (decrease) in units from capital
transactions ...................................... 767,465 2,122,745 162,858 530,231 49,257
--------- --------- ------- ------- ------
Units outstanding at December 31, 1997 ............. 4,938,272 2,481,552 280,878 1,004,669 49,257
--------- --------- ------- --------- ------
Net premiums ...................................... 235,218 127,113 37,137 55,993 124,428
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (17,077) (16,246) (1,939) (2,564) --
Surrenders ...................................... (371,035) (424,576) (20,362) (67,352) (9,789)
Cost of insurance ............................... (11,204) (6,797) (928) (2,002) (416)
Transfers (to) from the Guarantee Account ......... 69,943 102,984 62,318 28,874 11,707
Interfund transfers ............................... 50,630 652,003 195,121 35,806 331,630
--------- --------- ------- --------- -------
Net increase (decrease) in units from capital
transactions ...................................... (43,525) 434,481 271,347 48,755 457,560
--------- --------- ------- --------- -------
Units outstanding at December 31, 1998 ............. 4,894,747 2,916,033 552,225 1,053,424 506,817
========= ========= ======= ========= =======
</TABLE>
A-53
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE SALOMON BROTHERS
INSURANCE TRUST FUND VARIABLE SERIES FUND
------------------------- -----------------------------------
GROWTH AND MID CAP
INCOME EQUITY STRATEGIC INVESTORS TOTAL
FUND FUND FUND FUND RETURN
------------ ---------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
TYPE I UNITS
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 ...................................... -- -- -- -- --
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, 1997 ............. -- -- -- -- --
-- -- ---- -- --
Net premiums ...................................... 10,233 2,260 1,927 42 --
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. -- -- -- -- --
Surrenders ...................................... (273) (720) -- -- --
Cost of insurance ............................... (43) (49) (2) -- --
Transfers (to) from the Guarantee Account ......... 22,381 5,400 -- -- --
Interfund transfers ............................... 20,352 71,158 874 -- 6,299
------ ------ ------ -- -----
Net increase (decrease) in units from capital
transactions ...................................... 52,650 78,049 2,799 42 6,299
------ ------ ------ -- -----
Units outstanding at December 31, 1998 ............. 52,650 78,049 2,799 42 6,299
====== ====== ====== == =====
</TABLE>
A-54
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------------------------------------
S&P 500 GOVERNMENT MONEY TOTAL INTERNATIONAL
INDEX SECURITIES MARKET RETURN EQUITY
FUND FUND FUND FUND FUND
------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 .............. 400,009 153,756 1,508,360 252,584 47,044
------- ------- --------- ------- ------
Net premiums ....................................... 647,438 194,563 10,719,294 345,169 204,787
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)
Administrative expenses .......................... (290) (130) (792) (196) (80)
Transfers (to) from the Guarantee Account .......... 78,749 3,809 (49,295) 38,959 26,698
Interfund transfers ................................ 155,417 (66,854) (8,053,173) 35,026 58,323
------- ------- ---------- ------- -------
Net increase (decrease) in units from capital
transactions ....................................... 862,493 122,440 2,385,019 406,667 285,359
------- ------- ---------- ------- -------
Units outstanding at December 31, 1996 .............. 1,262,502 276,196 3,893,379 659,251 332,403
--------- ------- ---------- ------- -------
Net premiums ....................................... 1,106,640 58,332 7,321,970 188,455 143,803
Transfers (to) from the general account of Life of
Virginia:
Death benefits ................................... (46,669) -- (31,824) (4,811) (188)
Surrenders ....................................... (61,683) (10,472) (497,702) (40,510) (16,180)
Loans ............................................ -- -- -- -- --
Administrative expenses .......................... (1,001) (115) (2,877) (508) (358)
Transfers (to) from the Guarantee Account .......... 376,140 37,807 406,500 93,000 69,865
Interfund transfers ................................ 389,211 (361,748) (6,108,959) 33,268 85,065
--------- -------- ---------- ------- -------
Net increase (decrease) in units from capital
transactions ....................................... 1,762,638 (276,196) 1,087,108 268,894 282,007
--------- -------- ---------- ------- -------
Units outstanding at December 31, 1997 .............. 3,025,140 -- 4,980,487 928,145 614,410
--------- -------- ---------- ------- -------
Net premiums ....................................... 1,191,108 -- 4,686,359 224,832 71,002
Transfers (to) from the general account of Life of
Virginia:
Death benefits ................................... (18,705) -- (269,042) (8,405) (4,372)
Surrenders ....................................... (199,459) -- (1,083,395) (46,133) (38,542)
Cost of insurance ................................ (2,313) -- (4,489) (698) (803)
Transfers (to) from the Guarantee Account .......... 878,507 -- 1,448,793 291,977 130,273
Interfund transfers ................................ 313,281 -- (525,766) 35,416 (130,050)
--------- -------- ---------- ------- --------
Net increase (decrease) in units from capital
transactions ..................................... 2,162,419 -- 4,252,460 496,989 27,508
--------- -------- ---------- ------- --------
Units outstanding at December 31, 1998 ............. 5,187,559 -- 9,232,947 1,425,134 641,918
========= ======== ========== ========= ========
</TABLE>
A-55
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENT FUNDS, INC.
---------------------------
REAL ESTATE GLOBAL
SECURITIES INCOME
FUND FUND
------------- -------------
<S> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 ........................ 34,477 --
------ ----
Net premiums ................................................. 214,051 --
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. -- --
Surrenders ................................................. (1,826) --
Administrative expenses .................................... (43) --
Transfers (to) from the Guarantee Account .................... 19,914 --
Interfund transfers .......................................... 162,396 --
------- ----
Net increase (decrease) in units from capital transactions .... 394,492 --
------- ----
Units outstanding at December 31, 1996 ........................ 428,969 --
------- ----
Net premiums ................................................. 604,427 19,022
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (1,092) --
Surrenders ................................................. (24,343) (487)
Loans ...................................................... -- --
Administrative expenses .................................... (445) (8)
Transfers (to) from the Guarantee Account .................... 236,279 19,733
Interfund transfers .......................................... 234,452 41,030
------- --------
Net increase (decrease) in units from capital transactions .... 1,049,278 79,290
--------- --------
Units outstanding at December 31, 1997 ........................ 1,478,247 79,290
--------- --------
Net premiums ................................................. 242,837 52,447
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (9,506) --
Surrenders ................................................. (44,578) (2,877)
Cost of insurance .......................................... (1,006) (81)
Transfers (to) from the Guarantee Account .................... 346,955 83,494
Interfund transfers .......................................... (259,466) 73,722
--------- --------
Net increase (decrease) in units from capital transactions ... 275,236 206,705
--------- --------
Units outstanding at December 31, 1998 ....................... 1,753,483 285,995
========= ========
<CAPTION>
GE INVESTMENT FUNDS, INC.
----------------------------------------
US
VALUE EQUITY INCOME EQUITY
FUND FUND FUND
-------------- ------------- -----------
<S> <C> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 ........................ -- -- --
-- -- --
Net premiums ................................................. -- 162,212 --
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 ................................................. 242,987 1,357 --
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (153) -- --
Surrenders ................................................. (5,196) (415) --
Loans ...................................................... -- -- --
Administrative expenses .................................... (28) (42) --
Transfers (to) from the Guarantee Account .................... 146,978 5,210 --
Interfund transfers .......................................... 346,028 897,139 --
------- ------- --
Net increase (decrease) in units from capital transactions .... 730,616 903,249 --
------- ------- --
Units outstanding at December 31, 1997 ........................ 730,616 903,249 --
------- ------- --
Net premiums ................................................. 651,133 162,212 86,729
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (1,696) (5,856) --
Surrenders ................................................. (104,573) (49,209) (787)
Cost of insurance .......................................... (689) (703) (16)
Transfers (to) from the Guarantee Account .................... 607,675 345,204 51,261
Interfund transfers .......................................... 257,534 529,843 43,108
-------- ------- ------
Net increase (decrease) in units from capital transactions ... 1,409,384 981,491 180,295
--------- ------- -------
Units outstanding at December 31, 1998 ....................... 2,140,000 1,884,740 180,295
========= ========= =======
</TABLE>
A-56
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
----------------------------
MONEY BOND
FUND FUND
--------------- ------------
<S> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 .......... 58,163 275,480
-------- -------
Net premiums ................................... 70 307,614
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... -- (3,625)
Surrenders ................................... (1,020) (13,875)
Administrative expenses ...................... (6) (160)
Transfers (to) from the Guarantee Account ...... (156) 32,015
Interfund transfers ............................ (33,183) 109,648
--------- -------
Net increase (decrease) in units from
capital transactions ........................... (34,295) 431,617
--------- -------
Units outstanding at December 31, 1996 .......... 23,868 707,097
--------- -------
Net premiums ................................... 30 167,289
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... -- (8,306)
Surrenders ................................... (202) (30,599)
Loans ........................................ -- --
Administrative expenses ...................... (5) (513)
Transfers (to) from the Guarantee Account ...... -- 156,266
Interfund transfers ............................ (23,691) 2,783
--------- -------
Net increase (decrease) in units from capital
transactions ................................... (23,868) 286,920
--------- -------
Units outstanding at December 31, 1997 .......... -- 994,017
--------- -------
Net premiums ................................... -- 270,558
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... -- (14,333)
Surrenders ................................... -- (74,631)
Cost of insurance ............................ -- (785)
Transfers (to) from the Guarantee Account ...... -- 382,347
Interfund transfers ............................ -- 419,337
--------- -------
Net increase (decrease) in units from capital
transactions ................................... -- 982,493
--------- -------
Units outstanding at December 31, 1998 .......... -- 1,976,510
========= =========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
--------------------------------------------------------
CAPITAL HIGH MULTIPLE
APPRECIATION GROWTH INCOME STRATEGIES
FUND FUND FUND FUND
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 .......... 582,579 423,764 561,144 256,681
