As filed with the Securities and Exchange Commission on December 21, 1999
File No. 333-
File No. 811-5343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.
For Registration Under the Investment Company Act of 1940 X
Amendment No.
GE Life & Annuity Separate Account 4
(EXACT NAME OF REGISTRANT)
GE Life and Annuity Assurance Company
(Name of Depositor)
6610 W. Broad Street
Richmond, Virginia 23230
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICE)
Depositor's Telephone Number: (804) 281-6000
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Patricia L. Dysart COPY TO:
Associate General Counsel Stephen E. Roth, Esquire
and Asst. Vice President Sutherland, Asbill & Brennan, LLP.
GE Financial Assurance 1275 Pennsylvania Avenue, N.W.
6610 W. Broad Street Washington, D.C. 20004
Richmond, Virginia 23230
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of the registration statement.
TITLE OF SECURITIES BEING REGISTERED:
Interests in a Separate Account Under Flexible Premium Variable Annuity Policies
FILING FEE: None
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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GE LIFE & ANNUITY SEPARATE ACCOUNT 4
VARIABLE DEFERRED ANNUITY CONTRACT
FORM P1153 12/99
ISSUED BY: ADMINISTRATIVE OFFICE:
GE Life and Annuity Assurance Company GE Life and Annuity Assurance Company
6610 West Broad Street P.O. Box 691
Richmond, VA 23230 Leesburg, VA 20178
Telephone: (804) 281-6000
This prospectus describes an individual flexible premium variable deferred
annuity contract (the "Contract") issued by GE Life and Annuity Assurance
Company (the "Company", "GE Life & Annuity," "we," "us," or "our"). Most
transactions involving this Contract may be performed through our Electronic
Service Center.
The Contract offers you the accumulation of Contract Value and payment of
periodic annuity benefits. We pay these benefits on a variable basis.
You may allocate your Purchase Payments to the Separate Account. The Subaccounts
of the Separate Account invest in shares of the Funds. We list the Funds, and
their currently available portfolios, below.
Both the value of a Contract before the Annuity Commencement Date and the amount
of monthly payments afterward will depend upon the investment performance of the
portfolio(s) you select. You bear the investment risk of investing in the
portfolios.
GE INVESTMENTS FUNDS, INC.
o S&P 500 Index Fund o Money Market Fund
o Total Return Fund o International Equity Fund
o Real Estate Securities Fund o Value Equity Fund
o Income Fund o U.S. Equity Fund
o Premier Growth Equity Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
o VIP III Growth & Income Portfolio o VIP III Growth Opportunities
Portfolio
JANUS ASPEN SERIES
o Capital Appreciation Portfolio o High Yield Portfolio
o Flexible Income Portfolio o International Growth Portfolio
o Equity Income Portfolio
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AIM VARIABLE INSURANCE FUNDS, INC.
o AIM V.I. Capital Appreciation Fund o AIM V.I. Global Utilities Fund
o AIM V.I. Capital Development Fund o AIM V.I. Aggressive Growth Fund
o AIM V.I. Telecommunications Fund o AIM V.I. Government Securities Fund
o AIM V.I. Growth & Income Fund
DELAWARE GROUP PREMIUM FUND, INC.
o Delaware Devon Series o Delaware Social Awareness Series
Not all of these portfolios may be available in all states or in all markets.
YOUR INVESTMENT IN THE CONTRACT IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT
AGENCY.
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.
This prospectus details the information regarding the Separate Account that you
should know before investing. Please read it carefully, and it will remain
available through our Electronic Service Center. We have also provided current
prospectuses that contain information about the Funds available under the
Contract. You should read the Fund prospectuses carefully before purchasing a
Contract and they will remain available through our Electronic Service Center.
A Statement of Additional Information (SAI), dated ______ __, 2000, concerning
the Separate Account has been filed with the SEC and is incorporated by
reference into this prospectus. A table of contents for the SAI appears on the
last page of this prospectus. A free hard copy of the SAI is available upon
e-mail request through our Electronic Service Center at http://AnnuityNet.com.
The SAI is also available through the SEC website at http://www.sec.gov.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
The date of this prospectus is _______ __, 2000.
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<TABLE>
<CAPTION>
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TABLE OF CONTENTS
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<S> <C>
DEFINITIONS..............................................................................................1
EXPENSE TABLE............................................................................................2
SYNOPSIS.................................................................................................6
INVESTMENT RESULTS.......................................................................................8
FINANCIAL STATEMENTS.....................................................................................9
GE LIFE AND ANNUITY ASSURANCE COMPANY....................................................................9
SEPARATE ACCOUNT........................................................................................10
THE FUNDS............................................................................................10
SUBACCOUNTS..........................................................................................11
CHANGES TO THE SEPARATE ACCOUNT AND THE SUBACCOUNTS..................................................17
CHARGES AND OTHER DEDUCTIONS............................................................................18
DEDUCTIONS FROM THE SEPARATE ACCOUNT.................................................................18
DEDUCTIONS FOR PREMIUM TAXES.........................................................................18
OTHER CHARGES AND DEDUCTIONS.........................................................................18
THE CONTRACT............................................................................................19
PURCHASE OF THE CONTRACT.............................................................................19
OWNERSHIP............................................................................................19
PURCHASE PAYMENTS....................................................................................20
VALUATION DATE.......................................................................................20
ALLOCATION OF PURCHASE PAYMENTS......................................................................20
VALUATION OF ACCUMULATION UNITS......................................................................21
TRANSFERS...............................................................................................21
TRANSFERS BEFORE THE ANNUITY COMMENCEMENT DATE.......................................................21
TELEPHONE TRANSACTIONS...............................................................................16
TRANSFERS BY THIRD PARTIES...........................................................................22
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE........................................................23
SURRENDERS AND WITHDRAWALS..............................................................................16
THE DEATH BENEFIT.......................................................................................24
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE...................................................24
DISTRIBUTION RULES...................................................................................25
ANNUITY PAYOUTS.........................................................................................26
ANNUITY PAYMENT OPTIONS..............................................................................27
LIFE ANNUITY WITH PERIOD CERTAIN.....................................................................27
JOINT LIFE ANNUITY...................................................................................27
GENERAL INFORMATION..................................................................................27
ANNUITY PAYOUTS......................................................................................28
FEDERAL TAX MATTERS.....................................................................................29
VOTING RIGHTS...........................................................................................33
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REQUESTING PAYMENTS.....................................................................................34
DISTRIBUTION OF THE CONTRACTS...........................................................................34
COMMISSIONS..........................................................................................35
ADDITIONAL INFORMATION..................................................................................35
OWNER QUESTIONS......................................................................................35
RETURN PRIVILEGE.....................................................................................35
STATE REGULATION.....................................................................................35
RECORDS AND REPORTS..................................................................................35
OTHER INFORMATION....................................................................................36
LEGAL MATTERS........................................................................................36
CONDENSED FINANCIAL INFORMATION.........................................................................36
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION...........................................37
</TABLE>
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================================================================================
DEFINITIONS
================================================================================
We have tried to make this prospectus as understandable as possible.
However, in explaining how the Contract works, we have had to use certain terms
that have special meanings. We define these terms below.
ACCOUNT OR SEPARATE ACCOUNT -- The segregated investment account, GE Life &
Annuity Separate Account 4, into which GE Life & Annuity sets aside and invests
the assets for the Contract offered in this prospectus, and other variable
annuity contracts that we issue.
ACCUMULATION UNIT -- A measure we use to calculate Contract Value before the
Annuity Commencement Date.
ADMINISTRATIVE OFFICE -- The office designated by the Company to receive written
customer requests. The address is GE Life and Annuity Assurance Company, P.O.
Box 691, Leesburg, VA 20178.
ANNUITANT -- The person upon whose life we will base the annuity benefit
payments made after the Annuity Commencement Date.
ANNUITY COMMENCEMENT DATE - The date when we apply the Contract Value (less any
premium taxes) for payment of annuity benefits under the Annuity Payment Option
selected. This is the date of the first annuity payment and is specified in your
Contract unless changed after issue.
ANNUITY PAYMENT OPTION -- Any of the forms of annuity benefit payments allowed
under the Contract.
ANNUITY PAYOUT -- An amount paid at regular intervals after the Annuity
Commencement Date under one of the Annuity Payment Options available to the
Owner and/or any other payee. The amount paid may vary.
ANNUITY UNIT -- A measure we use to calculate the amount of Annuity Payouts
after the Annuity Commencement Date.
BENEFICIARY -- The person or entity whom the Owner designates to receive the
Death Benefit, if any, in case of the Owner's death.
CODE -- The Internal Revenue Code of 1986, as amended.
CONTINGENT ANNUITANT -- The person named by named by the Owner who, at the death
of the Annuitant before the Annuity Commencement Date, may become the Annuitant
in certain circumstances.
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CONTRACT VALUE -- At a given time before the Annuity Commencement Date, the
total value of all Accumulation Units for a Contract.
CONTRACT YEAR -- Each one-year period starting with the effective date of the
Contract to the anniversary of that date in the following year.
DEATH BENEFIT -- The amount payable to the Owner's designated Beneficiary if the
Owner dies before the Annuity Commencement Date.
ELECTRONIC SERVICE CENTER -- The electronic site that GE Life & Annuity
maintains specifically for this Contract to provide variable annuity contract
information and other information to current and prospective annuity Contract
Owners and through which various transactions may be performed. Certain of these
transactions may require faxed or mailed signatures. The Universal Resource
Locator (or "URL") for the Electronic Service Center is http://AnnuityNet.com.
FUND - Any open-end management investment company or portfolio thereof, or any
unit investment trust or series thereof, in which a Subaccount invests.
OWNER - The individual(s) or entity who possesses rights of ownership under the
Contract. "You" and "your" refer to the Owner. An Owner or joint Owner is
entitled to receive Annuity Payouts after the Annuity Commencement Date. Owners
refers to the Owner or joint Owner.
PURCHASE PAYMENTS - A payment received by the Company and applied to this
Contract. When used in connection with this Contract, the term "Purchase
Payment" means the same as the term "premium payment".
SUBACCOUNT -- That portion of the Separate Account which invests in shares of a
portfolio of a particular Fund. A Subaccount corresponds to each portfolio of a
Fund.
VALUATION DATE -- Each day the New York Stock Exchange (NYSE) is open for
regular trading except for days that a Subaccount's corresponding Fund does not
value its shares.
VALUATION PERIOD -- The period commencing at the close of regular trading
(currently 4:00 p.m. New York time) on each day that the NYSE is open for
regular trading (in other words, the Valuation Date) and ending at the close of
such trading on the next succeeding Valuation Date.
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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 Contract. The table reflects
expenses both of the Subaccounts of the Separate Account 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 prospectuses for the
Funds. Premium tax charges also may apply, although they do not appear in the
table. In addition, we reserve the right to impose a $10.00 transfer charge,
although we do not currently do so.
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OWNER TRANSACTION EXPENSES:
None.
