GE Life & Annuity Separate Account II
Prospectus For The
Flexible Premium Joint and Last Survivor Variable Life Insurance Policy
Policy Form P1251 5/99
issued by:
GE Life and Annuity Assurance Company
6610 West Broad Street
Richmond, Virginia 23230
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This prospectus describes a flexible premium joint and last survivor variable
life insurance policy offered by GE Life and Annuity Assurance Company ("we,"
"us," "our," the "Company", or "GE Life & Annuity"). It is underwritten on an
individual basis. The Policy provides life insurance protection, premium
flexibility, and the ability to change death benefits.
The Policy provides insurance on the lives of two Insureds. We will pay Death
Proceeds only on the death of the Last Insured. The amount of the Death Proceeds
will depend in part on the Death Benefit Option the Owner ("you" or "your")
selects. You can elect one of two Death Benefit Options under the Policy. Under
Option A, the Death Benefit will equal the greater of (l) the Specified Amount
plus the Policy's Account Value, or (2) the Account Value multiplied by the
applicable corridor percentage. Under Option B, the Death Benefit will equal the
greater of (l) the Specified Amount, or (2) the Account Value multiplied by the
applicable corridor percentage. We guarantee that your Death Benefit will at
least equal the Specified Amount so long as your Policy is in force.
You direct your premiums to the Investment Subdivisions of Separate Account II.
Each Investment Subdivision invests in shares of the Funds. We list the Funds,
and their currently available portfolios, below.
JANUS ASPEN SERIES:
Growth Portfolio, Aggressive Growth Portfolio, International Growth
Portfolio, Worldwide Growth Portfolio, Balanced Portfolio, Flexible Income
Portfolio, Capital Appreciation Portfolio
VARIABLE INSURANCE PRODUCTS FUND (VIP):
VIP Equity-Income Portfolio, VIP Overseas Portfolio, VIP Growth Portfolio
VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
VIP II Asset Manager Portfolio, VIP II Contrafund Portfolio
VARIABLE INSURANCE PRODUCTS FUND III (VIP III):
VIP III Growth & Income Portfolio, VIP III Growth Opportunities Portfolio
GE INVESTMENTS FUNDS, INC.:
S&P 500 Index Fund, Money Market Fund, Total Return Fund, International
Equity Fund, Real Estate Securities Fund, Value Equity Fund, Income Fund,
U.S. Equity Fund, Premier Growth Equity Fund
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OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Bond Fund/VA, Oppenheimer Aggressive Growth Fund/VA,
Oppenheimer Capital Appreciation Fund/VA, Oppenheimer High Income Fund/VA,
Oppenheimer Multiple Strategies Fund/VA
FEDERATED INSURANCE SERIES:
Federated American Leaders Fund II, Federated Utility Fund II, Federated
High Income Bond Fund II
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio, Alger American Small Capitalization
Portfolio
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT):
Goldman Sachs Growth and Income Fund, Goldman Sachs Mid Cap Value Fund
SALOMON BROTHERS VARIABLE SERIES FUND INC:
Salomon Investors Fund, Salomon Total Return Fund, Salomon Strategic Bond
Fund
Not all of these portfolios may be available in all states or in all
markets.
Your Policy provides for a Surrender Value. The amount of your Surrender Value
will depend upon the investment performance of the portfolio(s) you select. You
bear the investment risk of investing in Separate Account II.
You may cancel your Policy during the free-look period. Please note that
replacing your existing insurance coverage with the Policy might not be to your
advantage.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NEITHER THE U.S. GOVERNMENT NOR ANY GOVERNMENTAL AGENCY INSURES OR GUARANTEES
YOUR INVESTMENT IN THE POLICY.
This Prospectus contains information about Separate Account II that you should
know before investing. Please read this Prospectus carefully before investing
and keep it for future reference.
The date of this Prospectus is November 8, 1999.
<PAGE>
TABLE OF CONTENTS
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DEFINITIONS ........................................................... 6
POLICY SUMMARY ........................................................ 8
PORTFOLIO ANNUAL EXPENSE TABLE ........................................ 12
Other Policies ....................................................... 14
RISK SUMMARY .......................................................... 15
GE LIFE AND ANNUITY ASSURANCE COMPANY ................................. 18
State Regulation ..................................................... 18
SEPARATE ACCOUNT II ................................................... 19
Changes to Separate Account II ....................................... 19
THE PORTFOLIOS ........................................................ 19
Investment Subdivisions .............................................. 20
International and Global Equity ...................................... 20
Specialty ............................................................ 21
Small-Cap Stocks ..................................................... 21
Mid-Cap Growth ....................................................... 21
Mid-Cap Value ........................................................ 22
Large-Cap Growth ..................................................... 22
Large-Cap Value ...................................................... 23
Balanced ............................................................. 24
Global Bonds ......................................................... 24
High-Yield Bonds ..................................................... 25
Domestic Bonds ....................................................... 25
Money Market ......................................................... 25
Your Right to Vote Portfolio Shares .................................. 26
CHARGES AND DEDUCTIONS ................................................ 27
Premium Charge ....................................................... 27
Mortality and Expense Risk Charge .................................... 27
Monthly Deduction .................................................... 28
Cost of Insurance .................................................... 28
Surrender Charge ..................................................... 29
Partial Surrender Processing Fee ..................................... 30
Transfer Charge ...................................................... 31
Other Charges ........................................................ 31
Reduction of Charges for Group Sales ................................. 31
THE POLICY ............................................................ 32
Applying for a Policy ................................................ 32
Owner ................................................................ 32
Beneficiary .......................................................... 32
Changing the Beneficiary ............................................. 32
Canceling a Policy ................................................... 33
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PREMIUMS ................................................................ 33
General ................................................................ 33
Tax Free Exchanges (1035 Exchanges) .................................... 33
Certain Internal Exchanges ............................................. 33
Periodic Premium Plan .................................................. 34
Minimum Premium Payment ................................................ 34
Allocating Premiums .................................................... 34
HOW YOUR ACCOUNT VALUE VARIES ........................................... 35
Account Value .......................................................... 35
Surrender Value ........................................................ 35
Investment Subdivision Values .......................................... 35
Unit Values ............................................................ 36
Net Investment Factor .................................................. 36
TRANSFERS ............................................................... 36
General ................................................................ 36
Dollar-Cost Averaging .................................................. 37
Asset Allocation ....................................................... 37
Portfolio Rebalancing .................................................. 38
Transfers by Third Parties ............................................. 38
DEATH BENEFITS .......................................................... 39
Amount of Death Proceeds ............................................... 39
Death Benefit Options .................................................. 39
Changing the Death Benefit Option ...................................... 40
Changing the Specified Amount .......................................... 40
SURRENDERS AND PARTIAL SURRENDERS ....................................... 41
Surrenders ............................................................. 41
Partial Surrenders ..................................................... 41
Effect of Partial Surrenders on Account Value and Death Proceeds ....... 42
LOANS ................................................................... 42
General ................................................................ 42
Preferred Policy Debt .................................................. 42
Interest Rate Charged .................................................. 43
Repayment of Policy Debt ............................................... 43
Effect of Policy Loans ................................................. 43
TERMINATION ............................................................. 44
Premium to Prevent Termination ......................................... 44
Your Policy will Remain in Effect During the Grace Period .............. 44
Reinstatement .......................................................... 44
PAYMENTS AND TELEPHONE TRANSACTIONS ..................................... 44
Requesting Payments .................................................... 44
Telephone Transactions ................................................. 45
TAX CONSIDERATIONS ...................................................... 45
Federal Tax Matters .................................................... 45
Introduction ........................................................... 45
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Tax Status of the Policy ............................................... 45
Tax Treatment of Policies -- General ................................... 46
Special Rules for Modified Endowment Contracts ......................... 48
Income Tax Withholding ................................................. 49
Tax Status of the Company .............................................. 49
Changes in the Law and Other Considerations ............................ 49
OTHER POLICY INFORMATION ................................................ 49
Optional Payment Plans ................................................. 49
Dividends .............................................................. 50
Incontestability ....................................................... 50
Suicide Exclusion ...................................................... 51
Misstatement of Age or Gender .......................................... 51
Written Notice ......................................................... 51
Trustee ................................................................ 51
Other Changes .......................................................... 51
Reports ................................................................ 52
Change of Owner ........................................................ 52
Supplemental Benefits .................................................. 52
Using the Policy as Collateral ......................................... 53
Reinsurance ............................................................ 53
Legal Proceedings ...................................................... 53
ADDITIONAL INFORMATION .................................................. 53
Sale of the Policies ................................................... 53
Legal Matters .......................................................... 54
Year 2000 Readiness Disclosure ......................................... 54
Experts ................................................................ 55
Actuarial Matters ...................................................... 55
Financial Statements ................................................... 55
Executive Officers and Directors ....................................... 56
Other Information ...................................................... 56
HYPOTHETICAL ILLUSTRATIONS .............................................. 57
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE.