------- ------- ------- -------
Net premiums ................................... 1,152,800 440,344 922,316 383,300
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (23,778) (2,446) (14,183) (3,190)
Surrenders ................................... (34,224) (9,335) (24,799) (11,252)
Administrative expenses ...................... (668) (213) (520) (329)
Transfers (to) from the Guarantee Account ...... 169,506 50,413 94,808 45,770
Interfund transfers ............................ 275,079 189,075 176,989 77,022
--------- ------- ------- -------
Net increase (decrease) in units from
capital transactions ........................... 1,538,715 667,838 1,154,611 491,321
--------- ------- --------- -------
Units outstanding at December 31, 1996 .......... 2,121,294 1,091,602 1,715,755 748,002
--------- --------- --------- -------
Net premiums ................................... 713,649 880,279 703,696 349,189
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (10,958) (8,211) (16,328) (5,971)
Surrenders ................................... (79,872) (48,836) (109,043) (55,647)
Loans ........................................ -- -- -- --
Administrative expenses ...................... (1,748) (951) (1,245) (701)
Transfers (to) from the Guarantee Account ...... 369,347 337,722 379,179 151,804
Interfund transfers ............................ 64,736 210,754 262,960 13,450
--------- --------- --------- -------
Net increase (decrease) in units from capital
transactions ................................... 1,055,154 1,370,757 1,219,219 452,124
--------- --------- --------- -------
Units outstanding at December 31, 1997 .......... 3,176,448 2,462,359 2,934,974 1,200,126
--------- --------- --------- ---------
Net premiums ................................... 267,347 407,290 416,094 182,920
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................... (18,426) (19,533) (24,017) (11,769)
Surrenders ................................... (147,815) (120,149) (177,425) (74,629)
Cost of insurance ............................ (2,506) (1,908) (2,036) (993)
Transfers (to) from the Guarantee Account ...... 343,625 410,907 621,713 292,547
Interfund transfers ............................ (505,666) (126,117) (49,276) (29,622)
--------- --------- --------- ---------
Net increase (decrease) in units from capital
transactions ................................... (63,441) 550,490 785,053 358,454
--------- --------- --------- ---------
Units outstanding at December 31, 1998 .......... 3,113,007 3,012,849 3,720,027 1,558,580
========= ========= ========= =========
</TABLE>
A-57
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS
FUND
---------------------------
MONEY HIGH
MARKET INCOME
PORTFOLIO PORTFOLIO
------------- -------------
<S> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 ........................ 980,344 495,562
------- -------
Net premiums ................................................. 138 --
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (5,285) (1,518)
Surrenders ................................................. (18,734) (18,658)
Administrative expenses .................................... (323) (228)
Transfers (to) from the Guarantee Account .................... (31) (3,382)
Interfund transfers .......................................... (659,500) (168,501)
-------- --------
Net increase (decrease) in units from capital transactions .... (683,735) (192,287)
-------- --------
Units outstanding at December 31, 1996 ........................ 296,609 303,275
-------- --------
Net premiums ................................................. 931 306
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (9,387) (206)
Surrenders ................................................. (6,379) (17,828)
Loans ...................................................... -- --
Administrative expenses .................................... (179) (172)
Transfers (to) from the Guarantee Account .................... -- (595)
Interfund transfers .......................................... (281,595) (284,780)
-------- --------
Net increase (decrease) in units from capital transactions .... (296,609) (303,275)
-------- --------
Units outstanding at December 31, 1997 ........................ -- --
-------- --------
Net premiums ................................................. -- --
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. -- --
Surrenders ................................................. -- --
Cost of insurance .......................................... -- --
Transfers (to) from the Guarantee Account .................... -- --
Interfund transfers .......................................... -- --
-------- --------
Net increase (decrease) in units from capital transactions .... -- --
-------- --------
Units outstanding at December 31, 1998 ........................ -- --
======== ========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-----------------------------------------
EQUITY-
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------
<S> <C> <C> <C>
TYPE II UNITS
Units outstanding at December 31, 1995 ........................ 3,119,975 1,525,015 829,371
--------- --------- -------
Net premiums ................................................. 3,158,538 1,222,269 521,600
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (43,181) (21,919) (11,961)
Surrenders ................................................. (134,965) (50,499) (31,329)
Administrative expenses .................................... (2,658) (1,349) (733)
Transfers (to) from the Guarantee Account .................... 402,673 186,018 127,385
Interfund transfers .......................................... 541,485 167,039 123,110
--------- --------- -------
Net increase (decrease) in units from capital transactions .... 3,921,892 1,501,559 728,072
--------- --------- -------
Units outstanding at December 31, 1996 ........................ 7,041,867 3,026,574 1,557,443
--------- --------- ---------
Net premiums ................................................. 2,260,371 504,224 230,215
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (70,511) (17,520) (11,283)
Surrenders ................................................. (310,722) (121,652) (59,094)
Loans ...................................................... -- -- --
Administrative expenses .................................... (5,614) (2,437) (1,374)
Transfers (to) from the Guarantee Account .................... 959,930 232,691 169,290
Interfund transfers .......................................... 198,852 (7,282) (122,609)
--------- --------- ---------
Net increase (decrease) in units from capital transactions .... 3,032,306 588,024 205,145
--------- --------- ---------
Units outstanding at December 31, 1997 ........................ 10,074,173 3,614,598 1,762,588
---------- --------- ---------
Net premiums ................................................. 1,114,775 299,241 60,690
Transfers (to) from the general account of Life of
Virginia:
Death benefits ............................................. (77,675) (28,379) (10,651)
Surrenders ................................................. (485,863) (150,297) (67,437)
Cost of insurance .......................................... (7,075) (2,366) (1,208)
Transfers (to) from the Guarantee Account .................... 1,227,043 185,849 81,221
Interfund transfers .......................................... (509,932) (100,385) (208,247)
---------- --------- ---------
Net increase (decrease) in units from capital transactions .... 1,261,273 203,663 (145,632)
---------- --------- ---------
Units outstanding at December 31, 1998 ........................ 11,335,446 3,818,261 1,616,956
========== ========= =========
</TABLE>
A-58
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCTS FUND III
--------------------------- -----------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
TYPE II UNITS
Units outstanding at
December 31, 1995 ...................... 1,469,667 2,007,948 -- --
--------- --------- -- --
Net premiums ........................... 640,444 2,595,994 -- --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (19,704) (23,500) -- --
Surrenders ........................... (67,829) (72,281) -- --
Administrative expenses .............. (1,135) (2,159) -- --
Transfers (to) from the Guarantee
Account .............................. 117,636 428,333 -- --
Interfund transfers .................... 109,440 559,664 -- --
--------- --------- -- --
Net increase (decrease) in units from
capital transactions ................... 778,852 3,486,051 -- --
--------- --------- -- --
Units outstanding at
December 31, 1996 ...................... 2,248,519 5,493,999 -- --
--------- --------- -- --
Net premiums ........................... 317,380 2,003,590 452,458 553,737
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (14,483) (32,105) (176) (968)
Surrenders ........................... (101,528) (196,054) (9,166) (9,539)
Loans ................................ -- -- -- --
Administrative expenses .............. (1,272) (4,990) (79) (66)
Transfers (to) from the Guarantee
Account .............................. 132,093 1,027,864 208,287 207,607
Interfund transfers .................... 98,224 303,373 324,762 298,769
--------- --------- ------- -------
Net increase (decrease) in units from
capital transactions ................... 430,414 3,101,678 976,086 1,049,540
--------- --------- ------- ---------
Units outstanding at
December 31, 1997 ...................... 2,678,933 8,595,677 976,086 1,049,540
--------- --------- ------- ---------
Net premiums ........................... 252,836 1,051,752 918,372 716,944
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (17,250) (51,811) (49,171) (7,825)
Surrenders ........................... (134,438) (317,883) (60,159) (69,582)
Cost of insurance .................... (1,548) (6,665) (1,024) (1,197)
Transfers (to) from the Guarantee
Account .............................. 283,280 1,100,294 688,392 768,665
Interfund transfers .................... 114,498 (285,564) 371,319 502,246
--------- --------- ------- ---------
Net increase (decrease) in units from
capital transactions ................... 497,378 1,490,123 1,867,729 1,909,251
--------- --------- --------- ---------
Units outstanding at December 31,
1998 ................................... 3,176,311 10,085,800 2,843,815 2,958,791
========= ========== ========= =========
<CAPTION>
ADVISERS MANAGEMENT TRUST
----------------------------------------
BALANCED BOND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------
<S> <C> <C> <C>
TYPE II UNITS
Units outstanding at
December 31, 1995 ...................... 191,438 398,276 209,909
------- ------- -------
Net premiums ........................... -- (252) --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (1,089) (8,981) (1,419)
Surrenders ........................... (2,814) (3,959) (6,733)
Administrative expenses .............. (103) (315) (174)
Transfers (to) from the Guarantee
Account .............................. -- 120 --
Interfund transfers .................... (44,480) (127,260) (46,447)
------- -------- -------
Net increase (decrease) in units from
capital transactions ................... (48,486) (140,647) (54,773)
------- -------- -------
Units outstanding at
December 31, 1996 ...................... 142,952 257,629 155,136
------- -------- -------
Net premiums ........................... 25 -- --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (2,194) (1,620) --
Surrenders ........................... (10,921) (12,250) (3,242)
Loans ................................ -- -- --
Administrative expenses .............. (108) (204) (81)
Transfers (to) from the Guarantee
Account .............................. (601) (6,721) --
Interfund transfers .................... (129,153) (236,834) (151,813)
-------- -------- --------
Net increase (decrease) in units from
capital transactions ................... (142,952) (257,629) (155,136)
-------- -------- --------
Units outstanding at
December 31, 1997 ...................... -- -- --
-------- -------- --------
Net premiums ........................... -- -- --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... -- -- --
Surrenders ........................... -- -- --
Cost of insurance .................... -- -- --