SEPARATE ACCOUNT ANNUAL EXPENSES FOR THE SUBACCOUNTS:
(as a percentage of average Contract Value for each Subaccount):
Maximum Annuity Asset Charge
Mortality and expense risk charge .40%
Administrative expense charge .35%
---
Effective annual rate not to exceed .75%
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 WAIVERS (AFTER REIMBURSEMENT
PORTFOLIO AS APPLICABLE) + AS APPLICABLE) = TOTAL EXPENSES
- --------- ------------------ ---------------- --------------
<S> <C>
INTERNATIONAL
Janus Aspen International Growth Portfolio(4) 0.66 0.20 0.86
GE Investments International Equity Fund 1.00 0.15 1.15
VIP Overseas Portfolio(2)* 0.74 0.17 0.91
SPECIALTY
GE Investments Real Estate Securities Fund 0.85 0.14 0.99
AIM V.I. Global Utilities Fund(5) 0.65 0.46 1.11
AIM V.I. Telecommunications Fund(5) 1.00 TBD 1.00+
Delaware Group Social Awareness Series 0 0 0
SMALL-CAP BLEND
AIM V.I. Capital Development Fund(5) 0.00 1.21 1.21
SMALL-CAP GROWTH
AIM V.I. Aggressive Growth Fund(5) 0.10 1.06 1.16
MID-CAP VALUE
GE Investments Value Equity Fund** 0.65 0.10 0.75
MID-CAP BLEND
Delaware Group Devon Series(6) 0 0 0
MID-CAP GROWTH
AIM V.I. Capital Appreciation Fund(5) 0.62 0.05 0.67
LARGE-CAP BLEND
VIP III Growth & Income Portfolio(3)* 0.49 0.12 0.61
AIM V.I. Growth and Income Fund(5) 0.61 0.04 0.65
GE Investments S&P 500 Index Fund 0.35 0.10 0.45
LARGE-CAP GROWTH
Janus Aspen Capital Appreciation Portfolio(4) 0.70 0.22 0.92
Janus Aspen Equity Income Portfolio 0.75 0.50 1.25
</TABLE>
3
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<TABLE>
<S> <C>
LARGE-CAP VALUE
VIP III Growth Opportunities Portfolio(3)* 0.59 0.12 0.71
GE Investments U.S. Equity Fund 0.55 0.14 0.69
GE Investments Premier Growth Equity Fund 0.65 0.17 0.82
BALANCED
GE Investments Total Return Fund 0.50 0.13 0.63
DOMESTIC BONDS
GE Investments Income Fund 0.50 0.14 0.64
Janus Aspen Flexible Income Portfolio 0.65 0.08 0.73
AIM V.I. Government Securities Fund(5) 0.50 0.26 0.76
HIGH YIELD BOND
Janus Aspen High Yield Bond Portfolio 0.75 0.25 1.00
MONEY MARKET
GE Investments Money Market Fund(1) 0.25 0.12 0.37
</TABLE>
Not all portfolios may be available in all states or markets.
* The fees and expenses reported for the Variable Insurance Products Fund (VIP)
and Variable Insurance Products Fund III (VIP III) are prior to any fee waivers
and/or reimbursements as applicable.
** 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 GE Investment Management Incorporated currently serves as investment
adviser to GE Investments Funds, 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%.
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 .91% for VIP Overseas 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
during 1998 would have been .61% for VIP III Growth & Income Portfolio and
.71% for Growth Opportunities Portfolio.
4 Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1998 would have been .95% for International
Growth Portfolio, and .97% for Capital Appreciation Portfolio.
4
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5 Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of AIM Variable Insurance Funds, Inc. would have been 4.62%
for AIM V.I. Aggressive Growth Fund, .67% for AIM V.I. Capital
AppreciationFund, 5.80% for AIM V.I. Capital Development Fund, 1.11 for AIM
V.I. Global Utilities Fund, .76% for AIM V.I. Government Securities
Fund.65% for AIM V.I. Growth and Income Fund and 2.00% for AIM V.I.
Telecommunications Fund.
6 Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of Delaware Group Premium Fund, Inc. would have been .66%
for Devon Series and .83% for Social Awareness Series.
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 for the year ended December 31, 1998 (shown
above in Portfolio Annual Expenses).
* * *
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:
[To be added in a pre-effective amendment]
1. If you surrender* your Contract at the end of the applicable period:
1 year 3 years 5 years 10 years
------ ------- ------- --------
*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*:
1 year 3 years 5 years 10 years
------ ------- ------- --------
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.
5
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OTHER CONTRACTS
We offer other variable annuity contracts which may also invest in the
same portfolios offered in the Contract. These contracts have different charges
that could affect their subaccounts' performance and they offer different
benefits.
================================================================================
SYNOPSIS
================================================================================
WHAT TYPE OF CONTRACT AM I It is an individual deferred variable annuity
BUYING? contract issued by GE Life & Annuity. This
prospectus only provides disclosure about the
Contract. Certain features described in this
prospectus may vary from your Contract. See The
Contract.
WHAT IS THE ACCOUNT? It is a separate account established under
Virginia insurance law, and registered with the
SEC as a unit investment trust. The assets of
the Separate Account are allocated to one or
more Subaccounts. Those assets are not
chargeable with liabilities arising out of any
other business which GE Life & Annuity may
conduct. See Separate Account.
WHAT ARE MY INVESTMENT Through its various Subaccounts, the Separate
CHOICES? Account uses your Purchase Payments to purchase
shares, at your direction, in one or more of the
portfolios of the Funds. In turn, each
portfolio holds securities consistent with its
own particular investment policy. See Separate
Account - Subaccounts.
HOW DOES THE CONTRACT WORK? During the accumulation period, while you are
paying in, your Purchase Payments will buy
Accumulation Units under the Contract. When you
annuitize (that is, change your Contract to a
payment mode rather than an accumulation mode),
your Accumulation Units will be converted to
Annuity Units. Your periodic Annuity Payout will
be based upon the number of Annuity Units to
which you became entitled at the time you
annuitized and the value of each unit on the
Valuation Date the payment is calculated. See
The Contract.
WHAT CAN I DO THROUGH THE The Electronic Service Center is maintained to
ELECTRONIC SERVICE CENTER? provide information to current and prospective
customers and to enable various transactions.
For security, we may issue you a Personal
Identification Number (PIN) or password. You are
responsible for any use of this PIN or password.
Detailed instructions on how to perform various
transactions such as transferring funds from one
Subaccount to another Subaccount, changing the
Beneficiary or making a withdrawal can be found
at the Electronic Service Center. These
procedures must be followed.
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For legal reasons, certain transactions require
a document with a signature. Electronic requests
for transactions that require a signature will
not be processed.
WHAT CHARGES ARE We assess annual charges in the aggregate at an
ASSOCIATED WITH THIS effective annual rate of .75% against the daily
CONTRACT? net asset value of the Separate Account,
including that portion of the Account
attributable to your Purchase Payments. These
charges consist of an administrative expense
charge of .35% and a mortality and expense risk
charge of .40%.
If your state assesses a premium tax with
respect to your Contract, we will deduct those
amounts from Purchase Payments or Contract Value
at the time the tax is incurred (or at another
time we choose). See Charges and Other
Deductions.
Finally, each portfolio pays a management fee to
its investment advisers based upon its average
daily net asset value. Each portfolio also has
additional operating expenses associated with
the daily operation of the Funds. See the
Expense Table. These fees and expenses are more
fully described in the prospectuses for the
Funds.
HOW MUCH MUST I PAY, AND You may purchase the contract for $1000.00. In
HOW OFTEN? general, Purchase Payments are flexible,
although some limitations on the amounts may
apply. See The Contract - Purchase Payments.
HOW WILL MY ANNUITY When you annuitize, you elect an Annuity Payment
PAYOUTS BE CALCULATED? Option. Once you have done so, your Annuity
Payout will be based upon a number of factors.
One factor will be the changing values of the
Subaccounts to which you have allocated Purchase
Payments. Another factor will be your age at the
Annuity Commencement Date. See Annuity Payouts.
WHAT HAPPENS IF I DIE We will pay the Contract Value to your
BEFORE I ANNUITIZE? designated Beneficiary. Your Beneficiary will
have certain options for how we pay the money
out. See the Death Benefit.
MAY I TRANSFER CONTRACT Yes, but there may be limits on how often you
VALUE AMONG SUBACCOUNTS? may do so. Transfers are limited to three times
annually after the Annuity Commencement Date.
See Transfers.
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MAY I SURRENDER THE Yes, subject to Contract requirements. See
CONTRACT OR MAKE A Surrenders and Withdrawals.
WITHDRAWAL?
If you surrender the Contract or make a
withdrawal, certain charges may be assessed, as
discussed above and under Charges and Other
Deductions. In addition, if you take a
distribution before age 59 1/2 the Internal
Revenue Service may assess a 10% premature
withdrawal penalty tax. A surrender or a
withdrawal may be subject to tax withholding.
See Federal Tax Matters.
DO I GET A FREE LOOK AT Yes. If within ten days (or a longer period
THIS CONTRACT? if required by law) of the date you receive the
signed Contract through the Electronic Service
Center, you cancel the Contract through the
Electronic Service Center or return it, postage
prepaid to our Administrative Office, it will be
canceled. We will allocate your Purchase
Payments to the Subaccount investing in GE
Investments Funds' Money Market Fund until we
deem the free look period to have expired.
Solely for this purpose, we deem the free look
period to expire 15 days after we deliver your
Contract to your personal folder.
If you exercise this right, we will cancel the
Contract as of the day we receive your request,
and send you a refund equal to your Contract
Value plus any charges we have deducted from
your Purchase Payments prior to the allocation
to the Separate Account (and excluding any
charges the portfolios may have deducted) on or
before the date we received the returned
Contract. Or, if greater, we will refund your
Purchase Payments (less any withdrawals
previously taken). See Additional Information -
Return Privilege.
MAY I RECEIVE MATERIALS IN Yes. You may receive any materials in writing,
WRITING FROM GE LIFE & such as the prospectuses and annual reports, by
ANNUITY? contacting our Administrative Office or by
e-mailing our Electronic Service Center. In
addition, at any time, you may revoke your
consent to receive materials electronically by
writing our Administrative Office.
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INVESTMENT RESULTS
================================================================================
At times, the Separate Account 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. Total returns include the
reinvestment of all distributions. Total returns reflect portfolio charges and
expenses, the administrative expense charge, and the mortality and expense risk
charge. Total returns do not reflect any premium taxes. See the SAI for further
information.
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FINANCIAL STATEMENTS
================================================================================
The consolidated 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 Statement of Additional Information ("SAI"). If you would
like a free hard copy of the SAI, please contact our Electronic Service Center
at http://www.annuitynet.com. Otherwise, the SAI is available on the SEC's
website at http://www.sec.gov.
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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 principally offer life
insurance and annuity policies. We may 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")
owns the majority of our capital stock. GE Capital Assurance is an indirect
wholly owned subsidiary of General Electric Capital Corporation ("GE Capital").
GE Financial Assurance Holdings Inc., a direct wholly owned subsidiary of GE
Capital, owns the remaining stock. 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
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 Contracts 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.
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SEPARATE ACCOUNT
================================================================================
We established the Separate Account as a separate investment account on
August 19, 1987. The Separate Account may invest in mutual funds, unit
investment trusts, managed separate accounts, and other portfolios. We use the
Separate Account to support the Contract as well as for other purposes permitted
by law.
The Separate Account currently has 26 Subaccounts that are available
under the Contract, but that number may change in the future. Each Subaccount
invests exclusively in shares representing an interest in a separate
corresponding portfolio of the Funds described below. We allocate net Purchase
Payments in accordance with your instructions after we deem the free look period
to have ended.
The assets of the Separate Account belong to us. Nonetheless, we do not
charge the assets in the Separate Account attributable to the Contracts with
liabilities arising out of any other business which we may conduct. The assets
of the Separate Account shall, however, be available to cover the liabilities of
our general account to the extent that the assets of the Separate Account exceed
its liabilities arising under the Contracts supported by it. Income and both
realized and unrealized gains or losses from the assets of the Separate Account
are credited to or charged against the Separate Account without regard to the
income, gains, or losses arising out of any other business we may conduct.
