As filed with the Securities and Exchange Commission on May 13, 1998.
Registration No. 333-39955
Registration No. 811-8475
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
Registration Statement Under the Securities Act of 1933 X
Pre-Effective Amendment No. 1
Post-Effective Amendment No.
Registration Statement Under the Investment Company Act of 1940
Amendment No. 1
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GE Capital Life Separate Account II
(Exact Name of Registrant)
GE Capital Life Assurance Company of New York
(Name of Depositor)
125 Park Avenue, 6th Floor
New York, New York 10017-5529
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (212) 672-4400
Scott A. Curtis
GE Capital Life Assurance Company of New York
125 Park Avenue, 6th Floor
New York, New York 10017-5529
(Name and address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2415
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 Deferred Variable
Annuity Policies
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.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULE 481
Showing Location in Part A (Prospectus) Part B (Statement of Additional
Information) and Part C (Other Information) of Registration Statement of
Information Required by Form N-4
PART A
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C> <C>
1. Cover Page .. Cover Page
2. Definitions .. Definitions
3. Synopsis .. Summary, Fee Table
4. Condensed Financial Information .. Condensed Financial Information; Total Return and
Yield
5. General ..
(a) Depositor .. GE Capital Life Assurance Company of New York
(b) Registrant .. Separate Account II
(c) Portfolio Company .. The Funds
(d) Fund Prospectus .. The Funds
(e) Voting Rights .. Voting Rights and Reports
(f) Administrators .. N/A
6. Deductions and Expenses
(a) General .. Charges and Deductions; Summary
(b) Sales Load % .. Surrender Charges; Summary
(c) Special Purchase Plan .. N/A
(d) Commissions .. Distribution of the Policies
(e) Expenses-Registrant .. Charges and Deductions; Summary
(f) Fund Expenses .. The Funds; Fund Charges
(g) Organizational Expenses .. N/A
7. Policies
(a) Persons with Rights .. Summary; The Policy; Distribution of the Policies;
Income Payments; Voting Rights and Reports; (SAI)
General Provisions
(b) (i) Allocation of Purchase Payments .. Allocating Premium Payments
(ii) Transfers .. Transfers; Transfer Charges
(iii) Exchanges .. N/A
(c) Changes .. Additions, Deletions or Substitutions of Investments;
Changes by the Owner
(d) Inquiries .. Cover page; Summary; (SAI) Written Notice
8. Annuity Period .. Income Payments; Transfers; (SAI) Transfer of
Annuity Units
9. Death Benefit .. Death Provisions; Death Benefit; Payment of Benefits
10. Purchases and Policy Value
(a) Purchases .. Purchasing a Policy; Accumulation of Account Value;
Value of Accumulation Units
(b) Valuation .. Value of Accumulation Units
(c) Daily Calculation .. Value of Accumulation Units
(d) Underwriter .. Distribution of the Policies
11. Redemptions
(a) By Owners .. Surrenders
By Annuitant .. Optional Payment Plans
(b) Texas ORP .. N/A
(c) Check Delay .. Payment Under The Policies
(d) Lapse .. N/A
(e) Free Look .. Canceling a Policy (Refund Privilege)
12. Taxes .. Federal Tax Matters
13. Legal Proceedings .. Legal Proceedings
14. Table of Contents for the Statement of Additional
Information .. Statement of Additional Information Table of Contents
</TABLE>
<PAGE>
PART B
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
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<S> <C> <C>
15. Cover Page .. Cover Page
16. Table of Contents .. Table of Contents
17. General Information and History .. GE Capital Life Assurance Company of New York
18. Services
(a) Fees and Expenses of Registrant .. N/A
(b) Management Policies .. N/A
(c) Custodian .. N/A
Independent Public Accountant .. Experts
(d) Assets of Registrant . .. N/A
(e) Affiliated Persons .. N/A
(f) Principal Underwriter .. (SAI) Transfer of Annuity Units; Distribution of the
Policies
19. Purchase of Securities Being Offered .. (Prospectus) Distribution of the Policies
Offering Sales Load .. N/A
20. Underwriters .. (Prospectus) Distribution of the Policies
21. Calculation of Performance Data .. Calculation of Performance Data; (Prospectus) Total
Return and Yields
22. Annuity Payments .. (Prospectus) Income Payments
23. Financial Statements .. Financial Statements
</TABLE>
PART C -- OTHER INFORMATION
<TABLE>
<CAPTION>
Item of Form N-4 Prospectus Caption
- --------------------------------------------------------- ----------------------------------------------------
<S> <C> <C>
24. Financial Statements and Exhibits .. Financial Statements and Exhibits
(a) Financial Statements .. Financial Statements
(b) Exhibits .. Exhibits
25. Directors and Officers of the Depositor .. Directors and Officers of GE Capital Life
26. Persons Controlled By or Under Common Control Persons Controlled By or In Common Control with the
with the Depositor or Registrant .. Depositor or Registrant
27. Number of Policy Owners .. Number of Policy Owners
28. Indemnification .. Indemnification
29. Principal Underwriters .. Principal Underwriters
30. Location of Accounts and Records .. Location of Accounts and Records
31. Management Services .. Management Services
32. Undertakings .. Undertakings
Signature Page .. Signatures
</TABLE>
<PAGE>
PROSPECTUS
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY POLICY
offered by
GE CAPITAL LIFE SEPARATE ACCOUNT II
and
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
125 Park Avenue, 6th Floor, New York, New York 10017-5529
(212) 672-4400
Variable Annuity Service Center:
6610 West Broad Street
Richmond, VA 23230
(800) 313-5282
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This Prospectus describes a flexible premium deferred variable
annuity policy (the "Policy") offered by GE Capital Life Assurance
Company of New York ("GE Capital Life" or the "Company"). The Policy
provides for the accumulation of capital on a tax-deferred basis for
retirement or other long-term purposes. The Policy may be used in
connection with retirement plans, including plans that qualify for
favorable federal income tax treatment under the Internal Revenue Code.
The Owner may allocate Premium Payments and transfer Account Value
to one or more of the Investment Subdivision(s) of GE Capital Life
Separate Account II (the "Separate Account") and to the Guarantee
Account. Assets of each Investment Subdivision of the Separate Account
are invested solely in a designated investment portfolio that is part of
a series-type mutual fund (each a "Fund"). Currently, there are ten such
Funds with 37 portfolios available under this Policy. The Funds and
their currently available portfolios are listed on the following page.
This Prospectus must be read along with the current prospectuses for the
Funds.
Assets allocated or transferred to the Guarantee Account are
guaranteed a minimum rate of interest for a specified period of time.
This Prospectus sets forth the basic information that a prospective
investor should know before investing. A Statement of Additional
Information containing more detailed information about the Policy and
the Separate Account is available free of charge by writing or calling
us at our Variable Annuity Service Center at the address or telephone
number listed above. The Statement of Additional Information has the
same date as this Prospectus, has been filed with the Securities and
Exchange Commission, and is incorporated herein by reference. The Table
of Contents of the Statement of Additional Information is included at
the end of this Prospectus.
Please read this Prospectus carefully and retain it for future
reference
INVESTMENTS IN THE POLICIES AND SHARES OF THE FUNDS ARE NOT DEPOSITS WITH,
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND SUCH INVESTMENTS AND
SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTING IN THE POLICY
INVOLVES CERTAIN RISKS, INCLUDING THE RISK OF LOSS OF PREMIUM PAYMENTS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
June , 1998
1
<PAGE>
FUNDS AVAILABLE
Janus Aspen Series
Growth Portfolio, Aggressive Growth Portfolio, International Growth
Portfolio, Worldwide Growth Portfolio, Balanced Portfolio, Flexible
Income Portfolio, Capital Appreciation Portfolio
Variable Insurance Products Fund
Equity-Income Portfolio, Overseas Portfolio, Growth Portfolio
Variable Insurance Products Fund II
Asset Manager Portfolio, Contrafund Portfolio
Variable Insurance Products Fund III
Growth & Income Portfolio, Growth Opportunities Portfolio
GE Investments Funds, Inc.
S&P 500 Index Fund, Money Market Fund, Total Return Fund, International
Equity Fund, Real Estate Securities Fund, Global Income Fund, Value
Equity Fund, Income Fund, U.S. Equity Fund
Oppenheimer Variable Account Funds
Bond Fund, Aggressive Growth Fund, Growth Fund, High Income Fund,
Multiple Strategies Fund
Federated Insurance Series
American Leaders Fund II, Utility Fund II, High Income Bond Fund II
The Alger American Fund
Growth Portfolio, Small Capitalization Portfolio
PBHG Insurance Series Fund, Inc.
PBHG Growth II Portfolio, PBHG Large Cap Growth Portfolio
Goldman Sachs Variable Insurance Trust
Mid Cap Equity Fund, Growth & Income Fund
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
DEFINITIONS 4
FEE TABLE 5
EXAMPLES 8
SUMMARY 10
CONDENSED FINANCIAL INFORMATION 11
GE CAPITAL LIFE AND THE SEPARATE
ACCOUNT 12
GE Capital Life 12
IMSA Disclosure 12
The Separate Account 12
Additions, Deletions, or Substitutions of
Investments 12
THE FUNDS
Janus Aspen Series 13
Variable Insurance Products Fund 14
Variable Insurance Products Fund II 14
Variable Insurance Products Fund III 14
GE Investments Funds, Inc. 14
Oppenheimer Variable Account Funds 15
Federated Insurance Series 16
The Alger American Fund 16
PBHG Insurance Series Fund, Inc. 16
Goldman Sachs Variable Insurance Trust 17
THE POLICY 18
Purchasing a Policy 18
Canceling the Policy (Refund Privilege) 18
Allocating Premium Payments 18
Accumulation of Account Value 19
Value of Accumulation Units 19
Transfers 20
Dollar-Cost Averaging 21
Portfolio Rebalancing 21
Surrenders 22
Systematic Withdrawals 22
Death Provisions 23
CHARGES AND DEDUCTIONS 25
Surrender Charges 25
Mortality and Expense Risk Charge 26
Administrative Expense Charge 26
</TABLE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Annual Policy Maintenance Charge 26
Tax Charges 26
Fund Charges 27
INCOME PAYMENTS 27
Income Payments 27
Determination of Income Payments 27
Optional Payment Plans 27
TOTAL RETURN AND YIELDS 29
FEDERAL TAX MATTERS 30
Introduction 30
Non-Qualified Policies 31
Qualified Policies 33
IRA Policies 33
Roth IRAs 34
Simplified Employee Pension Plans 36
SIMPLE IRAs 36
Section 403(b) Annuities 36
Deferred Compensation Plans of State And
Local Government and Tax-Exempt
Organizations 37
Other Qualified Retirement Plans 37
Legal and Tax Advice for Qualified Plans 37
Direct Rollover and Mandatory Withholding
Requirements 37
Federal Income Tax Withholding 38
GENERAL INFORMATION 38
The Owner 38
The Annuitant 38
The Beneficiary 38
Changes By the Owner 38
Evidence of Death, Age, Gender or Survival 38
Payment under the Policies 39
Distribution of the Policies 39
Voting Rights and Reports 39
Year 2000 Compliance 40
Legal Proceedings 40
STATEMENT OF ADDITIONAL
INFORMATION TABLE OF CONTENTS 41
</TABLE>
3
<PAGE>
DEFINITIONS
Account Value -- The value of the Policy equal to the account value
allocated to the Investment Subdivisions of the Separate Account and any
Guarantee Account.
Accumulation Unit -- An accounting unit of measure used to
calculate the Account Value prior to the Maturity Date.
Additional Premium Payment -- Any Premium Payment made after the
initial Premium Payment.
Annuitant -- The person named in the Policy whose age (and gender
where appropriate) are used to determine Income Payments.
Annuity Unit -- An accounting unit of measure used on or after the
Maturity Date to calculate the amount of the second and each subsequent
Variable Income Payment.
Business Day -- Any day that the New York Stock Exchange is open
for business and any other day in which there is a material change in
the value of the assets in the Separate Account.
Code -- The Internal Revenue Code of 1986, as amended.
Death Benefit -- The death benefit provided under a Policy upon the
death of an Annuitant before Income Payments begin.
Designated Beneficiary(ies) -- The person(s) designated in the
Policy who is (are) alive (or in existence for non-natural designations)
on the date of death of an Owner, Joint Owner, or Annuitant and who will
be treated as the sole owner of this Policy following such a death
should an Owner, Joint Owner or Annuitant die before income payments
begin and while the Policy is in force.
Due Proof of Death -- Proof of death that is satisfactory to GE
Capital Life. Such proof may consist of the following if acceptable to
GE Capital Life: (a) a certified copy of the death certificate; or (b) a
certified copy of the decree of a court of competent jurisdiction as to
the finding of death.
Fixed Income Payments -- Income Payments that are fixed in amount.
Funds -- The mutual funds designated in this Prospectus as eligible
investments for the Separate Account.
General Account -- The assets of GE Capital Life that are not
segregated in any of the separate investment accounts of GE Capital
Life.
Guarantee Account -- The Guarantee Account is a separate investment
account of GE Capital Life under state insurance law (but not under
federal securities laws) into which Premium Payments may be allocated or
Account Value may be transferred.
Home Office -- The principal offices of GE Capital Life Assurance
Company of New York at 125 Park Avenue, 6th Floor, New York, New York
10017-5529.
Income Payment -- One of a series of payments made under one of the
Optional Payment Plans.
Investment Subdivision -- A subdivision of the Separate Account,
each of which invests exclusively in shares of a designated portfolio of
one of the Funds.
IRA Policy -- An individual retirement annuity Policy that receives
favorable federal income tax treatment under Section 408 of the Code.
Joint Owner -- Joint Owners own the Policy equally. If one Joint
Owner dies, the surviving Joint Owner has a right of survivorship to the
Policy.
Maturity Date -- The date stated in the Policy on which Income
Payments are scheduled to commence, if the Annuitant is living on that
date.
Maturity Value -- The Surrender Value of the Policy on the day
immediately preceding the Maturity Date.
Net Investment Factor -- An index applied to measure the investment
performance of an Investment Subdivision from the beginning of a
Valuation Period to the end of that same Valuation Period.
Non-Qualified Policy -- Policies not sold or used in connection
with retirement plans receiving favorable federal income tax treatment
under the Code.
4
<PAGE>
Owner -- The person or persons (in the case of Joint Owners)
entitled to receive Income Payments after the Maturity Date. The Owner
is also entitled to the ownership rights stated in the Policy during the
lifetime of the Annuitant. The original Owner is named in the Policy. As
used in this Prospectus, the words "you" and "your" shall refer to the
Owner.
Policy -- The flexible premium deferred variable annuity policy
issued by GE Capital Life and described in this Prospectus. The term
"Policy" or "Policies" includes the Policy described in this Prospectus,
a Policy application, any supplemental applications, any endorsements
and riders.
Policy Date -- The date on which the Policy goes into effect. The
Policy Date is shown in the Policy and is used to measure Policy years
and Policy anniversaries.
Premium Payment(s) -- An amount paid to GE Capital Life by the
Owner or on the Owner's behalf as consideration for the benefits
provided by the Policy.
Qualified Policies -- Policies used in connection with retirement
plans which receive favorable federal income tax treatment under the
Code.
Separate Account -- GE Capital Life Separate Account II.
Surrender Value -- The Account Value less any applicable surrender
charge.
Valuation Period -- The period between the close of business on a
Business Day and the close of business on the next succeeding Business
Day.
Variable Annuity Service Center -- The office to which all written
and telephone inquiries concerning the Policy or the Funds should be
made: 6610 West Broad Street, Richmond, VA 23230, 1-800-313-5282.
Variable Income Payments -- Payments made pursuant to an Optional
Payment Plan where such payments fluctuate based on the investment
performance of Investment Subdivisions selected by the Owner.
FEE TABLE
<TABLE>
<S> <C>
Owner Transaction Expenses:
Sales Charge on Premium Payments .................................................... None
Maximum Surrender Charge (Contingent Deferred Sales Charge) as a percentage of amount
surrendered ....................................................................... 6.00%
Other surrender fees ................................................................ None
Transfer charge:
First transfer each month ........................................................... None
Subsequent transfers (each) ......................................................... $ 10.00
Account Annual Expenses:
(as a percentage of account value) ..................................................
Mortality and Expense Risk Charge ................................................... 1.25%
Administrative Expense Charge ....................................................... 0.15%
Total Annual Expenses ............................................................... 1.40%
Other Annual Expenses:
Annual Policy Maintenance Charge .................................................... $ 25.00
</TABLE>
In addition, the amount of any state and local taxes levied by any
government entity on Premium Payments may be deducted from Account Value when
such taxes are incurred. GE Capital Life reserves the right to defer the
collection of this charge and to deduct it against your Account Value on the
surrender of your Policy or on application of Account Value to provide Income
Payments. GE Capital Life refers to this as the premium payment tax charge.
5
<PAGE>
Fund Annual Expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
Management Fees Other Expenses
(after fee waiver (after reimbursement- Total Annual
Fund as applicable as applicable) Expenses
- -------------------------------------------------------- ------------------- ----------------------- -------------
<S> <C> <C> <C>
Janus Aspen Series:
Growth Portfolio ...................................... 0.65% 0.05% 0.70%
Aggressive Growth Portfolio ........................... 0.73% 0.03% 0.76%
International Growth Portfolio ........................ 0.67% 0.29% 0.96%
Worldwide Growth Portfolio ............................ 0.66% 0.08% 0.74%
Balanced Portfolio .................................... 0.76% 0.07% 0.83%
lexible Income Portfolio .............................. 0.65% 0.10% 0.75%
Capital Appreciation Portfolio ........................ 0.23% 1.03% 1.26%
Variable Insurance Products Fund: *
Equity-Income Portfolio ............................... 0.50% 0.08% 0.58%
Overseas Portfolio .................................... 0.75% 0.17% 0.92%
Growth Portfolio ...................................... 0.60% 0.09% 0.69%
Variable Insurance Products Fund II: *
Asset Manager Portfolio ............................... 0.55% 0.10% 0.65%
Contrafund Portfolio .................................. 0.60% 0.11% 0.71%
Variable Insurance Products Fund III: *
Growth and Income Portfolio ........................... 0.49% 0.21% 0.70%
Growth Opportunities Portfolio ........................ 0.60% 0.14% 0.74%
GE Investments Funds, Inc.:
S&P 500 Index Fund .................................... 0.34% 0.12% 0.46%
Money Market Fund ..................................... 0.20% 0.12% 0.32%
Total Return Fund ..................................... 0.50% 0.15% 0.65%
International Equity Fund ............................. 0.98% 0.36% 1.34%
Real Estate Securities Fund ........................... 0.83% 0.12% 0.95%
Global Income Fund .................................... 0.40% 0.17% 0.57%
Value Equity Fund ..................................... 0.37% 0.09% 0.46%
Income Fund ........................................... 0.42% 0.17% 0.59%
U.S. Equity Fund ...................................... 0.55% 0.25% 0.80%
Oppenheimer Variable Account Funds:
Oppenheimer Bond Fund ................................. 0.73% 0.05% 0.78%
Oppenheimer Aggressive Growth Fund .................... 0.71% 0.02% 0.73%
Oppenheimer Growth Fund 0.73% ......................... 0.02% 0.75%
Oppenheimer High Income Fund .......................... 0.75% 0.07% 0.82%
Oppenheimer Multiple Strategies Fund .................. 0.72% 0.03% 0.75%
Federated Insurance Series:
Federated American Leaders Fund II .................... 0.66% 0.19% 0.85%
Federated Utility Fund II ............................. 0.48% 0.37% 0.85%
Federated High Income Bond Fund II .................... 0.51% 0.29% 0.80%
The Alger American Fund:
Alger American Growth Portfolio ....................... 0.75% 0.04% 0.79%
Alger American Small Capitalization Portfolio ......... 0.85% 0.04% 0.89%
PBHG Insurance Series Fund, Inc.:
PBHG Growth II Portfolio .............................. 0.0% 1.20% 1.20%
PBHG Large Cap Growth Portfolio ....................... 0.0% 1.10% 1.10%
Goldman Sachs Variable Insurance Trust Fund:
Goldman Sachs Growth and Income Fund .................. 0.75% 0.15% 0.90%
Goldman Sachs Mid Cap Equity Fund ..................... 0.80% 0.15% 0.95%
</TABLE>
- ---------
* The fees and expenses reported for Variable Insurance Products Fund,
Variable Insurance Products Fund II and Variable Insurance Products
Fund III are prior to any fee waiver and/or reimbursement as
applicable.
6
<PAGE>
The purpose of these tables is to assist an Owner in understanding
the various costs and expenses that an Owner will bear, directly and
indirectly. Except as noted below, the Tables reflect charges and
expenses of Separate Account II as well as the underlying Funds for the
most recent fiscal year. For more information on the charges described
in these Tables see Charges and Deductions and the Prospectuses for the
underlying Funds which accompany this Prospectus. In addition to the
expenses listed above, premium taxes varying from 0 to 3.5% may be
applicable.
The expense information regarding the Funds was provided by those
Funds. The Variable Insurance Products Fund, Variable Insurance Products
Fund II, Variable Insurance Products Fund III, Oppenheimer Variable
Account Funds, Janus Aspen Series, Federated Insurance Series, The Alger
American Fund, PBHG Insurance Series Fund, Inc., Goldman Sachs Variable
Insurance Trust and their investment advisers are not affiliated with GE
Capital Life. While GE Capital Life has no reason to doubt the accuracy
of these figures provided by these non-affiliated Funds, GE Capital Life
has not independently verified such information. The annual expenses
listed for all the Funds except for Variable Insurance Products Funds,
Variable Insurance Products Fund II and Variable Insurance Products Fund
III are net of certain reimbursements by the Funds' investment advisers.
GE Capital Life cannot guarantee that the reimbursements will continue.
With reimbursements, the total annual expenses of the portfolios of the
Variable Insurance Products Fund during 1997 would have been .57% for VIP
Equity-Income Portfolio, .90% for VIP Overseas Portfolio and .67% for VIP
Growth Portfolio.
With reimbursements, the total annual expenses of the portfolios of
the Variable Insurance Products Fund II during 1997 would have been .64%
for VIP II Asset Manager Portfolio and .68% for VIP II Contrafund
Portfolio.
With reimbursements, the total annual expenses of the portfolios of
the Variable Insurance Products Fund III during 1997 would have been
.73% for VIP III Growth Opportunities Portfolio.
GE Investment Management Incorporated currently serves as
investment adviser to GE Investments Funds, Inc. (formerly Life of
Virginia Series Fund, Inc.). Prior to May 1, 1997, Aon Advisors, Inc.
served as investment adviser to this Fund and had agreed to reimburse
the Fund for certain expenses of each of the Fund's portfolios. Absent
certain fee waivers or reimbursements, the total annual expenses of the
portfolios of GE Investments Funds, Inc. during 1997 would have been
.46% for S&P 500 Index Fund, .48% for Money Market Fund, .65% for Total
Return Fund, 1.43% for International Equity, .96% for Real Estate Fund,
.57% for Global Income Fund, .46% for Value Equity Fund, .76% for Income
Fund and .86% for U.S. Equity Fund.
Absent reimbursements, the total annual expenses of the portfolios
of the Janus Aspen Series during 1997 would have been .78% for Growth
Portfolio, .78% for Aggressive Growth Portfolio, 1.08% for International
Growth Portfolio, .81% for Worldwide Growth Portfolio, .83% for Balanced
Portfolio and 2.19% for Capital Appreciation Portfolio.
Absent certain fee waivers or reimbursements, the total annual
expenses of the portfolios of the Federated Insurance Series during 1997
would have been .94% for Federated American Leaders Fund II, 1.12% for
Federated Utility Fund II, and .89% for Federated High Income Bond Fund
II.
Absent certain fee waivers or reimbursements, the total annual
expenses of the portfolios of PBHG Insurance Series Funds, Inc. during
1997 would have been 4.38% for Growth II Portfolio and 5.21% for Large
Cap Growth Portfolio.
Absent certain fee waivers or reimbursements, the total annual
expenses of the portfolios of Goldman Sachs Variable Insurance Trust
would have been 1.51% for Growth and Income Fund and 1.33% for Mid Cap
Equity Fund.
7
<PAGE>
EXAMPLES: A Policyowner would pay the following expense on a $1,000
investment, assuming a 5% annual return on assets and the charges and
expenses reflected in the Fee Table above:
1. If you surrender* your Policy at the end of the applicable period:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Janus Aspen Series
Balanced ................................. 77.45 126.25 159.97 266.60
Flexible Income .......................... 76.65 123.82 155.91 258.49
Growth ................................... 76.14 122.30 153.37 253.39
Aggressive Growth ........................ 76.75 124.12 156.42 259.51
Worldwide Growth ......................... 76.54 123.51 155.41 257.48
Capital Appreciation ..................... 81.78 139.21 181.47 308.97
International Growth ..................... 78.76 130.18 166.52 279.62
VIPF
Equity-Income ............................ 74.92 118.64 147.24 241.04
Overseas ................................. 78.36 128.97 164.51 275.63
Growth ................................... 76.04 121.99 152.87 252.37
VIPF II
Asset Manager ............................ 75.64 120.77 150.83 248.27
Contrafund ............................... 76.24 122.60 153.88 254.42
VIPF III
Growth and Income ........................ 76.14 122.30 153.37 253.39
Growth Opportunities ..................... 76.54 123.51 155.41 257.48
GE Investments Funds, Inc.