Transfers (to) from the Guarantee
Account .............................. -- -- --
Interfund transfers .................... -- -- --
-------- -------- --------
Net increase (decrease) in units from
capital transactions ................... -- -- --
-------- -------- --------
Units outstanding at December 31,
1998 ................................... -- -- --
======== ======== ========
</TABLE>
A-59
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE
SERIES
--------------------------------------------
AMERICAN HIGH
LEADERS INCOME
PORTFOLIO BONDS UTILITY
FUND II FUND II FUND II
---------------- ------------- -------------
<S> <C> <C> <C>
TYPE II UNITS
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
---------- --------- ---------
Net premiums ........................... 1,050,794 473,760 292,385
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (44,621) (24,952) (12,603)
Surrenders ........................... (111,859) (152,690) (73,103)
Cost of insurance .................... (2,136) (1,284) (1,163)
Transfers (to) from the Guarantee
Account .............................. 942,089 803,434 316,103
Interfund transfers .................... 64,125 (7,464) 103,595
---------- --------- ---------
Net increase (decrease) in units from
capital transactions ................... 1,898,392 1,090,804 625,214
---------- --------- ---------
Units outstanding at December 31,
1998 ................................... 3,955,083 2,977,691 1,950,915
========== ========= =========
<CAPTION>
PBHG INSURANCE
ALGER AMERICAN SERIES FUND
--------------------------- ------------------------
LARGE CAP
SMALL CAP GROWTH GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
TYPE II UNITS
Units outstanding at
December 31, 1995 ...................... 401,258 312,011 -- --
------- ------- -- --
Net premiums ........................... 2,385,857 1,979,744 -- --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (6,505) (2,249) -- --
Surrenders ........................... (49,583) (21,913) -- --
Administrative expenses .............. (658) (517) -- --
Transfers (to) from the Guarantee
Account .............................. 364,980 234,626 -- --
Interfund transfers .................... 472,803 460,475 -- --
--------- --------- -- --
Net increase (decrease) in units from
capital transactions ................... 3,166,894 2,650,166 -- --
--------- --------- -- --
Units outstanding at
December 31, 1996 ...................... 3,568,152 2,962,177 -- --
--------- --------- -- --
Net premiums ........................... 1,139,813 1,030,593 108,061 306,146
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (25,827) (23,277) (63) --
Surrenders ........................... (95,915) (104,485) (998) (4,853)
Loans ................................ -- -- -- --
Administrative expenses .............. (3,710) (2,759) (28) (35)
Transfers (to) from the Guarantee
Account .............................. 865,037 527,894 51,297 100,624
Interfund transfers .................... 197,908 (9,957) 188,564 174,128
--------- --------- ------- -------
Net increase (decrease) in units from
capital transactions ................... 2,077,306 1,418,009 346,833 576,010
--------- --------- ------- -------
Units outstanding at
December 31, 1997 ...................... 5,645,458 4,380,186 346,833 576,010
--------- --------- ------- -------
Net premiums ........................... 543,439 690,044 168,982 126,932
Transfers (to) from the general
account of Life of Virginia:
Death benefits ....................... (35,528) (33,911) (3,311) (11,165)
Surrenders ........................... (238,113) (227,269) (33,291) (36,248)
Cost of insurance .................... (4,762) (3,266) (404) (590)
Transfers (to) from the Guarantee
Account .............................. 719,382 587,070 148,909 227,092
Interfund transfers .................... (547,462) 212,429 68,319 (42,435)
--------- --------- ------- -------
Net increase (decrease) in units from
capital transactions ................... 436,956 1,225,097 349,204 263,586
--------- --------- ------- -------
Units outstanding at December 31,
1998 ................................... 6,082,414 5,605,283 696,037 839,596
========= ========= ======= =======
</TABLE>
A-60
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------
AGGRESSIVE
GRWOTH GROWTH WORLDWIDE
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ------------- --------------
<S> <C> <C> <C>
TYPE II UNITS
Units outstanding at
December 31, 1995 ................ 1,251,004 1,875,640 1,227,070
--------- --------- ---------
Net premiums ..................... 1,109,539 1,939,884 2,853,570
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (5,075) (28,847) (26,212)
Surrenders ..................... (20,314) (111,109) (94,535)
Administrative expenses ........ (141) (2,321) (2,275)
Transfers (to) from the
Guarantee Account .............. 99,771 288,072 475,568
Interfund transfers .............. 227,267 921,603 713,001
--------- --------- ---------
Net increase (decrease) in units
from capital transactions ........ 1,411,047 3,007,282 3,919,117
--------- --------- ---------
Units outstanding at
December 31, 1996 ................ 2,662,051 4,882,922 5,146,187
--------- --------- ---------
Net premiums ..................... 608,750 1,633,216 3,372,062
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (22,328) (36,365) (35,456)
Surrenders ..................... (80,725) (180,611) (228,974)
Loans .......................... -- -- --
Administrative expenses ........ (1,935) (4,325) (4,300)
Transfers (to) from the
Guarantee Account .............. 253,985 867,094 1,289,775
Interfund transfers .............. 22,869 108,967 572,391
--------- --------- ---------
Net increase (decrease) in units
from capital transactions ........ 780,616 2,387,976 4,965,498
--------- --------- ---------
Units outstanding at
December 31, 1997 ................ 3,442,667 7,270,898 10,111,685
--------- --------- ----------
Net premiums ..................... 8,584,230 859,963 1,450,914
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (1,210,219) (49,261) (36,063)
Surrenders ..................... (5,336,460) (293,814) (402,150)
Cost of insurance .............. (83,426) (5,694) (7,564)
Transfers (to) from the
Guarantee Account .............. 8,351,873 854,937 1,487,450
Interfund transfers .............. (10,259,970) 190,192 (49,539)
----------- --------- ----------
Net increase (decrease) in units
from capital transactions ........ 46,028 1,556,323 2,443,048
----------- --------- ----------
Units outstanding at
December 31, 1998 ................ 3,488,695 8,827,221 12,554,733
=========== ========= ==========
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
TYPE II UNITS
Units outstanding at
December 31, 1995 ................ 73,538 36,272 -- --
------ ------ -- ----
Net premiums ..................... 547,525 240,317 388,753 --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (1,525) -- -- --
Surrenders ..................... (10,808) (1,714) (2,959) --
Administrative expenses ........ (267) (63) (11) --
Transfers (to) from the
Guarantee Account .............. 75,940 21,420 47,466 --
Interfund transfers .............. 308,093 28,937 249,356 --
------- ------- ------- ----
Net increase (decrease) in units
from capital transactions ........ 918,958 288,897 682,605 --
------- ------- ------- ----
Units outstanding at
December 31, 1996 ................ 992,496 325,169 682,605 --
------- ------- ------- ----
Net premiums ..................... 1,117,148 284,347 1,372,823 55,458
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (7,246) (4,723) (15,267) --
Surrenders ..................... (78,945) (17,933) (60,571) (1,630)
Loans .......................... -- -- -- --
Administrative expenses ........ (1,005) (342) (863) (7)
Transfers (to) from the
Guarantee Account .............. 423,506 175,029 576,462 35,560
Interfund transfers .............. 358,481 107,542 446,411 74,169
--------- ------- --------- --------
Net increase (decrease) in units
from capital transactions ........ 1,811,939 543,920 2,518,995 163,550
--------- ------- --------- ---------
Units outstanding at
December 31, 1997 ................ 2,804,435 869,089 3,001,600 163,550
--------- ------- --------- ---------
Net premiums ..................... 1,375,800 279,606 441,888 430,714
Transfers (to) from the general
account of Life of Virginia:
Death benefits ................. (37,836) (1,075) (22,070) (3,280)
Surrenders ..................... (191,342) (44,562) (83,852) (38,646)
Cost of insurance .............. (2,568) (846) (2,512) (341)
Transfers (to) from the
Guarantee Account .............. 1,386,720 485,989 655,579 289,248
Interfund transfers .............. 724,982 322,950 (134,423) 653,113
--------- ------- --------- ---------
Net increase (decrease) in units
from capital transactions ........ 3,255,756 1,042,062 854,610 1,330,808
--------- --------- --------- ----------
Units outstanding at
December 31, 1998 ................ 6,060,191 1,911,151 3,856,210 1,494,358
========= ========= ========= ==========
</TABLE>
A-61
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE SALOMON BROTHERS
INSURANCE TRUST FUND VARIABLE SERIES FUND
-------------------------- ------------------------------------
GROWTH AND MID CAP
INCOME EQUITY STRATEGIC INVESTORS TOTAL
FUND FUND FUND FUND RETURN
------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
TYPE II UNITS
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 ............................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... -- -- -- -- --
Loans .................................................... -- -- -- -- --
Administrative expenses .................................. -- -- -- -- --
Transfers (to) from the Guarantee Account .................. -- -- -- -- --
Interfund transfers ........................................ -- -- -- -- --
-- ---- -- -- ----
Net increase (decrease) in units from capital transactions .. -- -- -- -- --
-- ---- -- -- ----
Units outstanding at December 31, 1997 ...................... -- -- -- -- --
-- ---- -- -- ----
Net premiums ............................................... 205,860 187,855 -- 811 15,933
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... (4,646) (4,160) -- -- (2)
Cost of insurance ........................................ (13) (9) 1,466
Transfers (to) from the Guarantee Account .................. 104,669 147,037 8,628 52 1,350
Interfund transfers ........................................ 123,066 14,810 -- -- 8,634
------- -------- ----- --- -------
Net increase (decrease) in units from capital transactions .. 428,936 345,533 10,094 863 25,915
------- -------- ------ --- -------
Units outstanding at December 31, 1998 ...................... 428,936 345,533 10,094 863 25,915
======= ======== ====== === =======
</TABLE>
A-62
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT 4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(D) 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. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains of the
Account.
(E) 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 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 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, .50% for the Money
Market, Income Fund, and Total Return Funds, 1.00% for the International Equity
Fund, .85% for the Real Estate Securities Fund, .60% for the Global Income
Fund, .65% for the Value Equity Fund and .55% for the U.S. Equity 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.
(4) SUBSEQUENT EVENT
Effective January 1, 1999 The Life Insurance Company of Virginia merged
with The Harvest Life Insurance Company to form GE Life and Annuity Assurance
Company. Concurrently, the Account changed its name to GE Life & Annuity
Separate Account 4. Neither of these events have an impact on net assets or
unit values.
A-63
<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, 1998 and 1997,
and the related consolidated statements of income and comprehensive income,
shareholders' interest, and cash flows for the years then ended, and the nine
months ended December 31, 1996. We have also audited the pre-acquisition
statements of income and comprehensive income, shareholders' interest 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.