We registered the Separate Account with the SEC as a unit investment
trust under the Investment Company Act of 1940 ("1940 Act"). The Separate
Account meets the definition of a separate account under the federal securities
laws. Registration with the SEC does not involve supervision of the management
or investment practices or policies of the Separate Account by the SEC. You
assume the full investment risk for all amounts you allocate to the Separate
Account.
THE FUNDS There is a separate Subaccount which corresponds
to each portfolio of a Fund offered in this
Contract. You decide the Subaccounts to which
you allocate net Purchase Payments after we deem
the free look period to have ended. 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 distinct 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.
10
<PAGE>
Before allocating your net Purchase Payments and
Contract Value to a Subaccount, 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
the Separate Account. You bear the investment
risk of investing in the portfolios.
The investment objectives and policies of
certain portfolios may be similar to the
investment objectives and policies of other
portfolios that may be managed by the same
investment adviser or manager, but are not
available under the Contract. 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.
SUBACCOUNTS We offer you a choice from among 26 Subaccounts,
each of which invests in an underlying portfolio
of one of the Funds.
SUBACCOUNTS
<TABLE>
<S> <C>
- ------------------------- -------------------------------------------------- ----------------------------
SUBACCOUNT INVESTMENT OBJECTIVE(1) ADVISER (AND SUB-
ADVISER, AS APPLICABLE)
- ------------------------- -------------------------------------------------- ----------------------------
International Fund
========================= ================================================== ============================
JANUS ASPEN SERIES Seeks long term growth of capital. Normally, the Janus Capital Corporation
International Growth Portfolio pursues its objective by investing at
Portfolio least 65% of its total assets in securities of
issuers from at least five different countries,
excluding the United States. Although the
Portfolio intends to invest substantially all of
its assets in issuers outside of the United States,
it may at times invest in U.S. issuers and it may
at times invest all of its assets in fewer than
five countries or even a single country.
- ------------------------- -------------------------------------------------- ----------------------------
FIDELITY VARIABLE INSURANCE Seeks long-term growth of capital by investing at Fidelity Management &
PRODUCTS FUND least 65% of total assets in foreign securities, Research Company (Subadvised
VIP Overseas Portfolio primarily in common stocks. by Fidelity Management &
Research (U.K.) Inc.,
Fidelity Management &
Research Far East Inc.,
Fidelity International
Investment Advisors and
Fidelity International
Investment Advisors (U.K.)
Limited)
- ------------------------------
(1) Morningstar, together with the Funds, determined the catergories shown in this column.
11
<PAGE>
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital GE Investment
International Equity Fund by investing primarily in foreign equity and Management Incorporated
equity-related securities which the Adviser
believes have long-term potential for capital
growth.
- ------------------------- -------------------------------------------------- ----------------------------
Specialty
========================= ================================================== ============================
GE INVESTMENTS FUNDS Objective of providing maximum total return through GE Investment Management
Real Estate Securities Fund current income and capital appreciation by Incorporated (Subadvised by
investing primarily in securities of U.S. issuers Seneca Capital Management,
that are principally engaged in or related to the L.L.C.)
real estate industry including those that own
significant real estate assets. The portfolio will
not invest directly in real estate.
- ------------------------- -------------------------------------------------- ----------------------------
AIM VARIABLE INSURANCE Objectives are to achieve a high level of current AIM Advisors, Inc.
FUNDS, INC. income and secondarily, growth of capital, by (Subadvised by INVESCO
Global Utilities Fund investing primarily in the common and preferred Asset Management Limited)
stocks of public utility companies (either domestic
or foreign). The fund seeks to meet these
objectives by investing, normally, at least 65% of
its total assets in securities of domestic and
foreign public utility companies.
- ------------------------- -------------------------------------------------- ----------------------------
AIM VARIABLE INSURANCE Objective is long-term growth of capital. The fund AIM Advisors, Inc.
FUNDS, INC. seeks this objective by investing primarily in (Subadvised by INVESCO
Telecommunications Fund equity securities of companies throughout the world Asset Management Limited)
engaged in the development, manufacture or sale of
telecommunications services or equipment. The fund
will invest, normally, at least 65% of its total
assets in common and preferred stocks and warrants
to acquire such stocks issued by telecommunications
companies.
- ------------------------- -------------------------------------------------- ----------------------------
DELAWARE GROUP PREMIUM This fund invests primarily in stocks of medium to Delaware Management Group
FUND, INC. large sized companies that meet certain socially (Subadvised by Vantage
Social Awareness Series responsible criteria and which the fund expects to Investment Advisors)
grow over time. The fund strives to provide long
term capital appreciation to its shareholders.
- ------------------------- -------------------------------------------------- ----------------------------
Small-Cap Blend
========================= ================================================== ============================
AIM VARIABLE INSURANCE Objective is long-term growth of capital. The fund AIM Advisors, Inc.
FUNDS, INC. seeks to meet this objective by investing primarily (Subadvised by INVESCO
Capital Development Fund in securities, including common stocks, Asset Management Limited)
Convertible securities and bonds, of small and
medium sized companies. The fund may also invest
up to 25% of its total assets in foreign
securities.
- ------------------------- -------------------------------------------------- ----------------------------
Small-Cap Growth
========================= ================================================== ============================
AIM VARIABLE INSURANCE Objective is to achieve long-term growth of AIM Advisors, Inc.
FUNDS, INC. capital. The fund seeks to meet this objective by (Subadvised by INVESCO
Aggressive Growth Fund investing primarily in common stocks, convertible Asset Management Limited)
bonds, convertible preferred stocks and warrants of
small and medium sized companies whose earnings the
fund's portfolio managers expect to grow more than
15% per year. The fund may also invest up 25% of
its total assets in foreign securities.
- ------------------------- -------------------------------------------------- ----------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Mid-Cap Blend
- ------------------------- -------------------------------------------------- ----------------------------
- ------------------------- -------------------------------------------------- ----------------------------
<S> <C>
DELAWARE GROUP PREMIUM A total return fund that invests the majority of Delaware Management Company
FUND, INC. its assets in stocks. This series has a dual
Devon Series objective of capital appreciation and current
income. The fund invests primarily in common stocks
that it believes have the potential for above-
average dividend increases over time. Generally,
at least 65% of the Series assets will be invested
in dividend paying stocks.
- ------------------------- -------------------------------------------------- ----------------------------
Mid-Cap Growth
========================= ================================================== ============================
AIM VARIABLE INSURANCE Objective is growth of capital through investment AIM Advisors, Inc.
FUNDS, INC. in common stocks, with emphasis on medium and (Subadvised by INVESCO
Capital Appreciation Fund small sized growth companies. Asset Management Limited)
- ------------------------- -------------------------------------------------- ----------------------------
Mid-Cap Value
- ------------------------- -------------------------------------------------- ----------------------------
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing long term growth of capital GE Investment Management
Value Equity Fund by investing primarily in common stock and other Incorporated (Subadvised by
equity securities of companies that the investment NWQ Investment Management
adviser believes are undervalued by the marketplace Company)
at the time of purchase and that offer the
potential for above-average growth of capital.
Although the current portfolio reflects investments
primarily within the mid cap range, the Fund 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 Blend
========================= ================================================== ============================
FIDELITY VARIABLE Seeks high total return through a combination of Fidelity Management &
INSURANCE current income and capital appreciation by Research Company (Subadvised
PRODUCTS FUND III investing a majority of assets in common stocks by Fidelity Management &
VIP III Growth & Income with a focus on those that pay current dividends Research (U.K.) Inc. and
Portfolio and show potential for capital appreciation. Fidelity Management &
Research Far East Inc.)
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing capital appreciation and GE Investment Management
S&P 500 Index Fund(2) accumulation of income that corresponds to the Incorporated (Subadvised by
investment return of the Standard & Poor's 500 State Street Global Advisors)
Composite Stock Price Index through investment in
common stocks comprising the Index.
- ------------------------- -------------------------------------------------- ----------------------------
AIM VARIABLE INSURANCE Objective is growth of capital with a secondary AIM Advisors, Inc.
FUNDS, INC. objective of current income. The fund seeks to meet (Subadvised by INVESCO
Growth and Income Fund these objectives by investing at least 65% of its Asset Management Limited)
net assets in income producing securities,
including dividend paying common stocks and
convertible securities.
- ------------------------- -------------------------------------------------- ----------------------------
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 Contract.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Large-Cap Growth
========================= ================================================== ============================
<S> <C>
JANUS ASPEN SERIES Seeks long-term growth of capital. Pursues this Janus Capital Corporation
Capital Appreciation objective by investing primarily in common stocks
Portfolio of companies of any size.
- ------------------------- -------------------------------------------------- ----------------------------
JANUS ASPEN SERIES Seeks current income and long-term growth of Janus Capital Corporation
Equity Income Portfolio capital. It pursues its objective by normally
emphasizing investments in common stock, and growth
potential is a significant investment consideration.
- ------------------------- -------------------------------------------------- ----------------------------
Large-Cap Value
========================= ================================================== ============================
FIDELITY VARIABLE INSURANCE Seeks to provide capital growth by investing Fidelity Management &
PRODUCTS FUND III primarily in common stock and other types of Research Company (Subadvised
VIP III Growth Opportunities securities, including bonds, which may be lower- by Fidelity Management &
Portfolio quality debt securities. Research (U.K.) Inc. and
Fidelity Management &
Research Far East Inc.)
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital GE Investment Management
Premier Growth Equity as well as future (rather than current) income by Incorporated
Fund investing primarily in growth-oriented equity
securities.
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of capital GE Investment Management
U.S. Equity Fund through investments primarily in equity securities Incorporated
of U.S. companies.
- ------------------------- -------------------------------------------------- ----------------------------
Balanced
========================= ================================================== ============================
GE INVESTMENTS FUNDS Objective of providing the highest total return, GE Investment Management
Total Return Fund composed of current income and capital Incorporated
appreciation, as is consistent with prudent
investment risk by investing in common stock, bonds
and money market instruments, the proportion of
each being continuously determined by the
investment adviser.
- ------------------------- -------------------------------------------------- ----------------------------
High Yield Bond
========================= ================================================== ============================
JANUS ASPEN SERIES Seeks to obtain a high current income. Capital Janus Capital Corporation
High Yield Bond Portfolio appreciation is secondary objective when consistent
with its primary objective. It pursues its
objectives by normally investing 65% of its assets
in high-yield-risk fixed-income securities, and may
at time invest all of its assets in these
securities.
========================= ================================================== ============================
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Domestic Bonds
========================= ================================================== ============================
<S> <C>
JANUS ASPEN SERIES Seeks maximum total return consistent with Janus Capital Corporation
Flexible Income Portfolio preservation of capital. Total return is expected
to result from a combination of income and capital
appreciation. The portfolio pursues its objective
primarily by investing in any type of income-
producing securities. This portfolio may have
substantial holdings of lower-rated debt securities
or "junk" bonds. The risks of investing in junk
bonds are described in the prospectus for Janus
Aspen Series, which should be read carefully before
investing.
- ------------------------- -------------------------------------------------- ----------------------------
GE INVESTMENTS FUNDS Objective of providing maximum income consistent GE Investment Management
Income Fund with prudent investment management and Incorporated
preservation of capital by investing primarily in
income-bearing debt securities and other income
bearing instruments.
- ------------------------- -------------------------------------------------- ----------------------------
AIM VARIABLE INSURANCE Objective is to achieve a high level of current AIM Advisors, Inc.
FUNDS, INC. income consistent with reasonable concern for (Subadvised by INVESCO
Government Securities Fund safety of principal by investing in debt securities Asset Management Limited)
issued, guaranteed or otherwise backed by the
United States Government.