Income Fund .............................. 75.03 118.94 147.75 242.08
S&P 500 Index ............................ 73.72 114.97 141.08 228.53
Total Return ............................. 75.64 120.77 150.83 248.27
International Equity ..................... 82.58 141.59 185.42 316.64
Real Estate Securities ................... 78.66 129.88 166.01 278.62
Global Income ............................ 74.82 118.33 146.73 240.00
Value Equity ............................. 73.72 114.97 141.08 228.53
Money Market ............................. 72.30 110.66 133.84 213.73
U.S. Equity .............................. 77.15 125.34 158.45 263.57
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 76.65 123.82 155.91 258.49
Aggressive Growth ........................ 76.44 123.21 154.89 256.46
Growth ................................... 76.65 123.82 155.91 258.49
High Income .............................. 77.35 125.94 159.46 265.59
Bond ..................................... 76.95 124.73 157.44 261.54
Federated Insurance Series
High Income Bond II ...................... 77.15 125.34 158.45 263.57
Utility II ............................... 77.65 126.85 160.98 268.61
American Leaders II ...................... 77.65 126.85 160.98 268.61
The Alger American Fund
Growth ................................... 77.05 125.03 157.94 262.55
Small Capitalization ..................... 78.05 128.07 163.00 272.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 81.17 137.41 178.50 303.18
Large Cap Growth ......................... 80.17 134.41 173.53 293.43
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 78.15 128.37 163.50 273.63
Mid Cap Equity ........................... 78.66 129.88 166.01 278.62
</TABLE>
- ---------
* surrender includes annuitization over a period of less than 5 years
8
<PAGE>
2. If you annuitize at the end of the applicable period, or do not
surrender*:
<TABLE>
<CAPTION>
Subdivision Investing In: 1 Year 3 Years 5 Years 10 Years
- ------------------------------------------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Janus Aspen Series
Balanced ................................. 23.61 72.74 124.53 266.60
Flexible Income .......................... 22.81 70.33 120.49 258.49
Growth ................................... 22.31 68.82 117.96 253.39
Aggressive Growth ........................ 22.91 70.63 121.00 259.51
Worldwide Growth ......................... 22.71 70.02 119.99 257.48
Capital Appreciation ..................... 27.91 85.62 145.94 308.97
International Growth ..................... 24.91 76.65 131.05 279.62
VIPF
Equity-Income ............................ 21.10 65.18 111.86 241.04
Overseas ................................. 24.51 75.45 129.05 275.63
Growth ................................... 22.21 68.51 117.46 252.37
VIPF II
Asset Manager ............................ 21.81 67.30 115.43 248.27
Contrafund ............................... 22.41 69.12 118.47 254.42
VIPF III
Growth and Income ........................ 22.31 68.82 117.96 253.39
Growth Opportunities ..................... 22.71 70.02 119.99 257.48
GE Investments Funds, Inc.
Income Fund .............................. 21.20 65.48 112.37 242.08
S&P 500 Index ............................ 19.90 61.53 105.73 228.53
Total Return ............................. 21.81 67.30 115.43 248.27
International Equity ..................... 28.71 87.99 149.87 316.64
Real Estate Securities ................... 24.81 76.35 130.55 278.62
Global Income ............................ 21.00 64.87 111.35 240.00
Value Equity ............................. 19.90 61.53 105.73 228.53
Money Market ............................. 18.49 57.25 98.52 213.73
U.S. Equity .............................. 23.31 71.84 123.02 263.57
Oppenheimer Variable Account Funds
Multiple Strategies ...................... 22.81 70.33 120.49 258.49
Aggressive Growth ........................ 22.61 69.72 119.48 256.46
Growth ................................... 22.81 70.33 120.49 258.49
High Income .............................. 23.51 72.44 124.03 265.59
Bond ..................................... 23.11 71.23 122.01 261.54
Federated Insurance Series
High Income Bond II ...................... 23.31 71.84 123.02 263.57
Utility II ............................... 23.81 73.34 125.54 268.61
American Leaders II ...................... 23.81 73.34 125.54 268.61
The Alger American Fund
Growth ................................... 23.21 71.53 122.51 262.55
Small Capitalization ..................... 24.21 74.55 127.55 272.63
PBHG Insurance Series Fund, Inc.
Growth II ................................ 27.31 83.83 142.98 303.18
Large Cap Growth ......................... 26.31 80.85 138.03 293.43
Goldman Sachs Variable Insurance Trust Fund
Growth and Income ........................ 24.31 74.85 128.05 273.63
Mid Cap Equity ........................... 24.81 76.35 130.55 278.62
</TABLE>
- ---------
* surrender includes annuitization over a period of less than 5 years
THESE EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES PAID MAY BE GREATER OR LESS THAN
THOSE SHOWN. THE ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL. PAST OR
FUTURE ANNUAL RETURNS MAY BE GREATER OR LESS THAN THE ASSUMED AMOUNT.
9
<PAGE>
SUMMARY
The following summary of Prospectus information should be read in
conjunction with the detailed information appearing elsewhere in this
Prospectus. All written and telephone inquiries concerning the Policy or the
Funds should be made to the Company's Variable Annuity Service Center at 6610
West Broad Street, Richmond, VA 23230, (800) 313-5282.
The Policy
The Policy is a flexible premium deferred variable annuity issued
by GE Capital Life. The Policy allows the Owner to accumulate funds on a
tax-deferred basis by investing in the Separate Account or in the
Guarantee Account. The Separate Account is divided into 10 Investment
Subdivisions. Each investment Subdivision invests in a corresponding
portfolio of the Janus Aspen Series, the Variable Insurance Products
Fund, the Variable Insurance Products Fund II, the Variable Insurance
Products Fund III, the GE Investments Funds, Inc., the Oppenheimer
Variable Account Funds, the Federated Insurance Series, the Alger
American Fund, the PBHG Insurance Series Fund, Inc. and the Goldman
Sachs Variable Insurance Trust. The accompanying prospectuses provide
information about the Funds, including the risks of investing in the
portfolios of Funds. These prospectuses should be read in conjunction
with this prospectus.
The Account Value will vary daily as a function of the investment
performance of the Separte Account and any interest credited under the
Guarantee Account. GE Capital Life does not guarantee any minimum
Account Value for amounts allocated or transferred to the Separte
Account. Amounts allocated or transferred to the Guarantee Account are
guaranteed a fixed rate of interest for a specified period of time.
After the Maturity Date, either Variable Income Payments may be
made based upon the investment performance of the selected Investment
Subdivisions, or Fixed Income Payments may be made based upon the
guarantees of GE Capital Life. The payee will bear the investment risk
after the Maturity Date with respect to Variable Income Payments.
Premium Payments
The Policy requires an initial Premium Payment of at least $5,000
($2,000 for an IRA Policy). Additional Premium Payments of at least $500
for Non-Qualified Policies or $100 for Qualified Policies or $50 for IRA
Policies generally may be made any time before Income Payments begin.
(See "Purchasing a Policy").
Premium Payments may be allocated among up to ten Investment
Subdivisions (and, if applicable, a Guarantee Account) in accordance
with your written instructions. The minimum allocation percentage
permitted is 1% of each Premium Payment but not less than $100. You may
change the allocation of subsequent Premium Payments by written request.
(See "Allocating Premium Payments").
Refund Privilege
Within 10 days after you receive the Policy, you may cancel it by
delivering or mailing it to GE Capital Life or to the agent through whom
it was purchased.
Transfers
Before the Maturity Date, the Owner may transfer amounts from and
among the Investment Subdivisions of the Separate Account and the
Guarantee Account subject to certain restrictions. After the Maturity
Date, the payee may transfer Annuity Units among the available
Investment Subdivisions once each calendar year, subject to certain
restrictions. (See "Transfers").
Surrenders
Full or partial surrenders of Account Value may be made any time before
the Maturity Date. Any partial surrender amount must be at least $500 and the
partial surrender must not reduce the Account Value to below $5,000. (See
"Surrenders"). Account Value surrendered will generally be subject to a
surrender charge (also known as a contingent deferred sales charge). (See
"Charges and Deductions -- Surrender Charges").
Charges and Deductions
The following charges and deductions are assessed under the Policy:
Surrender Charge. GE Capital Life does not deduct any sales charge
from Premium Payments; however, it may deduct a surrender charge (also
referred to as a contingent deferred sales charge). A surrender charge
is deducted from full surrenders and certain partial surrenders of
Premium Payments made within six years from the date such payment was
received by GE
10
<PAGE>
Capital Life. The surrender charge percentage is equal to 6% of the
Premium Payment if surrendered within the first four years after the
Premium Payment was received, and reduces by 2% each year for the next
two years and is 0% after six full years following receipt of the
Premium Payment. The surrender charge is calculated by multiplying (1)
the surrender charge percentage and (2) the lesser of (a) the amount
surrendered and (b) the total premiums paid, less the total of all
partial surrender amounts previously allocated to that Premium Payment.
(See "Charges and Deductions -- Surrender Charges").
Transfer Charge. Before the Maturity Date, twelve transfers in a
calendar year may be made without a transfer charge. Thereafter, a $10
transfer charge will be assessed each time a transfer is made during the
calendar year. No transfer charge will be imposed on transfers made
after the Maturity Date. (See "Charges and Deductions -- Transfer
Charges").
Mortality and Expense Risk Charge. GE Capital Life imposes a daily
charge at an effective annual rate of 1.25% of the average daily net
assets in the Separate Account attributable to the Policies to
compensate GE Capital Life for mortality and expense risks it assumes.
(See "Charges and Deductions -- Mortality and Expense Risk Charge"). If
proceeds from this charge are not needed to cover mortality and expense
risks, the Company may use proceeds to finance distribution of the
Policies. The mortality and expense risk charge is not deducted from
amounts allocated to the Guarantee Account.
Administrative Expense Charge. GE Capital Life deducts a daily
charge at an effective annual rate of 0.15% of the average daily net
assets in the Separate Account attributable to the Policies. (See
Charges and Deductions -- Administrative Expense Charge).
Annual Policy Maintenance Charge. GE Capital Life deducts an annual
Policy Maintenance Charge of $25 from the Account Value attributable to
each Policy. The annual charge is made on each Policy anniversary and on
surrender. (See "Charges and Deductions -- Annual Policy Maintenance
Charge.)
Fund Expenses. Please read the prospectus for each of the Funds for
details on the expenses of each Fund.
Income Payments
The Owner may receive an income benefit beginning on the Maturity
Date if the Annuitant is living on that date. The income benefit will be
a Variable Income Payment. (See "Optional Payment Plans"). The payments
will be made under a "Life Income with 10 Years Certain" plan, unless
the Owner chooses otherwise. The amount of the income benefit will
depend on: (1) the Maturity Value; (2) the Annuitant's gender, where
appropriate, and age on the Maturity Date; and (3) the Optional Payment
Plan chosen.
At any time while the Annuitant is living and before the Maturity
Date, the Owner may change the payment plan by written request to GE
Capital Life. The income benefit will reflect the plan chosen. Payment
plans that base payment on the life or lives of one or more individuals
will base payment on the life of the Annuitant or the Annuitant and an
additional individual. The Maturity Value may be received in a lump sum
instead of an income benefit.
Death Provisions
Subject to a number of tax restrictions, certain benefits are
available to certain persons on the death of an Owner, Joint Owner or
Annuitant prior to the Maturity Date. (See "Distributions Under the
Policies -- Death Provisions.")
CONDENSED FINANCIAL INFORMATION
No condensed financial information is included for the Separate
Account because, as of the date of this Prospectus, the Separate Account
had not commenced operations. The financial statements for GE Capital
Life (as well as the auditors' report thereon) are in the Statement of
Additional Information.
11
<PAGE>
GE CAPITAL LIFE AND THE SEPARATE ACCOUNT
GE Capital Life
GE Capital Life Assurance Company of New York ("GE Capital Life")
is a stock life insurance company that was incorporated in New York on
February 23, 1988. GE Capital Life is ultimately a subsidiary of General
Electric Capital Corporation ("GE Capital"), a New York corporation that
is a diversified financial services company whose subsidiaries consist
of specialty insurance, equipment management, and commercial and
consumer financing businesses. GE Capital's ultimate parent, General
Electric Company, founded more than one hundred years ago by Thomas
Edison, is the world's largest manufacturer of jet engines, engineering
plastics, medical diagnostic equipment and large electric power
generation equipment.
GE Capital Life is licensed solely in New York and specializes in
writing individual fixed-rate deferred annuities, fixed payout immediate
annuities and variable deferred annuities. GE Capital Life's principal
offices are located at 125 Park Avenue, 6th Floor, New York, New York
10017-5529.
GE Capital Life is subject to regulation by the Superintendent of
Insurance of the State of New York. GE Capital Life submits annual
statements on its operations and finances to New York Insurance
Department. The Policy has been filed with the New York Insurance
Department.
IMSA Disclosure
GE Capital Life is a member of the Insurance Marketplace Standards
Association ("IMSA"). GE Capital Life may use the IMSA membership logo and
language in its advertisements, as outlined in IMSA's Marketing and Graphics
Guidelines. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
The Separate Account
GE Capital Life Separate Account II was established by GE Capital
Life as a separate investment account on April 1, 1996. The Separate
Account's assets are the property of GE Capital Life and are held
separately from GE Capital Life's other assets. Income, gains or losses,
whether or not realized, 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 GE
Capital Life may conduct. Although, the assets in the Separate Account
attributable to the Policies are not chargeable with liabilities arising
out of any other business that GE Capital Life may conduct, all
obligations under the Policies including the promise to make Income
Payments are general corporate obligations of GE Capital Life.
Furthermore, the Separate Account's assets are available to cover the
liabilities of GE Capital Life's general account to the extent that such
assets exceed the Separate Account's reserves and other liabilities.
The Separate Account is registered with the Securities and Exchange
Commission (the "Commission") as a unit investment trust under the Investment
Company Act of 1940, as amended (the "1940 Act"), and meets the definition of a
"separate account" under the federal securities laws. Registration with the
Commission, however, does not involve supervision of the management or
investment practices or policies of the Separate Account by the Commission.
The Separate Account currently has 37 Investment Subdivisions available
under the Policy. Premiums are allocated in accordance with the Owner's
instructions among up to ten of the 37 Investment Subdivisions. Assets of each
Investment Subdivision are invested exclusively in an investment portfolio of
one of the ten Funds described below under "The Funds."
Additions, Deletions, or Substitutions of Investments
GE Capital Life reserves the right, subject to compliance with
applicable law, to make additions to, deletions from, or substitutions
for the shares of the Fund portfolios that are held by the Separate
Account or that the Separate Account may purchase.
GE Capital Life reserves the right to establish additional
Investment Subdivisions of the Separate Account, each of which would
invest in a separate portfolio of a Fund, or in shares of another mutual
fund, with a specified investment objective. GE Capital Life may also
eliminate one or more Investment Subdivisions and substitute shares of
another Fund portfolio if the shares of the portfolio are no longer
available for investments, or if in GE Capital Life's sole judgment,
further investment in the portfolio would be inappropriate in view of
the purposes of the Separate Account.
To the extent permitted by applicable law, GE Capital Life reserves
the right: to deregister the Separate Account under the 1940 Act; to
manage the Separate Account under the direction of a committee; to
restrict or eliminate any voting rights
12
<PAGE>
of Owners, or other persons having voting rights as to the Separate
Account; to combine the Separate Account with other GE Capital Life
separate accounts; to transfer the assets of the Separate Account
associated with the Policies to another separate account. GE Capital
Life also reserves the right to make any changes to the Separate Account
required by the 1940 Act or other applicable law or regulation. No such
changes will be made without any necessary approval of the Commission
and the New York Insurance Department.
THE FUNDS
Separate Account II currently invests in ten mutual funds. Each of the
Funds currently available under the Policy is a registered open-end,
diversified investment company of the series-type.
Each Investment Subdivision invests exclusively in a designated
investment portfolio of one of the Funds. The assets of each such
portfolio are separate from other portfolios of that Fund and each
portfolio has separate investment objectives and policies. As a result,
each portfolio operates as a separate investment portfolio and the
investment performance of one portfolio has no effect on the investment
performance of any other portfolio. Some of the Funds may, in the
future, create additional portfolios.
Each of the Funds sells its shares to Separate Account II in
accordance with the terms of a participation agreement between the Fund
and GE Capital Life. The termination provisions of those agreements
vary. A summary of these termination provisions may be found in the
Statement of Additional Information. Should an agreement between GE
Capital Life and a Fund terminate, the Separate Account will not be able
to purchase additional shares of that Fund. In that event, Owners will
no longer be able to allocate Account Values or Premium Payments to
Investment Subdivisions investing in portfolios of that Fund.
Additionally, in certain circumstances, it is possible that a Fund or a
portfolio of a Fund may refuse to sell its shares to Separate Account II
despite the fact that the participation agreement between the Fund and GE
Capital Life has not been terminated. Should a Fund or a portfolio of a Fund
decide not to sell its shares to GE Capital Life, GE Capital Life will be
unable to honor Owner requests to allocate their account values or premium
payments to Investment Subdivisions investing in shares of that Fund or
portfolio.
Certain Investment Subdivisions invest in portfolios that have
similar investment objectives and/or policies; therefore, before
choosing Investment Subdivisions, carefully read the individual
prospectuses for the Funds, along with this prospectus.
Janus Aspen Series
The Janus Aspen Series has seven portfolios that are available
under this Policy: Growth Portfolio, Aggressive Growth Portfolio,
Worldwide Growth Portfolio, International Growth Portfolio, Balanced
Portfolio, Flexible Income Portfolio, and Capital Appreciation Portfolio
Growth Portfolio has the investment objective of long-term capital
growth in a manner consistent with the preservation of capital. The
Growth Portfolio is a diversified portfolio that pursues its objective
by investing in common stocks of companies of any size. Generally, this
Portfolio emphasizes larger, more established issuers.
Aggressive Growth Portfolio has the investment objective of
long-term growth of capital. The Aggressive Growth Portfolio is a
non-diversified portfolio that will seek to achieve its objective by
normally investing at least 50% of its equity assets in securities
issued by medium-sized companies.
Worldwide Growth Portfolio has the investment objective of
long-term growth of capital in a manner consistent with the preservation
of capital. The Worldwide Growth Portfolio will seek to achieve its
objective by investing in a diversified portfolio of common stocks of
foreign and domestic issuers of all sizes. The Portfolio normally
invests in issuers from at least five different countries including the
United States.
International Growth Portfolio has the investment objective of
long-term growth of capital. The International Growth Portfolio will
seek to achieve its objective primarily through investments in common
stocks of issuers located outside the United States. The Portfolio
normally invests at least 65% of its total assets in securities of
issuers from at least five different countries, excluding the United
States.
Balanced Portfolio has the investment objective of seeking
long-term growth of capital, consistent with the preservation of capital
and balanced by current income. The Portfolio normally invests 40-60% of
its assets in securities selected primarily for their growth potential
and 40-60% of its assets in securities selected primarily for their
income potential.
13
<PAGE>
Flexible Income Portfolio has the investment objective of seeking
to obtain maximum total return, consistent with preservation of capital.
Total return is expected to result from a combination of income and
capital appreciation. The Portfolio pursues its objective primarily by
investing in any type of income-producing securities. This Portfolio may
have substantial holdings of lower-rated debt securities or "junk"
bonds. The risks of investing in junk bonds are described in the
prospectus for Janus Aspen Series, which should be read carefully before
investing.
Capital Appreciation Portfolio has the investment objective of
seeking long-term growth of capital by investing primarily in common
stocks of companies of any size.
Janus Capital Corporation serves as investment adviser to Janus
Aspen Series.
Variable Insurance Products Fund
Variable Insurance Products Fund has three portfolios that are
available under this Policy: VIP Equity-Income Portfolio, VIP Overseas
Portfolio and VIP Growth Portfolio.
VIP Equity-Income Portfolio seeks reasonable income by investing
primarily in income-producing equity securities. In choosing these
securities, the Portfolio will also consider the potential for capital
appreciation. The Portfolio's goal is to achieve a yield, which exceeds
the composite yield on the securities comprising the Standard & Poor's
Composite Index of 500 Stocks.
VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. The Portfolio provides a
means for investors to diversify their own portfolios by participating
in companies and economies outside of the United States.
VIP Growth Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are
not restricted to any one type of security. Capital appreciation may
also be found in other types of securities, including bonds and
preferred stocks.
Fidelity Management & Research Company serves as investment adviser
to Variable Insurance Products Fund.
Variable Insurance Products Fund II
Variable Insurance Products Fund II has two portfolios that are
available under this Policy: VIP II Asset Manager Portfolio and VIP II
Contrafund Portfolio.
VIP II Asset Manager Portfolio seeks high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term money market instruments.
VIP II Contrafund Portfolio seeks capital appreciation by investing
mainly in equity securities of companies believed to be undervalued or
out-of-favor.
Fidelity Management & Research Company serves as investment adviser to
Variable Insurance Products Fund II.
Variable Insurance Products Fund III
Variable Insurance Products Fund III has two portfolios that are
available under this Policy: VIP III Growth & Income Portfolio and VIP
III Growth Opportunities Portfolio.
VIP III Growth & Income Portfolio seeks high total return through a
combination of current income and capital appreciation by investing
mainly in equity securities.
VIP III Growth Opportunities Portfolio seeks capital growth by
investing primarily in common stock and securities convertible to common
stock.
Fidelity Management & Research Company serves as investment adviser
to Variable Insurance Products Fund III.
GE Investments Funds, Inc.
GE Investments Funds, Inc. (GE Investments Funds) has nine
portfolios that are available under this Policy: S&P 500 Index Fund,
Money Market Fund, Total Return Fund, International Equity Fund, Real
Estate Securities Fund, Global Income Fund, Value Equity Fund, Income
Fund and U.S. Equity Fund. The U.S. Equity Fund is not available to
California policyowners at this time.
14
<PAGE>
S&P 500 Index Fund1 has the investment objective of providing capital
appreciation and accumulation of income that corresponds to the investment
return of the Standard & Poor's 500 Composite Stock Price Index, through
investment in common stocks traded on the New York Stock Exchange and the
American Stock Exchange, to a limited extent, in the over-the-counter markets.
Money Market Fund has the investment objective of providing the highest
level of current income as is consistent with high liquidity and safety of
principal by investing in high quality money market securities.
Total Return Fund has the investment objective of providing the highest
total return, composed of current income and capital appreciation, as is
consistent with prudent investment risk by investing in common stocks, bonds
and money market instruments, the proportion of each being continuously
determined by the investment adviser.
International Equity Fund has the investment objective of providing
long-term capital appreciation. The portfolio seeks to achieve its
objective by investing primarily in equity and equity-related securities
of companies that are organized outside of the U.S. or whose securities
are principally traded outside of the U.S.
Real Estate Securities Fund has the investment objective of
providing maximum total return through current income and capital
appreciation. The portfolio seeks to achieve its objective by investing
primarily in securities of U.S. issuers that are principally engaged in
or related to the real estate industry including those that own
significant real estate assets. The portfolio will not invest directly
in real estate.
Global Income Fund has the investment objective of high total
return, emphasizing current income and, to a lesser extent, capital
appreciation. The portfolio seeks to achieve these objectives by
investing primarily in income-bearing debt securities and other
income-bearing instruments of U.S. and foreign issuers.
Value Equity Fund has the investment objective of providing long-term
capital appreciation. The portfolio seeks to achieve this objective by
investing primarily in common stock and other equity securities that are
undervalued by the market and offer above-average capital appreciation
potential.
Income Fund has the investment objective or providing maximum income
consistent with prudent investment management and preservation of capital by
investing primarily in income-bearing debt securities and other income bearing
instruments.
U.S. Equity Fund has the investment objective of providing long-term
growth of capital by investing primarily in equity securities of U.S.
companies.
GE Investment Management Incorporated serves as investment adviser
to GE Investments Funds.
Oppenheimer Variable Account Funds
Oppenheimer Variable Account Funds has five portfolios that are
available under this Policy: Oppenheimer High Income Fund, Oppenheimer
Bond Fund, Oppenheimer Aggressive Growth Fund, Oppenheimer Growth Fund,
and Oppenheimer Multiple Strategies Fund.
Oppenheimer High Income Fund seeks a high level of current income
from investment in high yield fixed income securities, including unrated
securities or high risk securities in the lower rating categories. These
securities may be considered to be speculative. This Fund may have
substantial holdings of lower-rated debt securities or "junk" bonds. The
risks of investing in junk bonds are described in the prospectus for the
Oppenheimer Variable Account Funds, which should be read carefully
before investing.
Oppenheimer Bond Fund primarily seeks a high level of current income.
Secondarily, this Fund seeks capital growth when consistent with its primary
objective. Bond Fund will, under normal market conditions, invest at least 65%
of its total assets in investment grade debt securities.
Oppenheimer Aggressive Growth Fund seeks to achieve capital appreciation
by investing in "growth-type" companies.
Oppenheimer Growth Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies.
- ---------
(1) "Standard & Poor's," "S&P," and "S&P 500" are trademarks of
Mc-Graw Hill Companies, Inc. and have been licensed for use by GE
Investment Management Incorporated. The S&P 500 Index Fund is not
sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard
& Poor's makes no representation or warranty, express or implied,
regarding the advisability of investing in this Fund or the Policy.
15
<PAGE>
Oppenheimer Multiple Strategies Fund seeks a total investment return
(which includes current income and capital appreciation in the value of its
shares) from investments in common stocks and other equity securities, bonds
and other debt securities, and "money market" securities.
Oppenheimer Funds, Inc. serves as investment adviser to Oppenheimer
Variable Accounts Funds.
Federated Insurance Series
The Federated Insurance Series has three portfolios that are available
under this Policy: Federated Utility Fund II, Federated High Income Bond Fund
II and Federated American Leaders Fund II.
Federated Utility Fund II has the investment objective of high current
income and moderate capital appreciation. The Federated Utility Fund II will
seek to achieve its objective by investing primarily in equity and debt
securities of utility companies.
Federated High Income Bond Fund II has the investment objective of
high current income. The Federated High Income Bond Fund II will seek to
achieve its objective by investing primarily in a diversified portfolio
of professionally managed fixed-income securities. The fixed-income
securities in which the Fund intends to invest are lower-rated corporate
debt obligations, commonly referred to as "junk bonds". The risks of
these securities are described in the prospectus for the Federated
Insurance Series, which should be read carefully before investing.