<PAGE>
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DEFINITIONS
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We have tried to make this Prospectus as understandable as possible. However, in
explaining how the Policy works, we have had to use certain terms that have
special meanings. We define these terms below.
ACCOUNT VALUE -- The total amount under the Policy in each Investment
Subdivision and the General Account.
AGE -- The age of each Insured at his or her birthday nearest the Policy Date or
a Policy Anniversary.
ATTAINED AGE -- For each Insured, an Insured's Age on the Policy Date plus the
number of full years since the Policy Date.
BENEFICIARY -- The person or entity you designate to receive the Death Proceeds
payable at the death of the Last Insured.
CONTINUATION AMOUNT -- A cumulative amount set forth on the Policy data pages
for each month of the Continuation Period representing the minimum Net Total
Premium required to keep the Policy in force during the Continuation Period.
CONTINUATION PERIOD -- The number of Policy Years during which the Policy will
not lapse if the Net Total Premium is at least equal to the Continuation Amount
for the number of Policy Months that the Policy has been in force.
DEATH BENEFIT -- The amount determined under the Death Benefit Option in effect
as of the date of death of the Last Insured.
DEATH PROCEEDS -- The total amount payable to the Beneficiary upon the death of
the Last Insured.
FUND -- Any open-end management investment company or unit investment trust in
which Separate Account II invests.
GENERAL ACCOUNT -- Assets of GE Life & Annuity other than those allocated to
Separate Account II or any of our other separate accounts.
HOME OFFICE -- Our offices at 6610 West Broad Street, Richmond, Virginia 23230,
1-804-281-6000.
INSURED(S) -- The person(s) whose lives are insured under the Policy.
INVESTMENT SUBDIVISION -- A subdivision of Separate Account II, the assets of
which invest exclusively in a corresponding portfolio of a Fund. Not all
Investment Subdivisions may be available in all states or markets.
LAST INSURED -- The last Insured to die.
MONTHLY ANNIVERSARY DAY -- The same day in each month as the Policy Date.
NET PREMIUM -- The portion of each premium you allocate to one or more
Investment Subdivisions. It is equal to the premium paid times the Net Premium
Factor.
NET PREMIUM FACTOR -- The factor we use in determining the Net Premium which
reflects a deduction from each premium paid.
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NET TOTAL PREMIUM -- On any date, Net Total Premium equals the total of all
premiums paid to that date less (a) divided by (b), where:
(a) is any outstanding Policy Debt, plus the sum of any partial surrenders
to date; and
(b) is the Net Premium Factor.
OPTIONAL PAYMENT PLAN -- A plan under which any part of Death Proceeds or
Surrender Value proceeds can be used to provide a series of periodic payments to
you or a Beneficiary.
OWNER -- The person (or persons) who owns (or own) the Policy. "You" or "your"
refers to the Owner or Joint Owners. You may also name Contingent Owners.
PLANNED PERIODIC PREMIUM -- A level premium amount scheduled for payment at
fixed intervals over a specified period of time.
POLICY -- The Policy with any attached application(s), any riders, and
endorsements.
POLICY DATE -- The date as of which we issue the Policy and the date as of which
the Policy becomes effective. We measure Policy Years and Anniversaries from the
Policy Date. The Policy Date is shown on the Policy data pages. If the Policy
Date would otherwise fall on the 29th, 30th, or 31st day of a month, the Policy
Date will be the 28th.
POLICY DEBT -- The amount of outstanding loans plus accrued interest. We deduct
Policy Debt from proceeds payable at the death of the Last Insured, or at the
time of surrender.
POLICY MONTH -- A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
SEPARATE ACCOUNT II -- GE Life & Annuity Separate Account II, the segregated
asset account of GE Life & Annuity to which you allocate Net Premiums.
SPECIFIED AMOUNT -- An amount we use in determining the insurance coverage.
SURRENDER VALUE -- The amount we pay you when you surrender the Policy. It is
equal to Account Value minus any Policy Debt and minus any applicable surrender
charge.
UNIT VALUE -- A unit of measure we use to calculate the Account Value for each
Investment Subdivision.
VALUATION DAY -- For each Investment Subdivision, each day on which the New York
Stock Exchange is open for business except for days that the Investment
Subdivision's corresponding Fund does not value its shares.
VALUATION PERIOD -- The period that starts at the close of regular trading on
the New York Stock Exchange on any Valuation Day and continues to the end of the
next Valuation Day.
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POLICY SUMMARY
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PREMIUMS
. You select a premium payment plan. You are not required to pay premiums
according to the plan, but may vary frequency and amount, within limits,
and can skip planned premiums. SEE Periodic Premium Plan.
. Premium amounts depend on each Insured's Age, gender (where applicable),
rating class, the Specified Amount selected, and any supplemental benefit
riders. SEE Premiums.
. You may make unscheduled premium payments, within limits. SEE Premiums.
. Under certain circumstances, you may have to pay extra premiums to prevent
termination. SEE Premium to Prevent Termination.
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DEDUCTIONS FROM PREMIUMS
. If the initial Specified Amount is $500,000 or more, we currently deduct a
3 1/2% premium charge (5% maximum) from each premium before we place it in
an Investment Subdivision. If the initial Specified Amount is at least
$250,000 but less than $500,000, we currently deduct a 6 1/2% premium
charge (8% maximum). We currently do not deduct the maximum premium charge
but reserve the right to do so. We refer to the premium minus the premium
charge as a Net Premium. We do not assess a premium charge against the
policy loan portion of a premium received from the rollover of a life
insurance policy. SEE Premium Charge.
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ALLOCATION OF NET PREMIUMS
. You allocate your Net Premiums among up to seven of the Investment
Subdivisions of Separate Account II at any given time. Until l) the date
we approve the application, 2) the date we receive all necessary forms
(including any subsequent amendments to your application), and 3) the date
we receive the entire initial premium, we will place any premiums you pay
in a non-interest bearing account. We will then allocate your Net Premiums
to the Investment Subdivisions you designate or, for states that require
the refund of premiums during the free look period, we will allocate Net
Premiums to the Money Market Investment Subdivision for 15 days, then to
Investment Subdivisions you designate. SEE Allocating Premiums.