- ------------------------- -------------------------------------------------- ----------------------------
Money Market
========================= ================================================== ============================
GE INVESTMENTS FUNDS Objective of providing highest level of current GE Investment Management
Money Market Fund income as is consistent with high liquidity and Incorporated
safety of principal by investing in various types
of good quality money market securities.
- ------------------------- -------------------------------------------------- ----------------------------
</TABLE>
Not all of these portfolios may be available in all states or markets.
15
<PAGE>
We will purchase shares of the portfolios at net
asset value and direct them to the appropriate
Subaccounts of the Separate Account. We will
redeem sufficient shares of the appropriate
portfolios at net asset value to pay Death
Benefits and surrender/withdrawal proceeds, to
make Annuity Payouts, or for other purposes
described in the Contract. 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 Funds 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 the Separate Account and other
separate accounts. These percentages differ, and
some investment advisers or distributors pay us
a greater percentage than other advisers or
distributors. These agreements reflect
administrative services we provide.
CHANGES TO THE SEPARATE We reserve the right, within the law, to make
ACCOUNT AND THE SUBACCOUNTS additions, deletions and substitutions for the
Funds and/or any portfolios within the Funds in
which the Separate Account participates. We may
substitute shares of other portfolios for shares
already purchased, or to be purchased in the
future, under the Contract. This substitution
might occur if shares of a portfolio should no
longer be available, or if investment in any
Fund's shares 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 for the Contract.
We cannot substitute shares attributable to your
Contact without notice to you and before
approval of the SEC, in accordance with the 1940
Act. In this event we will inform you within
fifteen (15) days after such substitution occurs
by placing a notice in your personal folder at
the Electronic Service Center. This notice will
also be sent to your e-mail address on file with
us.
16
<PAGE>
We also reserve the right to establish
additional Subaccounts, 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 Subaccounts if, in our
sole discretion, marketing, tax, or investment
conditions warrant. We may combine existing
Subaccounts.
If permitted by law, we may deregister the
Separate Account under the 1940 Act in the event
such registration is no longer required, manage
the Separate Account under the direction of a
committee, create new separate accounts, or
combine the Separate Account with other separate
accounts of the Company. Further, to the extent
permitted by applicable law, we may transfer the
assets of the Separate Account to another
separate account.
================================================================================
CHARGES AND OTHER DEDUCTIONS
================================================================================
We will deduct the charges described below to cover our costs and
expenses, services provided, and risks assumed under the Contracts. We incur
certain costs and expenses for the distribution and administration of the
Contracts and for providing the benefits payable thereunder. Our administrative
services include:
o processing applications for and issuing the Contracts;
o processing purchases and redemptions of portfolio shares as
required;
o maintaining records;
o telephone transfers;
o administering Annuity Payouts;
o furnishing accounting and valuation services (including the
calculation and monitoring of daily Subaccount values);
o reconciling and depositing cash receipts;
o providing Contract confirmations and periodic statements; and
O providing Electronic services.
17
<PAGE>
The risks we assume include:
o the risk that the actual life-span of persons receiving Annuity Payouts
under the Contract will exceed the assumptions reflected in our
guaranteed rates (these rates are incorporated in the Contract and
cannot be changed); and
o the risk that our costs in providing the services will exceed our
revenues from Contract charges (which cannot be changed by us).
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. 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.
DEDUCTIONS FROM THE We deduct from the Separate Account an amount,
SEPARATE ACCOUNT computed daily, which is equal to an annual rate
of 0.75% of the daily net asset value. This is
our annuity asset charge. This charge consists
of an administrative expense charge of .35% and
a mortality and expense risk charge of .40%. We
will pay an administrative expense charge to
AnnuityNet, P.O. Box 691, Leesburg, VA 20178 for
the services it provides. AnnuityNet maintains
the Electronic Service Center, processes
applications, and performs various other
administrative services. These deductions are
reflected in your Contract Value.
DEDUCTIONS FOR PREMIUM Any premium tax or other tax levied by any
TAXES governmental entity as a result of the existence
of the Contracts or the Separate Account will be
deducted from the Contract 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 will
vary, generally depending upon the law of your
state of residence. In those states which tax
these premiums, the tax generally ranges from
0.5% to 4.0%.
OTHER CHARGES AND There are deductions from and expenses paid out
DEDUCTIONS of the assets of the underlying Funds that are
more fully described in the prospectuses for the
Funds.
In addition, we reserve the right to impose a
$10.00 transfer charge.
18
<PAGE>
================================================================================
THE CONTRACT
================================================================================
The Contract is an individual flexible premium variable deferred
annuity Contract. We describe your rights and benefits below and in the
Contract. Your Contract may differ in certain respects from the description
below because of the requirements of the state where we issued your Contract.
In addition, we reserve the right to amend the Contract to meet the requirements
of the 1940 Act or other applicable federal or state laws or regulations. You
will be notified of any changes, modifications, or waivers through the
Electronic Service Center.
PURCHASE OF THE CONTRACT If you wish to purchase the Contract, you must
apply for it by downloading, completing,
signing, and then sending the application to our
Administrative Office. When we receive the
completed application, we decide whether to
accept or reject it. If the application is
accepted, the Contract is prepared and executed
by our legally authorized officers. The Contract
is then provided to you through the Electronic
Service Center. See Distribution of the
Contracts.
Once a completed application and all other
information necessary for processing a purchase
order are received, we will apply your initial
Purchase Payment no later than two business days
after we receive the order. While attempting to
finish an incomplete application, we may hold
the initial Purchase Payment for no more than
five business days. If an incomplete application
cannot be completed within those five days, you
will be informed of the reasons, and the
Purchase Payment will be returned immediately
(unless you specifically authorize us to keep it
until the application is complete). Once the
application is complete, we must apply the
initial Purchase Payment within two business
days.
Purchase Payments can be made electronically by
an electronic fund transfer ("EFT"), wired or
mailed to: GE Life and Annuity Assurance
Company, P. O. Box 691, Leesburg, VA 20178.
To apply for a Contract, you must be of legal
age in a state where we may lawfully sell the
Contract. The Annuitant cannot be older than age
85 at the time of issue.
OWNERSHIP As the Owner, you have all the rights under the
Contract, subject to the rights of any
irrevocable Beneficiary. According to Virginia
law, the assets in the Separate Account equal to
the Contract liabilities are held for the
exclusive benefit of all Owners and their
designated Beneficiaries. You may not assign
your Contract without our permission.
19
<PAGE>
If you name a joint Owner in the application, we
will treat the joint Owners as having equal
undivided interests in the Contract. Either
joint Owner, independently of the other, may
exercise any ownership rights in the contract.
PURCHASE PAYMENTS You may make Purchase Payments at a frequency
and in the amount you select, subject to certain
limitations. You must obtain our approval before
you make total Purchase Payments for an
Annuitant age 79 or younger that exceed $2
million. If the Annuitant is age 80 or older at
the time of payment, the total amount not
subject to prior approval is $1 million. The
minimum initial Purchase Payment is $1,000.
Subsequent Purchase Payments must be at least
$100. Payments may be made or, if stopped,
resumed at any time until the Annuity
Commencement Date, the surrender of the
Contract, or the death of the Owner (or joint
Owner, if applicable), whichever comes first. We
reserve the right to refuse to accept a Purchase
Payment for any lawful reason.
VALUATION DATE We will value Accumulation Units and Annuity
Units once daily at the close of regular trading
(currently, 4:00 p.m. New York time) on each day
the New York Stock Exchange is open except for
days on which a corresponding portfolio does not
value its shares (Valuation Date). If a
Valuation Period contains more than one day, the
unit values will be the same for each day in the
Valuation Period.
ALLOCATION OF PURCHASE After we deem the free look period to end (15
PAYMENTS days after we deliver your Contract to your
personal folder), we place Purchase Payments
into the Separate Account's Subaccounts.
Following your allocation instructions, each
Subaccount invests in shares of the
corresponding portfolios of the Funds.
Upon allocation to the appropriate Subaccount,
we convert net Purchase Payments into
Accumulation Units. We determine the number of
Accumulation Units credited by dividing the
amount allocated to each Subaccount by the value
of an Accumulation Unit for that Subaccount on
the Valuation Date on which we receive the
Purchase Payment at our Administrative Office if
received before 4:00 p.m., New York time. If we
receive the Purchase Payment at or after 4:00
p.m, New York time, we will use the Accumulation
Unit value computed on the next Valuation Date.
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 the Separate Account and the fees
and expenses of the portfolios.
20
<PAGE>
You may change the allocation of subsequent
Purchase Payments at any time, without charge,
by sending us acceptable notice through our
Electronic Service Center or in writing to our
Administrative Office. The new allocation will
apply to any Purchase Payments made after we
receive notice of the change.
VALUATION OF ACCUMULATION We value Accumulation Units for each Subaccount
UNITS separately. Initially, we arbitrarily set the
value of each Accumulation Unit at $10.00.
Thereafter, the value of an Accumulation Unit in
any Subaccount for a Valuation Period equals the
value of an Accumulation Unit in that Subaccount
as of the preceding Valuation Period multiplied
by the net investment factor of that Subaccount
for the current Valuation Period.
The net investment factor is an index used to
measure the investment performance of a
Subaccount from one Valuation Period to the
next. The net investment factor for any
Subaccount for any Valuation Period reflects the
change in the net asset value per share of the
portfolio held in the Subaccount 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 Subaccount. 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 which we determine to have resulted
from the operations of the Subaccount.
================================================================================
TRANSFERS
================================================================================
TRANSFERS BEFORE THE Before the earliest of the surrender of the
ANNUITY COMMENCEMENT DATE Contract, payment of any Death Benefit, and the
Annuity Commencement Date, you may transfer all
or a portion of your Contract Value between and
among the Subaccounts of the Separate Account,
subject to certain conditions. We process
transfers among the Subaccounts of the Separate
Account as of the end of the Valuation Period
that we receive the transfer request through our
Electronic Service Center or in writing at
our Administrative Office. We may postpone
transfers to, from, or among the Subaccounts
of the Separate Account, under certain
circumstances. See Requesting Payments.
21
<PAGE>
We may restrict certain transfers from the
Subaccounts. Currently, there is no limit on
the number of transfers between and among
Subaccounts of the Separate Account; however,
we reserve the right to limit the number of
transfers each calendar year to twelve or, if
it is necessary for the Contract to continue
to be treated as an annuity contract by the
Code, a lower number. We do not currently
charge for transfers. However, we reserve the
right to assess a charge of $10.00 per
transfer.
Sometimes, we may not honor your transfer
request. We may not honor your transfer
request if:
(i) any Subaccount that would be
affected by the transfer is unable
to purchase or redeem shares of the
portfolio in which the Subaccount
invests;
(ii) the transfer is a result of more
than one trade involving the same
Subaccount within a 30 day
period;
(iii) the transfer would adversely affect
Accumulation Unit values (which may
occur if the transfer would affect
one percent or more of the relevant
portfolio's total assets); 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 Contract
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.
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 possesses this ability on
behalf of many Owners, the result can be
simultaneous transfers involving large amounts
of Contract Value. Such transfers can disrupt
the orderly management of the portfolios
underlying the Contract, 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 the
best interests of all shareholders of the Funds
underlying the Contracts, and the managements of
the Funds share this position. Therefore, as
described in your Contract, we may limit
transfers made by a third party.
22
<PAGE>
TRANSFERS AFTER THE You may transfer all or a portion of your
ANNUITY COMMENCEMENT DATE Contract Value from one Subaccount to another
Subaccount after the Annuity Commencement Date.