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, 1998 and 1997, and the
results of their operations and their cash flows for the years then ended, the
nine months ended December 31, 1996 and the pre-acquisition three months 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 LLP
Richmond, Virginia
January 22, 1999
<PAGE>
<TABLE>
<CAPTION>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in millions, except per share amounts)
December 31,
------------
ASSETS 1998 1997
- ------ ---------- ----------
<S> <C> <C>
Investments:
Fixed maturities available-for-sale, at fair value $ 6,077.2 $ 5,622.6
Equity securities available-for-sale, at fair value:
Common stocks 6.1 9.6
Preferred stocks, non-redeemable 48.3 95.1
Investment in subsidiary 2.6 2.6
Mortgage loans, net of valuation allowance of $20.0 and $17.2
at December 31, 1998 and 1997, respectively 528.1 496.2
Policy loans 198.3 188.4
Real estate owned 2.5 6.9
Other invested assets 130.8 49.5
----- ----
Total investments 6,993.9 6,470.9
------- -------
Cash 9.6 0.2
Accrued investment income 122.8 123.1
Deferred acquisition costs 242.0 165.0
Intangible assets 390.0 449.7
Reinsurance recoverable 15.3 8.7
Deferred income tax asset 41.1 57.4
Other assets 42.5 23.3
Separate account assets 5,528.7 4,066.4
------- -------
Total assets $ 13,385.9 $ 11,364.7
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
------------
LIABILITIES AND SHAREHOLDERS' INTEREST 1998 1997
---- ----
Liabilities:
<S> <C> <C>
Future annuity and contract benefits $ 6,455.3 $ 5,889.8
Liability for policy and contract claims 119.6 83.0
Other policyholder liabilities 86.4 75.2
Accounts payable and accrued expenses 108.8 101.0
Separate account liabilities 5,528.7 4,066.4
------- -------
Total liabilities 12,298.8 10,215.4
-------- --------
Shareholders' interest:
Net unrealized investment gains 49.8 74.3
-------- --------
Accumulated non-owner changes in equity 49.8 74.3
Preferred stock, Series A ($1,000 par value,
$1,000 redemption and liquidation value; 200,000
authorized, 120,000 shares issued and outstanding) 120.0 -
Common stock ($1,000 par value, 50,000
authorized, 4,000 shares issued and outstanding) 4.0 4.0
Common stock declared but not issued ($1,000
par value, 18,641 shares declared, 50,000 authorized) 18.6 -
Additional paid-in capital 917.6 925.9
Retained earnings (22.9) 145.1
----- -----
Total shareholders' interest 1,087.1 1,149.3
------- -------
Total liabilities and shareholders' interest $ 13,385.9 $ 11,364.7
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Preacquisition
--------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net investment income $ 482.7 $ 472.5 $ 334.4 $ 112.0
Net realized investment gains 26.3 13.3 6.0 9.0
Premiums 99.9 104.4 65.4 60.0
Cost of insurance 128.5 127.2 78.3 28.9
Variable product fees 60.8 44.4 23.1 5.9
Other income 17.6 18.5 11.6 4.5
--- ---- ---- ---
Total revenues 815.8 780.3 518.8 220.3
----- ----- ----- -----
Benefits and expenses:
Interest credited 329.6 323.4 226.0 76.1
Benefits & other changes in policy reserves 172.4 160.8 100.4 89.9
Commissions 99.2 117.3 78.5 35.7
General expenses 98.5 77.5 49.6 15.3
Amortization of intangibles, net 49.0 59.6 50.1 0.6
Change in deferred acquisition costs, net (76.2) (101.5) (71.7) (16.2)
Interest expense 2.0 - - -
--- ----- ----- -----
Total benefits and expenses 674.5 637.1 432.9 201.4
----- ----- ----- -----
Income before income taxes 141.3 143.2 85.9 18.9
Provision for income taxes 50.7 52.2 31.8 7.0
---- ---- ---- ---
Net income 90.6 91.0 54.1 11.9
---- ---- ---- ----
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities, net (24.5) 54.9 19.4 (91.2)
----- ---- ---- -----
Comprehensive income (loss) $ 66.1 $ 145.9 $ 73.5 $ (79.3)
====== ======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INTEREST
(Dollar amounts in millions, except share amounts)
<TABLE>
<CAPTION>
Common Stock
Declared
Preferred Stock Common Stock but not Issued
--------------- ------------ --------------
Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 - $ - 4,000 $ 4.0 - $ -
Comprehensive income:
Net income - - - - - -
Other comprehensive income, net of tax
Unrealized loss on securities, net - - - - - -
------ ------ ------ ------ ------ ------
Total comprehensive income - - - - - -
Capital contribution from parents - - - - - -
------ ------ ------ ------ ------ ------
BALANCES AT MARCH 31, 1996 - - 4,000 4.0 - -
Comprehensive income:
Net income - - - - - -
Other comprehensive income, net of tax
Unrealized gain on securities, net - - - - - -
------ ------ ------ ------ ------ ------
Total comprehensive income - - - - - -
Adjustment to reflect purchase method - - - - - -
------ ------ ------ ------ ------ ------
BALANCES AT DECEMBER 31, 1996 - - 4,000 4.0 - -
Comprehensive income:
Net income - - - - - -
Other comprehensive income, net of tax
Unrealized gain on securities, net - - - - - -
------ ------ ------ ------ ------ ------
Total comprehensive income - - - - - -
Adjustment to reflect purchase method - - - - - -
------ ------ ------ ------ ------ ------
BALANCES AT DECEMBER 31, 1997 - - 4,000 4.0 - -
Comprehensive income:
Net income - - - - - -
Other comprehensive income, net of tax
Unrealized loss on securities, net - - - - - -
------ ------ ------ ------ ------ ------
Total comprehensive income - - - - - -
Cash dividend declared and paid - - - - - -
Preferred stock dividend 120,000 120.0 - - - -
Common stock dividend declared but not issued - - - - 18,641 18.6
Adjustment to reflect purchase method - - - - - -
------ ------ ------ ------ ------ ------
BALANCES AT DECEMBER 31, 1998 120,000 $120.0 4,000 $ 4.0 18,641 $ 18.6
======= ====== ===== ===== ====== ======
Accumulated
Additional Non-owner Retained Total
Paid-In Changes Earnings Shareholders'
Capital in Equity (Deficit) Interest
------- --------- --------- --------
BALANCES AT DECEMBER 31, 1995 $749.1 $103.1 $(34.3) $ 821.9
Comprehensive income:
Net income - - 11.9 11.9
Other comprehensive income, net of tax
Unrealized loss on securities, net - (91.2) - (91.2)
------- --------- -------- --------
Total comprehensive income - (91.2) 11.9 (79.3)
Capital contribution from parents 69.3 - - 69.3
------- --------- -------- ---------
BALANCES AT MARCH 31, 1996 818.4 11.9 (22.4) 811.9
Comprehensive income:
Net income - - 54.1 54.1
Other comprehensive income, net of tax
Unrealized gain on securities, net - 19.4 - 19.4
------- --------- -------- --------
Total comprehensive income - 19.4 54.1 73.5
Adjustment to reflect purchase method 109.7 (11.9) 22.4 120.2
------- --------- -------- ---------
BALANCES AT DECEMBER 31, 1996 928.1 19.4 54.1 1,005.6
Comprehensive income:
Net income - - 91.0 91.0
Other comprehensive income, net of tax
Unrealized gain on securities, net - 54.9 - 54.9
------- --------- -------- -------
Total comprehensive income - 54.9 91.0 145.9
Adjustment to reflect purchase method (2.2) - - (2.2)
------- --------- -------- ---------
BALANCES AT DECEMBER 31, 1997 925.9 74.3 145.1 1,149.3
Comprehensive income:
Net income - - 90.6 90.6
Other comprehensive income, net of tax
Unrealized loss on securities, net - (24.5) - (24.5)
------- --------- -------- -------
Total comprehensive income - (24.5) 90.6 66.1
Cash dividend declared and paid - - (120.0) (120.0)
Preferred stock dividend - - (120.0) -
Common stock dividend declared but not issued - - (18.6) -
Adjustment to reflect purchase method (8.3) - - (8.3)
------- --------- -------- --------
BALANCES AT DECEMBER 31, 1998 $ 917.6 $ 49.8 $ (22.9) $1,087.1
======== ========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Preacquisition
--------------
Nine months Three months
ended ended
Years ended December 31, December 31, March 31,
1998 1997 1996 1996
---- ---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $ 90.6 $ 91.0 $ 54.1 $ 11.9
------ ------ ------ ------
Adjustments to reconcile net income to net cash by
operating activities:
Cost of insurance and surrender fees (169.6) (168.8) (89.3) (32.5)
Increase in future policy benefits 420.4 405.0 277.8 (4.9)
Net realized investment gains (26.3) (13.3) (6.0) (9.0)
Amortization of investment premiums and discounts 1.9 7.2 6.5 0.7
Amortization of intangibles 49.5 59.6 50.1 0.6
Deferred income tax expense (benefit) 29.5 (12.6) (7.9) 10.8
Change in certain assets and liabilities:
Decrease (increase) in:
Accrued investment income 0.3 (5.3) (37.6) 4.1
Deferred acquisition costs (76.2) (101.5) (71.7) (16.2)
Other assets, net (19.2) (9.3) 28.5 (55.9)
Increase (decrease) in:
Policy and contract claims 30.8 37.0 29.9 4.6
Other policyholder liabilites 11.3 (3.6) 71.4 9.8
Accounts payable and accrued expenses 24.7 (99.9) (15.7) 87.5
---- ----- ----- ----
Total adjustments 277.1 94.5 236.0 (0.4)
----- ---- ----- ----
Net cash provided by operating activities 367.7 185.5 290.1 11.5
----- ----- ----- ----
Cash flows from investing activities:
Proceeds from investment securities and other invested assets 1,901.6 788.6 1,123.1 299.5
Principal collected on mortgage loans 116.5 87.1 46.4 8.3
Purchase of investment securities and other invested assets (2,410.4) (1,115.7) (1,280.5) (169.2)
Mortgage loan originations and increase in policy loan balance (161.0) (13.7) (23.7) (40.4)
------ ----- ----- -----
Net cash provided by (used in) investing activities (553.3) (253.7) (134.7) 98.2
------ ------ ------ ----
Cash flows from financing activities:
Proceeds from issue of investment contracts 2,224.8 1,894.2 1,098.5 301.9
Redemption and benefit payments on investment contracts (1,909.8) (1,874.6) (1,304.0) (358.8)
Cash dividend to shareholders (120.0) - - (40.0)
Capital contribution - - 2.8
--- --- --- ---
Net cash provided by (used in) financing activities 195.0 19.6 (205.5) (94.1)
----- ---- ------ -----
Net increase (decrease) in cash and cash equivalents 9.4 (48.6) (50.1) 15.6
Cash and cash equivalents at beginning of year 0.2 48.8 98.9 83.3
--- ---- ---- ----
Cash and cash equivalents at end of year $ 9.6 $ 0.2 $ 48.8 $ 98.9
===== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The accompanying consolidated financial statements include the
historical operations and accounts of The Life Insurance Company of Virginia and
its subsidiary, Assigned Settlements Inc. (collectively the "Company" or "Life
of Virginia"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
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" or "GECA"). On December
31, 1996, the remaining 20% was contributed to GE Financial Assurance Holdings,
Inc. ("GEFAHI"). GECA is an indirect wholly-owned subsidiary of GEFAHI.