Federated American Leaders Fund II has the primary investment
objective of long-term growth of capital, and a secondary objective of
providing income. The Federated American Leaders Fund II will seek to
achieve its objective by investing, under normal circumstances, at least
65% of its total assets in common stock of "blue chip" companies.
Federated Advisers serves as investment adviser to Federated
Insurance Series.
The Alger American Fund
The Alger American Fund has two portfolios that are available under
this Policy: Alger American Growth Portfolio and Alger American Small
Capitalization Portfolio.
Alger American Growth Portfolio has the investment objective of
long-term capital appreciation. Except during temporary defensive
periods, this Portfolio invests at least 65% of its total assets in
equity securities of companies that, at the time of purchase, have a
total market capitalization of $1 billion or greater.
Alger American Small Capitalization Portfolio seeks long-term
capital appreciation. Except during temporary defensive periods, the
Portfolio invests at least 65% of its total assets in equity securities
of companies that, at the time of purchase of the securities, have total
market capitalization within the range of companies included in the
Russell 2000 Growth Index or the S&P Small Cap 600 Index, updated
quarterly. Both indexes are broad indexes of small capitalization
stocks. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization outside this combined range and in excess of that amount
(up to 100% of its assets) during temporary defensive periods.
Fred Alger Management, Inc. serves as the investment manager to The
Alger American Fund.
PBHG Insurance Series Fund, Inc.
PBHG Insurance Series Fund, Inc. (PBHG Insurance Series Fund) has
two portfolios that are available under this Policy: Growth II Portfolio
and Large Cap Growth Portfolio.
PBHG Growth II Portfolio seeks capital appreciation by investing at
least 65% of its total assets in the equity securities of small and
medium sized growth companies (market capitalization of up to $4
billion) that, in the Adviser's opinion, have an outlook for strong
earnings growth and the potential for significant capital appreciation.
PBHG Large Cap Growth Portfolio seeks long-term growth of capital
by investing primarily in the equity securities of large capitalization
companies (market capitalization of greater than $1 billion) that, in
the Adviser's opinion, have an outlook for strong growth in earnings and
potential for capital appreciation.
Pilgrim Baxter & Associates, Ltd. serves as the Investment Adviser
to PBHG Insurance Series Fund, Inc.
16
<PAGE>
Goldman Sachs Variable Insurance Trust
Goldman Sachs Variable Insurance Trust has two portfolios that are under
this Policy: Goldman Sachs Mid Cap Equity Fund and Goldman Sachs Growth and
Income Fund. Goldman Sachs Mid Cap Equity Fund and Goldman Sachs Growth and
Income Fund are not available to California policyowners at this time.
Goldman Sachs Mid Cap Equity Fund seeks to meet its objective primarily
through investments in equity securities of companies with public stock market
capitalization within the range of the market capitalization of companies
constituting the Russell Midcap Index at the time of investment (currently
between $400 million and $16 billion).
Goldman Sachs Growth and Income Fund seeks long-term capital growth and
growth of income, primarily through equity securities that, in the management
team's view, offer favorable capital appreciation and/or dividend-paying
ability.
Goldman Sachs Asset Management serves as Investment Adviser to Goldman
Sachs Variable Insurance Trust.
THERE IS NO ASSURANCE THAT ANY FUND WILL
ACHIEVE ITS STATED OBJECTIVES AND POLICIES.
GE Capital Life currently is compensated by an affiliate(s) of
certain of the Funds based upon an annual percentage of the average
assets held in the Fund by GE Capital Life. These percentage amounts,
which vary by Fund, are intended to reflect administrative and other
services provided by GE Capital Life to the Fund and/or affiliate(s).
Each Fund sells its shares to the Separate Account pursuant to a
participation agreement. The provisions regarding termination of each
such agreement are described in the Statement of Additional Information
under "Termination of Participation Agreements."
The Funds are used as investment vehicles for variable annuity policies
issued by GE Capital Life. Shares of the Funds are also available to registered
separate accounts of insurance companies other than GE Capital Life offering
variable annuity policies and variable life insurance policies. As a result,
there is a possibility that a material conflict may arise between the interests
of Owners owning Policies whose Policy values are allocated to the Separate
Account, and of owners of other policies whose values are allocated to one or
more other separate accounts investing in any one of the Funds. In addition,
Alger American Fund, GE Investments Funds and Janus Aspen Series may sell
shares to certain retirement plans. As a result, there is a possibility that a
material conflict may arise between the interests of Owners or owners of other
policies, and such retirement plans or participants in such retirement plans.
In the event of a material conflict, GE Capital Life will take any
necessary steps, including removing the Separate Account assets from the Fund
or replacing the Fund with another Fund, to resolve the matter. See the
individual Fund prospectuses for additional details.
The Guarantee Account
An Owner also may allocate Premium Payments and transfer Account Value to
the Guarantee Account. The Guarantee Account is a separate investment account
under state insurance law, and is not required to be registered under the
Investment Company Act of 1940. It is maintained as part of our General
Account. Accordingly, neither the General Account nor any interests therein are
subject to the provisions of the 1933 Act or the 1940 Act, and the information
has not been reviewed by the staff of the Securities and Exchange Commission.
Disclosure regarding the Guarantee Account and the General Account, however may
be subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
Each time a Policyowner allocates purchase payments or transfers Account
Value to the Guarantee Account, GE Capital Life establishes an interest rate
guarantee period. Each interest rate guarantee period is guaranteed an interest
rate for a specified period of time (the available interest rate guarantee
periods are shown in your policy form). At the end of the interest rate
guarantee period, a new interest rate will become effective, and an interest
rate guarantee period will commence for any remaining portion of that
particular allocation. Interest rates are determined by GE Capital Life in its
sole discretion. The determination made will be influenced by, but not
necessarily correspond to, interest rates available on fixed income investments
which the Company may acquire with the amounts it receives as premium payments
or transfers of Account Value under the Policies. A Policyowner will have no
direct or indirect interest in these investments. GE Capital Life will also
consider other factors in determining the interest rates, for the interest rate
guarantee period, including, but not limited to, regulatory and tax
requirements, sales commissions, and administrative expenses borne by the
Company, general economic trends, and competitive factors. Amounts allocated to
the Guarantee Account will not share in the investment performance
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of the General Account of GE Capital Life, or any portion thereof. THE
COMPANY'S MANAGEMENT WILL MAKE THE FINAL DETERMINATION OF THE INTEREST RATES IT
DECLARES FOR AN INTEREST RATE GUARANTEE PERIOD. GE CAPITAL LIFE CANNOT PREDICT
OR GUARANTEE THE LEVEL OF INTEREST RATES IN FUTURE INTEREST RATE GUARANTEE
PERIODS. HOWEVER, THE INTEREST RATES FOR ANY INTEREST RATE GUARANTEE PERIOD
WILL BE AT LEAST THE GUARANTEED INTEREST RATE SHOWN IN YOUR POLICY FORM.
GE Capital Life reserves the right to credit bonus interest premium or
additional premium allocated to a Guarantee Account participating in a
Dollar-Cost Averaging program. (This may not be available to all classes of
Policies.)
The initial interest rate guarantee period for any allocation will
be one year, unless the Owner elects otherwise at the time of
allocation. Subsequent interest rate guarantee periods will each be one
year, unless another period is selected at or before the beginning of
the subsequent period. During the first 10 days of each interest rate
guarantee period, the interest rate guarantee period may be changed to
any period GE Capital Life then offers. If the interest rate guarantee
period is changed, a different interest rate may apply. After the first
10 days of an interest rate guarantee period, that interest rate
guarantee period may not be changed.
THE POLICY
Purchasing a Policy
To purchase a Policy, individuals must apply through an authorized
registered agent of GE Capital Life. The minimum initial Premium Payment
is $5,000 ($2,000 for an IRA Policy). GE Capital Life reserves the right
to reject any request for a Policy and any initial Premium Payment for
any lawful reason and in a manner such that does not unfairly
discriminate against similarly situated purchasers.
If GE Capital Life is unable to issue a Policy due to incomplete
information regarding the applicant, the initial Premium Payment will be
credited to the Policy within two Valuation Periods after the later of
receipt of the information needed to issue the Policy or receipt of the
initial Premium Payment by GE Capital Life at its Variable Annuity
Service Center. If the initial Premium Payment cannot be credited within
five Business Days after receipt by GE Capital Life, GE Capital Life
will contact the applicant, explain the reason for the delay, and refund
the initial Premium Payment immediately, unless the applicant
specifically consents to GE Capital Life retaining the initial Premium
Payment until the required information is made complete. If GE Capital
Life retains the initial Premium Payment, it will be credited within two
Valuation Periods after the necessary requirements are fulfilled.
The Owner may make Additional Premium Payments at any time before
the Maturity Date. Additional Premium Payments must be for $500 or more
if the Policy is a Non-Qualified Policy, $50 or more if the Policy is an
IRA Policy, and $100 or more if the Policy is a Qualified Policy other
than an IRA Policy. Additional Premium Payments made under Qualified
Policies are limited to proceeds from certain qualified plans.
Additional Premium Payments are credited as of the next close of
business (on a Business Day) following receipt of the payment at the
Variable Annuity Service Center.
The Policy Date is the date on which the Policy becomes effective.
The Policy Date is set forth in the Policy. Policy years and
anniversaries for the initial Premium Payment are measured from the
Policy Date. Years for determining charges attributable to Additional
Premium Payments are measured from the date the Additional Premium
Payment is received by GE Capital Life at its Variable Annuity Service
Center.
Canceling the Policy (Refund Privilege)
The Owner may examine and cancel the Policy by returning it to GE
Capital Life at its Variable Annuity Service Center within 10 days after
the Policy is received. Once the Policy is received by GE Capital Life,
it will be canceled. GE Capital Life will refund the Account Value
(without reduction for any surrender charges) plus any amount deducted
from the Premium Payments. No transfers or partial surrenders may be
made during this 10-day refund period.
Allocating Premium Payments
The Owner, by written instructions, may allocate Premium Payments
among up to ten Investment Subdivisions of the Separate Account and to
the Guarantee Account. However, Account Value may not be invested in
more than ten Investment Subdivisions at any time. Allocations of less
than 1% of any Premium Payment to any one Investment Subdivision are not
permitted.
The Owner may change the allocation of Additional Premium Payments
at any time, without charge, by sending acceptable written notice to GE
Capital Life at its Variable Annuity Service Center. The new allocation
will apply to any Additional
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Premium Payments received after GE Capital Life receives the notice. The
Account Value in the Separate Account will vary with the investment
performance of the Investment Subdivisions the Owner selects, and the
Owner bears the entire investment risk for the Account Value in any
particular Investment Subdivision. The allocation of Premium Payments
will affect not only the Account Value prior to the Maturity Date, but
it may also affect the Death Benefit payable upon the Annuitant's death.
The Owner should periodically review his allocation of Account Value in
light of market conditions and overall financial planning requirements.
Accumulation of Account Value
The Policy provides for an accumulation of Account Value prior to the
Maturity Date. The Account Value equals the sum of the values of the amounts
allocated under the Policy to the Separate Account and the Guarantee Account.
GE Capital Life will determine Account Value in the Separate
Account on a daily basis. Account Value on the Separate Account will
reflect a number of factors, including Premium Payments, partial
surrenders, transfers, charges assessed in connection with the Policy,
and the investment performance of the shares purchased by the Investment
Subdivisions to which the Account Value is allocated. There is no
guaranteed minimum Account Value for amounts in the Separate Account.
Account Value in the Guarantee Account is the sum of all amounts
allocated to the Guarantee Account, plus any interest credited on those
amounts, less any amounts removed by transfer or surrender, and less any
amounts deducted for charges made under the terms of the Policy and any
riders that may apply.
On the date the initial Premium Payment is received and accepted by
GE Capital Life, the Account Value equals the initial Premium Payment.
Thereafter, at the end of each Valuation Period, the Account Value in
each Investment Subdivision is equal to (a) plus (b) plus (c) minus (d)
minus (e) minus (f) where:
(a) is the Account Value allocated to the Investment Subdivision
at the end of the preceding Valuation Period, multiplied by the
Investment Subdivision's Net Investment Factor (described below) for the
current period;
(b) is the total Premium Payments received during the current
Valuation Period;
(c) is any amounts transferred into the Investment Subdivision
during the current Valuation Period;
(d) is the Account Value transferred out of the Investment
Subdivision during the current Valuation Period;
(e) is any partial surrender made from the Investment Subdivision
during the current Valuation Period; and
(f) is any applicable premium tax deductions.
In addition, after the Policy Date whenever a Valuation Period
includes the Policy anniversary day, the Account Value at the end of
such Valuation Period is reduced by the Policy Maintenance Charge and
the Annual Death Benefit Charge(s), if any, allocated to the Account
Value in the Investment Subdivision for that Policy anniversary day. The
charge(s) will be allocated among the Investment Subdivisions in the
same proportion that the Account Value in each Investment Subdivision
bears to the total Account Value in all Investment Subdivisions on that
Policy anniversary day.
Value of Accumulation Units
The Accumulation Units of each Investment Subdivision are valued
separately. The value of Accumulation Units will change each Valuation
Period according to the investment performance of the shares purchased
by each Investment Subdivision and the deduction of certain charges from
the Account.
For each Investment Subdivision, the value of an Accumulation Unit
for the first Valuation Period was $10. The value of an Accumulation
Unit for each subsequent Valuation Period equals the value of the
Accumulation Unit as of the immediately preceding Valuation Period,
multiplied by the Net Investment Factor for that Investment Subdivision
for that subsequent Valuation Period. The value of an Accumulation Unit
for a Valuation Period is the same for each day in the period.
The Net Investment Factor is a number representing the change in
the value of Investment Subdivision assets on successive Business Days
due to investment income, realized or unrealized capital gains or
losses, deductions for taxes, if any, and deductions for the mortality
and expense risk charge and administrative expense charge. Each
Investment Subdivision has its own Net Investment Factor. The Net
Investment Factor for a Valuation Period is (a) divided by (b), minus
(c) where:
(a) is:
(1) the value of the net assets of that Investment Subdivision
at the end of the preceding Valuation Period; plus
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(2) the investment income and capital gains, realized or
unrealized, credited to the net assets of that Investment
Subdivision during the Valuation Period for which the Net
Investment Factor is being determined; minus
(3) the capital losses, realized or unrealized, charged against
those assets during the Valuation Period; minus
(4) any amount charged against that Investment Subdivision for taxes,
or any amount set aside during the Valuation Period by GE Capital
Life as a provision for taxes attributable to the operation or
maintenance of that Investment Subdivision; and
(b) is the value of the net assets of that Investment Subdivision at the
end of the preceding Valuation Period; and
(c) is a charge no greater than .003857% for each day in the Valuation
Period. This corresponds to 1.25% and 0.15% per year of the net assets of
that Investment Subdivision for mortality and expense risks, and for
administrative expenses, respectively.
When calculating the Net Investment Factor, the value of the assets in the
Account will be taken at their fair market value in accordance with generally
accepted accounting practices and applicable laws and regulations.
Transfers
Before Income Payments begin, the Owner may transfer Account Value from
and among the Guarantee Account and the Investment Subdivisions of the Separate
Account by sending a written request to the Variable Annuity Service Center.
All transfers will be effective as of the end of the Valuation Period during
which the written request is received at the Variable Annuity Service Center.
Currently, there is no limit to the number of transfers that may be made;
however, GE Capital Life reserves the right to limit, upon written notice, the
number of transfers to 12 each calendar year or a lower number if it is
necessary for the Policy to continue to receive annuity treatment by the
Internal Revenue Service. Transfers made under a Dollar Cost Averaging Program
will not count against any limit on the number of transfers available each
year.
The first 12 transfers in a calendar year may be made without transfer
charge. Thereafter, each time a transfer is made during the calendar year, a
transfer charge of $10 will be deducted from the amount transferred.
Transfers Among Investment Subdivisions. If the amount of Account Value
remaining in an Investment Subdivision after a transfer is less than $100, GE
Capital Life will transfer the amount remaining in addition to the amount
requested. GE Capital Life will not allow a transfer into any Investment
Subdivision unless the Account Value in that Investment Subdivision after the
transfer is at least $100.
After Income Payments begin, if Variable Income Payments are being made,
Annuity Units may be transferred among the Investment Subdivisions at the
payee's written request once each calendar year. No transfer charge will be
imposed on such transfers. The transfer will be effective as of the end of the
Valuation Period during which GE Capital Life receives the written request at
its Variable Annuity Service Center. The Variable Income Payment amount on the
date of the transfer will not be affected by the transfer, although subsequent
Variable Income Payments will reflect the investment experience of the selected
Investment Subdivisions.
If the number of Annuity Units remaining in an Investment Subdivision
after a transfer is less than 1, then this Annuity Unit will also be
transferred. In addition, transfers are only permitted into an Investment
Subdivision if, after the transfer, the number of Annuity Units of that
Investment Subdivision is at least 1.
GE Capital Life reserves the right to refuse to execute any transfer,
whether requested before or after Income Payments, if any of the Investment
Subdivisions that would be affected by the transfer are unable to purchase or
redeem shares of the Funds in which they invest.
Transfers between the Guarantee Account and the Investment Subdivisions.
The Owner may transfer amounts between the Guarantee Account and the Investment
Subdivisions of the Separate Account. Transfers will be effective on the date
the Owner's transfer request is received by GE Capital Life. With respect to
transfers between the Guarantee Account and the Investment Subdivisions of the
Separate Account, the following restrictions may be imposed:
For each allocation to a Guarantee Account, transfers to the Investment
Subdivisions of the Separate Account may be made only during the 30 day
period following the end of that allocation's interest rate guarantee
period. GE Capital Life may limit the amount which may be transferred to
the Investment Subdivisions. For any particular allocation to a
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Guarantee Account, the limit amount will not be less than (a) accrued
interest on that allocation, plus (b) 25% of the original amount of that
allocation.
No transfers from any Investment Subdivision of the Separate Account to
the Guarantee Account may be made during the six month period following the
transfer of any amount from the Guarantee Account to any Investment
Subdivisions of the Separate Account.
In all other respects, the rules and charges applicable to transfers
between the various Investment Subdivisions of the Separate Account will
apply to transfers involving a Guarantee Account.
Dollar-Cost Averaging. Owners may elect to have GE Capital Life
automatically transfer specified amounts from a Guarantee Account or one of
certain designated Investment Subdivisions of the Separate Account to any other
available Investment Subdivision(s) on a monthly or quarterly basis. This
privilege is intended to permit Owners to utilize "Dollar-Cost Averaging," a
long-term investment method that provides for regular level investments over a
period of time. GE Capital Life makes no representations or guarantees that
Dollar-Cost Averaging will result in a profit or protect against loss.
Owners must complete the Dollar-Cost Averaging section of the application
or a Dollar-Cost Averaging Agreement in order to participate in the Dollar-Cost
Averaging program. Currently, the Investment Subdivision available to allocate
money for the purpose of Dollar-Cost Averaging is the Money Market Fund of the
GE Investments Funds. Money may be allocated to this subdivision as initial
premium, additional premium or in the form of a transfer from other Investment
Subdivisions within the Account. Any amount allocated must conform to the
minimum amount and percentage requirements. (See "Allocation of Premium
Payments").
Alternatively, Owners may elect to have GE Capital Life automatically
transfer specified amounts from a Guarantee Account to any available Investment
Subdivision on a monthly or quarterly basis. Money may be allocated to the
Guarantee Account as an initial or subsequent premium or in the form of a
transfer of Account Value from one or more Investment Subdivisions. Such
allocations must comply with all applicable minimum amount and percentage
requirements (see "Purchasing A Policy" and "Allocating Premium Payments") as
well as rules applicable to transfer to the Guarantee Account. Apart from
automatic transfers under the Dollar-Cost Averaging Agreement, all rules
regarding transfers from the Guarantee Account will apply.
Owners may designate the amount of value under the Policy allocated to a
Guarantee Account that is subject to the Dollar-Cost Averaging program. GE
Capital Life reserves the right to limit the amount of each automatic transfer
to 10% per month of the amount so designated.
Automatic transfer from a Guarantee Account, as described above, will be
made on a first-in-first-out basis until the entire value of the designated
amount in the Guarantee Account is depleted. Prior to that time, an Owner may
discontinue such automatic transfers by sending GE Capital Life a written
notice. GE Capital Life reserves the right to discontinue or modify the
alternative Dollar-Cost Averaging program at any time for any reason on 30 days
written notice to the Owner.
Dollar-Cost Averaging will continue until the entire Account Value in a
Guarantee Account or the Investment Subdivision designated for Dollar-Cost
Averaging is depleted. Prior to that time, the Owner may discontinue
Dollar-Cost Averaging by sending GE Capital Life a written cancellation notice.
Owners may make changes to their Dollar-Cost Averaging program by calling GE
Capital Life at (800) 313-5282. Also, GE Capital Life reserves the right to
discontinue Dollar-Cost Averaging upon 30 days written notice to the Owner.
Dollar-Cost Averaging transfers are not included for the purpose of determining
any transfer charge.
Portfolio Rebalancing. Owners may elect to have GE Capital Life
automatically transfer amounts on a quarterly, semi-annual or annual basis to
maintain a specified percentage of Account Value in each of two or more
Investment Subdivisions of the Separate Account designated by the Owner. This
privilege permits Owners to use "Portfolio Rebalancing," a strategy that
maintains over time the Owner's desired allocation percentage in the designated
Investment Subdivisions. The percentage of Account Value in each of the
Investment Subdivisions may shift from the Portfolio Rebalancing allocation
percentage due to the performance of the Investment Subdivisions. GE Capital
Life makes no representations or guarantees that Portfolio Rebalancing will
result in a profit or protect against loss.
Owners must complete the Portfolio Rebalancing agreement to participate in
the Portfolio Rebalancing program. Owners may designate the Investment
Subdivisions and specify the rebalancing percentages in the agreement. The
specified percentages must be in whole percentages and must be at least 1%. The
date that a rebalancing transfer is effected is measured from the Policy Date,
or other date selected at GE Capital Life's sole discretion, based on the
rebalancing frequency chosen by an Owner. Account Value must be allocated to
each of the designated Investment Subdivisions for rebalancing to become
effective.
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Portfolio Rebalancing is offered free of charge and will continue as long
as there is Account Value in each of the designated Investment Subdivisions.
Prior to that time, Owners may discontinue Portfolio Rebalancing by sending GE
Capital Life a written cancellation notice. Owners may make changes to their
Portfolio Rebalancing program by calling GE Capital Life at (800) 313-5282.
Portfolio Rebalancing transfers are not included for the purpose of determining
any transfer charge. Owners should consider the possible effects of electing
other automatic programs such as Dollar-Cost Averaging and Systematic
Withdrawals concurrent with Portfolio Rebalancing. GE Capital Life reserves the
right to exclude Investment Subdivisions from Portfolio Rebalancing. GE Capital
Life also reserves the right to discontinue Portfolio Rebalancing upon 30 days
written notice to the Owner.
Powers of Attorney. As a general rule and as a convenience to Owners, GE
Capital Life allows the use of powers of attorney whereby Owners give third
parties the right to effect Account Value transfers on behalf of the Owners.
However, when the same third party possesses powers of attorney executed by
many Owners, the result can be simultaneous transfers involving large amounts
of Account Value. Such transfers can disrupt the orderly management of the
Funds, can result in higher costs to Owners, and are generally not compatible
with the long-range goals of purchasers of the Policies. GE Capital Life
believes that such simultaneous transfers effected by such third parties are
not in the best interests of all shareholders of the Funds and this position is
shared by the managements of those Funds.
Therefore, to the extent necessary to reduce the adverse effects of
simultaneous transfers made by third parties holding multiple powers of
attorney, GE Capital Life may not honor such powers of attorney and has
instituted or will institute procedures to assure that the transfer requests
that it receives have, in fact, been made by the Owners in whose names they are
submitted. However, these procedures will not prevent Owners from making their
own Account Value transfer requests.
Surrenders
The Owner may make a full or partial surrender of the Policy at any time
before Income Payments begin by sending a written request to GE Capital Life at
its Variable Annuity Service Center. The Policy must be submitted with a
request for a full surrender.
GE Capital Life will not permit a partial surrender that is less than $500
or that reduces the Account Value to less than $5,000. In the event that a
partial surrender request would reduce the Account Value to less than $5,000,
GE Capital Life will surrender only that amount of Account Value that would
reduce the remaining Account Value to $5,000 and deduct any surrender charge
from the amount surrendered.
Owners may specify whether the partial surrender should be made from the
Separate Account or the Guarantee Account. If the Owner does not so specify,
the surrender will be made first from Account Value in the Separate Account and
then from the Account Value in the Guarantee Account. Surrenders involving the
Guarantee Account will come from interest rate guarantee periods in the order
they were received.
The amount payable on full surrender of the Policy is the Surrender Value
at the end of the Valuation Period during which the request is received. The
Surrender Value equals the Account Value on the date GE Capital Life receives a
request for surrender less any applicable surrender charge. (See "Surrender
Charges"). Any applicable Policy Maintenance Charge that has not been
previously deducted may also be deducted from the Surrender Value. The
Surrender Value may be paid in a lump sum or under one of the Optional Payment
Plans specified in the Policy. (See "Optional Payment Plans"). Proceeds from
the Separate Account will generally be paid within seven days of receipt of a
request for a surrender. Postponement of payments may occur in certain
circumstances. (See "Payment Under the Policies").
Full and partial surrenders made before age 59 1/2 may have federal tax
consequences, including the imposition of a penalty tax of 10% of the taxable
portion withdrawn. Consult your tax adviser regarding the tax consequences
associated with making withdrawals. (See "Federal Tax Matters").