These transfers will be limited to three times
per Contract Year after the Annuity Commencement
Date. If you request a transfer from a
Subaccount, all of the Annuity Units in that
Subaccount must be transferred to a single
different Subaccount. Currently, there is no
charge for these transfers. However, we reserve
the right to impose a charge in the future for
these transfers.
TELEPHONE TRANSFERS In the event that the Electronic Service Center
is unable to accept Subaccount transfer requests
through the Internet, transfer requests will be
accepted by the AnnuityNet.com call center at
its toll free number (1-877-569-3789). We may be
liable for losses resulting from unauthorized or
fraudulent telephone transfers 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 recording telephone requests
and/or requesting other identifying information.
In addition, we will require written
authorization before allowing you to make
telephone transfers. We reserve the right to
limit telephone transactions. The call center
toll free number can be found in any of your
AnnuityNet.com confirmation emails. We will
process telephone transfer requests as of the
end of the Valuation Period that the call center
receives the request.
================================================================================
SURRENDERS AND WITHDRAWALS
================================================================================
Subject to the rules discussed below, we will allow the surrender of
your Contract in whole or in part at any time before the Annuity Commencement
Date upon your written request through our Electronic Service Center or in
writing to our Administrative Office.
We will not permit a withdrawal that is less than $300 or that reduces
Contract Value to less than $1,000. If your withdrawal request would reduce
Contract Value to less than $1,000, we will pay out only that amount of Contract
Value that would reduce the remaining Contract Value to $1,000.
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The amount payable on full surrender of the Contract is the Contract
Value at the end of the Valuation Period during which we receive the request
less any applicable premium tax charge (the "Contract Surrender Value"). We may
pay the Contract Surrender Value in a lump sum or under one of the Annuity
Payment Options specified in the Contract, based on your instructions.
Unless otherwise requested, we will deduct the amount of the withdrawal
from the Subaccounts on a pro-rata basis.
================================================================================
THE DEATH BENEFIT
================================================================================
DEATH BENEFIT BEFORE THE Upon due proof of the Owner's death before the
ANNUITY COMMENCEMENT DATE Annuity Commencement Date (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) along with the completed forms described
in your Contract, we will treat the Death
Benefit in accordance with the Beneficiary's
instructions, subject to the distribution rules
and termination of contract provisions described
below. The Death Benefit will be the Contract
SurrenderValue at the date of payment.
In certain circumstances, federal tax law
requires that distributions under the Contract
be made 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 Contract
Surrender Value upon death.
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:
(1) Owner or joint Owners;
(2) Primary Beneficiary;
(3) Contingent Beneficiary; or
(4) Owner's estate.
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We then will treat the designated Beneficiary as
the sole Owner of the Contract. If there is more
than one designated Beneficiary, we will treat
each one separately and apply the tax laws
described below.
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 Contract 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 Contract 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. Instead, the rules for non-
spouses will apply.
o NON-SPOUSES. If the designated Beneficiary
is not the surviving spouse of the deceased
person, this Contract 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 Contract Surrender Value in
one lump sum payment.
(2) Receive the Contract 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 a
lump sum payment of any Contract
Surrender Value remaining.
(3) Apply the Contract Surrender Value to
an Annuity Payment Option with certain
restrictions.
If no choice is made by the designated
Beneficiary within 60 days following receipt of
due proof of death, we will use payment choice 2
(payment of the entire value of the Contract
within 5 years of the date of death) if the
Beneficiary is an individual. We will not accept
any Purchase Payments after the non-spouse's
death. If the designated Beneficiary dies before
we have distributed the entire value of the
Contract, including interest accruing after the
date of death, we will pay in a lump sum payment
of any 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.
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<PAGE>
Under payment choices 1 or 2, the Contract will
terminate upon payment of the entire value of
the Contract, including interest accruing after
the date of death. Under payment choice 3, this
Contract will terminate when we apply the
Contract Surrender Value to provide Annuity
Payouts.
================================================================================
ANNUITY PAYOUTS
================================================================================
When you apply for a Contract, you may select any Annuity Commencement
Date permitted by law provided that the Annuity Commencement Date occurs before
the Annuitant's (or the elder of the joint Annuitants') 90th birthday.
Unless you elect otherwise, we will pay a monthly annuity benefit to
the Owner beginning on the Annuity Commencement Date if the Annuitant is still
living. We will pay the monthly annuity benefit under the Annuity Payment Option
which provides a life annuity with annuity payments guaranteed for 10 years,
using the gender and settlement age of the Annuitant instead of the payee,
unless you make another election. Under this Option, 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 initial
variable monthly annuity payment (for this purpose, we assume that the amount of
each payment equals the payment amount on the date we receive due proof of
death). We may pay this discounted amount in one sum.
You may select one of the forms of payment of annuities available under
the Contract (described below). Annuity payments to you under any of the Annuity
Payment Options are made on a monthly basis and, after the first payment, will
reflect the investment experience of the Subaccounts to which you allocated
Contract Value.
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<PAGE>
ANNUITY PAYMENT OPTIONS
LIFE ANNUITY WITH This option guarantees periodic payments during
PERIOD CERTAIN the lifetime of the Annuitant, with payments
guaranteed for at least a minimum period. The
minimum period is selected by the Owner, and can
be 0, 10 or 20 years. If the Annuitant dies
after payments have begun, but before the end of
the selected minimum period, the person entitled
to the remaining payments may be able to receive
the discounted value of those payments in a lump
sum. The amount of remaining payments for the
minimum period will be discounted at the same
rate used in calculating the initial variable
monthly annuity payment. Discounted means we
will adjust for the fact that, because each
remaining payment is being made early, it does
not earn any additional investment return.
JOINT LIFE ANNUITY This option provides periodic payments during
the joint lifetime of the Annuitant and a
designated joint Annuitant. The payments
continue during the lifetime of the surviving
Annuitant after the death of the first Annuitant
to die, and stop when both Annuitants have died.
GENERAL INFORMATION None of the options listed above currently
provide withdrawal features permitting the Owner
to withdraw commuted values as a lump sum
payment. We may make available other options,
with or without withdrawal features. The annuity
asset charge will be assessed on all variable
Annuity Payouts, including options that may be
offered that do not have a life contingency and
therefore no mortality risk.
Before the Annuity Commencement Date, you may
change:
o your Annuity Commencement Date (but you
must give us at least 14 days' notice
before payments are to begin and the
Annuitant(s) must be no older than 90 years
of age on the Annuity Commencement Date);
o your Annuity Payment Option;
o the allocation of your Contract Value among
the Subaccounts; and
o the primary Beneficiary, contingent
Beneficiary, and Contingent Annuitant
through our Electronic Service Center or in
writing to our Administrative Office if the
Annuitant is living. This policy may not be
assigned without our permission.
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<PAGE>
You may change any Beneficiary. A person named
irrevocably may be changed only with that
person's written consent. A change of
Beneficiary will revoke any previous
designation.
We must receive your request for a change in a
form acceptable to us. The change will take
effect as of the date we receive the request.
The change will be subject to any payment made
before we recorded the change.
ANNUITY PAYOUTS Variable Annuity Payouts will be determined
using:
1. The Contract Value on the Annuity
Commencement Date;
2. The annuity tables contained in the Contract;
3. The Annuity Payment Option selected; and
4. The investment performance of the Subaccounts
selected.
To determine the amount of payment, we make this
calculation:
1. First, we determine the amount of the first
Annuity Payout; then
2. we allocate that amount to the Subaccounts
according to your instructions; then
3. we determine the number of Annuity Units
for each Subaccount by dividing the amount
allocated by the Annuity Unit value on the
day the payment is due; and finally
4. we calculate the value of the Annuity Units
for each Subaccount on the day the payment
is due for each Annuity Payout thereafter.
To calculate your Annuity Payouts, we need to
make an assumption regarding the investment
performance of the Subaccounts you select. We
call this your assumed investment rate. We
assume an investment rate of 5% per year, as
applied to the applicable mortality table. This
means that if the annualized investment
performance, after expenses, of your Subaccounts
is less than 5%, then the dollar amount of your
Annuity Payout will decrease. Conversely, if the
annualized investment performance, after
expenses, of your Subaccounts is greater than
5%, then the dollar amount of your Annuity
Payouts will increase. The age used to determine
the monthly payment amount may be subject to an
adjustment as provided in the Contract, which
could result in a lower Annuity Payout than
without the adjustment.
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<PAGE>
================================================================================
FEDERAL TAX MATTERS
================================================================================
INTRODUCTION
This part of the prospectus discusses the federal income tax treatment of the
Contract. The federal income tax treatment of the Contract 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 or your Contract. This discussion also does not
address other federal tax consequences, or state or local tax consequences,
associated with a Contract. As a result, you should always consult a tax adviser
about the application of tax rules to your individual situation.
TAX DEFERRAL ON EARNINGS. The federal income tax law does not tax any increase
in an Owner's Contract Value until there is a distribution from the Contract.
However, certain requirements must be satisfied in order for this general rule
to apply, including:
o An individual must own the Contract (or the tax law must treat the
Contract as owned by an individual);
o The investments of the Separate Account must be "adequately
diversified" in accordance with Internal Revenue Service ("IRS")
regulations;
o The Owner's right to choose particular investments for a Contract must
be limited; and
o The Contract's Annuity Commencement Date must not occur near the end of
the Annuitant's life expectancy.
This part of the prospectus discusses each of these requirements.
CONTRACTS NOT OWNED BY AN INDIVIDUAL -- NO TAX DEFERRAL AND LOSS OF INTEREST
DEDUCTION. As a general rule, the Code does not treat a Contract that is owned
by an entity (rather than an individual) as an annuity contract for federal
income tax purposes. The entity owning the Contract pays tax currently on the
excess of the Contract Value over the premiums paid for the Contract. Contracts
issued to a corporation or a trust are examples of Contracts where the Owner
pays current tax on the Contract's earnings.
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<PAGE>
There are several exceptions to this rule. For example, the Code treats a
Contract as owned by an individual if the nominal Owner is a trust or other
entity that holds the Contract as an agent for an individual. However, this
exception does not apply in the case of any employer that owns a Contract to
provide deferred compensation for its employees.
In the case of a Contract issued after June 8, 1997 to a taxpayer that is not an
individual, or a Contract 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 Contract Value. Entities that are considering purchasing the Contract, or
entities that will benefit from someone else's ownership of a Contract, should
consult a tax adviser.
INVESTMENTS IN THE SEPARATE ACCOUNT MUST BE DIVERSIFIED. For a Contract to be
treated as an annuity contract for federal income tax purposes, the investments
of a separate account such as the Separate Account must be "adequately
diversified". The IRS has issued regulations that prescribe standards for
determining whether the investments of the Separate Account are adequately
diversified. If the Separate Account fails to comply with these diversification
standards, the Owner could be required to pay tax currently on the excess of the
Contract Value over the Purchase Payments made under the Contract.
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
the Separate Account will be considered "adequately diversified".
RESTRICTIONS ON THE EXTENT TO WHICH AN OWNER CAN DIRECT THE INVESTMENT OF
CONTRACT VALUES: Federal income tax law limits the Owner's right to choose
particular investments for the Contract. 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 Contract Values among the portfolios may exceed
those limits. If so, the Owner would be treated as the owner of the assets of
the Separate Account 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 Contracts. We therefore reserve the right to modify the Contract
without the Owners' consent to attempt to prevent the tax law from considering
the Owners as the owners of the assets of the Separate Account.
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 Contract begin or are scheduled to begin
on a date that is near the end of the Annuitant's life expectancy, it is
possible that the tax law will not treat the Contract as an annuity contract for
federal income tax purposes. In that event, the Owner would be currently taxable
on the excess of the Contract Value over the Purchase Payments made under the
Contract.