(b) Basis of Presentation
The accompanying consolidated financial statements have been prepared
on the basis of generally accepted accounting principles ("GAAP") for insurance
companies, which vary in several respects from accounting practices prescribed
or permitted by the Insurance Commissioner of the state where the Company is
domiciled. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and related disclosures. Actual results could differ from those
estimates.
Certain prior year amounts have been reclassified to conform to current
year presentation.
(c) Products
The Company primarily sells variable annuities and universal life
insurance to customers throughout most of the United States. The Company
distributes variable annuities primarily through intermediaries such as
stockbrokers and universal life insurance primarily through career agents and
independent brokers. The Company is also engaged in the sale of traditional
individual and group life products and guaranteed investment contracts.
Approximately 21%, 29%, and 31% of premium and annuity consideration collected,
in 1998, 1997, and 1996, respectively, came from customers residing in the South
Atlantic region of the United States, and approximately 28%, 13%, and 9% of
premium and annuity consideration collected, in 1998, 1997, and 1996,
respectively, came from customers residing in the Mid-Atlantic region of the
United States.
Although the Company markets its products through numerous
distributors, approximately 23%, 22%, and 21% of the Company's sales in 1998,
1997, and 1996,
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
respectively, have been through two specific national stockbrokerage firms. Loss
of all or a substantial portion of the business provided by these stockbrokerage
firms 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.
(d) 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
$921.6 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 shareholders' equity of
$109.7 (net of purchase accounting adjustments of $8.3 and $2.2 in 1998 and
1997, respectively), reflecting the application of the purchase method of
accounting. The Company's consolidated financial statements subsequent to April
1, 1996 reflect this new basis of accounting.
All amounts for periods ended before April 1, 1996 are labeled
"Preacquisition" and are based on the preacquisition historical costs in
accordance with generally accepted accounting principles. The periods ending
after such date are based on fair values at April 1, 1996 (which becomes the new
cost basis) and subsequent costs in accordance with the purchase method of
accounting.
(e) Revenues
Investment income is recorded when earned. Realized investment gains
and losses are calculated on the basis of specific identification. Premiums on
long-duration insurance products are recognized as earned when due or, in the
case of life contingent immediate annuities, when the contracts are issued.
Premiums received under annuity contracts without significant mortality risk and
premiums received on universal life products are not reported as revenues but as
future annuity and contract benefits. Cost of insurance is charged to universal
life policyholders based upon at risk amounts, and is recognized as revenue when
due. Variable product fees are charged to variable annuity and variable life
policyholders based upon the daily net assets of the policyholders' account
values, and are recognized as revenue when charged.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Other income consists primarily of surrender charges on certain policies.
Surrender charges are recognized as income when the policy is surrendered.
(f) Statements of Cash Flows
Certificates and other time deposits are classified as short-term
investments on the consolidated balance sheets and considered cash equivalents
on the consolidated statements of cash flows.
(g) Investments
The Company has designated its fixed maturities (bonds, notes,
mortgage-backed securities, and redeemable preferred stock) and equity
securities (common and non-redeemable preferred stock) as available-for-sale.
The fair value for fixed maturities and equity securities is based on individual
quoted market prices, where available. For fixed maturities not actively traded,
fair values are estimated using values obtained from independent pricing
services or, in the case of private placements, are estimated by discounting
expected future cash flows using a current market rate applicable to the credit
quality, call features and maturity of the investments, as applicable.
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 shareholders' interest and, accordingly,
have no effect on net income but are shown as a component of other comprehensive
income (loss). Unrealized losses that are considered other than temporary are
recognized in earnings through an adjustment to the amortized cost basis of the
underlying securities. 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
and comprehensive income. In general, the Company ceases to accrue investment
income when interest or dividend payments are in arrears.
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. Realized gains and losses are accounted for on the
specific identification method.
Mortgage loans and policy loans are carried at their unpaid principal
balance, net of allowances for estimated uncollectible amounts. Short-term
investments are carried at amortized cost which approximates fair value. Equity
securities are carried at fair value. Investments in limited partnerships are
accounted for under the equity method of accounting. Real estate is
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
carried generally at cost less accumulated depreciation. Other long-term
investments are carried generally at amortized cost.
Under certain securities lending transactions, the Company requires the
borrower provide collateral, consisting primarily of cash and government
securities, on a daily basis, in amounts equal to or exceeding 102% of the
market value of the applicable securities loaned.
(h) Deferred Acquisition Costs
Acquisition costs include costs and expenses which vary with and are
primarily related to the acquisition of insurance and investment contracts.
Deferred acquisition costs include first-year commissions in excess of
recurring renewal commissions, certain solicitation and printing costs, and
certain support costs such as underwriting and policy issue expenses. For
investments and universal life type contracts, amortization is based on the
present value of anticipated gross profits from investments, interest credited,
surrender and other policy charges, and mortality and maintenance expenses.
Amortization is adjusted retroactively when current or estimates of future gross
profits to be realized are revised. For other long-duration insurance contracts,
the acquisition costs are amortized in relation to the estimated benefit
payments or the present value of expected future premiums.
Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income, and, if not
considered recoverable, are charged to expense.
(i) Intangible Assets
Present Value of Future Profits-In conjunction with the acquisition of
the Company, a portion of the purchase price was assigned to the right to
receive future gross profits arising from existing insurance and investment
contracts. This intangible asset, called present value of future profits (PVFP),
represents the actuarially determined present value of the projected future cash
flows from the acquired policies.
Goodwill-Goodwill is amortized over a period of 20 years on the
straight-line method. Goodwill in excess of associated expected operating cash
flows is considered to be impaired and is written down to fair value. No such
write-downs have occurred.
(j) Federal Income Taxes
Pursuant to the acquisition on April 1, 1996, GE Capital, and AON, 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.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
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.
(k) Reinsurance
Premium revenue, benefits, underwriting, acquisition and insurance
expenses are reported net of the amounts relating to reinsurance ceded to other
companies. Amounts due from reinsurers for incurred future claims are reflected
in the reinsurance recoverable asset. The cost of reinsurance is accounted for
over the terms of the related treaties using assumptions consistent with those
used to account for the underlying reinsured policies.
(l) Future Annuity and Contract Benefits
Future annuity and contract benefits consist of the liability for
investment contracts, insurance contracts and accident and health contracts.
Investment contract liabilities are generally equal to the policyholder's
current account value. The liability for insurance and accident and health
contracts is calculated based upon actuarial assumptions as to mortality,
morbidity, interest, expense and withdrawals, with experience adjustments for
adverse deviation where appropriate.
(m) Liability for Policy and Contract Claims
The liability for policy and contract claims represents the amount
needed to provide for the estimated ultimate cost of settling claims relating to
insured events that have occurred on or before the end of the respective
reporting period. The estimated liability includes requirements for future
payments of (a) claims that have been reported to the insurer, and (b) claims
related to insured events that have occurred but that have not been reported to
the insurer as of the date the liability is estimated.
(n) Separate Account Assets and Liabilities
The separate account assets and liabilities represent funds held for
the exclusive benefit of the variable annuity and variable life contract owners.
The Company receives mortality risk fees and administration charges from the
variable mutual fund portfolios. The separate account assets are carried at fair
value and are equivalent to the liabilities that represent the policyholders'
equity in those assets.
The Company has periodically transferred capital to the separate
accounts to provide for the initial purchase of investments in new mutual fund
portfolios. As of December 31, 1998, approximately $41.8 of the Company's other
invested assets related to its capital investments in the separate accounts.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(o) INTEREST RATE RISK MANAGEMENT
As a matter of policy, the Company does not engage in derivatives
trading, market-making or other speculative activities.
The Company uses interest rate floors primarily to minimize risk on
investment contracts with minimum guaranteed interest rates. The Company
requires all interest rate floors to be designated and accounted for as hedges
of specific assets, liabilities or committed transactions; resulting payments
and receipts are recognized contemporaneously with effects of hedged
transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
Instruments used as hedges must be effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge at
the inception of the contract. Accordingly, changes in market values of hedged
instruments must be highly correlated with changes in market values of
underlying hedges items both at inception of the hedge and over the life of the
hedge contract. Any instrument designated but ineffective as a hedge is marked
to market and recognized in operations immediately.