Systematic Withdrawals
You may elect to receive, in the form of systematic withdrawals, any
partial surrender not subject to surrender charges. We will treat your request
for systematic withdrawals as a request for one partial surrender each policy
year, payable in equal installments over a 12 month period. A surrender charge
will be applied to any additional partial surrender(s) made during the time
Systematic Withdrawal payments are being made, unless all surrender charges
have expired. (See "Surrender Charges".)
The commencement date of the Systematic Withdrawal may be no sooner than
30 days after the policy date. Each partial surrender may not exceed 10% of the
account value on the effective date of that first installment for that policy
year.
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Systematic withdrawals end on the policy maturity date. We reserve the right to
discontinue systematic withdrawals upon 30 days written notice to you.
Systematic Withdrawals will be made from any Investment Subdivisions to
which Account Value is allocated. Withdrawals will be made from each of the
designated Investment Subdivisions in the same proportion that the Account
Value in each Investment Subdivision bears to the total Account Value in all
Investment Subdivisions from which the withdrawals are to be made. At any time
while Systematic Withdrawals are being made, each of the designated Investment
Subdivisions from which withdrawals are being made must count as one of the ten
Investment Subdivisions to which the Account Value of the Policy may be
allocated at any one time. (See "Allocating Premium Payments").
After a series of Systematic Withdrawals has begun, the frequency and/or
amount of payments may be changed upon request by the Owner, subject to the
following rules:
(1) only one such change may be requested in a calendar quarter;
(2) if the maximum amount was not elected at the time the current series of
Systematic Withdrawals was initiated, the remaining payments may be
increased;
(3) the total amount to be withdrawn during that 12-month period, including
amounts already paid, remains limited to 10% of the Account Value at the
time the current series of Systematic Withdrawals was initiated; and
(4) if the current series of Systematic Withdrawals is discontinued, any
remaining payments in the current 12-month period will be paid in a lump
sum on request.
Systematic Withdrawals may be discontinued at any time by the Owner by
notifying GE Capital Life in writing. GE Capital Life reserves the right to
discontinue Systematic Withdrawals upon 30 days written notice to Owners.
Otherwise, payments will continue until the earlier of (i) the date on which a
Systematic Withdrawal reduces the Account Value for the entire Policy below
$5,000, or (ii) the date on which the total Account Value in all Investment
Subdivisions designated for Systematic Withdrawals is insufficient to provide
further payments on the mode in effect.
If any Systematic Withdrawal would be or becomes less than $50, GE Capital
Life reserves the right to reduce the frequency of payments to an interval that
would result in each payment being at least $50. GE Capital Life also reserves
the right to prohibit simultaneous Systematic Withdrawals and Dollar-Cost
Averaging. Additional rules regarding Systematic Withdrawals, available payment
modes, and instructions for electing this option are available upon request.
The amount of each Systematic Withdrawal should be considered as a
distribution and taxed in the same manner as a partial surrender of the Policy.
However, there is some uncertainty regarding the tax treatment of Systematic
Withdrawals, and it is possible that additional amounts may be includible in
income. In addition, a 10% penalty tax may, subject to certain exceptions, be
imposed on any amounts includible in income due to Systematic Withdrawals. For
more information, see the "Federal Tax Matters" discussion of Taxation of
Systematic Withdrawals.
Death Provisions
Before the Maturity Date. If an Owner, Joint Owner, or Annuitant dies
before the Maturity Date (including before Income Payments begin), the
Designated Beneficiary will be treated as the sole owner of the Policy, subject
to the tax restrictions set forth below. A Death Benefit may be payable to the
Designated Beneficiary upon receipt by GE Capital Life of Due Proof of Death.
The Designated Beneficiary will be the first person listed below who is alive
or in existence on the date of death:
(1) Owner
(2) Joint Owner
(3) Beneficiary
(4) Contingent Beneficiary
(5) Owner's estate
If Joint Owners both survive, they become the Designated Beneficiary
together. In such cases, for purposes of the distribution rules discussed
below, each Designated Beneficiary will be treated separately with respect to
each Designated Beneficiary's portion of the Policy.
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Even if the Designated Beneficiary is treated as the sole owner of this
Policy, the death of the Designated Beneficiary will not be treated as the
death of an Owner for purposes of the Death Benefit provisions below, nor will
such death increase the time during which any required distributions from the
Policy may be made.
After the Maturity Date. If an Owner, Joint Owner, Annuitant, or
Designated Beneficiary dies after the Maturity Date (including after Income
Payments begin), payments that are already being made under the Policy will be
made at least as rapidly as under the method of distribution in effect at the
time of such death, notwithstanding any other provision of the Policy.
Death Benefit at Death of Annuitant. If the Annuitant dies before the
Income Payments begin, the Designated Beneficiary may elect to surrender the
Policy for a Death Benefit within 90 days of the date of such death. If the
election is not made within 90 days after the Annuitant's death, the Surrender
Value will be payable instead of the Death Benefit.
The Death Benefit will be the greater of: (1) the minimum death benefit
(described below); or (2) the Account Value on the date GE Capital Life
receives Due Proof of Death of the Annuitant. During the first six Policy
years, and subsequently if the Annuitant was age 81 or older on the Policy
Date, the minimum death benefit is the total Premium Payments adjusted for any
partial surrenders. During any subsequent six-year period if the Annuitant was
age 80 or younger on the Policy Date, the minimum death benefit will be the
Death Benefit on the last day of the previous six-year period plus any Premium
Payments since then, adjusted for any partial surrenders.
In lieu of payment of the Death Benefit, the Designated Beneficiary may
elect to continue the Policy after the Annuitant's death, provided that the
distribution rules (described below) do not require distribution of the entire
value of the Policy.
If the Designated Beneficiary is eligible and elects to continue the
Policy, the Account Value on the date GE Capital Life receives Due Proof
of Death will be set equal to the Death Benefit on that date. Any
increases in the Account Value will be allocated to the Investment
Subdivisions using the Premium Payment allocation in effect at that time.
If the Policy is continued after the death of the Annuitant, any Death
Benefit payable subsequently (at the death of the new Annuitant) will be
based on the new Annuitant's age on the Policy Date, rather than the age
of the previously deceased Annuitant.
If the Designated Beneficiary is not eligible to continue the Policy, the
Account Value on the date we receive Due Proof of Death of the Annuitant
will be set equal to the Death Benefit on that date and the distribution
rules will govern payment of proceeds.
Surrender charges will apply if the Policy is surrendered more than 90
days after the death of the Annuitant, without regard to whether or not
the Account Value was increased.
Distribution Rules. The Code requires that if an Owner dies before Income
Payments begin, the entire value of the Policy must generally be distributed
within five years of the date of the Owner's death. In the case of Joint
Owners, this requirement applies if either Joint Owner dies before Income
Payments begin. The following rules are designed to comply with these Code
requirements, and are applicable upon the death of an Owner or Joint Owner,
including the death of an Annuitant who is also an Owner. These rules will not
apply upon the death of an Annuitant, if the Annuitant was not also an Owner of
the Policy, all Owners of the Policy are natural persons, and a contingent
Annuitant survives. Even if no contingent Annuitant is alive on the death of
the Annuitant, if the Owner is a natural person, that Owner will be the
contingent Annuitant. Therefore, on the death of the Annuitant, the rules apply
only if (1) the Annuitant was an Owner, or (2) any Owner was not a natural
person. In addition, special rules may apply under certain qualified plans as
stated in the Policy.
Before Income Payments begin, if the Designated Beneficiary is not the
surviving spouse of the deceased Owner, Joint Owner or Annuitant, then the
Surrender Value or the applicable Death Benefit will be paid in one lump sum
to, or for the benefit of, the Designated Beneficiary. Instead of receiving a
lump sum distribution, however, the Designated Beneficiary may elect: (1) to
receive the Surrender Value at any time during the five-year period following
the death of the Owner, Joint Owner, or Annuitant by partially or fully
surrendering the Policy; or (2) to apply the entire Surrender Value (or
applicable Death Benefit) under Optional Payment Plan 1 or 2 (described below
under "Optional Payment Plans"), with the first payment to the Designated
Beneficiary being made within one year after the date of death of the Owner,
Joint Owner, or Annuitant, and with payments being made over the life of the
Designated Beneficiary or over a period not exceeding the Designated
Beneficiary's life expectancy.
If the entire Surrender Value has not been paid to the Designated
Beneficiary by the end of this five-year period following the date of death of
the Owner, Joint Owner, or Annuitant, and payments have not begun in accordance
with (2) above, then, in accordance with Code requirements and (1) above, GE
Capital Life will terminate the Policy at the end of that five-year period and
will pay the Account Value to, or for the benefit of, the Designated
Beneficiary. After this, there will be no remaining value in the Policy. If the
Designated Beneficiary dies before all required payments have been made, GE
Capital Life will make any remaining payments to any person named in writing by
the Designated Beneficiary. Otherwise, GE Capital Life will pay the Designated
Beneficiary's estate.
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Rather than the rules described above under Tax Restrictions, special
rules apply if the Designated Beneficiary is the surviving spouse of the
deceased Owner, Joint Owner, or Annuitant. In these cases, the surviving spouse
may continue the Policy as the Owner. In addition, that person will also become
the Annuitant if the deceased was the Annuitant, there is no surviving
contingent Annuitant, and the Policy has not been surrendered for one of the
Death Benefits described above available upon the Annuitant's death. On the
surviving spouse's death, the entire interest in the Policy will be paid within
five years of such spouse's death to the Designated Beneficiary named by the
surviving spouse (and if no Designated Beneficiary has been named, such payment
will be made to the surviving spouse's estate).
CHARGES AND DEDUCTIONS
Surrender Charges
GE Capital Life incurs certain sales and other expenses when the Policies
are issued. The majority of these expenses consist of commissions paid for
sales of these Policies; however, other distribution expenses are incurred in
connection with the printing of prospectuses, conducting seminars and other
marketing, sales, and promotional activities. To recover a portion of these
expenses, a surrender charge (also referred to as a contingent deferred sales
charge) is imposed on full and certain partial surrenders. Set forth below is a
general discussion of the amount and nature of the charge, followed by a more
technical explanation of how the charge is calculated.
Surrender charges will be imposed on full and partial surrenders of
Premium Payments made within six years of such payments. Surrender charges are
made to cover certain expenses relating to the sale of the Policy, including
commissions to registered representatives and other promotional expenses.
Surrender charges also apply to payments GE Capital Life makes upon maturity if
the Maturity Date occurs within six years of receipt of a Premium Payment.
Surrender charges are deducted from the amount surrendered. Premium
Payments are deemed to be surrendered before other components of Account Value.
Surrender charges are determined using the assumption that Premium Payments are
surrendered on a first-in first-out basis, up to the amount surrendered. For
each such Premium Payment, the charge is a percentage of the Premium Payment
(or portion thereof) surrendered. The charge is calculated separately for each
Premium Payment at the time it is surrendered, as specified in the table below.
Surrender Charge
Number of Full and Partially (as a Percentage of Premium
Completed Years Since Premium Payment Payment Surrendered)
- --------------------------------------- ----------------------------
1 6%
2 6%
3 6%
4 6%
5 4%
6 2%
7 and later 0%
After all Premium Payments have been surrendered, any remaining Account
Value may be surrendered without incurring surrender charges.
Reduced Charges on Certain Surrenders. No surrender charge applies to the
first surrender in any Policy year, if the amount surrendered is not more than
10% of the Account Value at the end of the Valuation Period during which the
surrender request is received. If the first surrender in any Policy year is a
full surrender, or a partial surrender of more than 10% of the Account Value,
no surrender charge will apply to a portion of the amount surrendered equal to
10% of the Account Value. Any remaining portion of the amount surrendered may
be subject to surrender charges, as described above. The amount subject to
charge will not exceed the amount surrendered.
Waived Surrender Charges for Certain Optional Payment Plans. Surrender
charges otherwise applicable will be waived if the amount surrendered is
applied to Optional Payment Plans 1, 2 (for a period of five or more years), 3
(for a payment period of at least 5 years based on guarantee interest) or 5.
(See "Optional Payment Plans").
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Transfer Charges
The Owner may transfer amounts from and among the Investment Subdivisions
of the Separate Account and the Guarantee Account. Twelve transfers in each
calendar year will be made without charge. Thereafter, each time amounts are
transferred during that calendar year, a transfer charge of $10 will be
deducted from the amount transferred to compensate GE Capital Life for the
costs in making the transfer. No transfer charge is imposed on transfers
occurring after Income Payments begin.
Mortality and Expense Risk Charge
A charge will be deducted from each Investment Subdivision to compensate
GE Capital Life for certain mortality and expense risks assumed in connection
with the Policies. This charge is not assessed against Account Value in the
Guarantee Account. The charge will be deducted daily and equals 0.003446% for
each day in a Valuation Period. The effective annual rate of this charge, which
is compounded daily, is 1.25% of the average daily net assets of the Account.
GE Capital Life guarantees that this charge of 1.25% will never increase.
The mortality risk assumed by GE Capital Life arises from its contractual
obligation to make Income Payments to each payee regardless of how long all
Annuitants or any individual Annuitant may live. Although Variable Income
Payments will vary in accordance with the investment performance of the shares
purchased by each Investment Subdivision, they will not be affected by the
mortality experience of persons receiving such payments or of the general
population. This assures each payee that neither the longevity of Annuitants
nor an improvement in life expectancy generally will have an adverse effect on
the Variable Income Payments received under the Policy. Mortality risk also
arises from the possibility that the Death Benefit will be greater than the
Account Value.
The expense risk assumed is that expenses incurred in issuing and
administering the Policies will be greater than estimated and, therefore, will
exceed the expense charge limits set by the Policies. If proceeds from this
charge are not needed to cover mortality and expense risks, GE Capital Life may
use proceeds to finance distribution of the Policies.
Administrative Expense Charge
A charge will be deducted from each Investment Subdivision to compensate
GE Capital Life for certain administrative expenses incurred in connection with
the Policies. This charge is not assessed against Account Value in the
Guarantee Account. The charge will be deducted daily and equals 0.000411% for
each day in a Valuation Period. The effective annual rate of this charge, which
is compounded daily, is 0.15% of the average daily net assets of the Account.
Annual Policy Maintenance Charge
A charge of $25 will be deducted annually from the Account Value of each
Policy to compensate GE Capital Life for certain administrative expenses
incurred in connection with the Policies. The charge will be deducted at each
anniversary and at surrender. GE Capital Life will waive this charge if the
Account Value exceeds $75,000 at the time the charge is due. The Policy
Maintenance Charge will compensate GE Capital Life for issuance, processing,
start-up and on-going administration expenses. These expenses include the cost
of processing applications, establishing Policy records, premium collection,
recordkeeping, processing Death Benefit claims, full or partial surrenders,
transfers, and reporting and overhead costs. Once a Policy is issued, the
amount of the Policy Maintenance Charge is guaranteed for the life of the
Policy.
The annual Policy Maintenance Charge will be allocated among the
Investment Subdivisions in the same proportion that the Policy's Account Value
in each Investment Subdivision bears to the total Account Value in all
Investment Subdivisions at the time the charge is made. If there is
insufficient Account Value in the Separate Account at the time the charge is
deducted, the annual Policy Maintenance Charge will be deducted from the
Guarantee Account. (See "Policy Maintenace Charge") Other allocation methods
may be available upon request.
Tax Charges
Because of its current status under the Code, GE Capital Life does not
expect to incur any federal income tax liability that would be chargeable to
the Separate Account. Based upon this expectation, no charge is being made
currently to the Separate Account for federal income taxes. If, however, GE
Capital Life determines that such taxes may be incurred, it may assess a charge
for those taxes from the Separate Account.
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Fund Charges
Because the Separate Account purchases shares of the Funds, the net assets
of each Investment Subdivision will reflect the investment advisory fee and
other expenses incurred by the investment portfolio of the Fund in which the
Investment Subdivision invests. For more information concerning these charges,
read the individual Fund prospectuses.
INCOME PAYMENTS
Income Payments
GE Capital Life will pay an Income Payment to the Owner beginning on the
Maturity Date if the Annuitant is still living, or earlier, as required by some
qualified plans. The Income Payment will be paid in the form of Variable Income
Payments similar to those described in Optional Payment Plan 1, Life Income
with 10 Years Certain using the gender and settlement age of the Annuitant
instead of the payee, unless the Owner elects payment under another Optional
Payment Plan. Under the Life Income with 10 Years Certain plan, if the
Annuitant lives longer than 10 years, payments will continue for his or her
life. If the Annuitant dies before the end of 10 years, the remaining payments
for the 10-year period will be discounted at the same rate used to calculate
the Income Payment. This discounted amount will be paid in one sum. Income
payments under qualified plans will follow the requirements set forth under the
policy.
Unless a different date is requested, the Maturity Date shall not go
beyond the Annuitant's 90th birthday. You may change the Maturity Date to any
earlier date by sending GE Capital Life written notice before the Maturity Date
then in effect.
During the lifetime of the Annuitant and prior to the Maturity Date,
however, the Owner, or the Designated Beneficiary upon the Owner's death, may
elect by written notice to the Variable Annuity Service Center, to receive
payments in a lump sum or under one of the Optional Payment Plans described
below. (If the election is being made by the Designated Beneficiary, only
available plans may be chosen.) Plans that base payment on the life or lives of
one or more individuals will base such payment on the life of the Annuitant or
the Annuitant and an additional individual.
Income Payments will be made monthly unless the Owner elects quarterly,
semi-annual or annual payments by written request to GE Capital Life. However,
if any payment made more frequently than annually would be or becomes less than
$20, GE Capital Life reserves the right to reduce the frequency of payments to
an interval that would result in each payment being at least $20. If the annual
payment payable is less than $20, GE Capital Life will pay the Maturity Value
(described below) in a lump sum and the Policy will terminate effective as of
the Maturity Date and GE Capital Life will have no further obligation under the
Policy.
Determination of Income Payments
The initial Income Payment under the Life Income with 10 Years Certain
plan is calculated by multiplying (a) times (b), divided by (c) where: (a) is
the monthly payment rate per $1,000, shown under the Policy's Optional Payment
Plans for Life Income with 10 Years Certain, using the gender and settlement
age of the Annuitant, instead of the payee, on the Maturity Date; (b) is the
Maturity Value, which equals the Surrender Value on the day immediately
preceding the Maturity Date; and (c) is $1,000.
If at the time Income Payments begin, the Owner has not provided GE
Capital Life with a written election not to have federal income taxes withheld,
GE Capital Life must by law withhold such taxes from the taxable portion of
such Income Payments and remit that amount to the federal government. Also, in
some other circumstances, GE Capital Life may withhold taxes. (See "Direct
Rollover and Mandatory Withholding Requirements, and Federal Income Tax
Withholding".)
Optional Payment Plans
Death Benefit and Surrender Value payments will be paid in one lump sum,
and Income Payments will be paid as described in the Income Payment section.
Subject to the payment plan rules stated in the Policy, and to the Death
Benefit and distribution rules stated above, however, any part of Death Benefit
or Surrender Value payments can be left with GE Capital Life and paid under an
Optional Payment Plan. (For the tax treatment of Surrender Value payments and
Death Benefits, see "Taxation of Partial and Full Surrenders," and "Taxation of
Death Benefit Proceeds"). During the Annuitant's life, the Owner (or the
Designated Beneficiary at the Owner's death) may choose a plan. If a
Beneficiary is changed, then the plan selection is no longer in effect unless a
request to continue it is made in writing. The Designated Beneficiary can
choose a plan at the death of the Annuitant if one has not been chosen.
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Optional Payment Plans can provide either Fixed Income Payments or
Variable Income Payments as selected by the Owner or the payee. There are
currently five plans available. Plans 1 through 5 can be used to provide Fixed
Income Payments, while only plans 1 and 5 are available to provide Variable
Income Payments. A plan and the form of the Income Payments may be designated
in the application or by notifying GE Capital Life in writing at its Variable
Annuity Service Center. If the payee is not a natural person, consent of GE
Capital Life is required prior to selecting a plan.
The effect of choosing a Fixed Income Payment is that the minimum amount
of each Income Payment will be calculated on the date the first Income Payment
is made and will not change. If Fixed Income Payments are chosen, the proceeds
will be transferred to the General Account of GE Capital Life on the date the
Income Payments begin. Benefits will not be less than those that would be
provided to a single premium immediate annuity applicant of the same class.
Payments made will equal or exceed those required by the State of New York. For
further information, you should contact GE Capital Life at its Variable Annuity
Service Center.
If the Owner, (or the Designated Beneficiary) elects to receive Variable
Income Payments under Optional Payment Plan 1 or 5, the proceeds may be
allocated among up to ten Investment Subdivisions. The first Variable Income
Payment is determined by the Optional Payment Plan chosen and the amount of
proceeds applied to the plan. The dollar amount of subsequent Income Payments
will reflect the investment experience of the selected Investment Subdivisions
and is determined by means of Annuity Units. Benefits under a variable income
option will not be less than those that would be provided to an applicant of
the same class under the corresponding option for a single premium variable
immediate annuity. Once variable income payments have commenced, neither
expenses actually incurred, other than taxes on the investment return, nor
mortality actually experienced, will adversely affect the dollar amount of
variable income payments.
The number of Annuity Units for an Investment Subdivision will be
determined when Income Payments begin and will remain fixed unless transferred.
(See "Transfers.") The number of Annuity Units for an Investment Subdivision is
(a) divided by (b) where: (a) is the portion of the first Income Payment
allocated to that Investment Subdivision; and (b) is the Annuity Unit Value for
that Investment Subdivision seven days before the first Income Payment is due.
For subsequent payments, the Income Payment amount for an Investment
Subdivision is the number of Annuity Units for that Investment Subdivision
multiplied by the Annuity Unit Value for that Investment Subdivision seven days
before the payment is due.
For each Investment Subdivision, the Annuity Unit Value for the first
Valuation Period was $10. The Annuity Unit Value for each subsequent Valuation
Period is (a) times (b) times (c) where: (a) is the Net Investment Factor for
that period; (b) is the Annuity Unit Value for the immediately preceding
Valuation Period; and (c) is the investment result adjustment factor.
The investment result adjustment factor recognizes an assumed interest
rate of 3% per year used in determining the amounts of the Income Payments.
This means that if the net investment experience of the Investment Subdivision
to which the Annuity Units apply for a given month exceeds the monthly
equivalent of 3% per year, the monthly payment will be greater than the
previous payment. If the net investment experience for such Subdivision is less
than the monthly equivalent of 3% per year, the monthly payment will be less
than the previous monthly payment.
Payments under Optional Payment Plans 1, 2, 3 or 5 will begin on the date
we receive proof of death, on surrender, or on the Maturity Date. Payments
under Plan 4 will begin at the end of the first interest period after the date
proceeds are otherwise payable. Plan 4 is not available under Qualified
Policies.
Under all of the Optional Payment Plans, if any payment made more
frequently than annually would be or becomes less than $100, GE Capital Life
reserves the right to reduce the frequency of payments to an interval that
would result in each payment being at least $20. If the annual payment payable
is less than $20, GE Capital Life will pay the Surrender Value in a lump sum.
Upon making such a payment, GE Capital Life will have no future obligation
under the Policy.
The fixed income options are shown below. Variable income options, if
applicable, have the same initial payment as the corresponding fixed option.
Plan 1 -- Life Income with Period Certain. Equal monthly payments will be
made for a guaranteed minimum period. If the payee lives longer than the
minimum period, payments will continue for his or her life. The minimum period
can be 10, 15 or 20 years. Guaranteed amounts payable under this plan will earn
interest at 3% compounded yearly. GE Capital Life may increase the interest
rate and the amount of any payment. If the payee dies before the end of the
guaranteed period, the amount of remaining payments for the minimum period will
be discounted at the same rate used in calculating Income Payments.
"Discounted" means GE Capital Life will deduct the amount of interest each
remaining payment would have earned had it not been paid out early. The
discounted amounts will be paid in one sum to the payee's estate unless
otherwise provided.
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Plan 2 -- Income for a Fixed Period. Equal periodic payments will be made
for a fixed period not longer than 30 years. Payments can be annual,
semi-annual, quarterly, or monthly. Guaranteed amounts payable under this plan
will earn interest at 3% compounded yearly. GE Capital Life may increase the
interest and the amount of any payment. If the payee dies, the amount of the
remaining guaranteed payments will be discounted to the date of the payee's
death at the same rate used in calculating Income Payments. The discounted
amount will be paid in one sum to the payee's estate unless otherwise provided.
Plan 3 -- Income of a Definite Amount. Equal periodic payments of a
definite amount will be paid. Payments can be annual, semi-annual, quarterly,
or monthly. The amount paid each year must be at least $120 for each $1,000 of
proceeds. Payments will continue until the proceeds are exhausted. The last
payment will equal the amount of any unpaid proceeds. If Fixed Income Payments
are made under this plan, unpaid Proceeds will earn interest at 3% compounded
yearly. GE Capital Life may increase the interest rate; if the interest rate is
increased, the payment period will be extended. If the payee dies, the amount
of the remaining proceeds with earned interest will be paid in one sum to his
or her estate unless otherwise provided.
Plan 4 -- Interest Income. Periodic payments of interest earned from the
proceeds left with GE Capital Life will be paid. Payments can be annual,
semi-annual, quarterly, or monthly, and will begin at the end of the first
period chosen. Proceeds will earn interest at 3% compounded yearly. GE Capital
Life may increase the interest rate and the amount of any payment. If the payee
dies, the amount of remaining proceeds and any earned but unpaid interest will
be paid in one sum to his or her estate unless otherwise provided. This plan is
not available under Qualified Policies.