. The Investment Subdivisions invest in corresponding portfolios of the
following Funds:
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<TABLE>
<S> <C>
JANUS ASPEN SERIES OPPENHEIMER VARIABLE ACCOUNT FUNDS
Growth Portfolio Oppenheimer Bond Fund/VA
Aggressive Growth Portfolio Oppenheimer Aggressive Growth Fund/VA
International Growth Portfolio Oppenheimer Capital Appreciation
Worldwide Growth Portfolio Fund/VA
Balanced Portfolio Oppenheimer High Income Fund/VA
Flexible Income Portfolio Oppenheimer Multiple Strategies
Capital Appreciation Portfolio Fund/VA
VARIABLE INSURANCE PRODUCTS FUND FEDERATED INSURANCE SERIES
VIP Equity-Income Portfolio Federated American Leaders Fund II
VIP Overseas Portfolio Federated Utility Fund II
VIP Growth Portfolio Federated High Income Bond Fund II
VARIABLE INSURANCE PRODUCTS FUND II THE ALGER AMERICAN FUND
VIP II Asset Manager Portfolio Alger American Growth Portfolio
VIP II Contrafund Portfolio Alger American Small Capitalization
VARIABLE INSURANCE PRODUCTS FUND III Portfolio
VIP III Growth & Income Portfolio GOLDMAN SACHS VARIABLE INSURANCE
VIP III Growth Opportunities Portfolio TRUST
GE INVESTMENTS FUNDS, INC. Growth and Income Fund
S&P 500 Index Fund Mid Cap Value Fund
Money Market Fund SALOMON BROTHERS VARIABLE SERIES
Total Return Fund FUNDS INC
International Equity Fund Investors Fund
Real Estate Securities Fund Total Return Fund
Value Equity Fund Strategic Bond Fund
Income Fund
U.S. Equity Fund SEE Investment Subdivisions.
Premier Growth Equity Fund
Not all of these portfolios may be available in all states or in all markets.
</TABLE>
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DEDUCTIONS FROM ASSETS
. Each Fund deducts management fees and other expenses from its assets. For the
year ended December 31, 1998, the minimum total annual expenses (as a
percentage of average net assets) was .37% and the maximum total annual
expenses (as a percentage of average net assets) was 1.15%. SEE Portfolio
Annual Expenses.
. We deduct a daily mortality and expense risk charge at a current effective
annual rate of 0.70% (maximum effective annual rate of 0.70%) from assets in
the Investment Subdivisions.
. We make a monthly deduction from your Account Value for (1) the cost of
insurance, (2) a policy charge of $5, (3) an expense charge of up to $.20 per
$1,000 of initial Specified Amount, (4) an expense charge of up to $.20 per
$1,000 of any increase in Specified Amount and (5) supplemental benefit
charges. SEE Monthly Deduction.
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ACCOUNT VALUE
. Account Value equals the total amount in each Investment Subdivision and the
General Account.
. Account Value serves as the starting point for calculating certain values
under a Policy, such as the Surrender Value and the Death Proceeds. Account
Value varies from day to day to reflect investment experience of the
Investment Subdivisions, charges deducted and other Policy transactions (such
as Policy loans, transfers and partial surrenders). SEE How Your Account
Value Varies.
. You can transfer Account Value among the Investment Subdivisions (subject to
certain restrictions). A $10 transfer charge applies to each transfer made
after the first transfer in a calendar month. SEE Transfers for rules and
limits. Policy loans reduce the amount available for allocations and
transfers.
. There is no minimum guaranteed Account Value. During the Continuation Period,
the Policy will lapse if the Surrender Value is too low to cover the monthly
deduction and the Net Total Premium is less than the Continuation Amount.
After the Continuation Period, the Policy will lapse if the Surrender Value
is too low to cover the monthly deduction. SEE Premium to Prevent
Termination.
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CASH BENEFITS
. You may take a Policy loan for up to 90% of the difference between Account
Value and any surrender charges, minus any Policy Debt. SEE Loans.
. You may partially surrender your Policy up to a maximum amount. The
minimum partial surrender amount is $500, and a processing fee equal to
the lesser of $25 or 2% of the amount of the partial surrender will apply
to each partial surrender. If you select Death Benefit Option B, you may
only make partial surrenders after the first Policy Year. SEE Partial
Surrenders.
. You can surrender your Policy at any time before the death of the Last
Insured for its Surrender Value (Account Value minus Policy Debt and minus
any applicable surrender charge). A surrender charge will apply during the
first 16 Policy Years, for 16 Policy Years after an increase in the
Specified Amount, or to the younger Insured's attained age 100 if earlier.
The surrender charge will not exceed $60 per $1,000 of Specified Amount.
SEE Surrenders and Surrender Charge.
. You may choose from a variety of payment options. SEE Requesting Payments.
DEATH BENEFITS
. The minimum Specified Amount available is $250,000.
. We will pay Death Proceeds only upon the death of the Last Insured.
. You may choose from two Death Benefit Options: Option A (greater of
Specified Amount plus Account Value, or the applicable corridor percentage
multiplied by Account Value); or Option B (greater of Specified Amount, or
the applicable corridor percentage multiplied by Account Value). We
determine the Specified Amount and Account Value for this purpose as of
the date of death of the Last Insured. SEE Death Benefits.
. Death Proceeds are payable as a lump sum or under a variety of options.
. You may change the Specified Amount and the Death Benefit Option. SEE
Changing the Specified Amount and Changing the Death Benefit Option for
rules and limits.
. During the Continuation Period, the Policy will remain in force regardless
of the sufficiency of Surrender Value so long as the Net Total Premium is
at least equal to the Continuation Amount. SEE Premium to Prevent
Termination.
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PORTFOLIO ANNUAL EXPENSE TABLE
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This table describes the portfolio fees and expenses. These fees and expenses
are shown as a percentage of net assets for the year ended December 31, 1998.
The prospectus for each Fund contains more detail concerning a portfolio's fees
and expenses.
PORTFOLIO ANNUAL EXPENSES
Annual expenses of the portfolios of the Funds for the year ended December 31,
1998 (as a percentage of each portfolio's average net assets):
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
(AFTER FEE WAIVER (AFTER REIMBURSEMENT TOTAL ANNUAL
AS APPLICABLE) AS APPLICABLE) EXPENSES
------------------- ---------------------- -------------
<S> <C> <C> <C>
PORTFOLIO
- ------------------------------------------------
INTERNATIONAL AND GLOBAL EQUITY
Janus Aspen Worldwide Growth Portfolio(1) .65% .07% .72%
Janus Aspen International Growth Portfolio(1) .66 .20 .86
VIP Overseas Portfolio*(2) .74 .17 .91
GE International Equity Fund 1.00 .15 1.15
SPECIALTY
GE Real Estate Securities Fund .85 .14 .99
SMALL-CAP STOCKS
Oppenheimer Aggressive Growth Fund/VA .69 .02 .71
Alger American Small Capitalization Portfolio .85 .04 .89
MID-CAP GROWTH
Janus Aspen Aggressive Growth Portfolio .72 .03 .75
Goldman Sachs VIT Mid Cap Value Fund**(5) .80 .15 .95
MID-CAP VALUE
GE Value Equity Fund*** .65 .10 .75
LARGE-CAP GROWTH
Janus Aspen Growth Portfolio(1) .65 .03 .68
Janus Aspen Capital Appreciation Portfolio(1) .70 .22 .92
VIP II Contrafund Portfolio*(3) .59 .11 .70
VIP Growth Portfolio*(2) .59 .09 .68
VIP III Growth & Income Portfolio*(4) .49 .12 .61
Oppenheimer Capital Appreciation Fund/VA .72 .03 .75
GE Premier Growth Equity Fund .65 .17 .82
Alger American Growth Portfolio .75 .04 .79
LARGE-CAP VALUE
VIP Equity-Income Portfolio*(2) .49 .09 .58
VIP III Growth Opportunities Portfolio*(4) .59 .12 .71
GE U.S. Equity Fund .55 .14 .69
GE S&P 500 Index Fund .35 .10 .45
Federated Utility Fund II(8) .68 .25 .93
Federated American Leaders Fund II(8) .74 .14 .88
Goldman Sachs VIT Growth and Income Fund(5) .75 .15 .90
Salomon Investors Fund(6) .70 .30 1.00
BALANCED
Janus Aspen Balanced Portfolio .72 .02 .74
VIP II Asset Manager Portfolio*(3) .54 .10 .64
Oppenheimer Multiple Strategies Fund/VA .72 .04 .76
GE Total Return Fund .50 .13 .63
Salomon Total Return Fund(6) .80 .20 1.00
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER EXPENSES
(AFTER FEE WAIVER (AFTER REIMBURSEMENT TOTAL ANNUAL
AS APPLICABLE) AS APPLICABLE) EXPENSES
------------------- ---------------------- -------------
<S> <C> <C> <C>
GLOBAL BONDS
Salomon Strategic Bond Fund(6) .75% .25% 1.00%
HIGH-YIELD BONDS
Janus Aspen Flexible Income Portfolio .65 .08 .73
Oppenheimer High Income Fund/VA .74 .04 .78
Federated High Income Bond Fund II .60 .18 .78
DOMESTIC BONDS
Oppenheimer Bond Fund/VA .72 .02 .74
GE Income Fund .50 .14 .64
MONEY MARKET
GE Money Market Fund(7) .25 .12 .37
</TABLE>
Not all portfolios may be available in all states or markets.