(2) INVESTMENTS
(a) General
<TABLE>
<CAPTION>
The sources of investment income of the Company were as follows:
Preacquisition
--------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Fixed maturities $ 415.3 $ 399.5 $ 276.9 $ 93.6
Equity securities 4.9 7.3 8.7 4.2
Mortgage loans 46.5 48.3 41.3 13.5
Policy loan interest 14.0 13.3 9.6 2.9
Other investments 6.7 9.0 3.3 0.1
------------- ------------- -------------- --------------
Gross investment income 487.4 477.4 339.8 114.3
Investment expenses (4.7) (4.9) (5.4) (2.3)
------------- ------------- -------------- --------------
Net investment income $ 482.7 $ 472.5 $ 334.4 $ 112.0
============= ============= ============== ==============
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Sales proceeds and gross realized investment gains and losses resulting
from the sales of investment securities available-for-sale were as follows:
<TABLE>
<CAPTION>
Preacquisition
--------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
-------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales proceeds $ 1,232.5 $ 387.1 $ 818.4 $ 262.9
============== =============== ============== ==============
Gross realized investment:
Gains 40.0 18.2 10.0 10.8
Losses (13.7) (4.9) (4.0) (1.8)
-------------- --------------- -------------- --------------
Net realized investment gains $ 26.3 $ 13.3 $ 6.0 $ 9.0
============== =============== ============== ==============
</TABLE>
The additional proceeds from the investments presented in the
consolidated statements of cash flows result from principal collected on
mortgage-backed securities, maturities, calls and sinking payments.
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 shareholders' interest as of December 31, are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Net unrealized gains on available-for-sale investment securities before
adjustments:
Fixed maturities $ 112.5 $ 154.5
Equity securities 5.5 14.6
Other invested assets 2.3 6.4
------------- --------------
Subtotal 120.3 175.5
------------- --------------
Adjustments to the present value of future profits and deferred acquisition costs: (43.7) (61.2)
Deferred income taxes (26.8) (40.0)
------------- --------------
Net unrealized gains on available-for-sale investment securities: $ 49.8 $ 74.3
============= ==============
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
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.
At December 31, the amortized cost, gross unrealized gains and losses,
and fair values of the Company's fixed maturities and equity securities
available-for-sale were as follows:
<TABLE>
<CAPTION>
Gross Gross
1998 Amortized unrealized unrealized Fair
- -------------
cost gains losses value
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. government and agencies $ 36.7 $ 1.3 $ (0.1) $ 37.9
States and municipal 1.6 0.4 - 2.0
Non-U.S. government 3.0 - (0.4) 2.6
U.S. corporate 3,765.9 126.7 (51.8) 3,840.8
Non-U.S. corporate 291.6 5.9 (7.2) 290.3
Mortgage-backed 1,865.9 47.3 (9.6) 1,903.6
----------- ----------- ---------- -----------
Total fixed maturities 5,964.7 181.6 (69.1) 6,077.2
Common stocks and non-redeemable preferred stocks 48.9 5.8 (0.3) 54.4
----------- ----------- ---------- -----------
Total available-for-sale securities $ 6,013.6 $ 187.4 $ (69.4) $ 6,131.6
=========== =========== ========== ===========
Gross Gross
1997 Amortized unrealized unrealized Fair
- ------------
cost gains losses value
------------ ---------- ---------- ------------
Fixed maturites:
U.S. government and agencies $ 44.3 $ 1.3 $ - $ 45.6
State and municipal 1.8 0.3 - 2.1
Non-U.S. government - - - -
U.S. corporate 3,362.1 120.6 (8.1) 3,474.6
Non-U.S. corporate 200.1 6.5 (0.3) 206.3
Mortgage-backed 1,859.8 39.6 (5.4) 1,894.0
------------ ---------- ---------- ------------
Total fixed maturities 5,468.1 168.3 (13.8) 5,622.6
Common stocks and non-redeemable preferred stocks 90.1 14.6 - 104.7
------------ ---------- ---------- ------------
Total available-for-sale securities $5,558.2 $ 182.9 $ (13.8) $ 5,727.3
============ ========== ========== ============
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
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.
1998
-------------------------
Amortized Fair
Cost Value
----------- ------------
Due in one year or less $ 119.6 $ 120.2
Due one year through five years 1,895.0 1,941.1
Due five years through ten years 1,299.4 1,304.5
Due after ten years 784.8 807.8
----------- ------------
Subtotals 4,098.8 4,173.6
Mortgage-backed securities 1,865.9 1,903.6
----------- ------------
Totals $ 5,964.7 $ 6,077.2
=========== ============
As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders of $4.0
and $4.7 as of December 31, 1998 and 1997, respectively.
As of December 31, 1998, approximately 26.6% and 14.8% 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.
As of December 31, 1998, the Company did not hold any fixed maturity
securities which exceeded 10% of shareholders' interest.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
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>
1998 1997
------------------------- --------------------------
Fair Fair
value Percent value Percent
------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
Agencies and treasuries $ 270.5 4.5 % $ 308.4 5.5 %
AAA/Aaa 1,518.7 25.0 1,464.5 26.0
AA/Aa 376.6 6.2 320.4 5.7
A/A 1,201.4 19.8 1,101.4 19.6
BBB/Baa 1,762.2 29.0 1,862.3 33.1
BB/Ba 378.3 6.2 306.8 5.5
B/B 187.4 3.1 76.7 1.4
Not rated 382.1 6.2 182.1 3.2
------------ ---------- ------------ -----------
Totals $ 6,077.2 100.0 % $ 5,622.6 100.0 %
============ ========== ============ ===========
</TABLE>
Bonds with ratings 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.
(b) Mortgage and Real Estate Portfolio
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, 1998:
Mortgage Real Estate
------------ ------------
South Atlantic 38.4 % 100.0 %
Pacific 16.3 -
East North Central 14.7 -
West South Central 10.8 -
Mountain 10.5 -
Other 9.3 -
------------ ------------
Totals 100.0 % 100.0 %
============ ============
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Type distribution as of December 31, 1998:
Mortgage Real Estate
------------- ------------
Office Building 23.6 % - %
Retail 23.3 100.0
Industrial 22.4 -
Apartments 21.2 -
Other 9.5 -
------------- ------------
Totals 100.0 % 100.0 %
============= ============
"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 definitions, the Company has two types of "impaired" loans
as of December 31, 1998 and 1997: 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 ($11.3
and $23.0, respectively). There was no allowance for losses on these loans as of
December 31, 1998 and 1997. Average investment in impaired loans during 1998 and
1997 was $20.0 and $23.0 and interest income earned on these loans while they
were considered impaired was $1.8 and $2.0 for the years ended 1998 and 1997,
respectively. There were no impaired loans nor related interest income earned on
such loans in 1996.
The following table shows the activity in the allowance for losses
during the years ended December 31:
1998 1997
--------------- ---------------
Balance on January 1 $ 17.2 $ 20.8
Provision charged to operations 1.1 1.1
Amounts written off, net of recoveries 1.7 (4.7)
--------------- ---------------
Balance at December 31 $ 20.0 $ 17.2
=============== ===============
The allowance for losses on mortgage loans at December 31, 1998 and
1997 represented 3.6% and 3.4% of gross mortgage loans, respectively.
The Company had $5.6 and $6.4 of non-income producing mortgage loan
investments as of December 31, 1998 and December 31, 1997, respectively.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(3) Deferred Acquisition Costs
<TABLE>
<CAPTION>
Activity impacting deferred policy acquisition costs was as follows:
Preacquisition
----------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Unamortized balance - beginning of period $ 173.2 $ 71.7 $ - $ 363.9
Costs deferred 93.6 112.3 74.9 22.2
Amortization, net (17.4) (10.8) (3.2) (6.0)
--------------- --------------- --------------- ----------------
Unamortized balance - end of period 249.4 173.2 71.7 380.1
Cumulative effect of net unrealized
investment (gains) losses (7.4) (8.2) (1.4) 17.9
--------------- --------------- --------------- ----------------
Recorded balance $ 242.0 $ 165.0 $ 70.3 $ 398.0
=============== =============== =============== ================
</TABLE>
(4) Intangibles
(a) Present Value of Future Profits (PVFP)
As of April 1, 1996, Life of Virginia established an intangible asset
that 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, net of accreted interest, in a manner similar to the
amortization of deferred acquisition costs. Interest accretes at rates credited
to policyholders on underlying contracts. Recoverability of PVFP is evaluated
periodically by comparing the current estimate of expected future gross profits
to the unamortized asset balance. If such a comparison indicates that the
expected gross profits will not be sufficient to recover PVFP, the difference is
charged to expense.
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.
PVFP is 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 shareholders' interest, net of applicable income
tax. The components of PVFP are as follows:
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Preacquisition
----------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
------------ ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Unamortized bal. - beginning of period $ 385.7 $ 438.9 $ - $ 32.6
Purchase accounting adjustments - - 484.0 -
Interest accrued at 6.25%, 6.75% and 6.25%
for 1998, 1997, and 1996, respectively 24.0 28.4 22.4 0.5
Amortization (70.4) (81.6) (67.5) (1.1)
------------ ------------- ------------- ----------------
Unamortized balance - end of period 339.3 385.7 438.9 32.0
Cumulative effect of net unrealized
investment (gains) losses (36.3) (53.1) (19.7) -
------------ ------------- ------------- ----------------
Recorded balance $ 303.0 $ 332.6 $ 419.2 $ 32.0
============ ============= ============= ================
</TABLE>
The estimated percentage of the December 31, 1998 balance, before the
effect of unrealized investment gains or losses, to be amortized over each of
the next five years is as follows:
1999 11.4 %
2000 8.3
2001 7.3
2002 6.0
2003 5.0
(b) Goodwill
At December 31, 1998 and 1997, total unamortized goodwill was $87.0 and
$117.1, respectively, which is shown net of accumulated amortization and
adjustments of $41.4 and $13.2 for the years ended December 31, 1998 and 1997,
respectively. Goodwill amortization was $2.6, $6.4, and $5.0 for the years
ending December 31, 1998 and 1997, and for the nine month period ending December
31, 1996, respectively. Cumulative adjustments to goodwill totaled $(27.6),
($1.9) and $11.2 for the years ending December 31, 1998 and 1997, and for the
nine month period ending December 31, 1996, respectively. Adjustments relate
primarily to the settlement of purchase price with AON.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(5) 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.
In order to limit to amount of loss retention, certain policy risks are
reinsured with other insurance companies. The maximum of individual ordinary
life insurance normally retained by the Company on any one life policy is $1.
The Company does not have significant reinsurance contracts with any one
reinsurer that could have a material impact on its results of operations.