Plan 5 -- Joint Life and Survivor Income. Equal monthly payments will be
made to two payees for a guaranteed minimum of 10 years. Each payee must be at
least 35 years old when payments begin. Payments will continue as long as
either payee is living. If Fixed Income Payments are made under this Plan, the
guaranteed amount payable under this plan will earn interest at 3% compounded
yearly. GE Capital Life may increase the interest rate and the amount of any
payment. If both payees die before the end of the minimum period, the amount of
the remaining payments for the 10-year period will be discounted at the same
rate used in calculating Income Payments. The discounted amount will be paid in
one sum to the survivor's estate unless otherwise provided.
TOTAL RETURN AND YIELDS
From time to time, GE Capital Life may advertise total return and/or yield
for the Investment Subdivisions. Certain portfolios of the Funds have been in
existence prior to the commencement of the offering of the Policies. GE Capital
Life may advertise or include in sales literature the performance of the
Investment Subdivisions that invest in these portfolios for these prior
periods. The performance information of any period prior to the commencement of
the offering of the Policies is calculated as if the Policy had been offered
during those periods, using current charges and expenses. In addition, each
Investment Subdivision may, from time to time, advertise performance relative
to certain performance rankings and indices compiled by independent
organizations.
Performance information discussed herein is based on historical results
and does not indicate or project future performance. More detailed information
as to the calculation of performance information appears in the Statement of
Additional Information.
Total return and yields for the Investment Subdivision are based on the
investment performance of the corresponding investment portfolios of the Funds.
Each portfolio's performance in part reflects its expenses. See the
prospectuses for the Funds for Fund expense information.
Total return for an Investment Subdivision refers to quotations made
assuming an investment under a Policy has been held in that Investment
Subdivision for various periods of time including 1 year, 5 years and 10 years,
or from inception of the Investment Subdivisions if any of those periods are
not available. When an Investment Subdivision has been in operation for one,
five, and ten years, respectively, the total return for these periods will be
provided.
An average annual total return quotation represents the average annual
compounded rate of return that would equate a hypothetical initial investment
of $1,000 (as of the first day of the period for which the total return
quotation is provided) to the redemption value of that investment (as of the
last day of the period). Such quotations show the average annual percentage
change in the value of a hypothetical investment during the periods specified.
The standardized version of average annual total return reflects all historical
investment results, less all charges and deductions applied against the
Investment Subdivision (including any Surrender Charge that would apply if an
Owner terminated the Policy at the end of each period indicated and any
deductions for premium payment taxes).
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In addition to the standardized version described above, total return
performance quotations computed on non-standard bases may be used in
advertisements. For example, average annual total return information may be
presented, computed on the same basis as described above, except deductions
will not include sales or administrative charges. Average annual total returns
that exclude sales or administrative expenses, or both, will be greater than
standardized average annual total returns for comparable periods. Total return
for an Investment Subdivision refers to quotations made assuming that an
investment under a Policy has been held in the Investment Subdivision for
various periods of time. Non-standard performance data will only be disclosed
if the standard performance data for the required periods is also disclosed.
For additional information regarding the calculation of performance data,
please refer to the Statement of Additional Information.
The yield of a "money market" Investment Subdivision refers to the income
generated by an investment in that Investment Subdivision over a specified
seven-day period, which is then annualized. Yield is calculated by assuming
that the income generated for that seven-day period is generated each seven-day
period over a 52-week period. The effective yield is calculated similarly but
the income earned by an investment in that money market Subdivision is assumed
to be reinvested each period. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment.
The yield of an Investment Subdivision (other than a "money market"
Subdivision) refers to the income generated by an investment in that Investment
Subdivision over a specified 30-day (or one-month) period. The income generated
over the period is assumed to be generated and reinvested each month for six
months. The resulting semi-annual yield is then doubled.
In advertising and sales literature, the performance of each Investment
Subdivision may be compared to the performance of other variable annuity
issuers in general or to the performance of particular types of variable
annuities investing in mutual funds, or investment portfolios of mutual funds
with investment objectives similar to each of the Investment Subdivisions.
Lipper Analytical Services, Inc. ("Lipper") and the Variable Annuity Research
Data Service ("VARDS") are independent services which monitor and rank the
performance of variable annuity issuers in each of the major categories of
investment objectives on an industry-wide basis.
Lipper's rankings include variable life insurance issuers as well as
variable annuity issuers. VARDS rankings compare only variable annuity issuers.
The performance analyses prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees, or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide the
highest total return within various categories of funds defined by the degree
of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Investment Subdivision to various widely recognized indices. One such index is
the Standard & Poor's 500 Composite Stock Price Index, a measure of stock
market performance. This unmanaged index does not consider tax consequences or
the expense of operating or managing an investment portfolio, and may not
consider reinvestment of income dividends.
GE Capital Life may also report other information including the effect of
tax-deferred compounding on an Investment Subdivision's investment returns, or
returns in general, which may be illustrated by tables, graphs, or charts. All
income and capital gains derived from the Investment Subdivisions' investments
in the Funds are reinvested on a tax-deferred basis.
FEDERAL TAX MATTERS
Introduction
The following discussion is general in nature and is not intended as tax
advice. The federal income tax consequences associated with the purchase of a
Policy are complex, and the application of the pertinent tax rules to a
particular person may vary according to facts peculiar to that person. This
discussion is based on the law, regulations, and interpretations existing on
the date of this Prospectus. These authorities, however, are subject to change
by Congress, the Treasury Department, and judicial decisions. This discussion
does not address state or other local tax consequences associated with the
purchase of a Policy.
GE CAPITAL LIFE MAKES NO GUARANTEE REGARDING ANY TAX TREATMENT -- FEDERAL,
STATE, OR LOCAL -- OF ANY POLICY OR OF ANY TRANSACTION INVOLVING A POLICY.
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Non-Qualified Policies
Premium Payments. A purchaser of a Policy that does not qualify for the
special tax treatment discussed below in connection with Policies used as
individual retirement annuities or used with other qualified retirement plans
may not deduct or exclude from gross income the amount of the premiums paid. In
this discussion, such a Policy is called a "Non-Qualified Policy".
Tax Deferral During Accumulation Period. In general, until distributions
are made or deemed to be made from a Non-Qualified Policy (as discussed below),
an Owner who is a natural person is not taxed on increases in the Account Value
resulting from the investment experience of the Separate Account. However, this
rule applies only if (1) the investments of the Separate Account are
"adequately diversified" in accordance with Treasury Department regulations,
and (2) GE Capital Life, rather than the Owner, is considered the owner of the
assets of the Separate Account for federal tax purposes.
(1) Diversification Requirements. Treasury Department regulations
prescribe the manner in which the investments of a separate account such as the
Separate Account are to be "adequately diversified." Any failure of the
Separate Account to comply with the requirements of these regulations would
cause each Owner to be taxable currently on the increase in the Account Value.
The Separate Account, through the Funds, intends to comply with the
diversification requirements prescribed by the Treasury Department regulations.
Although GE Capital Life does not control the investments of the Funds, it has
entered into agreements regarding participation in the Funds which require the
Funds to be operated in compliance with the requirements prescribed by the
Treasury Department.
(2) Ownership Treatment. In certain circumstances, variable contract
owners may be considered the owners, for federal tax purposes, of the assets of
the separate account used to support their contracts. In those circumstances,
income and gains from the separate account assets would be includible in the
variable contract owners' gross income annually as earned. The Internal Revenue
Service (the "Service") has stated in published rulings that a variable
contract owner will be considered the owner of separate account assets if the
owner possesses incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. The Treasury Department has
announced, in connection with the issuance of regulations concerning investment
diversification, that those regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated
asset (i.e. separate) account may cause the investor, rather than the insurance
company, to be treated as the owner of the assets in the separate account."
This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular sub-accounts (of a separate account) without being
treated as owners of the underlying assets." As of the date of this Prospectus,
no such guidance has been issued.
The ownership rights under the Policy are similar to, but different in
certain respects from, those addressed by the Service in rulings in which it
was determined that policy owners were not owners of separate account assets.
For example, the Owner of this Policy has the choice of more Funds to which to
allocate Premium Payments and Account Values, and may be able to reallocate
more frequently than in such rulings. These differences could result in an
Owner being considered, under the standard of those rulings, the owner of the
assets of the Separate Account. Because GE Capital Life does not know what
standards will be set forth in regulations or revenue rulings which the
Treasury Department has stated it expects to be issued, GE Capital Life has
reserved the right to modify its practices to attempt to prevent the Owner from
being considered the owner of the assets of the Separate Account.
Frequently, if the Service or the Treasury Department sets forth a new
position which is adverse to taxpayers, the position is applied on a
prospective basis only. Thus, if the Service or the Treasury Department were to
issue regulations or a ruling which treated an Owner as the owner of the assets
of the Separate Account, that treatment might apply only on a prospective
basis. However, if the ruling or regulations were not considered to set forth a
new position, an Owner might retroactively be determined to be the owner of the
assets of the Separate Account.
An Owner who is not a natural person -- that is, an entity such as a
corporation or a trust -- generally is taxable currently on the annual increase
in the Account Value of a Non-Qualified Policy, unless an exception to this
general rule applies. Exceptions exist for, among other things, an Owner which
is not a natural person but which holds the Policy as an agent for a natural
person. The following discussion applies to Policies owned by natural persons.
In addition, if the Policy's Maturity Date occurs at a time when the
Annuitant is at an advanced age, such as over age 85, it is possible that the
Owner will be taxable currently on the annual increase in the Account Value.
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Taxation of Partial and Full Surrenders. A distribution is made from a
Non-Qualified Policy upon the Policy's partial or full surrender. Any amount so
distributed upon a partial surrender is includible in income to the extent that
the Account Value immediately before the partial surrender exceeds the
"investment in the contract" at that time. The amount distributed upon a full
surrender is includible in income to the extent that the Policy's Surrender
Value exceeds the investment in the contract at the time of surrender. For
these purposes, the investment in the contract at any time equals the total of
the Premium Payments made for a Policy to that time, less any amounts
previously received from the Policy which were not included in income.
If an Owner transfers a Policy without adequate consideration to a person
other than the Owner's spouse (or to a former spouse incident to divorce), the
Owner will be taxed on the difference between his or her Account Value and the
investment in the contract at the time of transfer. In such case, the
transferee's investment in the contract will be increased to reflect the
increase in the transferor's income.
In addition, the Policy provides a Death Benefit that in certain
circumstances may exceed the greater of the Premium Payments and the Account
Value. As described elsewhere in this Prospectus, GE Capital Life imposes
certain charges with respect to the Death Benefit. It is possible that some
portion of those charges could be treated for federal tax purposes as a partial
surrender of the Policy.
All non-qualified annuity contracts which are issued by GE Capital Life or
any of its affiliates with the same person designated as the Owner within the
same calendar year will be aggregated and treated as one contract for purposes
of determining any tax on distributions.
Taxation of Annuity Payments. Amounts may be distributed from a
Non-Qualified Policy as payments under one of the five Optional Payment Plans.
In the case of Optional Payment Plans other than Plan 4 (Interest Income),
typically a portion of each payment is includible in income when it is
distributed. Normally, the portion of a payment includible in income equals the
excess of the payment over the exclusion amount. The exclusion amount, in the
case of Variable Income Payments under Plans 1 and 5, is the amount determined
by dividing the "investment in the contract" allocated to that plan for the
Policy when the payments begin to be made (as defined above), adjusted for any
period-certain or refund feature, by the number of payments expected to be made
(determined by Treasury Department regulations). Also, in the case of Fixed
Income Payments under Plans 1, 2, 3, and 5, the exclusion amount is the amount
determined by multiplying the payment by the ratio of such investment in the
contract allocated to that plan, adjusted for any period-certain or refund
feature, to the Policy's "expected return" (determined under Treasury
Department regulations). However, payments which are received after the
investment in the contract has been fully recovered -- i.e., after the sum of
the excludable portions of the payments equals the investment in the contract
- -- will be fully includible in income. On the other hand, should the payments
cease because of the death of the Annuitant before the investment in the
contract has been fully recovered, the Annuitant (or, in certain cases, the
Designated Beneficiary) is allowed a deduction for the unrecovered amount.
If certain amounts, such as the Death Benefit, become payable in a lump
sum from a Policy, it is possible that such amounts might be viewed as
constructively received and thus subject to tax, even though not actually
received. A lump sum will not be constructively received if it is applied under
an Optional Payment Plan within 60 days after the date on which it becomes
payable. (Any Optional Payment Plan selected must comply with applicable
minimum distribution requirements imposed by the Code.)
In the case of Optional Payment Plan 4, the proceeds left with GE Capital
Life are considered distributed for tax purposes at the time Plan 4 takes
effect, and are taxed in the same manner as a full surrender of the Policy, as
described above. The periodic interest payments are includible in the
recipient's income when they are paid or made available. In addition, if
amounts are applied under Plan 3 when the payee is at an advanced age, such as
age 80 or older, it is possible that such amounts would be treated in a manner
similar to that under Plan 4.
Taxation of Systematic Withdrawals. In the case of Systematic Withdrawals,
the amount of each withdrawal should be considered as a distribution and taxed
in the same manner as a partial surrender of the Policy, as described above.
However, there is some uncertainty regarding the tax treatment of Systematic
Withdrawals, and it is possible that additional amounts may be includible in
income.
Taxation of Death Benefit Proceeds. Amounts may be distributed before the
Maturity Date from a Non-Qualified Policy because of the death of the Owner, a
Joint Owner, or the Annuitant. Such Death Benefit proceeds are includible in
the income of the recipient as follows: (1) if distributed in a lump sum, they
are taxed in the same manner as a full surrender of the Policy, as described
above (substituting the Death Benefit Proceeds for the Surrender Value), or (2)
if distributed under an Optional Payment Plan, they are taxed in the same
manner as annuity payments, as described above.
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Penalty Tax on Premature Distributions. Subject to certain exceptions, a
penalty tax is also imposed on the foregoing distributions from a Non-Qualified
Policy, equal to 10 percent of the amount of the distribution that is
includible in income. The exceptions provide, however, that this penalty tax
does not apply to distributions made (1) on or after the recipient attains age
59 1/2, (2) because the recipient has become disabled (as defined in the tax
law), (3) on or after the death of the Owner, or if such Owner is not a natural
person, on or after the death of the primary Annuitant under the Policy (as
defined in the tax law), or (4) as part of a series of substantially equal
periodic payments over the life (or life expectancy) of the recipient or the
joint lives (or life expectancies) of the recipient and his or her designated
beneficiary (as defined in the tax law). In the case of Systematic Withdrawals,
it is uncertain whether such withdrawals will qualify for exception (4) above.
If Systematic Withdrawals did qualify for this exception, any modification of
the systematic withdrawals could result in certain adverse tax consequences. In
addition, a transfer between Investment Subdivisions may result in payments not
qualifying for exception (4) above.
Assignments. An assignment or pledge of (or an agreement to assign or
pledge) a Non-Qualified Policy is taxed in the same manner as a partial
surrender, as described above, to the extent of the value of the Policy so
assigned or pledged. The investment in the contract is increased by the amount
includible as income with respect to such assignment or pledge, though it is
not affected by any other amount in connection with the assignment or pledge
(including its release).
Loss of Interest Deduction Where Policies are Held by or for the Benefit
of Certain Non-Natural Persons. In the case of Policies issued after June 8,
1997 to a non-natural taxpayer (such as a corporation or a trust), or held for
the benefit of such an entity, otherwise deductible interest may no longer be
deductible by the entity, regardless of whether the interest relates to debt
used to purchase or carry the Policy. However, this interest deduction
disallowance does not affect Policies where the income on such Policies is
treated under section 72(u) of the Code as ordinary income that is received or
accrued by the Owner during the taxable year. Entities that are considering
purchasing the Policy, or entities that will be beneficiaries with respect to a
Policy, should consult a tax advisor.
Qualified Policies
The following sections describe tax considerations of Policies used as
Individual Retirement Annuities or other qualified retirement plans ("Qualified
Policies"). GE Capital Life does not currently offer all of the types of
Qualified Policies described, and may not offer them in the future. Prospective
purchasers of Qualified Policies should therefore contact GE Capital Life's
Variable Annuity Service Center to ascertain the availability of Qualified
Policies at any given time.
IRA Policies
Premium Payments. A Policy that meets certain requirements set forth in
the tax law may be used as an individual retirement annuity (i.e., an "IRA
Policy"). Both the amount of the Premium Payments that may be paid, and the tax
deduction that the Owner may claim for such Premium Payments, are limited under
an IRA Policy.
In general, the Premium Payments that may be made for any IRA Policy for
any year are limited to the lesser of $2,000 or 100 percent of the individual's
earned income for the year. Also, with respect to an individual who has less
income than his or her spouse, Purchase Payments may be made by that individual
to an IRA Policy to the extent of the lesser of (1) $2,000, or (2) the sum of
(i) the compensation includible in such individual's gross income for the
taxable year and (ii) the compensation includible in the gross income of the
individual's spouse for the taxable year reduced by the amount allowed as a
deduction for IRA contributions to such spouse. An excise tax is imposed on IRA
contributions that exceed the law's limits.
The deductible amount of the Premium Payments made for an IRA Policy for
any taxable year is limited to the amount of the Premium Payments that may be
paid for the Policy for that year. Furthermore, a single person who is an
active participant in a qualified retirement plan (that is, a qualified
pension, profit-sharing, or annuity plan, a simplified employee pension plan, a
"SIMPLE" retirement account, or a "section 403(b)" annuity plan, as discussed
below) and who has adjusted gross income in excess of $35,000 may not deduct
Premium Payments, and such a person with adjusted gross income between $25,000
and $35,000 may deduct only a portion of such payments. Also, married persons
who file a joint return, one of whom is an active participant in a qualified
retirement plan, and who have adjusted gross income in excess of $50,000 may
not deduct Premium Payments, and those with adjusted gross income between
$40,000 and $50,000 may deduct only a portion of such payments. Married persons
filing separately may not deduct Premium Payments if either the taxpayer or the
taxpayer's spouse is an active participant in a qualified retirement plan.
In applying these and other rules applicable to an IRA Policy, all
individual retirement accounts and annuities owned by an individual are treated
as one Policy, and all amounts distributed during any taxable year are treated
as one distribution.
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Tax Deferral During Accumulation Period. Until distributions are made from
an IRA Policy, increases in the Account Value of the Policy are not taxed.
IRA Policies generally may not provide life insurance coverage, but they
may provide a death benefit that equals the greater of the premiums paid and
the contract value. The Policy provides a Death Benefit that in certain
circumstances may exceed the greater of the Premium Payments and the Account
Value. It is possible that the Policy's Death Benefit provisions could be
viewed as violating the prohibition on investment in life insurance contracts
with the result that the Policy would be not be viewed as satisfying the
requirements of an IRA Policy.
Taxation of Distributions and Rollovers. If all Premium Payments made to
an IRA Policy were deductible, all amounts distributed from the Policy are
included in the recipient's income when distributed. However, if nondeductible
Premium Payments were made to an IRA Policy (within the limits allowed by the
tax law), a portion of each distribution from the Policy typically is included
in income when it is distributed. In such a case, any amount distributed as an
annuity payment or in a lump sum upon death or a full surrender is taxed as
described above in connection with such a distribution from a Non-Qualified
Policy, treating as the investment in the contract the sum of the nondeductible
Premium Payments at the end of the taxable year in which the distribution
commences or is made (less any amounts previously distributed that were
excluded from income). Also in such a case, any amount distributed upon a
partial surrender is partially includible in income. The includible amount is
the excess of the distribution over the exclusion amount which in turn equals
the distribution multiplied by the ratio of the investment in the contract to
the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below) amounts may be "rolled over" from a qualified
retirement plan to an IRA Policy (or from one individual retirement annuity or
individual retirement account to an IRA Policy) without incurring tax if
certain conditions are met. Only certain types of distributions from qualified
retirement plans or individual retirement annuities may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from an IRA Policy equal to 10 percent of the amount
of the distribution includible in income. (Amounts rolled over from an IRA
Policy generally are excludable from income.) The exceptions provide, however,
that this penalty tax does not apply to distributions made (1) on or after age
59 1/2, (2) on or after death or because of disability (as defined in the tax
law), or (3) as part of a series of substantially equal periodic payments over
the life (or life expectancy) of the recipient or the joint lives (or joint
life expectancies) of the recipient and his or her designated beneficiary (as
defined in the tax law). In addition to the foregoing, failure to comply with a
minimum distribution requirement will result in the imposition of a penalty tax
of 50 percent of the amount by which a minimum required distribution exceeds
the actual distribution from an IRA Policy. Under this requirement,
distributions of minimum amounts from an IRA Policy as specified in the tax law
must commence by April 1 of the calendar year following the calendar year in
which the Annuitant attains age 70 1/2, or when he or she retires, whichever is
later. Further, after 1988, such distributions generally must begin by April 1
of the calendar year in which the employee attains age 70 1/2 regardless of
whether he or she has retired.
Roth IRAs
Recently enacted Section 408A of the Code permits eligible individuals to
contribute to a type of IRA Policy known as a "Roth IRA." Roth IRAs differ from
other IRA Policies in several respects. Among the differences is that, although
Premium Payments to a Roth IRA are not tax deductible, "qualified
distributions" from a Roth IRA will be excludable from income. Additionally,
the eligibility and mandatory distribution requirements for Roth IRAs differ
from non-Roth IRA Policies.
Premium Payments. The maximum amount of contributions allowable for any
taxable year to all Roth IRAs maintained for an individual (the "contribution
limit") generally is the lesser of $2,000 and 100% of compensation for the
taxable year. The contribution limit is reduced by the amount of any deductible
and non-deductible contributions to a non-Roth IRA Policy. For individuals who
file a joint return and receive less compensation for the taxable year than
their spouse, special rules apply.
For taxpayers with adjusted gross incomes in excess of certain limits, no
contribution (or only a reduced contribution) to a Roth IRA is allowed. For
married individuals filing a joint return, the contribution limit is phased out
for adjusted gross incomes between $150,000 and $160,000. (Special rules apply
to married individuals filing separate returns.) For single individuals, the
contribution limit is phased out for adjusted gross incomes between $95,000 and
$110,000.
Rollovers. A rollover may be made to a Roth IRA only if it is a "qualified
rollover contribution." A "qualified rollover contribution" is a rollover
contribution to a Roth IRA from another Roth IRA or from a non-Roth IRA Policy,
but only if such rollover contribution meets the rollover requirements for IRA
Policies under section 408(d)(3) of the Code. In addition, a transfer may be
made to a Roth IRA directly from another Roth IRA or from a non-Roth IRA Policy.
Persons with adjusted gross incomes in excess of $100,000 or who are married and
file a separate return are not eligible to make a qualified rollover
contribution or a transfer in a taxable year from a non-Roth IRA Policy to a
Roth IRA.
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In the case of a qualified rollover contribution or a transfer from a
non-Roth IRA Policy to a Roth IRA, any portion of the amount rolled over which
would be includible in gross income were it not part of a qualified rollover
contribution or a nontaxable transfer will be includible in gross income.
However, the 10 percent penalty tax on premature distributions generally will
not apply. If such a rollover occurs before January 1, 1999, any portion of the
amount rolled over which is required to be included in gross income must be
included ratably over the 4-taxable year period beginning with the taxable year
in which the rollover is made.
Conversions. All or part of amounts in a non-Roth IRA Policy may be
converted into a Roth IRA. Such a conversion can be made without taking an
actual distribution from the IRA Policy. For example, an individual may make a
conversion by notifying the IRA Policy issuer or trustee, whichever is
applicable. The conversion of an IRA Policy to a Roth IRA is a special type of
qualified rollover contribution. Hence, the IRA Policy participant must be
eligible to make a qualified rollover contribution in order to convert an IRA
Policy to a Roth IRA. A conversion typically will result in the inclusion of
some or all of the IRA Policy value in gross income, as described above.
UNDER SOME CIRCUMSTANCES, IT MAY NOT BE ADVISABLE TO ROLLOVER, TRANSFER,
OR CONVERT ALL OR PART OF A NON-ROTH IRA POLICY TO A ROTH IRA. WHETHER AN OWNER
SHOULD DO SO WILL DEPEND ON THE IRA POLICY OWNER'S PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING, BUT NOT LIMITED TO, SUCH FACTORS AS WHETHER THE OWNER
IS QUALIFIED TO MAKE SUCH A ROLLOVER, TRANSFER, OR CONVERSION, HIS OR HER
FINANCIAL SITUATION, AGE, CURRENT AND FUTURE INCOME NEEDS, YEARS TO RETIREMENT,
CURRENT AND FUTURE TAX RATES, AND ABILITY AND DESIRE TO PAY CURRENT INCOME
TAXES WITH RESPECT TO AMOUNTS ROLLED OVER, TRANSFERRED, OR CONVERTED, AND
WHETHER SUCH TAXES MIGHT NEED TO BE PAID WITH WITHDRAWALS FROM THE OWNER'S ROTH
IRA (SEE DISCUSSION BELOW OF "NONQUALIFIED DISTRIBUTIONS" AND "PENDING
LEGISLATION"). PERSONS CONSIDERING A ROLLOVER, TRANSFER, OR CONVERSION SHOULD
CONSULT A QUALIFIED TAX ADVISOR.
Qualified Distributions. Any "qualified distribution" from a Roth IRA is
excludible from gross income. A "qualified distribution" is a payment or
distribution which satisfies two requirements. First, the payment or
distribution must be (a) made after the Owner attains age 59 1/2, (b) made
after the Owner's death, (c) attributable to the Owner being disabled, or (d) a
qualified first-time homebuyer distribution within the meaning of section
72(t)(2)(F) of the Code. Second, the payment or distribution must be made in a
taxable year that is at least five years after (a) the first taxable year for
which a contribution was made to any Roth IRA established for the Owner, or (b)
in the case of a payment or distribution properly allocable to a qualified
rollover contribution from a non-Roth IRA Policy (or income allocable thereto),
the taxable year in which the rollover contribution was made.