*The fees and expenses reported for the Variable Insurance Products Fund (VIP),
Variable Insurance Products Fund II (VIP II) and Variable Insurance Products
Fund III (VIP III) are prior to any fee waiver and/or reimbursement as
applicable.
**These expenses are estimated due to the portfolio being in existence for less
than 10 months.
***Although past practice reflects investments within the mid cap range, the
portfolio is not restricted on the capitalizations of the companies in which
it can invest.
(1)Absent reimbursements, the total annual expenses of the portfolios of the
Janus Aspen Series during 1998 would have been .75% for Growth Portfolio,
.95% for International Growth Portfolio, .74% for Worldwide Growth Portfolio,
and .97% for Capital Appreciation Portfolio.
(2)A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or Fidelity Management &
Research Company ("FMR") on behalf of certain funds, have entered into
arrangements with their custodian whereby credits realized as a result of
uninvested cash balances were used to reduce custodian expenses. With
reimbursements, the total annual expenses of the portfolios of the Variable
Insurance Products Fund during 1998 would have been .57% for VIP
Equity-Income Portfolio, .89% for VIP Overseas Portfolio and .66% for VIP
Growth Portfolio.
(3)A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. With reimbursements, the total annual expenses of the
portfolios of the Variable Insurance Products Fund II during 1998 would have
been .63% for VIP II Asset Manager Portfolio and .66% for VIP II Contrafund
Portfolio.
(4)A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. With reimbursements, the total annual expenses of the
portfolios of the Variable Insurance Products Fund III during 1998 would have
been .60% for VIP III Growth & Income Portfolio and .70% for VIP III Growth
Opportunities Portfolio.
(5)Goldman Sachs Asset Management has voluntarily agreed to reduce or limit
certain other expenses (excluding management fees, taxes, interest, brokerage
fees, litigation, indemnification and other extraordinary expenses) to the
extent such expenses exceed 0.15% of each Fund's respective average daily net
assets. The investment adviser may modify or discontinue any of the
limitations set forth above in the future at its discretion. Absent
reimbursements, the total annual expenses during 1998 would have been 2.69%
for Growth and Income Fund and 4.79% for Mid Cap Value Fund.
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<PAGE>
(6)Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of Salomon Brothers Variable Series Fund during 1998 would
have been 2.07% for Investors Fund, 2.90% for Total Return Fund and 1.79% for
Strategic Bond Fund.
(7)GE Investment Management Incorporated currently serves as investment adviser
to GE Investments Funds, Inc. (formerly Life of Virginia Series Fund, Inc.)
and has voluntarily agreed to waive a portion of the fee payable by the Fund.
Absent this fee waiver, the total annual expenses of the GE Money Market Fund
would have been .59%.
(8)Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of the Federated Insurance Series during 1998 would have been
.89% for Federated American Leaders Fund II and 1.00% for Federated Utility
Fund II.
The expense information regarding the Funds was provided by those Funds. We have
not independently verified this information. We cannot guarantee that the
reimbursements and fee waivers provided by certain of the Funds will continue.
OTHER POLICIES
We offer other variable life insurance policies which also invest in the same
portfolios of the Funds. These policies may have different charges that could
affect the value of the Investment Subdivisions and may offer different benefits
more suitable to your needs. To obtain more information about these policies,
contact your agent, or call (800) 352-9910.
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RISK SUMMARY
================================================================================
INVESTMENT Your Account Value is subject to the risk that
RISK investment perfor mance will be unfavorable and that
your Account Value will decrease. Because we continue
to deduct charges from Account Value, if investment
results are sufficiently unfavorable and/or you stop
making premium payments at or above the minimum
requirements, the Surrender Value of your Policy may
fall to zero. In that case, the Policy will terminate
without value and insurance coverage will no longer be
in effect, unless you make an additional payment
sufficient to prevent a termination during the 61-day
grace period. However, your Policy will not lapse
during the Continuation Period, even if your Surrender
Value is too low to cover the monthly deductions so
long as the Net Total Premium is at least equal to the
Continuation Amount. On the other hand, if investment
experience is sufficiently favorable and you have kept
the Policy in force for a substantial time, you may be
able to draw upon Account Value, through partial
surrenders and Policy loans.
---------------------
RISK OF If the Surrender Value of your Policy is too low to pay
TERMINATION the Monthly Deduction when due (and, during the
Continuation Period, the Net Total Premium is less than
the Continuation Amount), the Policy will be in default
and a grace period will begin. There is a risk that if
withdrawals, loans, and monthly deductions reduce your
Surrender Value to too low an amount and/or if the
investment experience of your selected Investment
Subdivisions is unfavorable, then your Policy could
lapse. In that case, you will have a 61-day grace
period to make a sufficient payment. If you do not make
a sufficient payment before the grace period ends, your
Policy will terminate without value, insurance coverage
will no longer be in effect, and you will receive no
benefits. After termination, you may reinstate your
Policy within three years subject to certain
conditions.
- -----------------------
TAX RISKS We intend for the Policy to satisfy the definition of a
"life insurance contract" under section 7702 of the
Internal Revenue Code of 1986, as amended (the "Code").
In general, earnings under the Policy will not be taxed
until a distribution is made from the Policy. In
addition, death benefits generally will be excludable
from income. In the case of a Policy that is considered
a "modified endowment contract," special rules apply
and a 10% penalty tax may be imposed on distributions,
including loans. SEE Special Rules for Modified
Endowment Contracts. You should consult a qualified tax
advisor in all tax matters involving your Policy.
- ---------------------
15
<PAGE>
LIMITS ON The Policy permits you to take partial surrenders.
PARTIAL However, if you selected Option B, you may only make
SURRENDERS partial surrenders after the first Policy Year.
The minimum partial surrender amount is $500, and we
will assess a processing fee on the surrender. There is
a limit on the maximum amount you may partially
surrender.
Partial surrenders will reduce your Account Value and
Death Pro ceeds. Federal income taxes and a penalty tax
may apply to partial surrenders.
- ---------------------
EFFECTS OF A Policy loan, whether or not repaid, will affect
POLICY LOANS Account Value over time because we subtract the amount
of the loan from the Investment Subdivisions as
collateral. We then credit a fixed interest rate to the
loan collateral. As a result, the loan collateral does
not participate in the investment results of the
Investment Subdivisions. The longer the loan is
outstanding, the greater the effect is likely to be.