A summary of reinsurance activity is as follows:
<TABLE>
<CAPTION>
Preacquisition
---------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Direct $ 333.0 $ 321.3 $ 94.7 $ 73.7
Assumed 19.2 20.7 59.0 35.0
Ceded (123.8) (110.4) (10.0) (19.8)
--------------- --------------- --------------- ---------------
Net premiums earned $ 228.4 $ 231.6 $ 143.7 $ 88.9
--------------- --------------- --------------- ---------------
Percentage of amount assumed to net 8% 9% 41% 39%
=============== =============== =============== ===============
</TABLE>
Due to the nature of the Company's reinsurance contracts, premiums
earned approximate premiums written. The above premium amounts include cost of
insurance charges on universal life policies.
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
$82.3, $72.7, $60.5, and $17.2 for the years ended December 31, 1998 and 1997,
the nine months ended December 31, 1996, and the three months ended March 31,
1996, respectively.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
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. For the three
months ended March 31, 1996, premiums of $33.9, benefits of $46.7, commission
expense of $10.2 and a capital contribution of $69.3 as a result of various
reinsurance transactions.
(6) Future Annuity and Contract Benefits
(a) Investment Contracts
Investment contracts are broadly defined to include contracts without
significant mortality or morbidity risk. Payments received from sales of
investment contracts are recognized by providing a liability equal to the
current account value of the policyholder's contracts. Interest rates credited
to investment contracts are guaranteed for the initial policy term with renewal
rates determined as necessary by management.
(b) Insurance Contracts
Insurance contracts are broadly defined to include contracts with
significant mortality and/or morbidity risk. The liability for future benefits
of insurance contracts is the present value of such benefits based on mortality,
morbidity, and other assumptions which were appropriate at the time the policies
were issued or acquired. These assumptions are periodically evaluated for
potential premium deficiencies. Reserves for cancelable accident and health
insurance are based upon unearned premiums, claims incurred but not reported,
and claims in the process of settlement. This estimate is based on the
experience of the insurance industry and the Company, adjusted for current
trends. Any changes in the estimated liability are reflected in income as the
estimates are revised.
<PAGE>
The following chart summarizes the major assumptions underlying the
Company's recorded liabilities for future annuity and contract benefits:
<TABLE>
<CAPTION>
Mortality/
Withdrawal Morbidity Interest Rate December 31,
----------------------------
Assumption Assumption Assumption 1998 1997
-------------- --------------- -------------- ------------ -------------
<S> <C> <C>
Investment Contracts N/A N/A N/A $ 4,463.3 $ 3,951.4
Limited-payment Contracts None (a) 3.8-9.3% 14.4 14.0
Traditional life insurance contracts Company (b) 7.2% 369.0 363.7
Experience
Universal life-type contracts N/A N/A N/A 1,605.7 1,557.4
Accident & Health Company (c) 7.2% 2.9 3.3
Experience
------------ -------------
Total future annuity and contract benefits $ 6,455.3 $ 5,889.8
============ =============
</TABLE>
a) Either the United States Population Table, 1983 Group Annuitant Mortality
Table or 1983 Individual Annuitant Mortality Table.
b) Principally modifications of the 1965-70 or 1975-80 Select and Ultimate
Tables.
c) The 1958 Commissioner's Standard Ordinary Table and 1964 modified and 1987
Commissioner's Disability Tables.
(7) Income Taxes
Beginning April 1, 1996, Life of Virginia and its subsidiary have been
included in the life insurance company consolidated federal income tax return of
GECA 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
income taxes nor entitled to recoveries related to those periods.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
The total provision for income taxes consisted of the following
components:
<TABLE>
<CAPTION>
Preacquisition
---------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Current federal income tax provision (benefit) $ 19.9 $ 62.4 $ 38.1 $ (3.6)
Deferred federal income tax provision (benefit) 28.7 (12.4) (7.6) 10.3
------------- -------------- --------------- ---------------
Subtotal-federal provision 48.6 50.0 30.5 6.7
Current state income tax provision (benefit) 1.3 2.4 1.6 (0.2)
Deferred state income tax provision (benefit) 0.8 (0.2) (0.3) 0.5
------------- -------------- --------------- ---------------
Subtotal-state provision 2.1 2.2 1.3 0.3
------------- -------------- --------------- ---------------
Total income tax provision $ 50.7 $ 52.2 $ 31.8 $ 7.0
============= ============== =============== ===============
</TABLE>
The reconciliation of the federal statutory rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
Preacquisition
-----------------
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Statutory U.S. federal income tax rate 35.0 % 35.0 % 35.0 % 35.0 %
State income tax 0.5 0.5 0.5 0.5
Non-deductible goodwill amortization 0.7 1.6 2.0 0.0
Other, net (0.3) (0.6) (0.5) 1.5
------------- --------------- --------------- ---------------
Effective rate 35.9 % 36.5 % 37.0 % 37.0 %
============= =============== =============== ===============
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
The components of the net deferred income tax asset (liability) at
December 31 are as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
----------------- -----------------
<S> <C> <C>
Assets:
Insurance reserve amounts $ 147.1 $ 142.9
Deferred acquisition costs - 11.8
Other 5.9 24.5
----------------- -----------------
Total deferred tax assets 153.0 179.2
----------------- -----------------
Liabilities:
Net unrealized investment gains on investment securities 26.8 40.0
Investments 3.5 2.7
Present value of future profits 67.1 79.1
Deferred acquisition costs 14.5 -
----------------- -----------------
Total deferred tax liabilities 111.9 121.8
----------------- -----------------
Net deferred income tax asset $ 41.1 $ 57.4
================= =================
</TABLE>
Based on an analysis of the Company's tax position, management believes
it is more likely than not that the results of future operations and
implementation of tax planning strategies will generate sufficient taxable
income enabling the Company to realize remaining deferred tax assets.
Accordingly, no valuation allowance for deferred tax assets is deemed necessary.
The Company paid (refunded) $19.2, $64.4, $38.6, and $(2.4), for
federal and state income taxes for the year ended December 31, 1998, 1997, the
nine months ended December 31, 1996, and three months ended March 31, 1996,
respectively.
(8) Related Party Transactions
Life of Virginia pays investment advisory fees and other fees to
affiliates. Amounts incurred for these items aggregated $11.5, $11.9, $3.2, and
$3.5 for the years ended December 31, 1998 and 1997, the nine months ended
December 31, 1996, and the three months ended March 31, 1996, respectively. Life
of Virginia charges affiliates for certain services and for the use of
facilities and equipment which aggregated $19.1, $4.6, $2.0, and $1.0, for the
years ended December 31, 1998 and 1997, the nine months ended December 31, 1996,
and the three months ended March 31, 1996, respectively.
Life of Virginia pays interest on outstanding amounts under a credit
funding agreement with GNA Corporation, the parent company of GECA. Interest
expense under this agreement was $2.0 and $0.0 with outstanding borrowings of
$53.9 and $0.0 as of December 31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6. Amounts included in net
investment income related to these holdings totaled $0.1, $0.1, $0.1, and $0.2
for the years ended December 31, 1998 and 1997, for the nine months ended
December 31, 1996, and the three months ended March 31, 1996, respectively.
During 1998, Life of Virginia sold $18.5 of third-party preferred stock
investments to an affiliate. This resulted in a gain on sale of $3.9, which is
included in net realized investment gains.
<PAGE>
(9) Commitments and Contingencies
(a) Mortgage Loan Commitments
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 as of December 31,
1998 and 1997, totaled $72.0 and $16.7, respectively.
(B) Guaranty Association Assessments
The Company is required by law to participate in the guaranty
associations of the various states in which they do business. The state guaranty
associations ensure payment of guaranteed benefits, with certain restrictions,
to policyholders of impaired or insolvent insurance companies by assessing all
other companies involved in similar lines of business.
There are currently several unrelated insurance companies which had
substantial amounts of annuity business in the process of liquidation or
rehabilitation. The Company paid assessments of $2.9, $3.8, $0.2 and $1.4 to
various state guaranty associations during 1998, 1997, the nine month period
ended December 31, 1996, and the three month period ended March 31, 1996,
respectively. At December 31, 1998 and 1997, accounts payable and accrued
expenses include $15.4 and $18.2, respectively, related to estimated future
payments.
(c) Leases
The Company has noncancelable operating leases for certain office
space, equipment and automobiles. Rental expense for all operating leases for
the years ended December 31, 1998 and 1997, for the nine months ended December
31, 1996, and the three months ended March 31, 1996 amounted to $1.4, $1.3,
$2.5, and $0.8, respectively.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Future minimum commitments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 1998
are summarized as follows:
Minimum lease payments
1999 $ 1.2
2000 0.8
2001 0.5
2002 0.3
2003 -
Later years -
-----
Total minimum payments required $ 2.8
=====
(d) Litigation
There is no pending litigation to which the Company is a party
or of which any of the Company's property is the subject which management
believes will have an adverse material impact on the Company's financial
condition or results of operations. In addition, there are no legal
proceedings contemplated by any governmental authorities against the Company of
which management has any knowledge.
(10) Fair Value of Financial Instruments
The Company has adopted SFAS No. 119, Disclosures About Derivative
Financial Instruments and Fair Value of Financial Instruments. This statement
requires disclosures about the amounts, nature and terms of derivative financial
instruments and modifies existing disclosure requirements for other financial
instruments.
The Company has no derivative financial instruments as defined by SFAS
No. 119 as of December 31, 1998 other than mortgage loan commitments of $77.2
and interest rate floors of $17.2. The notional value of the interest rate
floors at December 31, 1998 was $1,800 and the floors expire from September 2003
to October 2003.
The fair values of financial instruments presented in the applicable
notes to the Company's consolidated financial statements are estimates of the
fair values at a specific point in time using available market information and
valuation methodologies considered appropriate by management. These estimates
are subjective in nature and involve uncertainties and significant judgment in
the interpretation of current market data. Therefore, the fair values presented
are not necessarily indicative of amounts the Company could realize or settle
currently. The Company does not necessarily intend to dispose of or liquidate
such instruments prior to maturity.