Nonqualified Distributions. A distribution from a Roth IRA which is not a
qualified distribution is generally taxed in the same manner as a distribution
from a non-Roth IRA Policy. However, such a distribution will be treated as
made first from contributions to the Roth IRA to the extent that such
distribution, when added to all previous distributions from the Roth IRA, does
not exceed the aggregate amount of contributions to the Roth IRA. Generally,
all Roth IRAs are aggregated to determine the tax treatment of distributions.
Mandatory Distributions. Distributions of minimum amounts from a Roth IRA
need not commence at age 70 1/2. However, if the Owner dies before the entire
interest in a Roth IRA is distributed, any remaining interest in the Policy
must be distributed by December 31 of the calendar year containing the fifth
anniversary of the Owner's death, subject to certain exceptions.
As described in "Federal Tax Matters," there is some uncertainty regarding
the proper characterization of the Policy's death benefit for purposes of the
tax rules governing IRA Policies (which include Roth IRAs). Additionally, the
foregoing discusses the federal income tax consequences surrounding Roth IRAs
and does not address any state income tax consequences that may apply. Persons
intending to use the Policy in connection with a Roth IRA should seek competent
advice regarding these issues.
Pending Legislation. Pending legislation may modify these rules
retroactively to January 1, 1998
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Simplified Employee Pension Plans
An employer may use a Policy to establish for an employee an individual
retirement annuity plan known as a "simplified employee pension plan" (or
"SEP"), if certain requirements set forth in the tax law are satisfied. Premium
Payments may be made into a Policy used in a SEP generally in accordance with
the rules applicable to individual retirement annuities, though with expanded
contribution limits. Such payments are deductible by the employer and are not
includible in the income of the employee. The taxation of distributed amounts
generally follows the rules applicable to individual retirement annuities. As
discussed above (see "IRA Policies"), there is some uncertainty regarding the
proper characterization of the Policy's Death Benefit provisions for purposes
of certain tax rules governing IRAs (which would include SEP IRAs). Employers
intending to use the Policy in connection with a SEP should seek competent tax
advice.
SIMPLE IRAs
Section 408(p) of the Code permits certain small employers to establish
"SIMPLE retirement accounts," including SIMPLE IRAs, for their employees. Under
SIMPLE IRAs, certain deductible contributions are made by both employees and
employers. SIMPLE IRAs are subject to various requirements, including limits on
the amounts that may be contributed, the persons who may be eligible, and the
time when distributions may commence. As discussed above (see "IRA Policies"),
there is some uncertainty regarding the proper characterization of the Policy's
Death Benefit provisions for purposes of certain tax rules governing IRAs
(which would include SIMPLE IRAs). Employers intending to use the Policy in
connection with a SIMPLE retirement account should seek competent tax advice.
Section 403(b) Annuities
Premium Payments. Premiums paid for a Policy on behalf of an employee by a
public educational institution or certain other tax-exempt employers are not
included in the employee's income if the Policy meets certain requirements set
forth in the tax law. There are a number of limitations on contributions to a
"Section 403(b) Policy". For example, Premium Payments made as elective
deferrals through a salary reduction agreement with an employee generally are
limited to $9,500 per year (or, if greater, $7,000 per year as adjusted by the
Service for cost of living increases). (Note that contributions to certain
other qualified retirement plans, such as Section 401(k) plans or to SEP plans,
by the Owner may reduce these limits on elective deferrals.) Other limitations
may be more restrictive.
In applying these and other rules applicable to a Section 403(b) Policy,
that Policy and all similar contracts purchased by the same employer for the
same employee are treated as one contract.
Tax Deferral During Accumulation Period. Until distributions are made from
a Section 403(b) Policy, increases in the Account Value are not taxed.
Purchasers should consider that the Policy provides a Death Benefit that
in certain circumstances may exceed the greater of the Premium Payments and the
Account Value. It is possible that such Death Benefit could be characterized as
an incidental death benefit. If the Death Benefit were so characterized, this
could result in currently taxable income to purchasers. In addition, there are
limitations on the amount of incidental death benefits that may be provided
under a Section 403(b) Policy. Even if the Death Benefit under the Policy were
characterized as an incidental death benefit, it is unlikely to violate those
limits unless the purchaser also purchases a life insurance contract as part of
his or her Section 403(b) Policy.
Taxation of Distributions and Rollovers. If no portion of the premiums
paid into a Section 403(b) Policy were includible in the employee's income, all
amounts distributed from the Policy are included in the recipient's income when
distributed. However, if Premium Payments were made to a Section 403(b) Policy
which were includible in the employee's income, a portion of each distribution
from the Policy typically is included in income when it is distributed. In such
a case, any amount distributed as an annuity payment or in a lump sum upon
death or a full surrender is taxed as described above in connection with such a
distribution from a Non-Qualified Policy, treating as the investment in the
contract the sum of the Premium Payments made into the Policy which were not
excluded from income as of the time the distribution commences or is made (less
any amounts previously distributed that were excluded from income). Also in
such a case, any amount distributed upon a partial surrender is partially
includible in income. The includible amount is the excess of the distribution
over the exclusion amount, which in turn equals the distribution multiplied by
the ratio of the investment in the contract to the Account Value.
In any event, subject to the direct rollover and mandatory withholding
requirements (discussed below), amounts may be rolled over from a Section
403(b) Policy (or similarly qualifying contract) to another Section 403(b)
Policy (or similarly qualifying contract) or to an individual retirement
account or individual retirement annuity without incurring tax if certain
conditions are met. Only certain types of distributions may be rolled over.
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A Section 403(b) Policy generally is required to prohibit distributions of
amounts attributable to elective deferrals and earnings thereon (made under a
salary reduction agreement) prior to age 59 1/2, separation from service, death
or disability. Distributions of elective deferrals (but not any income earned
thereon) may nonetheless be permitted in the case of hardship.
Penalty Taxes. Subject to certain exceptions, a penalty tax is also
imposed on distributions from a Section 403(b) Policy equal to 10 percent of
the amount of the distribution includible in income. (Amounts rolled over from
a Section 403(b) Policy generally are excludable from income, although various
withholding requirements may nonetheless apply to such amounts, as discussed
below). The exceptions provide, however, that this penalty tax does not apply
to distributions made (1) on or after age 59 1/2, (2) on or after death or
because of disability (as defined in the tax law), (3) as part of a series of
substantially equal periodic payments beginning after the employee separates
from service and made over the life (or life expectancy) of the employee or the
joint lives (or joint life expectancies) of the employee and his or her
designated beneficiary (as defined in the tax law), or (4) after separation
from service after attainment of age 55.
In addition to the foregoing, failure to comply with a minimum
distribution requirement will result in the imposition of a penalty tax of 50
percent of the amount by which a minimum required distribution exceeds the
actual distribution from a Section 403(b) Policy. Under this requirement,
distributions of minimum amounts specified by the tax law must commence by
April 1 of the calendar year following the calendar year in which the employee
attains age 70 1/2, or when he retires, whichever is later.
Deferred Compensation Plans of State and Local Government and Tax-Exempt
Organizations
Section 457 of the Code permits employees of state and local governments
and tax-exempt organization to defer a portion of their compensation without
paying current taxes. The employees must be participants in an eligible
deferred compensation plan. Generally, a Policy purchased by a state or local
government or a tax-exempt organization will not be treated as an annuity
contract for federal income tax purposes. Those who intend to use the Policies
in connection with such plans should seek competent tax advice.
Other Qualified Retirement Plans
Premium Payments. Premium Payments made by an employer for a Policy used
in connection with a pension, profit-sharing, or annuity plan qualified under
section 401 or 403(a) of the Code are deductible by the employer within certain
limits. Such payments are also excludable from the income of the employee
within certain limits.
Tax Deferral and Taxation of Distributions. The deferral of taxation on
Account Value increases and the tax treatment of distributed amounts (including
the penalty tax) described above in the case of IRA Policies and Section 403(b)
Policies generally applies with respect to amounts held under or distributed
from Policies used in connection with other qualified retirement plans. For
Policies and amounts distributed therefrom to be eligible for such treatment,
certain requirements specified in the tax law must be satisfied.
The Policy provides a Death Benefit that in certain circumstances may
exceed the greater of the Premium Payments and the Account Value. It is
possible that such Death Benefit could be characterized as an incidental death
benefit. There are limitations on the amount of incidental death benefits that
may be provided under pension and profit sharing plans. In addition, the
provision of such benefits may result in currently taxable income.
Legal and Tax Advice for Qualified Plans
The requirements of the tax law applicable to qualified retirement plans,
and the tax treatment of amounts held and distributed under such plans, are
quite complex. Accordingly, a prospective purchaser of a Policy to be used in
connection with any such plan should seek competent legal and tax advice
regarding the suitability of the Policy for the situation involved, the
applicable requirements, and the treatment of the rights and benefits under a
Policy so used.
Direct Rollover and Mandatory Withholding Requirements
If a Policy is used in connection with a pension, profit-sharing, or
annuity plan qualified under sections 401(a) or 403(a) of the Code, or is a
Section 403(b) Policy, any "eligible rollover distribution" from the Policy
will be subject to the new direct rollover and mandatory withholding
requirements. An eligible rollover distribution generally is any taxable
distribution from a qualified pension plan under section 401(a) of the Code,
qualified annuity plan under section 403(a) of the Code, or section 403(b)
annuity or custodial account, excluding certain amounts (such as minimum
distributions required under section 401(a)(9) of the Code and distributions
which are part of a "series of substantially equal periodic payments" made for
the life or a specified period of 10 years or more). Under these requirements,
withholding at a rate of 20 percent will be imposed on any eligible rollover
distribution received from the Policy. Unlike withholding on certain other
amounts distributed from the Policy, discussed below, the recipient cannot elect
out of withholding with respect to an eligible rollover distribution. However,
this 20 percent withholding will not apply if, instead of receiving the eligible
rollover distribution, the plan participant elects to have it directly
transferred to certain qualified retirement plans. Prior to receiving an
eligible rollover distribution, the plan participant will receive notice (from
the plan administrator or GE Capital Life) explaining generally the direct
rollover and mandatory withholding requirements and how to avoid the 20 percent
withholding by electing a direct transfer.
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Federal Income Tax Withholding
Amounts distributed from a Policy, to the extent includible in income
under the federal tax laws, are subject to federal income tax withholding. GE
Capital Life will withhold and remit a portion of such amounts to the U.S.
Government unless properly notified by the Owner or other payee, at or before
the time of the distribution, that he or she chooses not to have any amounts
withheld. In some instances, however, GE Capital Life may be required to
withhold amounts. (See the discussion above regarding withholding requirements
applicable to distributions from various qualified retirement plans including
Section 403(b) policies.)
GENERAL INFORMATION
The Owner
The Owner or Joint Owners are designated in the Policy. (Joint Owners own
the Policy equally with the right of survivorship.) The Owner or Joint Owners
may exercise all of the rights and privileges under the Policy, subject to the
rights of any beneficiary named irrevocably, and any assignee under an
assignment filed with GE Capital Life. Disposition of the Policy is subject to
the Policy's death provisions. (See "Death Provisions"). If the Owner dies
before the Annuitant, the Designated Beneficiary will become the sole owner of
the Policy following such a death, subject to the distribution rules in the
Policy's death provisions. If the Owner does not name a Joint Owner or a
primary beneficiary or contingent beneficiary, or if a Joint Owner or primary
beneficiary or contingent beneficiary is not living (or in existence for
purposes of non-natural designations) at the Owner's death, ownership will pass
to the Owner's estate. The Designated Beneficiary, for purposes of the required
distribution rules of Section 72(s) of the Code, will receive the required
distribution if the Owner dies prior to the Maturity Date. The required
distribution is more fully described in Death Provisions.
The Annuitant
The Policy names the Owner or someone else as the Annuitant. A contingent
Annuitant also may be named. If no contingent Annuitant has been named, the
Owner shall be treated as the contingent Annuitant at the death of the
Annuitant. GE Capital Life reserves the right to restrict the election of the
contingent Annuitant to conform to its administrative procedures and within the
restrictions of federal and state law. At the death of the Annuitant prior to
the Maturity Date, the contingent Annuitant, if any, may become the Annuitant
in certain circumstances. (See "Death Provisions").
The Beneficiary
One or more primary and contingent beneficiary(ies) may be designated by
the Owner in an application or in a written request. If changed, the primary
beneficiary or contingent beneficiary is as shown in the latest change filed
with GE Capital Life.
Changes by the Owner
Prior to the Maturity Date and during the Annuitant's life, the Owner or
Joint Owner may be changed if this right is reserved. Such changes may give
rise to taxable income and a 10% penalty tax. (See Taxation of Partial and Full
Surrenders.) The primary beneficiary, contingent beneficiary and contingent
Annuitant may also be changed if this right is reserved.
To make a change, a written request must be sent to GE Capital Life at its
Variable Annuity Service Center. The request and the change must be in a form
satisfactory to GE Capital Life and must actually be received by GE Capital
Life. The change will take effect as of the date the request is signed by the
Owner. The change will be subject to any payment made before the change is
recorded by GE Capital Life.
Evidence of Death, Age, Gender or Survival
GE Capital Life will require proof of death before it acts on Policy
provisions relating to the death of the Owner or other person(s). GE Capital
Life may also require proof of the age, gender or survival of any person or
persons before acting on any applicable Policy provision.
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Payment under the Policies
GE Capital Life will usually pay any amounts payable as a result of full
or partial surrender within seven days after it receives a written request at
its Variable Annuity Service Center in a form satisfactory to it. GE Capital
Life will usually pay any Death Benefit within seven days after it receives Due
Proof of Death. Amounts payable as a result of full or partial surrender, death
of the Annuitant or the Maturity Date may be postponed whenever: (i) the New
York Stock Exchange is closed other than customary weekend and holiday
closings, or trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission; or (ii) the Commission by order
permits postponement for the protection of Owners; or (iii) an emergency
exists, as determined by the Securities and Exchange Commission, as the result
of which disposal of securities is not reasonably practicable or it is not
reasonably practicable to determine the value of the net assets of the Separate
Account.
Payments under a Policy which are derived from any amount paid to GE
Capital Life by check or draft may be postponed until such reasonable time as
GE Capital Life is satisfied that the check or draft has cleared the bank upon
which it is drawn.
If, at the time the Owner makes a full or partial surrender request, he or
she has not provided GE Capital Life with a written election not to have
federal income taxes withheld, GE Capital Life must by law withhold such taxes
and remit that amount to the federal government. Moreover, the Code provides
that a 10% penalty will be imposed on certain early surrenders. (See "Federal
Tax Matters").
Any Death Benefit proceeds that are paid in one lump sum will include
interest from the date of receipt of Due Proof of Death to the date of payment.
Interest will be paid at a rate set by GE Capital Life, or by law if greater.
The minimum interest rate which will be paid is 2.5%. Interest will not be paid
beyond one year or any longer time set by applicable law.
Distribution of the Policies
The Policies will be sold by individuals who, in addition to being
licensed to sell variable annuity policies for GE Capital Life, are also
registered representatives of Capital Brokerage Corporation, the principal
underwriter of the Policies, or of broker-dealers who have entered into written
sales agreements with the principal underwriter. Capital Brokerage Corporation,
an affiliate of GE Capital Life, is a Virginia corporation located at 6610 W.
Broad St., Richmond, Virginia 23230, and 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.
Writing agents of GE Capital Life will receive commissions based on a
commission schedule and rules. Commissions depend on the premiums paid. The
agent will receive a commission of 3% of the initial premium paid and any
Additional Premium Payments.
Agents may also be eligible to receive certain bonuses and allowances, as
well as retirement plan credits, based on commissions earned. Field management
of GE Capital Life receives compensation which may be based in part on the
level of agent commissions in their management units. Broker-dealers and their
registered agents will receive first-year and subsequent year commissions
equivalent to the total commissions and benefits received by the field
management and writing agents of GE Capital Life.
Voting Rights and Reports
To the extent required by law, GE Capital Life will vote the Funds' shares
held in the Separate Account at regular and special shareholder meetings of the
Funds, in accordance with instructions received from persons having voting
interests in the Separate Account. If, however, the 1940 Act or any regulation
thereunder should be amended, and as a result, GE Capital Life determines that
it is permitted to vote Fund shares in its own right, it may elect to do so.
Before Income Payments begin, the Owner exercises the voting rights under
the Policy. After Income Payments begin, the person receiving the Income
Payments has the voting interests. Before Income Payments begin, the number of
votes which each Owner has the right to instruct will be determined for a
portfolio by dividing a Policy's Account Value in the Investment Subdivision
investing in that portfolio by the net asset value per share of the portfolio.
Fractional shares will be counted. After Income Payments begin, the number of
votes after the first Income Payment is received will be determined by dividing
the reserve for such Policy allocated to the Investment Subdivision by the net
asset value per share of the corresponding portfolio. After Income Payments
begin, the reserves attributable to a Policy decrease as the reserves allocated
to the Investment Subdivision decrease. Fractional shares will be counted.
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The number of votes which the Owner has the right to instruct will be
determined as of the date coincident with the date established by a particular
Fund for determining shareholders eligible to vote at the meeting of that Fund.
Voting instructions will be solicited by written communications prior to such
meeting in accordance with procedures established by that Fund.
GE Capital Life will vote Fund shares held in the Separate Account as to
which no timely instructions are received, and Fund shares held in the Separate
Account that it owns as a consequence of accrued charges under the Policies and
other variable annuity policies supported by the Separate Account, in
proportion to the voting instructions which are received with respect to all
policies funded through the Separate Account. Each person having a voting
interest will receive proxy materials, reports and other materials relating to
the appropriate portfolio.
Year 2000 Compliance
Like other financial services providers, GE Capital Life utilizes computer
systems that may be affected by Year 2000 date data processing issues and it
also relies on services providers, including banks, custodians, administrators,
and investment managers that also may be affected. GE Capital Life is engaged
in a process to evaluate and develop plans to have its computer systems and
critical applications ready to process Year 2000 date data. It is also
confirming that its service providers are also so engaged. The resources that
are being devoted to this effort are substantial. Remedial actions include
inventorying the company's computer systems, applications and interfaces,
assessing the impact of the Year 2000 date data on them, developing a range of
solutions specific to particular situations and implementing appropriate
solutions. Some systems, applications and interfaces will be replaced or
upgraded to new software or new releases of existing software which are Year
2000 ready. Others will be modified as necessary to become ready. It is
difficult to predict with precision whether the amount of resources ultimately
devoted, or the outcome of these efforts, will have any negative impact on GE
Capital Life and Separate Account II. However, as of the date of this
prospectus, it is not anticipated that Owners will experience negative effects
on their investment, or on the services provided in connection therewith, as a
result of Year 2000 readiness implementation. GE Capital Life's target dates
for completion of these activities depend upon the particular situation. The
Company's goal is to be substantially Year 2000 ready for critical applications
by mid-1999, but there can be no assurance that GE Capital Life will be
successful in meeting its goal, or that interaction with other service
providers will not impair GE Capital Life's services at that time.
Legal Proceedings
GE Capital Life, like all other companies, is involved in lawsuits,
including class action lawsuits. In some class action and other lawsuits
involving insurance companies, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on it or the Separate Account.
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
-----
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK ........................ 45
THE POLICIES ......................................................... 45
Transfer of Annuity Units After Income Payments Begin .............. 45
TERMINATION OF PARTICIPATION AGREEMENTS .............................. 45
CALCULATION OF PERFORMANCE DATA ...................................... 46
Money Market Investment Subdivisions ............................... 46
Other Investment Subdivisions ...................................... 47
Other Performance Data ............................................. 47
FEDERAL TAX MATTERS .................................................. 48
Taxation of GE Capital Life ........................................ 48
IRS Required Distributions ......................................... 48
GENERAL PROVISIONS ................................................... 48
Using the Policies as Collateral ................................... 48
Non-Participating .................................................. 49
Misstatement of Age or Gender ...................................... 49
Incontestability ................................................... 49
Statement of Values ................................................ 49
Written Notice ..................................................... 49
DISTRIBUTION OF THE POLICIES ......................................... 49
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS ........ 49
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS ................ 49
STATE REGULATION OF GE CAPITAL LIFE .................................. 50
LEGAL MATTERS ........................................................ 50
EXPERTS .............................................................. 50
FINANCIAL STATEMENTS ................................................. 50
41
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(This Page Intentionally Left Blank)
<PAGE>
PART B
GE CAPITAL LIFE SEPARATE ACCOUNT II
STATEMENT OF ADDITIONAL INFORMATION
for the
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY POLICY
offered by
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
125 Park Avenue, 6th Floor
New York, New York 10017-5529
(212) 672-4400
Variable Annuity Service Center
6610 West Broad Street
Richmond, VA 23230
(800) 313-5282
This Statement of Additional Information expands upon subjects discussed
in the current Prospectus for the flexible premium deferred variable annuity
policy ("Policy") offered by GE Capital Life Assurance Company of New York ("GE
Capital Life" or the "Company"). You may obtain a copy of the Prospectus dated
, 1998 by writing or calling us at our Variable Annuity Service Center at
the address or telephone number listed above. Terms used in the current
Prospectus for the Policy are incorporated in this Statement of Additional
Information.
THIS STATEMENT OF ADDITIONAL INFORMATION IS
NOT A PROSPECTUS AND SHOULD BE READ ONLY
IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
June , 1998
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STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Page
-----
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK ......................... 44
THE POLICIES .......................................................... 44
Transfer of Annuity Units After Income Payments Begin ................ 44
TERMINATION OF PARTICIPATION AGREEMENTS ............................... 44
CALCULATION OF PERFORMANCE DATA ....................................... 46
Money Market Investment Subdivisions ................................. 46
Other Investment Subdivisions ........................................ 47
Other Performance Data ............................................... 47
FEDERAL TAX MATTERS ................................................... 48
Taxation of GE Capital Life .......................................... 48
IRS Required Distributions ........................................... 48
GENERAL PROVISIONS .................................................... 48
Using the Policies as Collateral ..................................... 48
Non-Participating .................................................... 49
Misstatement of Age or Gender ........................................ 49
Incontestability ..................................................... 49
Statement of Values .................................................. 49
Written Notice ....................................................... 49
DISTRIBUTION OF THE POLICIES .......................................... 49
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS ......... 49
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS ................. 49
STATE REGULATION OF GE CAPITAL LIFE ................................... 50
LEGAL MATTERS ......................................................... 50
EXPERTS ............................................................... 50
FINANCIAL STATEMENTS .................................................. 50
44
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GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
GE Capital Life Assurance Company of New York (known as First GNA Life
Insurance Company of New York until February 1, 1996) is a stock life insurance
company that was incorporated in New York on February 23, 1988. GE Capital Life
is ultimately a subsidiary of General Electric Capital Corporation ("GE
Capital"), a New York corporation that is a diversified financial services
company whose subsidiaries consist of specialty insurance, equipment
management, and commercial and consumer financing businesses. GE Capital's
ultimate parent, General Electric Company, founded more than one hundred years
ago by Thomas Edison, is the world's largest manufacturer of jet engines,
engineering plastics, medical diagnostic equipment and large electric power
generation equipment.
GE Capital Life is licensed solely in New York and specializes in writing
individual fixed-rate deferred annuities, fixed payout immediate annuities and
variable deferred annuities. GE Capital Life's principal offices are located at
124 Park Avenue, 6th Floor, New York, NY 10017-5529
THE POLICIES
Transfer of Annuity Units After Income Payments Begin
After Income Payments begin, upon the payee's written request Annuity
Units may be transferred once per calendar year from the Investment Subdivision
in which they are currently held. GE Capital Life reserves, however, the right
to refuse to execute any transfer if any of the Investment Subdivisions that
would be affected by the transfer are unable to purchase or redeem shares of
the mutual funds in which the Investment Subdivisions invest. The amount of the
increase in the number of Annuity Units for the Investment Subdivision to which
the transfer is made is (a) times (b), divided by (c) where: (a) is the number
of Annuity Units for the Investment Subdivision in which the Annuity Units are
currently held; (b) is the Annuity Unit Value for the Investment Subdivision in
which the Annuity Units are currently held; and (c) is the Annuity Unit Value
for the Investment Subdivision to which the transfer is made.
If the number of Annuity Units remaining in an Investment Subdivision
after the transfer is less than 1, GE Capital Life will transfer the amount
remaining in addition to the amount requested. GE Capital Life will not
transfer into any Investment Subdivision unless the number of Annuity Units of
that Investment Subdivision after the transfer is at least 1. The amount of the
Income Payment as of the date of the transfer will not be affected by the
transfer.
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their shares
to the Separate Account contain varying provisions regarding termination. The
following summarizes those provisions:
Janus Aspen Series. This agreement may be terminated by the parties on six
months' advance written notice.
Variable Insurance Products Fund, Variable Insurance Products Fund II and
Variable Insurance Products Fund III. ("the Fund") These agreements provide for
termination (1) on one year's advance notice by either party, (2) at GE Capital
Life'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 GE Capital
Life'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 GE Capital Life has suffered
material adverse changes in its business or financial condition or is the
subject of material adverse publicity, (7) at the option of GE Capital Life 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 GE Capital Life decides to make
another mutual fund available as a funding vehicle for its Policies.
Oppenheimer Variable Account Funds. This agreement may be terminated by
the parties on six months' advance written notice.
Federated Insurance Series. This agreement may be terminated by any of the
parties on 180 days written notice to the other parties.
Alger American Fund. This agreement may be terminated at the option of any
party upon six months' written notice to the other parties, unless a shorter
time is agreed to by the parties.
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PBHG Insurance Series Fund, Inc. This agreement may be terminated at the
option of any party upon six months' written notice to the other parties,
unless a shorter time is agreed to by the parties.
Goldman Sachs Variable Insurance Trust. This agreement may be terminated
at the option of any party upon six months' written notice to the other
parties, unless a shorter time is agreed to by the parties.