Depending on the investment results of the Investment
Subdivisions, the effect could be favorable or
unfavorable.
A Policy loan also reduces the Death Proceeds. A Policy
loan could make it more likely that a Policy would
terminate. There is a risk if the loan reduces your
Surrender Value to too low an amount and investment
experience is unfavorable, that the Policy will lapse,
resulting in adverse tax consequences. You must submit
a sufficient payment during the grace period to avoid
the Policy's termination without value and the end of
insurance coverage.
- ---------------------
16
<PAGE>
COMPARISON WITH OTHER The Policy is similar in many ways to universal life
INSURANCE POLICIES insurance. As with universal life insurance:
o the Owner pays premiums for insurance coverage on
the Insureds;
o the Policy provides for the accumulation of Surrender
Value that is payable if the Owner surrenders the
Policy during the Insureds' lifetimes;
o and the Surrender Value may be substantially lower
than the premiums paid.
However, the Policy differs from universal life
insurance in that it permits you to place your premium
in the Investment Subdivisions. The amount and duration
of life insurance protection and of the Policy's
Account Value will vary with the investment performance
of the Investment Subdivisions you select.
The Surrender Value of your Policy may decrease if the
investment performance of the Investment Subdivisions
to which you allocate Account Value is sufficiently
adverse. If the Surrender Value becomes insufficient to
cover charges when due and the Continuation Period is
not in effect, the Policy will terminate without value
after a grace period.
- ---------------------
17
<PAGE>
- --------------------------------------------------------------------------------
GE LIFE AND ANNUITY ASSURANCE COMPANY
- --------------------------------------------------------------------------------
We are a stock life insurance company operating under a charter granted by the
Commonwealth of Virginia on March 21, 1871. We are principally engaged in the
offering of life insurance and annuity policies. We are admitted to do business
in 49 states and the District of Columbia. Our principal offices are at 6610
West Broad Street, Richmond, Virginia 23230. Before January 1, 1999, our name
was The Life Insurance Company of Virginia.
General Electric Capital Assurance Company ("GE Capital Assurance"), which is an
indirect wholly-owned subsidiary of General Electric Capital Corporation ("GE
Capital") owns the majority of our stock. GE Financial Assurance Holdings, Inc.,
a direct wholly-owned subsidiary of GE Capital, owns our remaining stock. GE
Capital, a New York corporation, is a diversified financial services company
whose subsidiaries consist of specialty insurance, equipment management, and
commercial and consumer financing businesses. GE Capital's indirect parent,
General Electric Company, founded more than one hundred years ago by Thomas
Edison, is the world's largest manufacturer of jet engines, engineering
plastics, medical diagnostic equipment and large electric power generation
equipment.
GNA Corporation, a direct wholly-owned subsidiary of GE Financial Assurance
Holdings, Inc., directly owns the stock of Capital Brokerage Corporation (the
principal underwriter for the Policies and a broker/dealer registered with the
U.S. Securities and Exchange Commission).
We are a member of the Insurance Marketplace Standards Association ("IMSA"). We
may use the IMSA membership logo and language in our advertisements, as outlined
in IMSA's Marketing and Graphics Guidelines. Companies that belong to IMSA
subscribe to a set of ethical standards covering various aspects of sales and
service for individually sold life insurance and annuities.
STATE REGULATION
We are subject to regulation by the State Corporation Commission of the
Commonwealth of Virginia. We file an annual statement with the Virginia
Commissioner of Insurance on or before March l of each year covering our
operations and reporting on our financial condition as of December 31 of the
preceding year. Periodically, the Commissioner of Insurance examines our
liabilities and reserves and those of Separate Account II and assesses their
adequacy, and a full examination of our operations is conducted by the State
Corporation Commission, Bureau of Insurance of the Commonwealth of Virginia, at
least every five years.
We are also subject to the insurance laws and regulations of other states within
which we are licensed to operate.
18
<PAGE>
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT II
- --------------------------------------------------------------------------------
We established GE Life & Annuity Separate Account II as a separate investment
account on August 2l, 1986. Separate Account II currently has thirty-eight
Investment Subdivisions available under the Policy. Each Investment Subdivision
invests exclusively in shares representing an interest in a separate
corresponding portfolio of one of the ten Funds described below.
The assets of Separate Account II belong to us. However, we may not charge the
assets in Separate Account II attributable to the Policies with liabilities
arising out of any other business which we may conduct. If Separate Account II's
assets exceed the required reserves and other liabilities, we may transfer the
excess to our General Account. Income and both realized and unrealized gains or
losses from the assets of Separate Account II are credited to or charged against
Separate Account II without regard to the income, gains or losses arising out of
any other business we may conduct.
Separate Account II is registered with the SEC as a unit investment trust under
the Investment Company Act of l940 (the "l940 Act") and meets the definition of
a separate account under the federal securities laws. Registration with the SEC
does not involve supervision of the management or investment practices or
policies of Separate Account II by the SEC.
CHANGES TO SEPARATE ACCOUNT II
Separate Account II may include other Investment Subdivisions that are not
available under the Policy. We may substitute another investment subdivision or
insurance company separate account under the Policy if, in our judgment,
investment in an Investment Subdivision should no longer be possible or becomes
inappropriate to the purposes of the Policies, or if investment in another
investment subdivision or insurance company separate account is in the best
interest of Owners. No substitution may take place without notice to Owners and
prior approval of the SEC and insurance regulatory authorities, to the extent
required by the l940 Act and applicable law.
We may also, where permitted by law:
o create new separate accounts;
o transfer assets of Separate Account II, which we determine to be associated
with the class of Policies to which this Policy belongs, to another
separate account;
o add new Investment Subdivisions to or remove Investment Subdivisions from
Separate Account II, or combine Investment Subdivisions;
o remove existing Funds;
o substitute new Funds for any existing Fund which we determine is no longer
appropriate in light of the purposes of the Separate Account;
o deregister Separate Account II under the 1940 Act; and
o operate Separate Account II under the direction of a committee or in
another form.
- --------------------------------------------------------------------------------
THE PORTFOLIOS
- --------------------------------------------------------------------------------
You decide the Investment Subdivisions to which you direct Net Premiums. You may
change your premium allocation without penalty or charges. There is a separate
Investment Subdivision which corresponds to each portfolio of a Fund offered in
this Policy.
19
<PAGE>
Each Fund is registered with the Securities and Exchange Commission as an
open-end management investment company under the 1940 Act. The assets of each
portfolio are separate from other portfolios of a Fund and each portfolio has
separate investment objectives and policies. As a result, each portfolio
operates as a separate portfolio and the investment performance of one portfolio
has no effect on the investment performance of any other portfolio.
Before choosing an Investment Subdivision to allocate your Net Premiums and
Account Value, carefully read the prospectus for each Fund, along with this
Prospectus. We summarize the investment objectives of each portfolio below.
There is no assurance that any of the portfolios will meet these objectives.
The investment objectives and policies of certain portfolios are similar to the
investment objectives and policies of other portfolios that may be managed by
the same investment adviser or manager. The investment results of the
portfolios, however, may be higher or lower than the results of such other
portfolios. There can be no assurance, and no representation is made, that the
investment results of any of the portfolios will be comparable to the investment
results of any other portfolio, even if the other portfolio has the same
investment adviser or manager, or if the other portfolio has a similar name.
INVESTMENT SUBDIVISIONS
We offer you a choice from among 38 Investment Subdivisions, each of which
invests in an underlying portfolio of one of the Funds. You may invest in up to
seven Investment Subdivisions at any one time.