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NO GUARANTEES REGARDING TAX TREATMENT: We make no guarantees regarding the tax
treatment of any Contract or of any transaction involving a Contract. However,
the remainder of this discussion assumes that your Contract 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 Contract Value until there is a
distribution from your Contract.
WITHDRAWALS AND SURRENDERS. A withdrawal occurs when you receive less than the
total amount of the Contract's Contract Surrender Value. In the case of a
withdrawal, you will pay tax on the amount you receive to the extent your
Contract Surrender Value before the withdrawal exceeds your "investment in the
contract". (This term is explained below.) This income (and all other income
from your Contract) 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 Contract's Contract
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 Purchase
Payments under the Contract, reduced by any amounts you previously received from
the Contract that you did not include in your income.
ASSIGNMENTS AND PLEDGES. The Code treats any assignment or pledge of (or
agreement to assign or pledge) any portion of your Contract Value as a
withdrawal.
GIFTING A CONTRACT. If you transfer ownership of your Contract -- without
receiving a payment equal to your Contract's value -- to a person other than
your spouse (or to your former spouse incident to divorce), you will pay tax on
your Contract 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.
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 the Code, 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.
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TAXATION OF DEATH BENEFITS. We may distribute amounts from your Contract 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 Contract's Annuity Commencement Date. BEFORE THE CONTRACT'S
ANNUITY COMMENCEMENT DATE:
o If received under an Annuity Payment Option, Death Benefits are taxed
in the same manner as Annuity Payouts.
o If not received under an Annuity Payment Option, Death Benefits are
taxed in the same manner as a withdrawal.
AFTER THE CONTRACT'S ANNUITY COMMENCEMENT DATE:
o If received in accordance with the existing Annuity Payment Option,
Death Benefits are excludible from income to the extent that they do
not exceed the unrecovered "investment in the contract". Death
Benefits in excess of the unrecovered "investment in the contract"
are includable 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 PAYMENTS. The Code
may impose a penalty tax equal to 10% of the amount of any payment from your
Contract 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 taxpayer.
SPECIAL RULES IF YOU OWN MORE THAN ONE CONTRACT. In certain circumstances, you
must combine some or all of the annuity contracts 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:
o If you purchase a Contract 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.
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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.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a Contract 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 provide 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 the Separate Account. We do not anticipate that we
will incur any federal income tax liability on the income and gains earned by
the Separate Account. 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 the Separate Account, we may
impose a charge against the Separate Account 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.
================================================================================
VOTING RIGHTS
================================================================================
As required by law, we will vote the portfolio shares held in the
Separate Account at meetings of the shareholders of the various Funds. The
voting will be done according to the instructions of Owners who have interests
in any Subaccounts 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.
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The number of votes which you have the right to cast will be determined
by applying your percentage interest in a Subaccount to the total number of
votes attributable to the Subaccount. In determining the number of votes, we
will recognize fractional shares.
We will vote portfolio shares of a class held in a Subaccount for which
we received no timely instructions in proportion to the voting instructions
which we received for all Contracts participating in that Subaccount. 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 a Subaccount 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 Separate Account - Subaccounts.
================================================================================
REQUESTING PAYMENTS
================================================================================
To request a payment, you must provide us with notice in a form
satisfactory to us. We will ordinarily pay any Death Benefit, withdrawal, or
surrender proceeds within seven days after receipt through our Electronic
Service Center or in writing at our Administrative Office of all the
requirements for such a payment. We will determine the amount of the payment as
of the end of the Valuation Period during which our Electronic Service Center or
Administrative Office receives all such requirements.
We may delay making a payment, applying Contract Value to a payment
option, or processing a transfer request if: (1) the disposal or valuation of
the Separate Account'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 (not to
exceed 30 days).
================================================================================
DISTRIBUTION OF THE CONTRACTS
================================================================================
Capital Brokerage Corporation (doing business in Indiana, Minnesota, New Mexico,
and Texas as GE Capital Brokerage Corporation) ("Capital Brokerage") is the
principal underwriter of the Contracts. Capital Brokerage, a Washington
corporation and an affiliate of ours, is located at 6630 W. Broad St., Richmond,
Virginia 23230. 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"). Independent
broker-dealers will sell the Contracts. These broker-dealers have selling
agreements with Capital Brokerage and have been licensed by state insurance
departments to represent us. We will offer the Contracts in all states where we
are licensed to do business.
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COMMISSIONS
We may pay commissions to broker-dealers of up to 1.40% of Purchase Payments.
Commission payments will not result in increased charges and other expenses, and
thus will not affect your Contract Value.
================================================================================
ADDITIONAL INFORMATION
================================================================================
OWNER QUESTIONS The obligations to Owners under the Contracts
are ours. Please direct your questions and
concerns to us through our Electronic Service
Center or in writing to our Administrative
Office.
RETURN PRIVILEGE Within the free look period (usually 10 days)
after you receive the Contract, you may cancel
the Contract for any reason through the
Electronic Service Center or return it, postage
prepaid, to our Administrative Office, P.O. Box
691, Leesburg, VA 20178. If you cancel your
Contract, it will be void. Upon cancellation, we
will return the greater of all Purchase Payments
made(less any withdrawals taken) or the Contract
Value. In certain states, you may have more than
10 days to return a Contract for a 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 once every five years.
RECORDS AND REPORTS As presently required by the 1940 Act and
applicable regulations, we are responsible for
maintaining all records and accounts relating to
the Separate Account. At least once each year,
we will provide you with a report showing
information about your Contract for the period
covered by the report. The report will show the
Contract Value in each Subaccount. The report
also will show Purchase Payments and charges
made during the statement period. We will also
provide you with an annual and a semi-annual
report for each portfolio underlying a
Subaccount to which you have allocated Contract
Value, as required by the 1940 Act. In addition,
when you make Purchase Payments, transfers, or
withdrawals, you will be provided with a
confirmation of these transactions.
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OTHER INFORMATION A registration statement has been filed with the
SEC, under the Securities Act of 1933 as
amended, for the Contracts 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 the Separate Account, the Company, and the
Contracts offered. Statements in this prospectus
about the content of Contracts and other legal
instruments are summaries. For the complete text
of these Contracts and instruments, please refer
to these documents as filed with the SEC and
available on the SEC's website at
http://www.sec.gov.
LEGAL The Company, like other life insurance
MATTERS 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 the Separate Account.
================================================================================
CONDENSED FINANCIAL INFORMATION
================================================================================
Because the Subaccounts which are available under this Contract did not
begin operation before the date of this prospectus, we did not include financial
information for the Subaccounts in the prospectus or in the SAI.
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================================================================================
STATEMENT OF ADDITIONAL INFORMATION
================================================================================
TABLE OF CONTENTS
Page
The Contracts..................................................................1
Transfer of Annuity Units...................................................1
Net Investment Factor.......................................................1
Termination of Participation Agreements........................................2
Calculation of Performance Data................................................2
Money Market Subaccount.....................................................3
Other Subaccounts...........................................................4
Tax Matters....................................................................6
Taxation of The Company.....................................................6
IRS Required Distributions..................................................6
General Provisions.............................................................7
Designation of Beneficiaries................................................7
Ownership...................................................................7
Non-Participating...........................................................7
Misstatement of Age or Gender...............................................7
Incontestability............................................................7
Statement of Values.........................................................7
Written Notice..............................................................7
Distribution of the Contracts..................................................8
Legal Developments Regarding Employment-Related Benefit Plans..................8
Legal Matters..................................................................8
Experts........................................................................8
Financial Statements...........................................................9
Dated ____, 2000
GE Life and Annuity Assurance Company
6610 West Broad Street
Richmond, Virginia 23230
If you would like a printed copy of this prospectus, or the SAI (Statement of
Additional Information), please email us at [email protected].
<PAGE>
PART B
GE LIFE AND ANNUITY ASSURANCE COMPANY
SEPARATE ACCOUNT 4
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY CONTRACT
FORM P1153 12/99
OFFERED BY
GE LIFE AND ANNUITY ASSURANCE COMPANY
(A Virginia Stock Corporation)
6610 W. Broad Street
Richmond, Virginia 23230
ADMINISTRATIVE OFFICE:
GE LIFE AND ANNUITY ASSURANCE COMPANY
P.O. Box 691
Leesburg, VA 20178
This Statement of Additional Information expands upon subjects discussed in the
current prospectus for the above-named flexible premium variable deferred
annuity contract (the "Contract") offered by GE Life and Annuity Assurance
Company. You may obtain a copy of the prospectus dated _________ through our
Electronic Service Center at http://www.annuitynet.com. The prospectus is also
available on the SEC's website at http://www.sec.gov. Terms used in the current
prospectus for the Contract 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 CONTRACT AND THE FUNDS.
Dated ___________
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
THE CONTRACTS................................................................1
Transfer of Annuity Units.................................................1
Net Investment Factor.....................................................1
TERMINATION OF PARTICIPATION AGREEMENTS......................................2
CALCULATION OF PERFORMANCE DATA..............................................2
Money Market Subaccount...................................................3
Other Subaccounts.........................................................4
TAX MATTERS..................................................................6
Taxation of The Company...................................................6
IRS Required Distributions................................................6
GENERAL PROVISIONS...........................................................7
Designation of Beneficiaries..............................................7
Ownership.................................................................7
Non-Participating.........................................................7
Misstatement of Age or Gender.............................................7
Incontestability..........................................................7
Statement of Values.......................................................7
Written Notice............................................................7
DISTRIBUTION OF THE CONTRACTS................................................8
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS................8
LEGAL MATTERS................................................................8
EXPERTS......................................................................8
FINANCIAL STATEMENTS.........................................................9
<PAGE>
THE CONTRACTS
TRANSFER OF ANNUITY UNITS
Annuity Units may be transferred upon request, but not more than three times in
a Contract Year. If a transfer is requested from a Subaccount, all of the
Annuity Units in that Subaccount must be transferred to a single different
Subaccount.
The number of Annuity Units for the new Subaccount will be (a) times (b),
divided by (c), where:
(a) is the number of Annuity Units for the current Subaccount;
(b) is the value of an Annuity Unit for the current Subaccount; and
(c) is the value of an Annuity Unit for the new Subaccount.
The values of (a), (b) and (c) are all determined as of the date we receive the
transfer request.
The amount of the Annuity Payout as of the date of the transfer will not be
affected by the transfer (however, subsequent Annuity Payouts will reflect the
investment experience of the selected Subaccounts).
NET INVESTMENT FACTOR
The Net Investment Factor measures investment performance of the Subaccounts of
Account 4 during a Valuation Period. Each Subaccount has its own Net Investment
Factor for a Valuation Period. The Net Investment Factor of a Subaccount
available under the Contracts for a Valuation Period is (a) divided by (b) minus
(c) where:
(a) is the result of
(1) the value of the net assets of that Subaccount 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 Subaccount at the end of the
Valuation Period for which the Net Investment Factor is being
determined, minus
(3) the capital losses, realized or unrealized, charged against those
assets during the Valuation Period, minus
(4) any amount charged against that Subaccount 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 Subaccount at the end of the
preceding Valuation Period; and
(c) is a charge no greater than .002063% for each day in the Valuation
Period. This corresponds to a total of .75% per year of the net assets of
1
<PAGE>
that Subaccount and consists of a .40% mortality and expense risk charge and
a .35% administrative expense charge.
The values of the assets in Separate Account 4 will be taken at their fair
market value in accordance with generally accepted accounting practices and
applicable laws and regulations.
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 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.
AIM VARIABLE INSURANCE FUNDS, INC.[Information to be added by pre-effective
amendment.]
DELAWARE GROUP PREMIUM FUND, INC.[Information to be added by pre-effective
amendment.]