GE Investments Funds, Inc. has entered into a Stock Sale Agreement with GE
Capital Life pursuant to which the Fund sells its shares to Separate Account
II.
CALCULATION OF PERFORMANCE DATA
From time to time, GE Capital Life may disclose total return, yield, and
other performance data for the Investment Subdivisions pertaining to the
Policies. Such performance data will be computed, or accompanied by performance
data computed, in accordance with the standards defined by the Securities and
Exchange Commission.
The calculations of yield, total return, and other performance data do not
reflect the effect of any premium tax.
Money Market Investment Subdivisions
From time to time, advertisements and sales literature may quote the yield
of the "money market" Investment Subdivision for a seven-day period, in a
manner which does not take into consideration any realized or unrealized gains
or losses on shares of the corresponding money market investment portfolio or
on its portfolio securities. This current annualized yield is computed by
determining the net change (exclusive of unrealized gains and losses on the
sale of securities and unrealized appreciation and depreciation and income
other than investment income) at the end of the seven-day period in the value
of a hypothetical account under a Policy having a balance of one unit in that
"money market" Investment Subdivision at the beginning of the period, dividing
such net change in Account Value by the value of the account at the beginning
of the period to determine the base period return, and annualizing the result
on a 365-day basis. The net change in Account Value reflects: (1) net income
from the investment portfolio attributable to the hypothetical account; and (2)
charges and deductions imposed under the Policy which are attributable to the
hypothetical account. The charges and deductions include the per unit charges
for the annual Policy Maintenance Charge, Administrative Expense Charge, and
the Mortality and Expense Risk Charge. For purposes of calculating current
yields for a Policy, an average per unit annual Policy Maintenance Charge is
used. Current Yield will be calculated according to the following formula:
Current Yield = ((NCP-ES)/UV) X (365/7)
where:
NCP= the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income) for
the seven-day period attributable to a hypothetical account having a
balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value on the first day of the seven-day period.
The effective yield of a "money market" Investment Subdivision determined
on a compounded basis for the same seven-day period may also be quoted. The
effective yield is calculated by compounding the base period return according
to the following formula:
Effective Yield = (1+((NCP-ES)/UV))365/7-1
where:
NCP= the net change in the value of the investment portfolio (exclusive of
realized gains or losses on the sale of securities and unrealized
appreciation and depreciation and income other than investment income) for
the seven-day period attributable to a hypothetical account having a
balance of one Investment Subdivision unit.
ES = per unit expenses of the hypothetical account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The yield on amounts held in a "money market" Investment Subdivision
normally will fluctuate on a daily basis. Therefore, the disclosed yield for any
given past period is not an indication or representation of future yields or
rates of return. A "money market" Investment Subdivision's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Investment Subdivision's corresponding money market
investment portfolio, the types and quality of portfolio securities held by that
investment portfolio, and that investment portfolio's operating expenses.
Because of the charges and deductions imposed under the Policy, the yield for a
"money market" Investment Subdivision will be lower than the yield for its
corresponding "money market" investment portfolio.
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<PAGE>
Yield calculations do not take into account the Surrender Charge under the
Policy, a maximum of 6% of each Premium Payment made during the six years prior
to a full or partial surrender.
Other Investment Subdivisions
Total Return. Sales literature or advertisements may quote total return,
including average annual total return for one or more of the Investment
Subdivisions for various periods of time including 1 year, 5 years and 10
years, or from inception of the Investment Subdivisions if any of those periods
are not available.
Average annual total return for a period represents the average annual
compounded rate of return that would equate an initial investment of $1,000
under a Policy to the redemption value of that investment as of the last day of
the period. The ending date for each period for which total return quotations
are provided will be for the most recent practicable, considering the type and
media of the communication, and will be stated in the communication.
Average annual total return will be calculated using Investment
Subdivision unit values and deductions for the annual Policy Maintenance
Charge, and the Surrender Charge as described below:
1. GE Capital Life calculates unit value for each Valuation Period based on
the performance of the Investment Subdivision's underlying investment
portfolio (after deductions for Fund expenses, the Administrative Expense
Charge, and the Mortality and Expense Risk Charge).
2. The Policy Maintenance Charge is $25 per year, deducted at the beginning
of each Policy Year after the first. For purposes of calculating average
annual total return, an average Policy Maintenance Charge (currently 0.1%
of Account Value attributable to the hypothetical investment) is used.
3. The Surrender Charge will be determined by assuming a surrender of the
Policy at the end of the period. Average annual total return for periods
of six years or less will therefore reflect the deduction of a Surrender
Charge.
4. Total return does not consider Annual Death Benefit Charges.
5. Total return will then be calculated according to the following formula:
TR = (ERV/P)1/N-1
where:
TR = The average annual total return for the period.
ERV = The ending redeemable value (reflecting deductions as described
above) of the hypothetical investment at the end of the period.
P = A hypothetical single investment of $1,000.
N = The duration of the period (in years).
Other Performance Data
GE Capital Life 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 $1000.
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Sales literature may also quote cumulative and/or average annual total
return that does not reflect the Surrender Charge. This is calculated in
exactly the same way as average annual total return, except that the ending
redeemable value of the hypothetical investment is replaced with an ending
value for the period that does not take into account any charges on withdrawn
amounts.
In addition, GE Capital Life may present historic performance data for the
Investment Subdivisions since their inception reduced by some or all of the
fees and charges under the Policy. Such adjusted historic performance includes
data that precedes the inception dates of the Investment Subdivisions. This
data is designed to show the performance that would have resulted if the Policy
had been in existence during that time.
Other non-standard quotations of Investment Subdivision performance may
also be used in sales literature. Such quotations will be accompanied by a
description of how they were calculated.
FEDERAL TAX MATTERS
Taxation of GE Capital Life
GE Capital Life does not expect to incur any federal income tax liability
attributable to investment income or capital gains retained as part of the
reserves under the Policies. (See "Federal Tax Matters" in the Prospectus.)
Based upon these expectations, no charge is being made currently to the
Separate Account for federal income taxes which may be attributable to the
Separate Account. GE Capital Life will periodically review the question of a
charge to the Separate Account for federal income taxes related to the Separate
Account. Such a charge may be made in future years if GE Capital Life believes
that it may incur federal income taxes. This might become necessary if the tax
treatment of GE Capital Life is ultimately determined to be other than what GE
Capital Life currently believes it to be, if there are changes made in the
federal income tax treatment of annuities at the corporate level, or if there
is a change in GE Capital Life's tax status. In the event that GE Capital Life
should incur federal income taxes attributable to investment income or capital
gains retained as part of the reserves under the Policies, the Account Value
would be correspondingly adjusted by any provision or charge for such taxes.
If there is a material change in applicable state or local tax laws
causing an increase in taxes other than premium taxes (for which GE Capital
Life currently may impose a charge), charges for such taxes attributable to the
Separate Account may be made.
IRS Required Distributions
In order to be treated as an annuity contract for federal income tax
purposes, section 72(s) of the Code requires any Non-Qualified Policy to
provide that (a) if any Owner dies on or after the Maturity Date but prior to
the time the entire interest in the Policy has been distributed, the remaining
portion of such interest will be distributed at least as rapidly as under the
method of distribution being used as of the date of that Owner's death; and (b)
if any Owner dies prior to the Maturity Date, the entire interest in the Policy
will be distributed (1) within five years after the date of that Owner's death,
or (2) as Income Payments which will begin within one year of that Owner's
death and which will be made over the life of the Owner's "designated
beneficiary" or over a period not extending beyond the life expectancy of that
beneficiary. The "designated beneficiary" generally is the person who will be
treated as the sole owner of the Policy following the death of the Owner, Joint
Owner or, in certain circumstances, the Annuitant. However, if the "designated
beneficiary" is the surviving spouse of the decedent, these distribution rules
will not apply until the surviving spouse's death (and this spousal exception
will not again be available). If any Owner is not an individual, the death of
the Annuitant will be treated as the death of an Owner for purposes of these
rules.
The Non-Qualified Policies contain provisions which are intended to comply
with the requirements of section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. GE Capital Life intends
to review such provisions and modify them if necessary to assure that they
comply with the requirements of Code section 72(s) when clarified by regulation
or otherwise.
Other rules may apply to Qualified Policies.
GENERAL PROVISIONS
Using the Policies as Collateral
A Non-Qualified Policy can be assigned as collateral security. GE Capital
Life must be notified in writing if a Policy is assigned. Any payment made
before the assignment is recorded at GE Capital Life's Home Office will not be
affected.
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GE Capital Life is not responsible for the validity of an assignment. An
Owner's rights and the rights of a Beneficiary may be affected by an
assignment.
A Qualified Policy may not be sold, assigned, transferred, discounted,
pledged or otherwise transferred except under such conditions as may be allowed
under applicable law.
Non-Participating
The Policy is non-participating. No dividends are payable.
Misstatement of Age or Gender
If an Annuitant's age or gender was misstated on the Policy data page, any
Policy benefits or proceeds, or availability thereof, will be determined using
the correct age and gender. If any overpayment has been made, an adjustment
including interest on the amount of the overpayment will be made to the next
payment(s). Any underpayments will be credited with interest on the amount of
the underpayment and will be paid in full with the next payment. The interest
rate used will be 3% per annum, unless otherwise required by law.
Incontestability
GE Capital Life will not contest the Policy.
Statement of Values
At least once each year, GE Capital Life will send the Owner a statement
of values within 30 days after each report date. The statement will show
Account Value, Premium Payments and charges made during the report period.
Written Notice
Any written notice should be sent to GE Capital Life at its Home Office at
125 Park Avenue, 6th Floor, New York, NY 10017-5529 or to its Variable Annuity
Service Center at 6610 West Broad Street Richmond, VA 23230.
The Policy number and the Annuitant's full name must be included.
GE Capital Life will send all notices to the Owner at the last known
address on file with GE Capital Life.
DISTRIBUTION OF THE POLICIES
Capital Brokerage Corporation, the principal underwriter of the Policies,
is registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is member of the National
Association of Securities Dealers, Inc.
The Policies are offered to the public through brokers licensed under the
federal securities laws and state insurance laws that have entered into
agreements with Capital Brokerage Corporation. The offering is continuous and
Capital Brokerage Corporation does not anticipate discontinuing the offering of
the Policies. However, GE Capital Life does reserve the right to discontinue
the offering of the Policies.
LEGAL DEVELOPMENTS REGARDING EMPLOYMENT-RELATED BENEFIT PLANS
On July 6, 1983, the Supreme Court held in Arizona Governing Committee for
Tax Deferred Annuity v. Norris, 463 U.S. 1073 (1983), that optional annuity
benefits provided under an employee's deferred compensation plan could not,
under Title VII of the Civil Rights Act of 1964, vary between men and women on
the basis of sex. The Policy contains guaranteed annuity purchase rates for
certain optional payment plans that distinguish between men and women.
Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII generally,
on any employment-related insurance or benefit program for which a Policy may
be purchased.
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS
GE Capital Life reserves the right, subject to compliance with applicable
law, to make additions to, deletions from, or substitutions for the shares of
the Fund portfolios that are held by the Separate Account or that the Separate
Account may purchase. If the shares of a portfolio are no longer available for
investment or if in its judgment further investment in any portfolio should
become inappropriate in view of the purposes of the Separate Account, GE Capital
Life reserves the right to eliminate the shares of any of the portfolios of the
Funds and to substitute shares of another portfolio or of another open-end,
registered investment company. GE Capital Life will not substitute any shares
attributable to an Owner's Account Value in the Separate Account without notice
and prior approval of the Securities and Exchange Commission, to the extent
required by the 1940 Act or other applicable law. Nothing contained herein shall
prevent the Separate Account from purchasing other securities for other series
or classes of policies or from permitting a conversion between portfolios or
classes of policies on the basis of requests made by Owners.
49
<PAGE>
GE Capital Life also reserves the right to establish additional Investment
Subdivisions of the Separate Account, each of which would invest in a separate
portfolio of a Fund, or in shares of another investment company, with a
specified investment objective. New Investment Subdivisions may be established
when, in the sole discretion of GE Capital Life, marketing, tax or investment
conditions warrant, and any new Investment Subdivisions may be made available
to existing Owners on a basis to be determined by GE Capital Life. One or more
Investment Subdivisions may also be eliminated if, in the sole discretion of GE
Capital Life, marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, GE Capital Life may, by
appropriate endorsement, make such changes in these and other policies as may
be necessary or appropriate to reflect such substitution or change. If deemed
by GE Capital Life to be in the best interests of persons having voting rights
under the Policies, and, if permitted by law, GE Capital Life 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; or combine the Separate Account with other GE Capital Life separate
accounts. To the extent permitted by applicable law, GE Capital Life may also
transfer the assets of the Separate Account associated with the Policies to
another separate account. In addition, GE Capital Life may, when permitted by
law, restrict or eliminate any voting rights of Owners or other persons who
have voting rights as to the Separate Account.
STATE REGULATION OF GE CAPITAL LIFE
GE Capital Life, a stock life insurance company organized under the laws
of New York, is subject to regulation by the New York Insurance Department. An
annual statement is filed with the New York Superintendent of Insurance each
year covering the operations and reporting on the financial condition of GE
Capital Life as of December 31 of the preceding year. Periodically, the
Superintendent of Insurance examines the liabilities and reserves of GE Capital
Life and the Separate Account and certifies their adequacy, and a full
examination of GE Capital Life's operations is conducted by the New York
Insurance Department at least once every five years.
LEGAL MATTERS
Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided advice
on certain legal matters relating to federal securities laws applicable to the
issue and sale of the Policies described in this Prospectus. All matters of New
York law pertaining to the Policy, including the validity of the Policy and GE
Capital Life's right to issue the Policies under New York insurance law, have
been passed upon by Michael J. Furney, Assistant Vice President of GE Capital
Life.
EXPERTS
The financial statements of GE Capital Life Assurance Company of New York
as of December 31, 1997 and 1996, and for each of the years in the three-year
period ended December 31, 1997, have been included herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and in the registration statement, upon the
authority of said firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
No financial statements are presented for the Separate Account because the
Separate Account has not yet commenced operations.
The financial statements of GE Capital Life Assurance Company of New York
included herein should be distinguished from the financial statements of the
Separate Account (when presented) and should be considered only as bearing on
the ability of GE Capital Life to meet its obligations under the Policy.
Such financial statements of GE Capital Life Assurance Company of New York
should not be considered as bearing on the investment performance of the assets
held in the Separate Account.
50
<PAGE>
GE CAPITAL LIFE ASSURANCE
COMPANY OF NEW YORK
Financial Statements
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
51
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
GE Capital Life Assurance Company of New York:
We have audited the accompanying balance sheets of GE Capital Life
Assurance Company of New York as of December 31, 1997 and 1996, and the related
statements of income, shareholders' interest, and cash flows for each of the
years in the three-year period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GE Capital Life Assurance
Company of New York as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
January 23, 1998
52
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
December 31, 1997 and 1996
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
1997 1996
ASSETS -------------- ------------
<S> <C>
INVESTMENTS:
Fixed maturities available-for-sale, at fair value (amortized cost of $1,468.2 in 1997
and $1,395.0 in 1996) .............................................................. $ 1,490.2 1,389.9
Mortgage loans, (net of valuation allowance of $.5 in 1997 and $.2 in 1996) .......... 173.5 142.4
Policy loans ......................................................................... 1.4 1.3
Short-term investments ............................................................... 2.5 20.5
----------- -------
TOTAL INVESTMENTS ..................................................................... 1,667.6 1,554.1
----------- -------
Cash .................................................................................. 1.9 1.2
Accrued investment income ............................................................. 30.3 28.9
Deferred acquisition costs ............................................................ 42.7 32.0
Intangible assets ..................................................................... 56.9 74.1
Other assets .......................................................................... 8.1 18.7
----------- -------
TOTAL ASSETS .......................................................................... $ 1,807.5 1,709.0
=========== =======
LIABILITIES AND SHAREHOLDERS' INTEREST
LIABILITIES:
Future annuity and contract benefits ................................................. $ 1,446.4 1,365.1
Unearned premiums .................................................................... 10.5 6.8
Liability for policy and contract claims ............................................. 6.4 7.0
Other policyholder liabilities ....................................................... 34.3 14.6
Accounts payable and accrued expenses ................................................ 46.5 66.1
Deferred income tax liability ........................................................ 3.1 0.2
----------- -------
TOTAL LIABILITIES ..................................................................... 1,547.2 1,459.8
----------- -------
SHAREHOLDERS' INTEREST:
Common stock ($1,000 par value, 2,000 shares authorized, issued and outstanding) ..... 2.0 2.0
Additional paid-in capital ........................................................... 259.4 259.4
Net unrealized investment gains (losses) ............................................. 7.3 (1.3)
Accumulated deficit .................................................................. (8.4) (10.9)
----------- --------
TOTAL SHAREHOLDERS' INTEREST .......................................................... 260.3 249.2
----------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST .......................................... $ 1,807.5 1,709.0
=========== ========
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995
(Dollar amounts in millions)
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ---------
<S> <C>
REVENUES:
Net investment income ................................. $ 111.6 102.4 91.6
Net realized investment gains (losses) ................ 2.2 (0.4) (1.9)
Premiums .............................................. 46.9 57.2 7.4
Other income .......................................... 3.7 4.1 4.9
-------- ------ ------
TOTAL REVENUES ......................................... 164.4 163.3 102.0
BENEFITS AND EXPENSES:
Interest credited ..................................... 71.7 67.1 63.3
Benefits and other changes in policy reserves ......... 42.5 54.7 10.0
Commissions ........................................... 17.6 11.0 4.1
General expenses ...................................... 11.0 9.3 4.6
Amortization of intangibles, net ...................... 8.2 7.1 6.1
Increase in deferred acquisition costs, net ........... (15.6) (11.6) (4.0)
-------- ------ ------
TOTAL BENEFITS AND EXPENSES ............................ 135.4 137.6 84.1
-------- ------ ------
Income before income taxes ............................. 29.0 25.7 17.9
Provision for income taxes ............................. 11.5 9.8 8.4
-------- ------ ------
NET INCOME ............................................. $ 17.5 15.9 9.5
======== ====== ======
</TABLE>
See accompanying notes to financial statements.
54
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDERS' INTEREST
Years ended December 31, 1997, 1996 and 1995
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Unrealized
Common stock Additional investment Retained Total
------------------- paid-in gains earnings shareholders'
Shares Amount capital (losses) (deficit) interest
-------- -------- ------------ ------------ ---------- --------------
<S> <C>
BALANCES AT DECEMBER 31, 1994 ............ 2,000 $ 2.0 257.8 (69.7) (5.8) 184.3
Net income ............................... -- -- -- -- 9.5 9.5
Purchase price adjustments ............... -- -- 3.0 -- -- 3.0
Net unrealized investment gains .......... -- -- -- 74.8 -- 74.8
Dividend ................................. -- -- -- -- (14.8) (14.8)
----- ------ ----- ------ ------ ------
BALANCES AT DECEMBER 31, 1995 ............ 2,000 2.0 260.8 5.1 (11.1) 256.8
Net income ............................... -- -- -- -- 15.9 15.9
Other .................................... -- -- (1.4) -- -- (1.4)
Net unrealized investment losses ......... -- -- -- (6.4) -- ( 6.4)
Dividend ................................. -- -- -- -- (15.7) (15.7)
----- ------ ------ ------ ------ ------
BALANCES AT DECEMBER 31, 1996 ............ 2,000 2.0 259.4 (1.3) (10.9) 249.2
Net income ............................... -- -- -- -- 17.5 17.5
Net unrealized investment gains .......... -- -- -- 8.6 -- 8.6
Dividend ................................. -- -- -- -- (15.0) (15.0)
----- ------ ------ ------ ------ ------
BALANCES AT DECEMBER 31, 1997 ............ 2,000 $ 2.0 259.4 7.3 ( 8.4) 260.3
===== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995
(Dollar amounts in millions)
<TABLE>
<CAPTION>
1997 1996 1995
---------- ----------- -----------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................................................... $ 17.5 15.9 9.5
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in future policy benefits .............................................. 106.1 108.3 69.3
Assumptive reinsurance premiums ................................................. -- ( 23.0) --
Net realized investment losses (gains) .......................................... (2.2) 0.4 1.9
Amortization of investment premiums and discounts ............................... 4.7 7.7 7.1
Amortization of intangibles ..................................................... 8.2 7.1 6.1
Deferred income tax benefit ..................................................... (1.7) (3.1) (3.5)
Change in certain assets and liabilities:
Decrease (increase) in:
Accrued investment income ..................................................... (1.4) (4.8) (0.9)
Deferred acquisition costs .................................................... (15.6) (11.6) (4.0)
Other assets, net ............................................................. 10.6 (14.6) 9.4
Increase (decrease) in: .........................................................
Other policy related balances .................................................. 22.8 17.9 5.2
Accounts payable and accrued expenses .......................................... (19.6) 45.4 6.8
-------- ------- -------
Total adjustments .................................................................. 111.9 129.7 97.4
-------- ------- -------
Net cash provided by operating activities .......................................... 129.4 145.6 106.9
-------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investments in fixed maturities and real estate ..................... 264.9 228.6 372.6
Purchases of fixed maturities ..................................................... (340.4) (183.6) (413.6)
Mortgage and policy loan originations ............................................. (40.6) (112.1) (33.8)
Mortgage and policy loan repayments ............................................... 9.2 3.2 0.1
-------- ------- -------
Net cash used in investing activities .............................................. (106.9) (63.9) (74.7)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of investment contracts ....................................... 151.1 121.6 186.0
Redemption and benefit payments on investment contracts ........................... (175.9) (181.7) (188.3)
Dividends paid .................................................................... (15.0) (15.7) (14.8)
-------- ------- -------
Net cash used in financing activities .............................................. (39.8) (75.8) (17.1)
-------- ------- -------
Net increase (decrease) in cash and cash equivalents ............................... (17.3) 5.9 15.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ..................................... 21.7 15.8 0.7
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................................... $ 4.4 21.7 15.8
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1995 and 1996
(Dollar amounts in millions)
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the historical operations
and accounts of GE Capital Life Assurance Company of New York (GECLA-NY or the
Company).
GE Capital Life Assurance Company of New York is a majority-owned
subsidiary of General Electric Capital Assurance Company (GE Capital
Assurance), which, in turn, is wholly-owned by GE Financial Assurance Holdings,
Inc. (GE Financial Assurance). The remaining minority interest is owned by
Great Northern Insurance Annuity Corporation (GNIAC), which is also a
wholly-owned subsidiary of GE Capital Assurance.
Basis of Presentation
These financial statements have been prepared on the basis of generally
accepted accounting principles (GAAP) for stock life insurance companies, which
vary in several respects from accounting practices prescribed or permitted by
the Department of Insurance of the State of New York 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 reclassifications have been made to the 1996 and 1995 financial
statements to conform to the 1997 presentation. These reclassifications have no
effect on reported net income or shareholders' interest.
Products
The Company markets and sells products in the State of New York through
financial institutions and various agencies. The primary products of the
Company are investment type deferred annuities, structured settlements,
immediate annuities, and long-term care policies. During 1997, five financial
institutions accounted for 77% of product sales; of that 77%, one financial
institution accounted for 55% of total product sales.
Revenues
Investment income is recorded when earned. 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 are not
reported as revenues but as future annuity and contract benefits liability.
Other income consists primarily of surrender charges on certain policies.
Surrender charges are recognized as income when the policy is surrendered.
Statements of Cash Flows
Certificates and other time deposits are classified as short-term
investments on the balance sheets and considered cash equivalents in the
statements of cash flows.
Investments
The Company has designated its fixed maturities as available-for-sale. The
fair value for fixed maturities is based on 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. Unrealized losses that are considered other than
temporary are recognized in earnings through an adjustment to the amortized
cost basis of the underlying securities.
Investment income on mortgage-backed securities is initially based upon
yield, cash flow and prepayment assumptions at the date of purchase. Subsequent
revisions in those assumptions are recorded using the retrospective method,
whereby the
57
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
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.
The Company does not engage in derivatives trading, market-making or other
speculative activities. The Company has no significant open or outstanding
derivative transactions during the years 1997, 1996 or 1995.
Mortgage and policy loans are stated at the unpaid principal balance of
such loans, net of allowances for estimated uncollectible amounts.
Deferred Acquisition Costs
Deferred acquisition costs include costs and expenses which vary with and
are primarily related to the acquisition of insurance and investment contracts,
such as commissions, direct advertising and printing, and certain support costs
such as underwriting and policy issue expenses. Deferred acquisition costs
capitalized are determined by actual costs and expenses incurred by product in
the year of issue.
For investment contracts, the amortization of deferred acquisition costs
is based on the present value of the anticipated gross profits resulting from
investments, interest credited, surrender charges, mortality and maintenance
expenses. As actual gross profits vary from projected, the impact on
amortization is included in net income. For insurance contracts, the
acquisition costs are amortized in relation to the benefit payments or the
present value of expected future premiums.
Recoverability of deferred acquisition costs is evaluated periodically by
comparing the current estimate of expected future gross profits to the
unamortized asset balances. If such comparison indicates that the expected
gross profits will not be sufficient to recover the asset, the difference will
be charged to expense.
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 the 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 its estimated period of 25 years of
benefit 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.
Federal Income Taxes
The Company is included with GE Capital Assurance in a life insurance
consolidated federal income tax return. Deferred taxes are allocated by
applying the asset and liability method of accounting for deferred income taxes
to members of the group as if each member was a separate taxpayer. Intercompany
balances are settled annually.
Reinsurance
Premium revenue, benefits, underwriting, acquisition and insurance
expenses are reported net of the amounts relating to reinsurance ceded to other
companies, except for reinsurance costs for universal life products. Amounts
due from reinsurers for incurred and estimated future claims are reflected in
the reinsurance recoverable asset which is included in other assets on the
balance sheet. 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.