Financial instruments that, as a mater of accounting policy, are reflected
in the accompanying consolidated financial statements at fair value are not
included in the following disclosures. Such items include fixed maturities,
equity securities and certain other invested assets. The carrying value of
policy loans and short-term investments approximate fair value at both
December 31, 1998 and 1997.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions, except per share amounts)
At December 31, the carrying amounts and fair value of the Company's
financial instruments were as follows:
1998 1997
------------------ -------------------
Carrying Fair Carrying Fair
amount value amount value
------------------ -------------------
Mortgage Loans $528.1 $590.1 $496.2 $532.2
Investment type insurance contracts 4,463.3 4,462.6 3,951.4 3,909.0
Interest rate floors 17.2 12.5 -- --
The fair value of mortgage loans is estimated by discounting the
estimated future cash flows using interest rates applicable to current loan
origination, adjusted for credit risk.
The estimated fair value of investment contracts is the amount payable
on demand (cash surrender value) for deferred annuities and the net present
value based on interest rates currently offered on similar contracts for
non-life contingent immediate annuities. Fair value disclosures are not required
for insurance contracts.
(11) Restrictions On Dividends
Insurance companies are restricted by states as to the aggregate amount
of dividends they may pay to their parent in any consecutive twelve-month period
without regulatory approval. Generally, dividends may be paid out of earned
surplus without approval with thirty days prior written notice within certain
limits. The limits are generally based on 10% of the prior year surplus (net of
adjustments in some cases) and prior year statutory income (net gain from
operations, net income adjusted for realized capital gains, or net investment
income). Dividends in excess of the prescribed limits or the Company's earned
surplus require formal state insurance commission approval. The maximum dividend
payout which may be made without prior approval in 1999 is $47.9.
On December 3, 1998, the Company received approval from the
Commonwealth of Virginia for, and declared, a dividend payable in cash,
preferred stock and/or common stock at the election of each shareholder. GEFAHI
elected to receive cash and preferred stock and GECA elected to receive common
stock. A cash dividend of $120 was paid and a Series A preferred stock dividend
of $120 was issued to GEFAHI on December 15, 1998. The Series A preferred stock
has a par value of $1,000 per share, is redeemable at par at the Company's
election, and is not subject to call penalties. Dividends on the preferred stock
are cumulative and payable semi-annually at the annual rate of 8.0% of the par
value. The Series A preferred stock is not convertible into any other security
of the Company, and the holders thereof have no voting rights except with
respect to any proposed changes in the preferences and special rights of such
stock. GECA will receive its dividend in the form of 18,641 shares of newly
issued common stock in 1999.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(12) Supplementary Financial Data
The Company files financial statements with state insurance regulatory
authorities and the National Association of Insurance Commissioners (NAIC) that
are prepared on an accounting basis prescribed by such authorities (statutory
basis). Statutory accounting practices differ from generally accepted accounting
principles (GAAP) in several respects, causing differences in reported net
income and shareholders' interest. Permitted statutory accounting practices
encompass all accounting practices not so prescribed but that have been
specifically allowed by state insurance authorities. The Company has no
significant permitted accounting practices.
Statutory net income and statutory capital and surplus is summarized
below:
<TABLE>
<CAPTION>
Preacquisition
Nine months Three months
Year ended Year ended ended ended
December 31, December 31, December 31, March 31,
1998 1997 1996 1996
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Statutory net income $ 52.2 $ 73.9 $ 69.7 $ (8.3)
Statutory capital and surplus $ 481.1 $ 522.5 $ 419.1 $ 360.5
</TABLE>
The NAIC adopted Risk Based Capital (RBC) requirements to evaluate the
adequacy of statutory capital and surplus in relation to risks associated with
(i) asset quality, (ii) insurance risk, (iii) interest rate risk, and (iv) other
business factors. The RBC formula is designated as an early warning tool for the
states to identify possible under-capitalized companies for the purpose of
initiating regulatory action. In the course of operations, the Company
periodically monitors its RBC level. At December 31, 1998 and 1997, the Company
exceeded the minimum required RBC levels.
(13) Operating Segment Information
At year-end 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, Disclosures About Segments of an Enterprise and
Related Information, which requires segment data to be measured and analyzed on
a basis that is consistent with how business activities are reported internally
to management. Life of Virginia and its affiliated companies, which are
subsidiaries of GEFAHI, conduct operations through two business segments: (1)
Wealth Accumulation and Transfer, comprised of products intended to increase the
policyholder's wealth, transfer wealth to beneficiaries or provide a means for
replacing the income of the insured in the event of premature death, and (2)
Wealth and Lifestyle Protection, comprised of products intended to protect
accumulated wealth and income from the financial drain of unforeseen events. As
Life of Virginia sells primarily variable annuity and universal life policies,
it operates in the Wealth Accumulation and Transfer Segment. Accordingly, no
segment data is provided.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
(14) Accounting Pronouncements Not Yet Adopted
During 1998, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement requires that,
upon adoption, all derivative instruments (including certain derivative
instruments embedded in other contracts) be recognized in the balance sheet at
fair value, and that changes in such fair values be recognized in earnings
unless specific hedging criteria are met. Changes in the values of derivatives
that meet these hedging criteria will ultimately offset related earnings effects
of the hedged items; effects of certain changes in fair value are recorded in
equity pending recognition in earnings. As required in SFAS No. 133, the Company
will adopt the Statement by January 1, 2000. The impact of adoption will be
determined by several factors, including the specific hedging instruments in
place and their relationships to hedged items, as well as market conditions.
Management has not estimated the effects of adoption as it believes that such
determination will not be meaningful until closer to the adoption date.
In December 1997, the American Institute of Certified Public
Accountants issued a new Statement of Position (SOP) 97-3, Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments. This SOP
provides guidance on accounting by insurance and other enterprises for
guaranty-fund and certain other insurance related assessments. The SOP requires
enterprises to recognize (1) a liability for assessments when (a) an assessment
has been asserted or information available prior to issuance of the financial
statements indicates it is probable that an assessment will be asserted, (b) the
underlying cause of the asserted or probable assessment has occurred on or
before the date of the financial statements, and (c) the amount of the loss can
be reasonably estimated and (2) an asset for an amount when it is probable that
a paid or accrued assessment will result in an amount that is recoverable from
premium tax offsets or policy surcharges from in-force policies. This SOP is
effective for financial statements for fiscal years beginning after December 15,
1998 and will be reported in a manner similar to a cumulative effect of a change
in accounting principle in the initial year of adoption. As a result of the
adoption of this SOP, the Company expects to record an asset of approximately
$4, net of tax.
(15) Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income. This
statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income includes all changes in equity from non-owner sources,
investments by and distributions to owners are excluded. Prior year consolidated
financial statements have been restated to conform to the requirements of SFAS
130.
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Components of other comprehensive income and related tax effects are
shown below:
<TABLE>
<CAPTION>
Year Ended
----------
December 31, 1998 December 31, 1997
---------------------------- ------------------------------
Before-Tax Tax Net-of-Tax Before-Tax Tax Net-of-Tax
Amount Effect Amount Amount Effect Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period $ (11.4) $ 4.0 $ (7.4) $ 97.7 $ (34.2) $ 63.5
Less: reclassification adjustment for gains
realized in net income (26.3) 9.2 (17.1) (13.3) 4.7 (8.6)
----- --- ----- ----- --- ----
Net unrealized gains (losses) on securities (37.7) 13.2 (24.5) 84.4 (29.5) 54.9
----- ---- ----- ---- ----- ----
Total other comprehensive income (loss) $ (37.7) $ 13.2 $ (24.5) $ 84.4 $ (29.5) $ 54.9
======= ====== ======= ====== ======= ======
Preacquisition
--------------
Nine Months Ended Three Months Ended
----------------- ------------------
December 31, 1996 March 31, 1996
------------------------------------- --------------------------------------
Before-Tax Tax Net-of-Tax Before-Tax Tax Net-of-Tax
Amount Effect Amount Amount Effect Amount
------ ------ ------ ------ ------ ------
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period $ 35.8 $ (12.5) $ 23.3 $ (131.3) $ 46.0 $ (85.3)
Less: reclassification adjustment for gains
realized in net income (6.0) 2.1 (3.9) (9.0) 3.1 (5.9)
---- --- ---- ---- --- ----
Net unrealized gains (losses) on securities 29.8 (10.4) 19.4 (140.3) 49.1 (91.2)
---- ----- ---- ------ ---- -----
Total other comprehensive income (loss) $ 29.8 $ (10.4) $ 19.4 $ (140.3) $ 49.1 $ (91.2)
====== ======= ====== ======== ====== =======
</TABLE>
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(Dollar amounts in millions)
Components of accumulated non-owner changes in equity are shown below:
<TABLE>
<CAPTION>
Adjustment Accumulated
Unrealized To Reflect Non-owner
Gains (losses) Purchase Changes in
on Securities Method Equity
--------------- ------------- ----------------
Preacquisition
- ---------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1995 $ 103.1 $ - $ 103.1
Changes for the three months ended March 31, 1996 (91.2) - (91.2)
--------------- ------------- ----------------
Balance March 31, 1996 11.9 - 11.9
Postacquisition
- ---------------
Changes for the nine months ended December 31, 1996 19.4 (11.9) 7.5
--------------- ------------- ----------------
Balance December 31, 1996 31.3 (11.9) 19.4
Changes for the year ended December 31, 1997 54.9 - 54.9
--------------- ------------- ----------------
Balance December 31, 1997 86.2 (11.9) 74.3
Changes for the year ended December 31, 1998 (24.5) - (24.5)
--------------- ------------- ----------------
Balance December 31, 1998 $ 61.7 $ (11.9) $ 49.8
=============== ============= ================
</TABLE>
(16) Subsequent Event
Effective January 1, 1999, The Harvest Life Insurance Company
("Harvest") merged into The Life Insurance Company of Virginia with the merged
Company renamed GE Life and Annuity Assurance Company ("GELAAC"). Harvest's
former parent, Federal Home Life Insurance Company ("FHLIC"), will receive
common stock of GELAAC in exchange for its interest in Harvest. FHLIC is an
indirect wholly-owned subsidiary of GEFAHI. Following are the proforma results
of operations for the Company for the year ended December 31, 1998 and 1997 as
if Harvest had been a part of Life of Virginia as of January 1, 1997.
Proforma Results
------------------------------------------
as of or for the year ending December 31,
------------------------------------------
1998 1997
-------------------- --------------------
Total assets $ 14,785.4 $ 12,735.2
Revenues 939.1 974.4
Net income 105.8 107.3