CALCULATION OF PERFORMANCE DATA
From time to time, the Company may disclose total return, yield, and other
performance data for the Subaccounts pertaining to the Contracts. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the Securities and Exchange
Commission.
The calculations of yield, total return, and other performance data do not
reflect the effect of any premium tax that may be applicable to a particular
Contract. Premium taxes will vary, generally depending on the law of your state
or residence. In those states which tax these premiums, the tax generally ranges
from 0.5% to 4.0%.
2
<PAGE>
MONEY MARKET SUBACCOUNT
From time to time, advertisements and sales literature may quote the yield of
the Money Market Subaccount 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 Contract having a balance of one unit in the Money Market
Subaccount at the beginning of the period, dividing such net change in Contract
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 Contract Value reflects: 1) net income from the investment portfolio
attributable to the hypothetical account; and 2) charges and deductions imposed
under the Contract which are attributable to the hypothetical account. The
charges and deductions include the per unit charges for the administrative
expense charge and the mortality and expense risk charge. For purposes of
calculating current yields for a Contract, 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 Subaccount 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 Subaccount 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 Subaccount unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
3
<PAGE>
The yield on amounts held in the Money Market Subaccount 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. The
Money Market Subaccount's actual yield is affected by changes in interest rates
on money market securities, average portfolio maturity of the Subaccount's
corresponding money market investment portfolio, the types and quality of
portfolio securities held by that investment portfolio, and that investment
portfolio's operating expenses. Because of the charges and deductions imposed
under the Contract, the yield for the Money Market Subaccount will be lower than
the yield for its corresponding money market investment portfolio.
OTHER SUBACCOUNTS
TOTAL RETURN. Sales literature or advertisements may quote total return,
including average annual total return for one or more of the Subaccounts 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 Contract 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 Contract was available, performance data will
be based on the performance of the underlying portfolios, with the level of
Account 4 and contract charges currently in effect. Average annual total return
will be calculated using Subaccount unit values as described below:
1. The Company calculates unit value for each Valuation Period based on
the performance of the Subaccount's underlying investment portfolio
(after deductions for Fund expenses, the administrative expense charge,
and the mortality and expense risk charge).
2. 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).
4
<PAGE>
The available Subaccounts have not yet commenced operations; therefore, standard
performance data for the available Subaccounts is not available at this time.
However, non-standard adjusted historical performance data (reflects all fees
and charges) for the portfolios underlying the available Subaccounts is as
follows:
<TABLE>
<CAPTION>
From the
SUBACCOUNT For the Date of
For the 3-year For the 5-year 10-year Subaccount Date of
period ended period ended period ended Inception to Subaccount
12/31/98 12/31/98 12/31/98 12/31/98 Inception
<S> <C>
INTERNATIONAL
Janus Aspen International Growth Portfolio
GE Investments International Equity Fund
VIP Overseas Portfolio
SPECIALTY
GE Investments Real Estate Securities Fund
AIM V.I. Global Utilities Fund
AIM V.I. Telecommunications Fund
Delaware Group Social Awareness Series
SMALL-CAP BLEND
AIM V.I. Capital Development Fund
SMALL-CAP GROWTH
AIM V.I. Aggressive Growth Fund
MID-CAP VALUE
GE Investments Value Equity Fund
MID-CAP BLEND
Delaware Group Devon Series
MID-CAP GROWTH
AIM V.I. Capital Appreciation Fund
LARGE-CAP BLEND
VIP III Growth & Income Portfolio
AIM V.I. Growth and Income Fund
GE Investments S&P 500 Index Fund
LARGE-CAP GROWTH
Janus Aspen Capital Appreciation Portfolio
Janus Aspen Equity Income Portfolio
LARGE-CAP VALUE
VIP III Growth Opportunities Portfolio*
GE Investments U.S. Equity Fund
GE Investments Premier Growth Equity Fund
BALANCED
GE Investments Total Return Fund
DOMESTIC BONDS
GE Investments Income Fund
Janus Aspen Flexible Income Portfolio
AIM V.I. Government Securities Fund
HIGH YIELD BOND
Janus Aspen High Yield Bond Portfolio
MONEY MARKET
GE Investments Money Market Fund
</TABLE>
++ Returns for periods of less than one year are not annualized.
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.
5
<PAGE>
The Funds have provided the price information used to calculate the total return
of the Subaccounts for periods prior to the inception of the Subaccounts. 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.
Other non-standard quotations of Subaccount performance may also be used in
sales literature. Such quotations will be accompanied by a description of how
they were calculated.
TAX MATTERS
TAXATION OF THE COMPANY
We may 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 the Contract to provide that (a) if any Owner
dies on or after the Annuity Commencement Date but prior to the time the entire
interest in the Contract 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 Annuity Commencement Date, the entire interest in the
Contract will be distributed (1) within five years after the date of that
Owner's death, or (2) as Annuity Payouts which will begin within one year of
that Owner's death and which will be made over the life of the Owner's
6
<PAGE>
"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 Contracts 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.
GENERAL PROVISIONS
DESIGNATION OF BENEFICIARIES
You may designate a Beneficiary during your lifetime and, unless prohibited by a
previous designation, change the Beneficiary by filing a written request with
our Administrative Office, or through our Electronic Service Center. Each change
of Beneficiary revokes any previous designation.
OWNERSHIP
You may not assign your Contract without our permission. Your rights and the
rights of a Beneficiary may be affected by an assignment.
NON-PARTICIPATING
The Contract is non-participating. No dividends are payable.
MISSTATEMENT OF AGE OR GENDER
If an Annuitant's age or gender was misstated on the Contract data pages, any
Contract benefits or proceeds, or availability thereof, will be determined using
the correct age and gender.
INCONTESTABILITY
We will not contest the Contract.
STATEMENT OF VALUES
At least once each year, we will provide you a statement of values within 30
days after each report date. The statement will show Contract Value, Purchase
Payments and charges made during the report period.
WRITTEN NOTICE
Any written notice should be sent to us at our Administrative Office at P.O. Box
691, Leesburg, VA 20178. The Contract number and the Annuitant's full name must
be included.
We will send all notices to the Owner to the last known email address on file
with the company.
7
<PAGE>
DISTRIBUTION OF THE POLICIES
Capital Brokerage Corporation, the principal underwriter of the Contracts, 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.
The Contracts are sold to the public through brokers licensed under the federal
securities laws and state insurance laws and have entered into selling
agreements with Capital Brokerage Corporation. The offering is continuous and
Capital Brokerage Corporation does not anticipate discontinuing the offering of
the Contracts. However, the Company does reserve the right to discontinue the
offering of the Contracts.
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 Contract 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 Contract 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 Contracts 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 Contract,
including the validity of the Contract and the Company's right to issue the
Contracts 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
8
<PAGE>
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 dated January 22, 1999 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 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 three years in
the period then ended.
The consolidated financial statements of The Life Insurance Company of Virginia,
now known as GE Life and Annuity Assurance Company, and subsidiaries included
herein should be distinguished from the financial statements of Account 4 and
should be considered only as bearing on the ability of the Company to meet its
obligations under the Contract.
Such consolidated financial statements of The Life Insurance Company of
Virginia, now known as GE Life and Annuity Assurance Company, and subsidiaries
should not be considered as bearing on the investment performance of the assets
held in Account 4.
9
<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>
The Life Insurance Company of Virginia and Subsidiary
FINANCIAL STATEMENTS
Year Ended December 31, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
Financial Statements
Year Ended December 31, 1998
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
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
All required financial statements are included in Part B of this Registration
Statement.
(b) Exhibits
(1)(a) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of Separate Account 4. 12/
(1)(b) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twenty-two (22) additional subdivisions of
Separate Account 4, investing in shares of Money Market
Portfolio, High Income Portfolio, Equity-Income Portfolio,
Growth Portfolio and Overseas Portfolio of the Fidelity Variable
Insurance Products Fund; Asset Manager Portfolio of the Fidelity
Variable Insurance Products Fund II; Money Market Portfolio,
Government Securities Portfolio, Common Stock Index Portfolio,
Total Return Portfolio of the Life of Virginia Series Fund,
Inc.; Limited Maturity Bond Portfolio, Growth Portfolio and
Balanced Portfolio of the Neuberger & Berman Advisers Management
Trust; Growth Portfolio, Aggressive Growth Portfolio, and
Worldwide Growth Portfolio of the Janus Aspen Series; Money
Fund, High Income Fund, Bond Fund, Capital Appreciation Fund,
Growth Fund, Multiple Strategies Fund of the Oppenheimer
Variable Account Funds. 12/
(1)(c) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of two additional investment subdivisions of
Separate Account 4, investing in shares of the International
Equity Portfolio and the Real Estate Securities Portfolio of
Life of Virginia Series Fund. 12/
(1)(d) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of four additional investment subdivisions of
Separate Account 4, investing in shares of the American Growth
Portfolio and the American Small Capitalization Portfolio of The
Alger American Fund, and the Growth Portfolio and Flexible
Income Portfolio of the Janus Aspen Series. 8/
(1)(e) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twelve additional investment subdivisions
of Separate Account 4, investing in shares of the Growth &
Income Portfolio and Growth Opportunities Portfolio of Variable
Insurance Products Fund III; Growth II Portfolio and Large Cap
Growth Portfolio of the PBHG Insurance Series Fund, Inc.; Global
Income Fund and Value Equity Fund of GE Investments Funds,
Inc. 11/
<PAGE>
(1)(f) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of two additional investment subdivisions of
Separate Account 4, investing in shares of the Capital
Appreciation Portfolio of the Janus Aspen Series. 11/
(1)(g) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of twenty-two (22) additional subdivisions
of Separate Account 4. 12/
(1)(h) Resolution of Board of Directors of Life of Virginia authorizing
the establishment of six additional investment subdivisions of
Separate Account 4, investing in shares of the U.S. Equity Fund
of the GE Investments Funds, Inc., Growth and Income Fund of the
Goldman Sachs Variable Insurance Trust Fund and Mid Cap Equity
Fund of Goldman Sachs Variable Insurance Trust. Further a name
change for Oppenheimer Variable Account Fund Capital
Appreciation Fund to Oppenheimer Variable Account Fund
Aggressive Growth Fund. 12/
(1)(i) Resolution of Board of Directors of GE Life & Annuity
authorizing the establishment of an additional Investment
Subdivision investing in shares of GE Premier Growth Equity Fund
of GE Investments Funds, Inc.15/
(1)(j) Resolution of Board of Directors of GE Life & Annuity
authorizing the establishment of seven additional investment
subdivisions of Separate Account 4, investing in shares of AIM
V.I. Capital Appreciation Fund, AIM V.I. Capital Development
Fund, AIM V.I.. Telecommunications Fund, AIM V.I. Growth &
Income Fund, AIM V.I. Global Utilites Fund, AIM V.I. Aggressive
Growth Fund and AIM V.I. Government Securities Fund of AIM
Variable Insurance Funds, Inc. 16/
(1)(k) Resolution of Board of Directors of GE Life & Annuity
authorizing the establishment of two additional investment
subdivisions of Separate Account 4, investing in shares of
Delaware Group Social Awareness Series and Delaware Group Devon
Series of Delaware Group Premium Fund, Inc. 16/
(2) Not Applicable.
(3)(a) Underwriting Agreement dated December 12, 1997 between The Life
Insurance Company of Virginia and Capital Brokerage Corporation.
12/
(b) Dealer Sales Agreement dated December 13, 1997.12/
(4)(a) Form of Contract
(a)(i) Original Form of Contract 16/
(5)(a) Form of Application. 16/
(6)(a) Certificate of Incorporation of The Life Insurance Company of
Virginia. 12/
<PAGE>
(b) By-Laws of The Life Insurance Company of Virginia. 12/
(7) Not Applicable.