<TABLE>
<CAPTION>
ADVISER (AND SUB-
INVESTMENT SUBDIVISION INVESTMENT OBJECTIVE(1) ADVISER, AS APPLICABLE)
- -------------------------------- --------------------------------------------- --------------------------
INTERNATIONAL AND GLOBAL EQUITY
---------------------------------------------
<S> <C> <C>
JANUS ASPEN SERIES Seeks long-term capital growth in a manner Janus Capital Corporation
Worldwide Growth Portfolio consistent with the preservation of capital.
Pursues this objective by investing in a
diversified portfolio of common stocks of
foreign and domestic issuers of all sizes.
Normally invests in at least five different
countries including the United States.
- --------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long-term growth of capital. Pursues Janus Capital Corporation
International Growth Portfolio this 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.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Standard and Poor's, together with the Funds, determined these categories.
20
<PAGE>
<TABLE>
<S> <C> <C>
FIDELITY VARIABLE INSURANCE Seeks long-term growth of capital by Fidelity Management &
PRODUCT FUND investing at least 65% of total assets in Research Company
VIP Overseas Portfolio foreign securities, primarily in common (Subadvised by Fidelity
stocks. Management & Research
(U.K.) Inc., Fidelity
Management & Research Far
East Inc., Fidelity
International Advisors and
Fidelity International
Investment Advisors (U.K.)
Limited)
- ----------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of GE Investment Management
International Equity Fund capital by investing primarily in foreign Incorporated
equity and equity-related securities which the
Adviser believes have long-term potential for
capital growth.
- ----------------------------------------------------------------------------------------------------------------
SPECIALTY
- ----------------------------- -------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing maximum total GE Investment Management,
Real Estate Securities Fund return through current income and capital Incorporated (Subadvised by
appreciation by investing primarily in Seneca Capital Management,
securities of U.S. issuers that are principally L.L.C.)
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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SMALL-CAP STOCKS
- ----------------------------- ----------------------------------------------
OPPENHEIMER VARIABLE Seeks to achieve capital appreciation by OppenheimerFunds, Inc.
ACCOUNT FUNDS investing in "growth-type" companies.
Aggressive Growth Fund/VA
- -----------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN FUND Seeks long-term capital appreciation by Fred Alger Management, Inc.
Alger American Small focusing on small, fast-growing companies Inc.
Capitalization Portfolio that offer innovative products, services or
technologies to a rapidly expanding marketplace.
Under normal circumstances, the portfolio
invests primarily in the equity securities of
small capitalization companies. A small
capitalization company is one that has a market
capitalization within the range of the Russell
2000 Growth Index or the S&P(R) Small Cap 600
Index.
- ------------------------------------------------------------------------------------------------------------------
MID-CAP GROWTH
- ----------------------------- ----------------------------------------------
JANUS ASPEN SERIES Non-diversified portfolio pursuing Janus Capital Corporation
Aggressive Growth Portfolio long-term growth of capital. Pursues this
objective by normally investing at least 50% of
its assets in equity securities issued by
medium-sized companies.
- -------------------------------------------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE Seeks long-term capital appreciation, Goldman Sachs Asset
INSURANCE TRUST (VIT) primarily through equity securities of Management
Mid Cap Value Fund companies with public stock market
capitalizations within the range of the market
capitalization of companies constituting the
Russell Midcap Index at the time of investment
(currently between $400 million and $16
billion).
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
MID-CAP VALUE
- -------------------------------- ----------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long term growth of GE Investment Management
Value Equity Fund capital by investing primarily in common Incorporated (Subadvised by
stock and other equity securities of NWQ Investment
companies that the investment adviser Management Company)
believes are undervalued by the marketplace
at the time of purchase and that offer the
potential for above-average growth of
capital. Although the current portfolio
reflects investments primarily within the mid
cap range, the Fund is not restricted to
investments within any particular
capitalization and may in the future invest a
majority of its assets in another
capitalization range.
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP GROWTH
- -------------------------------- ----------------------------------------------
JANUS ASPEN SERIES Seeks long-term capital growth consistent Janus Capital Corporation
Growth Portfolio with the preservation of capital and pursues
its objective by investing in common stocks
of companies of any size. Emphasizes
larger, more established issuers.
- ---------------------------------------------------------------------------------------------------------------------
JANUS ASPEN SERIES Seeks long-term growth of capital. Pursues Janus Capital Corporation
Capital Appreciation Portfolio this objective by investing primarily in
common stocks of companies of any size.
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks long-term capital appreciation by Fidelity Management &
PRODUCT FUND II investing mainly in common stocks and in Research Company
VIP II Contrafund Portfolio securities of companies whose value is (Subadvised by Fidelity
believed to have not been fully recognized Management & Research
by the public. This fund invests in domestic (U.K.) Inc. and Fidelity
and foreign issuers. This fund also invests Management & Research Far
in "growth" stocks or "value" stocks or East Inc.)
both.
- ----------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks capital appreciation by investing Fidelity Management &
PRODUCTS FUND primarily in common stocks of companies Research Company
VIP Growth Portfolio believed to have above-average growth
potential.
- ----------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks high total return through a Fidelity Management &
PRODUCTS FUND III combination of current income and capital Research Company
VIP III Growth & Income appreciation by investing a majority of (Subadvised by Fidelity
Portfolio assets in common stocks with a focus on Management & Research
those that pay current dividends and show (U.K.) Inc. and Fidelity
potential for capital appreciation. Management & Research Far
East Inc.)
- -----------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE Seeks capital appreciation from investments OppenheimerFunds, Inc.
ACCOUNT FUNDS in securities of well-known and established
Capital Appreciation Fund/VA companies. Such securities generally have a
history of earnings and dividends and are
issued by seasoned companies (having an
operating history of at least five years,
including predecessors). Current income is
a secondary consideration in the selection
of the Capital Appreciation Fund's portfolio
securities.
- ------------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of GE Investment Management
Premier Growth Equity Fund capital as well as future (rather than Incorporated
current) income by investing primarily in
growth-oriented equity securities.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C>
THE ALGER AMERICAN FUND Seeks long-term capital appreciation by Fred Alger Management,
Alger American Growth focusing on growing companies that Inc.
Portfolio generally have broad product lines, markets,
financial resources and depth of management.
Under normal circumstances, the portfolio
invests primarily in the equity securities of
large companies. The portfolio considers a
large company to have a market capitalization
of $1 billion or greater.
- -----------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE
- ------------------------------ ----------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks reasonable income and will consider Fidelity Management &
PRODUCT FUND the potential for capital appreciation. The Research Company
VIP Equity-Income Portfolio fund also seeks a yield, which exceeds the
composite yield on the securities comprising
the S&P 500 by investing primarily in
income-producing equity securities and by
investing in domestic and foreign issuers.
- -----------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks to provide capital growth by Fidelity Management &
PRODUCTS FUND III investing primarily in common stock and Research Company
VIP III Growth Opportunities other types of securities, including bonds, (Subadvised by Fidelity
Portfolio which may be lower-quality debt securities. Management & Research
(U.K.) Inc. and Fidelity
Management & Research Far
East Inc.)
- -----------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing long-term growth of GE Investment Management
U.S. Equity Fund capital through investments primarily in Incorporated
equity securities of U.S. companies.
- -----------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing capital appreciation GE Investment Management
S&P 500 Index Fund(2) and accumulation of income that Incorporated (Subadvised by
corresponds to the investment return of the State Street Global Advisors)
Standard & Poor's 500 Composite Stock Price
Index through investment in common stocks
comprising the Index.
- -----------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES Seeks high current income and moderate Federated Investment
Utility Fund II capital appreciation by investing primarily Management Company
in equity and debt securities of utility
companies.