Future Annuity and Contract Benefits
Future annuity and contract benefits consists of the liabilities for life
insurance policies, accident and health, and deferred annuity contracts. 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. The liability for deferred annuity contracts is generally equal to
the policyholder's current account value.
58
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
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, (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, and (c) claim adjustment
expenses. Claim adjustment expenses include costs incurred in the claim
settlement process such as legal fees and costs to record, process, and adjust
claims.
(2) INVESTMENTS
General
For the years ended December 31, the sources of investment income of the
Company were as follows:
1997 1996 1995
---------- --------- ---------
Fixed maturities ................. $ 99.1 95.6 91.4
Mortgage loans ................... 13.6 8.4 0.8
------- ----- ----
Gross investment income .......... 112.7 104.0 92.2
Investment expenses .............. (1.1) (1.6) (0.6)
------- ------ -----
Net investment income ............ $ 111.6 102.4 91.6
======= ====== =====
For the years ended December 31, sales proceeds and gross realized
investment gains and losses resulting from the sales of investment securities
available-for-sale were as follows:
1997 1996 1995
-------- --------- --------
Sales proceeds ........................... $ 88.0 58.4 248.3
Gross realized investments:
Gains .................................. 2.6 0.9 2.5
Losses ................................. (0.4) (1.3) (4.4)
------- ----- ------
Net realized investment gains (losses) ... $ 2.2 (0.4) (1.9)
======= ===== ======
The additional proceeds from investments presented in the 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 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 are summarized as follows:
1997 1996
---------- --------
Net unrealized gains (losses) on fixed
maturities available-for-sale before
adjustments ................................ $ 22.0 (5.1)
Adjustments to the present value of future
profits and deferred acquisition costs ..... (10.8) 3.1
Deferred income taxes ....................... ( 3.9) 0.7
------- -----
Net unrealized gains (losses) on available-
for-sale investment securities ............. $ 7.3 (1.3)
======= =====
59
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(2) INVESTMENTS -- Continued
At December 31, the amortized cost, gross unrealized gains and losses, and
fair values of the Company's fixed maturities available-for-sale were as
follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
1997 cost gains losses value
- ----------------------------------------------- ----------- ------------ ------------ -----------
<S> <C>
Fixed maturities:
U.S. government and agency ......... $ 34.5 0.5 -- 35.0
Non U.S. government ................ 5.2 0.1 -- 5.3
Non U.S. corporate ................. 54.3 1.0 (0.2) 55.1
U.S. corporate ..................... 899.8 14.7 (1.5) 913.0
Mortgage-backed .................... 474.4 9.4 (2.0) 481.8
--------- ---- ---- -------
Total fixed maturities ............... $ 1,468.2 25.7 (3.7) 1,490.2
========= ==== ==== =======
</TABLE>
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
1996 cost gains losses value
- ----------------------------------------------- ----------- ------------ ------------ -----------
<S> <C>
Fixed maturities:
U.S. government and agency ......... $ 48.8 0.8 -- 49.6
Non U.S. government ................ 5.2 0.6 ( 0.1) 5.7
Non U.S. corporate ................. 47.2 -- -- 47.2
U.S. corporate ..................... 876.7 10.4 (21.5) 865.6
Mortgage-backed .................... 417.1 7.0 (2.3) 421.8
--------- ---- ----- -------
Total fixed maturities ............... $ 1,395.0 18.8 (23.9) 1,389.9
========= ==== ===== =======
</TABLE>
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.
1997
------------------------
Amortized Fair
cost value
----------- ----------
Due in one year or less ................... $ 129.9 130.9
Due after one year through five years ..... 476.8 482.2
Due after five years through ten years .... 317.2 324.1
Due after ten years ....................... 69.9 71.2
--------- -------
Subtotals ................................. 993.8 1,008.4
Mortgage-backed securities ................ 474.4 481.8
--------- -------
Totals .................................... $ 1,468.2 1,490.2
========= =======
As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders of $0.1
at December 31, 1997 and 1996.
At December 31, 1997, approximately 20.4%, 11.0% and 16.3% of the
Company's investment portfolio is comprised of securities issued by the
manufacturing, utility and financial industries, respectively, the vast
majority of which are rated investment grade, and which are senior secured
bonds. This portfolio is widely diversified among various geographic regions in
the United States, and is not dependent on the economic stability of one
particular region. At December 31, 1997, the Company did not hold any fixed
maturity securities, other than securities issued or guaranteed by the U.S.
government, which exceeded 10% of shareholders' interest.
60
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(2) INVESTMENTS -- Continued
The credit quality of the fixed maturity portfolio at December 31 follows.
The categories are based on the higher of the ratings published by Standard &
Poors or Moody's.
<TABLE>
<CAPTION>
1997 1996
--------------------- ----------------------
Fair Fair
value Percent value Percent
----------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Agencies and treasuries ......... $ 317.9 21.3% $ 368.7 26.5%
AAA/Aaa ......................... 162.9 10.9 75.7 5.5
AA/Aa ........................... 94.5 6.4 65.7 4.7
A/A ............................. 419.1 28.1 411.5 29.6
BBB/Baa ......................... 425.8 28.6 425.1 30.6
BB/Ba ........................... 35.4 2.4 15.2 1.1
B/B ............................. 3.6 0.2 1.5 0.1
Not rated ....................... 31.0 2.1 26.5 1.9
--------- ----- --------- -----
Totals .......................... $ 1,490.2 100.0% $ 1,389.9 100.0%
========= ===== ========= =====
</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.
At December 31, 1997 and 1996, there were no fixed maturities in default
as to principal and interest.
Mortgage Loans
At December 31, 1997 and 1996, the Company's mortgage loan portfolio
consisted of 115 and 97, respectively, first mortgage loans on commercial real
estate properties. The loans, which are originated by the Company through a
network of mortgage bankers, are made only on completed, leased properties and
have a maximum loan-to-value ratio of 75% at the date of origination.
At December 31, 1997 and 1996, respectively, the Company held $35.1 and
$24.6 in mortgages secured by real estate in California, comprising 20.2% and
17.2% of the respective total mortgage portfolio. For the years ended December
31, 1997, 1996 and 1995, respectively, the Company originated $11.4, $21.8 and
$3.2 of mortgages secured by real estate in California, which represent 28.0%,
20.0% and 9.5% and of the respective total originations for those years.
"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 homogeneous loans, and therefore applies principally
to the Company's commercial loans. There were no impaired loans at December 31,
1997 and 1996.
61
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(3) DEFERRED ACQUISITION COSTS
Activity impacting deferred acquisition costs for the years ended December
31, was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C>
Unamortized balance at January 1 ............. $ 31.2 17.4 13.4
Transfers in of AMEX reinsurance ............. -- 2.2 --
Costs deferred ............................... 18.5 12.7 5.6
Amortization, net ............................ (2.9) (1.1) (1.6)
------- ----- -----
Unamortized balance at December 31 ........... 46.8 31.2 17.4
------- ----- -----
Cumulative effect of net unrealized investment
(gains) losses ............................. ( 4.1) 0.8 (2.5)
------- ----- -----
Recorded balance ............................. $ 42.7 32.0 14.9
======= ===== =====
</TABLE>
(4) INTANGIBLE ASSETS
Present Value of Future Profits (PVFP)
The method used by the Company to value PVFP is summarized as follows: (1)
identify the future gross profits attributable to certain lines of business,
(2) identify the risks inherent in realizing those gross profits, and (3)
discount these gross profits at the rate of return that the Company must earn
in order to accept the inherent risks.
After PVFP is determined, the amount 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. As actual results vary from projected amounts, the impact on
amortization is included in net income.
Recoverability of PVFP is evaluated periodically by comparing the current
estimate of expected future gross profits to the unamortized asset balance. If
such comparison indicates that the expected gross profits will not be
sufficient to recover PVFP, the difference is charged to expense.
The following table presents the activity in PVFP for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C>
Unamortized balance at January 1 ............. $ 38.9 34.5 38.8
Transfers of AMEX reinsurance ................ -- 10.0 --
Interest accrued at 5.6% in 1997, 5.4% in
1996 and 1995 .............................. 1.4 1.9 2.2
Amortization ................................. ( 8.1) (7.5) (6.5)
------- ----- ------
Unamortized balance at December 31 ........... 32.2 38.9 34.5
------- ----- ------
Cumulative effect of net unrealized investment
(gains) losses ............................. ( 6.7) 2.3 (11.5)
------- ----- ------
Recorded balance ............................. $ 25.5 41.2 23.0
======= ===== ======
</TABLE>
The estimated percentage of the December 31, 1997 balance, before the
effect of unrealized investment gains or losses, to be amortized over each of
the next five years is as follows:
1998 14%
1999 12%
2000 10%
2001 7%
2002 6%
62
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(4) INTANGIBLE ASSETS -- Continued
Goodwill
At December 31, 1997 and 1996, total unamortized goodwill was $31.4 and
$33.0, respectively, which is shown net of accumulated amortization of $7.0 and
$5.4, respectively. Goodwill amortization was $1.6, $1.6 and $1.8 for the years
ended December 31, 1997, 1996 and 1995, respectively. Goodwill in excess of
associated expected operating cash flows is considered to be impaired and is
written down to fair value (no such charges have been made).
(5) REINSURANCE
In order to limit the amount of loss retention, certain policy risks are
reinsured with other insurance companies. The maximum amount of life insurance
retained on any one life may not exceed $150,000. Reinsurance contracts do not
relieve the Company of its obligations to policyholders. In the unlikely event
that the reinsurers would be unable to meet their obligations, the Company is
liable for the reinsured claims. The Company monitors both the financial
condition of individual reinsurers and risk concentrations arising from similar
geographic regions, activities and economic characteristics of reinsurers to
lessen the risk of default by such reinsurers.
During 1995, the Company entered into a reinsurance agreement with an
affiliated company, PHF Life Insurance Company (PHF). Effective December 31,
1995, the Company assumed all liabilities and future premiums related to PHF's
New York universal life, whole life, structured settlement, accident and
health, and deferred annuity business. The transaction involved transferring
reserves valued at $83.1 and fixed maturities of $82.5, resulting in a loss of
$0.6. These investments were placed in a trust account with Bankers Trust for
the benefit of PHF policyholders allowing PHF to take the reserve credit on
this block of business. The trust totaled $73.3 at December 31, 1997.
Effective April 1, 1996 the accidental death and dismemberment and
long-term care business written by AMEX Assurance Company (AMEX), an acquired
affiliated company, in the state of New York was ceded directly to the Company
on an assumptive basis. Significant assets and liabilities transferred include
investments valued at $23 and reserves valued at $23 and recorded as assumed
premiums and change in policy reserves, respectively. No gain or loss was
recognized as a result of this transaction.
The effects of reinsurance on premiums written and earned for the years
ended December 31 were as follows:
<TABLE>
<CAPTION>
Written Earned
--------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
---------- --------- -------- --------- --------- --------
<S> <C>
Direct ...................................... $ 48.2 30.4 3.2 44.5 28.6 3.2
Assumed ..................................... 3.6 33.8 4.2 3.6 28.8 4.2
Ceded ....................................... (1.1) (0.4) -- (1.2) (0.2) --
------- ----- ---- ----- ----- ----
Net Premiums ................................ $ 50.7 63.8 7.4 46.9 57.2 7.4
------- ----- ---- ----- ----- ----
Percentage of amount assumed to net ......... 7.1 53.0 57.0 7.7 50.0 57.0%
======= ===== ==== ===== ===== ====
</TABLE>
Reinsurance recoveries recognized as a reduction of benefits amounted to
$11.2, $18.5, and $30.5 during 1997, 1996 and 1995, respectively. These
recoveries were partially offset by certain changes in benefits and other
policy reserves.
(6) FUTURE ANNUITY AND CONTRACT BENEFITS
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 policyholders' contracts. Interest rates credited
to investment contracts are guaranteed for the initial policy term with renewal
rates determined as necessary by management. At December 31, 1997 and 1996,
investment contracts comprised $1,314.5 and $1,267.1, respectively.
63
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
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 contracts 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. At December 31, 1997 and
1996, insurance contracts comprised $131.9 and $98.0, respectively.
Interest rate assumptions used in calculating the present value of future
annuity and contract benefits range from 5.9% to 9.9%.
(7) RELATED-PARTY TRANSACTIONS
The Company receives administrative services from certain affiliates for
which progress payments for these services are made monthly. For the years
ended December 31, 1997, 1996 and 1995, these services were valued at $9.8,
$6.1, and $3.5, respectively.
(8) INCOME TAXES
The total provision for income taxes for the years ended December 31
consisted of the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- --------
<S> <C>
Current federal income tax provision .................. $ 13.2 13.1 8.8
Deferred federal income tax benefit ................... (1.7) (2.8) (2.6)
------- ----- -----
Subtotal federal provision ............................ 11.5 10.3 6.2
Current state income tax provision (benefit) .......... -- (0.2) 3.1
Deferred state income tax benefit ..................... -- (0.3) (0.9)
------- ----- -----
Subtotal state provision (benefit) .................... -- (0.5) 2.2
------- ----- -----
Total income tax provision ............................ $ 11.5 9.8 8.4
======= ===== =====
</TABLE>
The reconciliation of the federal statutory tax rate to the effective
income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ----------
<S> <C>
Statutory U.S. federal income tax rate .......... 35.0 35.0 35.0%
State income tax ................................ -- (1.3) 7.8
Goodwill amortization ........................... 1.9 2.0 3.4
Other, net ...................................... 2.8 2.4 0.8
---- ----- ----
Effective rate .................................. 39.7 38.1 47.0%
==== ===== ====
</TABLE>
64
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(8) INCOME TAXES -- Continued
The components of the net deferred income tax benefit at December 31 are
as follows:
1997 1996
---------- ---------
Assets:
Future annuity and contract benefits ................ $ 25.6 20.9
Net unrealized losses on investment securities ...... -- 0.7
Other ............................................... -- 1.8
------- -----
Total deferred tax assets ........................... 25.6 23.4
------- -----
Liabilities:
Net unrealized gains on investment securities ....... ( 3.9) --
Investments ......................................... ( 5.1) (10.3)
Present value of future profits ..................... ( 8.2) ( 5.7)
Deferred acquisition costs .......................... (10.5) ( 5.4)
Other, net .......................................... ( 1.0) ( 2.2)
------- ------
Total deferred tax liabilities ...................... (28.7) (23.6)
------- ------
Net deferred income tax liability ................... $ (3.1) ( 0.2)
======= ======
The Company paid $12.1, $14.3 and $3.6, for federal and state income taxes
during the years 1997, 1996 and 1995, respectively.
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.
(9) COMMITMENTS AND CONTINGENCIES
Mortgage Loan Commitments
As of December 31, 1997 and 1996, the Company was committed to fund $0 and
$8.2, respectively, in mortgage loans.
Guaranty Association Assessments
The Company is required to participate in the guaranty association of the
state of New York. The state guaranty association ensures 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. The insolvency of a major insurer that wrote significant business
in New York could have an adverse impact on the profitability of the Company.
Litigation
There is no material pending litigation to which the Company is a party or
of which any of the Company's property is the subject, and 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 fair values of financial instruments presented in the applicable notes
to the Company's 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.
65
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
Financial instruments that, as a matter of accounting policy, are
reflected in the accompanying financial statements at fair value are not
included in the following disclosures. Such items include fixed maturities. The
carrying value of policy loans, short-term investments and accrued investment
income approximates fair value at December 31, 1997 and 1996, respectively.
At December 31, the carrying amounts and fair values of the Company's
financial instruments were as follows:
1997 1996
---------------------- ----------------------
Amortized Fair Amortized Fair
cost value cost value
----------- ---------- ----------- ----------
Mortgage loans ............... $ 173.5 179.7 142.4 145.2
Investment contracts ......... 1,306.3 1,297.5 1,256.7 1,206.9
--------- ------- ------- -------
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 risks.
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 are deemed extraordinary and require formal state insurance commission
approval. Based on statutory results as of December 31, 1997, the Company is
able to pay $16.1 in dividends in 1998 without obtaining regulatory approval.
(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 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
authority. The Company has no significant permitted accounting practices.
Statutory net income for the years ended December 31, 1997, 1996 and 1995
was $13.7, $16.5 and $25.8, respectively. Statutory capital and surplus as of
December 31, 1997 and 1996 was $162.6 and $158.1, respectively.
The NAIC has 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 level of RBC. At December 31, 1997 and 1996, the
Company exceeded the minimum required RBC levels.
(13) BUSINESS SEGMENTS
The Company conducts its 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 for 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.
66
<PAGE>
GE CAPITAL LIFE ASSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS -- Continued
(13) BUSINESS SEGMENTS -- Continued
The following is a summary of industry segment activity for 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------------------------------
Wealth Wealth & Wealth Wealth &
Accumulation Lifestyle Accumulation Lifestyle
and Transfer Protection Consolidation and Transfer Protection Consolidated
-------------- ------------ ---------------------------- ------------ -------------
<S> <C>
Net investment income .......................... $ 107.5 4.1 111.6 99.9 2.5 102.4
Net unrealized investment gains (losses) ....... 2.2 -- 2.2 (0.4) -- (0.4)
Premiums ....................................... 20.5 26.4 46.9 18.5 38.7 57.2
Other revenues ................................. 3.7 -- 3.7 4.1 -- 4.1
---------- ---- ------- -------- ---- --------
Total revenues ................................. 133.9 30.5 164.4 122.1 41.2 163.3
---------- ---- ------- -------- ---- --------
Interest credited, benefits and other changes
in policy reserves ............................ 99.1 15.1 114.2 90.1 31.7 121.8
Commissions .................................... 8.9 8.7 17.6 6.2 4.8 11.0
Amortization of intangibles .................... 7.4 0.8 8.2 6.2 0.9 7.1
Other operating costs and expenses ............. (0.1) (4.5) (4.6) 1.5 (3.8) (2.3)
---------- ----- -------- -------- ----- --------
Total benefits and expenses .................... 115.3 20.1 135.4 104.0 33.6 137.6
---------- ----- -------- -------- ----- --------
Income before income taxes ..................... $ 18.6 10.4 29.0 18.1 7.6 25.7
---------- ----- -------- -------- ----- --------
Total assets ................................... $ 1,711.9 95.6 1,807.5 1,628.6 80.4 1,709.0
========== ===== ======== ======== ===== ========
</TABLE>
Wealth and Lifestyle Protection was not a reportable segment until 1996
due to the acquisition of AMEX, a primary issuer of Wealth and Lifestyle
Protection products, in October 1995.
67
<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 or will be included in a pre-effective amendment.
(b) Exhibits
<TABLE>
<S> <C>
(1) Resolution of Board of Directors of GE Capital Life Assurance Company of New York ("GE Capital Life")
authorizing the establishment of the GE Capital Life Separate Account II (the "Separate Account"). 1/
(2) Not Applicable
(3) Underwriting Agreement between GE Capital Life and Capital Brokerage Corporation 2/
(3)(i) Dealer Sales Agreement 2/
(4)(i) Form of Policy 2/
(4)(ii) Endorsements to Policy
(a) Guarantee Account Rider 1/
(b) Trust Endorsement 1/
(c) Pension Endorsement 2/
(d) Individual Retirement Annuity Endorsement 2/
(e) 403(b) Annuity Endorsement 2/
(5) Form of Application 2/
(6)(i) Certificate of Incorporation of GE Capital Life 1/
(6)(ii) By-Laws of GE Capital Life 1/
(7) Not Applicable
(8)(i) Form of Participation Agreement regarding Alger American Fund
(8)(ii) Form of Participation Agreement regarding Federated Insurance Series
(8)(iii) Form of Participation Agreement regarding GE Investments Funds, Inc.
(8)(iv) Form of Participation Agreement regarding Janus Aspen Series
(8)(v) Form of Participation Agreement regarding Oppenheimer Variable Account Funds
(8)(vi) Form of Participation Agreement regarding PBHG Insurance Series Fund
(8)(vii) Form of Participation Agreement regarding Variable Insurance Products Fund VIPF
(8)(viii) Form of Participation Agreement regarding Variable Insurance Products Fund II VIPF II
(8)(ix)) Form of Participation Agreement regarding Variable Insurance Products Fund III VIPF III
(8)(x) Form of Participation Agreement regarding Goldman Sachs Variable Insurance Trust
(9) Opinion and Consent of Counsel
(10)(i) Consent of Sutherland, Asbill & Brennan LLP
(10)(ii) Consent of Independent Auditors
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Power of Attorney 1/
</TABLE>
- ---------
1/ Incorporated herein by reference to initial filing of the registration
statement on Form N-4 File No. 333-39955, filed with the Securities and
Exchange Commission on September 10, 1997.
2/ Incorporated herein
II-1
<PAGE>
Item 25. Directors and Officers of GE Capital Life
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ---------------------- --------------------------------- ----------------------------------------
<S> <C>
Barry J. Grossman American Mayflower President and Chief Executive Officer
2 Penn Plaza
New York, NY 10121
Marshall S. Belkin 345 Kear Street Director
Yorktown Heights, NY 10598
Donald W. Britton First Colony Life Director
700 Main Street
Lynchburg, VA 24505
Richard I. Byer Clark & Pope, Inc. Director
317 Madison Avenue
New York, NY 10017
Ronald V. Dolan First Colony Life Chairman of the Board
700 Main Street
Lynchburg, VA 24505
Bernard M. Eiber 55 Northern Blvd. Director
Room 302
Great Neck, NY 11021
Jerry S. Handler Handro Properties Director
151 West 40th St.
New York, NY 10018
Stephen P. Joyce GE Financial Assurance Director
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
Ray M. Perisho Union Fidelity Life Director
4850 Street Rd.
Trevose, PA 19049
Leon E. Roday GE Financial Assurance Senior Vice President & General Counsel
6604 West Broad St.
Richmond, VA 23230
Ididore Sapir Granit Apartments at the Granit Director
Apt. 756, P.O. Box 657
Kernonkson, NY 12446
Thomas A. Skiff GE Financial Assurance Director
1650 Los Gamos DR.
San Rafael, CA 94903
Steven A. Smith First Colony Life Director
700 Main Street
Lynchburg, VA 24505
George T. Stewart First Colony Life Director
700 Main Street
Lynchburg, VA 24505
Geoffrey S. Stiff First Colony Life Director
700 Main Street
Lynchburg, VA 24505
Gerald A. Kaufman 33 Walt Whitman Rd., Suite 233 Director
Huntrington Station, NY 11746
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- -------------------- ------------------------ -------------------------------------
<S> <C>
Thomas W. Casey GE Financial Assurance Vice President and Chief Financial
Officer
6604 W. Broad St.
Richmond, VA23230
Stephen N. DeVos GE Financial Assurance Vice President and Controller
6604 W. Broad St.
Richmond, VA 23230
</TABLE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The following chart identifies the persons controlled by or under common
control with the Depositor or the Registrant.
[Organizational Chart goes here]
Item 27. Number of Policyowners
Not applicable
Item 28. Indemnification
The Bylaws of GE Capital Life provides that:
(a) See Exhibit (6)(ii) -- Article VIII
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
depositor pursuant to the foregoing provisions, or otherwise, the depositor has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the depositor of expenses incurred
or paid by a director, officer or controlling person of the depositor in
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the depositor will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 29. Principal Underwriters
(a) Capital Brokerage Corporation is the principal underwriter of the
Policies as defined in the Investment Company Act of 1940.
II-3
<PAGE>
(b)
<TABLE>
<CAPTION>
Name Address Positions and Offices with Depositor
- ------------------------- ---------------------------------- -----------------------------------------
<S> <C>
Scott A. Curtis GE Financial Assurance President and Chief Executive Officer
6610 W. Broad St.
Richmond, VA 23230
Stephen P. Joyce GE Financial Assurance Senior Vice President
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
Charles A. Kaminski GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Victor C. Moses GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Geoffrey S. Stiff First Colony Life Senior Vice President
700 Main St.
Lynchburg, VA 23219
Mary Catherine Yeagley GE Financial Assurance Senior Vice President
601 Union St., Ste. 5600
Seattle, WA 98101
Jeffrey I. Hugunin GE Financial Assurance Treasurer
6604 W. Broad St.
Richmond, VA 23230
John W. Attey GE Financial Assurance Vice President, Counsel & Assistant
7125 W. Jefferson Ave., Ste. 200 Secretary
Lakewood, CO 80235
Thomas W. Casey GE Financial Assurance Vice President & Chief Financial Officer
6604 W. Broad St.
Richmond, VA 23230
Stephen N. DeVos GE Financial Assurance Vice President & Controller
6604 W. Broad St.
Richmond, VA 23230
Scott A. Reeks GE Financial Assurance Vice President & Assistant Treasurer
6610 W. Broad St.
Richmond, VA 23230
Edward J. Wiles, Jr. GE Financial Assurance Vice President, Counsel & Secretary
777 Long Ridge Rd., Bldg. "B"
Stamford, CT 06927
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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
Capital Life at its executive offices.
Item 31. Management Services
All management Policies are discussed in Part A or Part B of this
Registration Statement.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post-effective amendment to
this Registration Statement as frequently as necessary to ensure that the
audited financial statements in the Registration Statement are never more than
16 months old for so long as payments under the variable annuity Policies may
be accepted.
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(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 Capital Life at the
address or phone number listed in the Prospectus.
SECTION 403(b) REPRESENTATIONS
GE Capital Life represents that in connection with its offering of
Policies as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code of 1986, it is relying on a
no-action letter dated November 28, 1988, to the American Council of Life
Insurance (Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of
the Investment Company Act of 1940, and that paragraphs numbered (1) through
(4) of that letter will be complied with.
SECTION 26(e)(2)(A) REPRESENTATION
GE Capital Life hereby represents that the fees and charges deducted under
the Policy, in the aggregate, are reasonable in relation to the services
rendered, the expenses expected to be incurred, and the risks assumed by GE
Capital Life.
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