(8)(a) Stock Sale Agreement between The Life Insurance Company of
Virginia and The Life of Virginia Series Fund, Inc. 12/
(b) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation, and The Life Insurance
Company of Virginia. 12/
(b)(i) Amendment to Participation Agreement Referencing Policy Form
Numbers. 12/
(b)(ii) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and The Life
Insurance Company of Virginia. 9/
(b)(iii) Amendment to Participation Agreement among Variable Insurance
Products Fund, Fidelity Distributors Corporation, and GE Life
and Annuity Assurance Company. 16/
(c) Participation Agreement between Janus Capital Corporation and
The Life Insurance Company of Virginia. 12/
(c)(i) Amendment to Participation Agreement between Janus Capital
Corporation and GE Life and Annuity Assurance Company. 16/
(d) Participation Agreement between Variable Insurance Products Fund
III and The Life Insurance Company of Virginia. 11/
(e) Participation Agreement between GE Investments Funds, Inc. and
GE Life and Annuity Assurance Company.15/
(f) Participation Agreement between AIM Variable Insurance Funds,
Inc. and GE Life and Annuity Assurance Company. 16/
(g) Participation Agreement between Delaware Group Premium Fund,
Inc. and GE Life and Annuity Assurance Company. 16/
(9) Opinion and Consent of Counsel. 16/
(10)(a) Consent of Counsel. 16/
(b) Consent of Independent Auditors. 16/
(11) Not Applicable.
<PAGE>
(12) Not Applicable.
(13) Schedule showing computation for Performance Data 16/
(14) (i) Power of Attorney dated April 16, 1997.11/
(ii) Power of Attorney dated April 15, 1999 15/
(iii) Power of Attorney dated December 20, 1999 16/
--------------------------
8/ Incorporated herein by reference to post-effective amendment number 3 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on September 28, 1995.
9/ Incorporated herein by reference to post-effective amendment number 4 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on April 30, 1996.
10/ Incorporated herein by reference to post-effective amendment number 6 to
the Registrant's registration statement on Form N-4, File No. 33-76334,
filed with the Securities and Exchange Commission on March 24, 1997.
11/ Incorporated herein by reference to post-effective amendment number 7 to
the Registrant's registration statement on Form N-4, File No. 33-76334
filed with the Securities and Exchange Commission on May 1, 1997.
12/ Incorporated herein by reference to post-effective amendment number 9 to
the Registrant's registration statement on Form N-4, File No. 33-76334
filed with the Securities and Exchange Commission on May 1, 1998.
13/ Incorporated herein by reference to post-effective amendment number 11 to
the Registrant's registration statement on Form N-4, File No. 33-76334
filed with the Securities and Exchange Commission on July 17, 1998.
14/ Incorporated herein by reference to pre-effective amendment number 11 to
the Registrant's registration statement on Form N-4, File No. 333-62695
filed with the Securities and Exchange Commission on December 18, 1998.
15/ Incorporated herein by reference to pre-effective amendment number 16 to
the Registrant's registration statement on Form N-4, File No. 33-76334
filed with the Securities and Exchange Commission on April 30, 1999.
16/ To be filed in a pre-effective amendment.
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF GE LIFE & ANNUITY
<TABLE>
<CAPTION>
Positions and Offices
Name Address with Depositor
<S> <C>
Michael G. Fraizer GE Financial Assurance Director and Chairman of
6604 W. Broad Street the Board
Richmond, VA 23230
Pamela S. Schutz GE Life & Annuity Director and President
6610 W. Broad Street
Richmond, VA 23230
Selwyn L. Flournoy, Jr GE Life & Annuity Director and Senior Vice
6610 W. Broad Street President
Richmond, VA 23230
Robert D. Chinn GE Life & Annuity Director and Senior Vice
6610 W. Broad Street President - Agency
Richmond, VA 23230
Elliot Rosenthal GE Life & Annuity Senior Vice President -
6610 W. Broad Street Investment Products
Richmond, VA 23230
Victor C. Moses GE Financial Assurance Director
601 Union Street, Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff GE Life & Annuity Director
6610 W. Broad Street
Richmond, VA 23230
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
ORGANIZATIONAL CHART
----------- GENERAL ELECTRIC
| COMPANY
OTHER SUBSIDIARIES |
(100%)
|
GENERAL ELECTRIC
CAPITAL SERVICES, INC.
|
(100%)
|
GENERAL ELECTRIC
CAPITAL CORPORATION
<PAGE>
|
(100%)
|
GE FINANCIAL ASSURANCE----------------
HOLDINGS, INC. |
| |
(100%) |
| |
GNA CORPORATION |
| |
(100%) 20%
| |
GENERAL ELECTRIC |
CAPITAL ASSURANCE COMPANY |
| |
(80%) |
| |
GE LIFE AND ANNUITY------------------
ASSURANCE COMPANY
ITEM 27. NUMBER OF POLICYOWNERS
Not applicable.
ITEM 28. INDEMNIFICATION
Section 13.1-698 and 13.1-702 of the Code of Virginia, in brief, allow a
corporation to indemnify any person made party to a proceeding because such
person is or was a director, officer, employee, or agent of the corporation,
against liability incurred in the proceeding if: (1) he conducted himself in
good faith; and (2) he believed that (a) in the case of conduct in his official
capacity with the corporation, his conduct was in its best interests; and (b) in
all other cases, his conduct was at least not opposed to the corporation's best
interests and (3) in the case of any criminal proceeding, he had no reasonable
cause to believe his conduct was unlawful. The termination of a proceeding by
judgment, order, settlement or conviction is not, of itself, determinative that
the director, officer, employee, or agent of the corporation did not meet the
standard of conduct described. A corporation may not indemnify a director,
officer, employee, or agent of the corporation in connection with a proceeding
by or in the right of the corporation, in which such person was adjudged liable
to the corporation, or in connection with any other proceeding charging improper
personal benefit to such person, whether or not involving action in his official
capacity, in which such person was adjudged liable on the basis that personal
benefit was improperly received by him. Indemnification permitted under these
sections of the Code of Virginia in connection with a proceeding by or in the
right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.
Section 5 of the By-Laws of GE Life & Annuity further provides that:
<PAGE>
(a) The Corporation shall indemnify each director, officer and employee of
this Company who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative (other than an action
by or in the right of the Corporation) by reason of the fact that he is or
was a director, officer or employee of the Corporation, or is or was serving
at the request of the Corporation as a director, officer or employee of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgements [sic], fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in the best interests of the
Corporation, and with respect to any criminal action, had no cause to believe
his conduct unlawful. The termination of any action, suit or proceeding by
judgement [sic], order, settlement, conviction, or upon a plea of nolo
contendere, shall not of itself create a presumption that the person did not
act in good faith, or in a manner opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, believed
his conduct unlawful.
(b) The Corporation shall indemnify each director, officer or employee of the
Corporation who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgement [sic] in its favor by reason of the fact
that he is or was a director, officer or employee of the Corporation, or is
or was serving at the request of the Corporation as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
court shall deem proper.
(c) Any indemnification under subsections (a) and (b) (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer or
employee is proper in the circumstances because he has met the applicable
standard of conduct set forth in subsections (a) and (b). Such determination
shall be made (1) by the Board of Directors of the Corporation by a majority
vote of a quorum consisting of the directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (3) by the stockholders of
the Corporation.
(d) Expenses (including attorneys' fees) incurred in defending an action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative, may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in subsection (c) upon receipt of an undertaking by or on behalf of
<PAGE>
the director, officer or employee to repay such amount to the Corporation
unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article.
(e) The Corporation shall have the power to make any other or further
indemnity to any person referred to in this section except an indemnity
against gross negligence or willful misconduct.
(f) Every reference herein to director, officer or employee shall include
every director, officer or employee, or former director, officer or employee
of the Corporation and its subsidiaries and shall enure to the benefit of the
heirs, executors and administrators of such person.
(g) The foregoing rights and indemnification shall not be exclusive of any
other rights and indemnification to which the directors, officers and
employees of the Corporation may be entitled according to law.
* * *
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
depositor pursuant to the foregoing provisions, or otherwise, the depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the depositor of expenses incurred
or paid by a director, officer or controlling person of the depositor in
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Capital Brokerage Corporation is the principal underwriter of the
Contracts as defined in the Investment Company Act of 1940, and is also the
principal underwriter for flexible premium variable life insurance policies
issued through GE Life & Annuity Separate Accounts I, II, III and V.
<PAGE>
(b)
<TABLE>
<CAPTION>
Positions and Offices
Name Address with Depositor
<S> <C>
Scott A. Curtis GE Financial Assurance President and Chief
6610 W. Broad St. Executive Officer
Richmond, VA 23230
Charles A. Kaminski GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Victor C. Moses GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Senior Vice President
700 Main St.
Lynchburg, VA 23219
Mary Catherine Yeagley GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Jeffrey I. Hugunin GE Financial Assurance Treasurer
6604 W. Broad St.
Richmond, VA 23230
John W. Attey GE Financial Assurance Vice President, Counsel
7125 W. Jefferson Ave., Ste. 200 & Assistant Secretary
Lakewood, CO 80235
Thomas W. Casey GE Financial Assurance Vice President & Chief
6604 W. Broad St. Financial Officer
Richmond, VA 23230
Stephen N. DeVos GE Financial Assurance Vice President &
6604 W. Broad St. Controller
Richmond, VA 23230
Scott A. Reeks GE Financial Assurance Vice President &
6610 W. Broad St. Assistant Treasurer
Richmond, VA 23230
Edward J. Wiles, Jr. GE Financial Assurance Vice President, Counsel
777 Long Ridge Rd., Bldg. "B" & Secretary
Stamford, CT 06927
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules under it are maintained by GE Life
& Annuity at its administrative offices.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this Registration
Statement.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post-effective amendment to
this Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more
<PAGE>
than 16 months old for so long as payments under the variable annuity
contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2)
a post card or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of
Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional Information
and any financial statements required to be made available under this Form
promptly upon written or oral request to GE Life & Annuity at the address or
phone number listed in the Prospectus.
SECTION 26(f) REPRESENTATION
GE Life & Annuity hereby represents that the fees and charges deducted under
the Contract, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by GE
Life & Annuity.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant, GE Life & Annuity Separate Account 4, has duly caused this
registration statement to be signed on its behalf by the undersigned thereunto
duly authorized, and its seal to be hereunto affixed and attested, in the County
of Henrico in the Commonwealth of Virginia, on the _________of December, 1999.
GE Life & Annuity Separate Account 4
(Registrant)
By:
----------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
GE Life and Annuity Assurance Company
GE Life and Annuity Assurance Company
(Depositor)
By:
----------------------------
Selwyn L. Flournoy, Jr.
Senior Vice President
GE Life and Annuity Assurance Company
<PAGE>
As required by the Securities Act of 1933, this registration statement has been
signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
/s/ Director, Chairman of the Board
- ---------------------
Michael Fraizer
/s/PAMELA S. SCHUTZ Director and President
- ---------------------
Pamela S. Schutz
- ----------------------
Selwyn L. Flournoy, Jr. Director, Senior Vice President
/s/ROBERT D. CHINN Director, Senior Vice President
- ----------------------
Robert D. Chinn
/s/VICTOR C. MOSES Director
- ----------------------
Victor C. Moses
/s/GEOFFREY S. STIFF Director, Senior Vice President
- ----------------------
Geoffrey S. Stiff
By , pursuant to Power of Attorney executed on
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