- -----------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES Seeks long-term growth of capital with a Federated Investment
American Leaders Fund II secondary objective of providing income. Management Company
Seeks to achieve its objective by investing,
under normal circumstances, at least 65%
of its total assets in common stock of "blue
chip" companies.
- -----------------------------------------------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE Seeks long-term capital growth and growth Goldman Sachs Asset
INSURANCE TRUST (VIT) of income, primarily through equity Management
Growth and Income Fund securities that are considered to have
favorable prospects for capital appreciation
and/or dividend-paying ability.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
(2) "Standard & Poor's," "S&P," and "S&P 500" are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed for use by GE Investment
Management Incorporated. The S&P 500 Index Fund is not sponsored, endorsed, sold
or promoted by Standard & Poor's, and Standard & Poor's makes no representation
or warranty, express or implied, regarding the advisability of investing in this
Fund or the Policy.
23
<PAGE>
<TABLE>
<S> <C> <C>
BALANCED
- -------------------------------- -----------------------------------------------
JANUS ASPEN SERIES Seeks long term growth of capital. Pursues Janus Capital Corporation
Balanced Portfolio this objective consistent with the
preservation of capital and balanced by
current income. Normally invests 40-60% of
its assets in securities selected primarily
for their growth potential and 40-60% of its
assets in securities selected primarily for
their income potential.
- -----------------------------------------------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE Seeks high total return with reduced risk Fidelity Management &
PRODUCTS FUND II over the long-term by allocating assets Research Company
VIP II Asset Manager Portfolio among stocks, bonds and short-term and (Subadvised by Fidelity
money market instruments. Management & Research
(U.K.) Inc. and Fidelity
Management & Research Far
East Inc.)
- -----------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE Seeks total investment return (which OppenheimerFunds, Inc.
ACCOUNT FUNDS includes current income and capital
Multiple Strategies Fund/VA appreciation in the values of its shares)
from investments in common stocks and other
equity securities, bonds and other debt
securities, and "money market" securities.
- -----------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing the highest total GE Investment Management
Total Return Fund return, composed of current income and Incorporated
capital appreciation, as is consistent with
prudent investment risk by investing in
common stock, bonds and money market
instruments, the proportion of each being
continuously determined by the investment
adviser.
- -----------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE Seeks to obtain above-average income by Salomon Brothers Asset
SERIES FUNDS primarily investing in a broad variety of Management Inc
Total Return Fund securities, including stocks, fixed-income
securities and short-term obligations.
- -----------------------------------------------------------------------------------------------------------------------
GLOBAL BONDS
- ----------------------------- ----------------------------------------------
SALOMON BROTHERS VARIABLE Seeks high level of current income with Salomon Brothers Asset
SERIES FUND capital appreciation as a secondary Management Inc
Strategic Bond Fund objective, through a globally-diverse
portfolio of fixed-income investments, including
lower-rated fixed income securities commonly
known as junk bonds.
- -----------------------------------------------------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE Seeks long-term growth of capital with Salomon Brothers Asset
SERIES FUND current income as a secondary objective, Management Inc
Investors Fund primarily through investments in common
stocks of well-known companies.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<S> <C> <C>
HIGH-YIELD BONDS
- ---------------------------- -----------------------------------------------
JANUS ASPEN SERIES Seeks maximum total return consistent with Janus Capital Corporation
Flexible Income Portfolio preservation of capital. Total return is
expected to result from a combination of income
and capital appreciation. The portfolio pursues
its objective primarily by investing in any type
of income-producing securities. This portfolio
may have substantial holdings of lower-rated debt
securities or "junk" bonds. The risks of
investing in junk bonds are described in the
prospectus for Janus Aspen Series, which should
be read carefully before investing.
- -----------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE Seeks high current income from OppenheimerFunds, Inc.
ACCOUNT FUNDS investments in high yield fixed income
High Income Fund/VA securities, including unrated securities or
high-risk securities in lower rating categories.
These securities may be considered 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.
- -----------------------------------------------------------------------------------------------------------------------
FEDERATED INSURANCE SERIES Seeks high current income by investing Federated Investment
High Income Bond Fund II primarily in a diversified portfolio of Management Company
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 and their
high yield potential are described in the
prospectus for the Federated Insurance Series,
which should be read carefully before investing.
- -----------------------------------------------------------------------------------------------------------------------
DOMESTIC BONDS
- ---------------------------- -----------------------------------------------
OPPENHEIMER VARIABLE Seeks high level of current income and OppenheimerFunds, Inc.
ACCOUNT FUNDS capital, and growth when this fund will
Bond Fund/VA invest at least 65% of its total assets in
investment grade debt securities.
- -----------------------------------------------------------------------------------------------------------------------
GE INVESTMENTS FUNDS Objective of providing maximum income GE Investment Management
Income Fund consistent with prudent investment Incorporated
management and preservation of capital by
investing primarily in income-bearing debt
securities and other income bearing
instruments.
- -----------------------------------------------------------------------------------------------------------------------
MONEY MARKET
- ---------------------------- -----------------------------------------------
GE INVESTMENTS FUNDS Objective of providing highest level of GE Investment Management
Money Market Fund current income as is consistent with high Incorporated
liquidity and safety of principal by investing in
various types of good quality money market
securities.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Not all of these portfolios may be available in all states or markets.
We will purchase shares of the portfolios at net asset value and direct them to
the appropriate Investment Subdivisions of Separate Account II. We will redeem
sufficient shares of the
25
<PAGE>
appropriate portfolios at net asset value to pay surrender/partial surrender
proceeds or for other purposes described in the Policy. We automatically
reinvest all dividends and capital gain distributions of the portfolios in
shares of the distributing portfolios at their net asset value on the date of
distribution. In other words, we do not pay portfolio dividends or portfolio
distributions out to Owners as additional units, but instead reflect them in
Unit Values.
Shares of the portfolios of the Funds are not sold directly to the general
public. They are sold to us, and they may also be sold to other insurance
companies that issue variable annuity and variable life insurance policies. In
addition, they may be sold to retirement plans.
When a Fund sells shares in any of its portfolios both to variable annuity and
to variable life insurance separate accounts, it engages in mixed funding. When
a Fund sells shares in any of its portfolios to separate accounts of
unaffiliated life insurance companies, it engages in shared funding.
Each Fund may engage in mixed and shared funding. Therefore, due to differences
in redemption rates or tax treatment, or other considerations, the interests of
various shareholders participating in a Fund could conflict. A Fund's Board of
Directors will monitor for the existence of any material conflicts, and
determine what action, if any, should be taken. SEE the Prospectuses for the
Funds.
We have entered into agreements with either the investment adviser or
distributor of each of the Funds under which the adviser or distributor pays us
a fee ordinarily based upon an annual average percentage of the average
aggregate net amount we have invested on behalf of Account II and other separate
accounts. These percentages differ, and some investment advisers or distributors
pay us a greater percentage than other advisors or distributors. These
agreements reflect administrative services we provide.
YOUR RIGHT TO VOTE PORTFOLIO SHARES
As required by law, we will vote the portfolio shares held in Separate Account
II at meetings of the shareholders of the Funds. The voting will be done
according to the instructions of Owners who have interests in any Investment
Subdivisions which invest in the portfolios of the Funds. If the 1940 Act or any
regulation under it should be amended, and if as a result we determine that we
are permitted to vote the portfolios' shares in our own right, we may elect to
do so.
We will determine the number of votes which you have the right to cast by
applying your percentage interest in an Investment Subdivision to the total
number of votes attributable to the Investment Subdivision. In determining the
number of votes, we will recognize fractional shares.
We will vote portfolio shares of a class held in an Investment Subdivision for
which we received no timely instructions in proportion to the voting
instructions which we received for all Policies participating in that Investment
Subdivision. We will apply voting instructions to abstain on any item to be
voted on a pro-rata basis to reduce the number of votes eligible to be cast.
Whenever a Fund calls a shareholders meeting, each person having a voting
interest in an Investment Subdivision will receive proxy material, reports and
other materials relating to the portfolio. Since each portfolio may engage in
shared funding, other persons or entities besides the Company may vote portfolio
shares. SEE Investment Subdivisions.
26
<PAGE>
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
This section describes the charges and deductions we make under the Policy to
compensate us for the services and benefits we provide, costs and expenses we
incur, and risks we assume. The services and benefits we provide include:
o the partial surrender, surrender, Policy loan and death benefits under
the Policy;
o investment options, including Net Premium allocations, dollar-cost
averaging and portfolio rebalancing programs;
o administration of various elective options under the Policy; and
o the distribution of various reports to Owners.
The costs and expenses we incur include:
o those associated with underwriting applications, increases in Specified
Amount, and riders;
o various overhead and other expenses associated with providing the
services and benefits provided by the Policy;
o sales and marketing expenses; and
o other costs of doing business, such as federal, state and local premium
and other taxes and fees.
The risks we assume include:
o that the Insureds may live for a shorter period of time than estimated,
resulting in the payment of greater death benefits than expected; and
o that the costs of providing the services and benefits under the Policies
will exceed the charges deducted.
We may profit from any charges deducted, such as the mortality and expense risk
charge. We may use any such profits for any purpose, including payment of
distribution expenses.
PREMIUM CHARGE
If the initial Specified Amount is $500,000 or more, we currently deduct a
3 1/2% charge (5% maximum) from each premium before placing the resulting Net
Premium in the Investment Subdivisions. If the initial Specified Amount is at
least $250,000 but less than $500,000, we currently deduct a 6 1/2% premium
charge (8% maximum). We currently do not deduct the maximum premium charge but
reserve the right to do so. We will not assess the premium charge against the
policy loan portion of a premium received from the rollover of a life insurance
policy.
MORTALITY AND EXPENSE RISK CHARGE
We currently deduct a daily charge from assets in the Investment Subdivisions
attributable to the Policies at an effective annual rate of 0.70% of net assets.
We will not increase this charge for the duration of your Policy. This charge is
factored into the net investment factor.
The mortality risk we assume is the risk that the Insureds may live for a
shorter period of time than estimated and, therefore, a greater amount of death
benefit proceeds than expected will be
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payable. The expense risk we assume 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.
MONTHLY DEDUCTION
We make a monthly deduction on the Policy Date and each Monthly Anniversary Day
from Account Value. The monthly deduction for each Policy consists of:
o the cost of insurance charge (discussed below);
o a policy charge of $5;
o an expense charge of up to $.20 per $1,000 of initial Specified Amount
(however, our current practice may be more favorable to you in that we
currently vary this charge based on the issue Age of each Insured, and in
that we currently deduct this charge only in the first ten Policy Years);
o an expense charge for any increases in Specified Amount of up to $.20 per
$1,000 of increase (however, our current practice may be more favorable
to you in that we currently vary this charge based on the issue Age of
each Insured, and in that we currently deduct this charge only during the
first ten Policy Years following the increase); and
o any charges for additional benefits added by riders to the Policy (SEE
Supplemental Benefits).
We will allocate the monthly deduction for a Policy Month among the Investment
Subdivisions of Separate Account II in the same proportion that your Policy's
Account Value in each Subdivision bears to the total Account Value in all
Investment Subdivisions at the beginning of the Policy Month.
COST OF INSURANCE
The cost of insurance is a significant charge under your Policy because it is
the primary charge for the death benefit we provide you. We determine the cost
of insurance in a manner that reflects the anticipated mortality of both
Insureds and the fact that the death benefit is not payable until the death of
the Last Insured. Because the cost of insurance depends on a number of factors
(Age, gender (where applicable), Policy duration, and rating class), the cost
will vary from Policy to Policy and from Monthly Anniversary Day to Monthly
Anniversary Day. The cost of insurance rates generally increase as the Insureds'
attained age increases.
We calculate the cost of insurance on each Monthly Anniversary Day based on the
net amount at risk. We determine the net amount at risk by the following
formula:
Death Benefit = Account Value
-------------
1.0032737
To determine the cost of insurance for a particular Policy Month, we divide the
net amount at risk by 1000 and multiply that result by the applicable cost of
insurance rate. If Option B is in effect, and the Specified Amount has
increased, we first consider the Account Value part of the
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initial Specified Amount. If the Account Value is more than the initial
Specified Amount, we will consider it part of the increased Specified Amounts
resulting from increases in the order of the increases.
The cost of insurance rates for the Policy are based on each Insured's Age,
gender (where applicable), Policy duration, and applicable rating class. We
currently place Insureds in the following rating classes when we issue the
Policy, based on our underwriting: a male or female or unisex rating class where
appropriate under applicable law (currently including the state of Montana); and
a nicotine use or no nicotine use rating class. In addition, some Insureds may
qualify for a preferred rating. The original rating classes apply to the initial
Specified Amount. If you apply for an increase in Specified Amount, you will
have to submit evidence satisfactory to us that each Insured is insurable at the
same rating class used at the time we issued the Policy. The death of the first
Insured to die will not affect the cost of insurance scale for the second
Insured.
We may change the cost of insurance rates from time to time at our sole
discretion, but we guarantee that the rates we charge will never exceed the
maximum rates shown in your Policy. These rates are based on the Commissioners'
1980 Standard Ordinary Mortality Tables. The maximum cost of insurance rates are
based on each Insured's age nearest birthday at the start of the Policy Year.
Modifications to cost of insurance rates are made for rating classes other than
standard. The rates we currently charge are, at most ages, lower than the
maximum permitted under the Policies and depend on our expectation of future
experience with respect to mortality, interest, expenses, persistency, and
taxes. A change in rates will apply to all pairs of persons of the same age,
gender (where applicable), and rating class and whose Policies have been in
effect for the same length of time.
In most states, there is no maturity age, and the cost of insurance charges will
continue past age 100 of the younger Insured.
SURRENDER CHARGE
If you fully surrender your Policy during the surrender charge period, we will
deduct a surrender charge. We calculate the schedule of surrender charges that
applies to a Policy by multiplying surrender charge factors times the Specified
Amount, divided by $1,000. We determine the factors per $1,000 of Specified
Amount and vary them by issue Age, gender (where applicable), and rating class
of each Insured and by the number of months since the Policy Date. The surrender
charge remains level for the first six Policy Years and then decreases uniformly
each Policy month to zero over the next 10 Policy Years or to the younger
Insured's attained age 100, whichever is earlier. We will deduct the surrender
charge before we pay the Surrender Value. The surrender charge will not exceed
$60 per $1,000 of Specified Amount.
The chart below illustrates the surrender charge factor for the first Policy
Year per $1,000 of Specified Amount for Policies which are issued on a male no
nicotine use and female no nicotine use standard rating class basis. These
calculations assume both Insureds are the same issue Age.
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<PAGE>
<TABLE>
<CAPTION>
Factor per $1,000
Issue Age of Specified Amount
- ----------- --------------------
<S> <C>
25/25 $12
35/35 $14
45/45 $18
55/55 $24
65/65 $35
75/75 $41
85/85 $34
</TABLE>
If you increase the Specified Amount (other than as a result of a change from
Death Benefit Option A to Death Benefit Option B), you will be subject to an
additional surrender charge for another 16 Policy Years following the increase
or to the younger Insured's attained age 100, if earlier. We will base the
amount of the additional surrender charge on the initial scale of per $1,000
surrender charge factors calculated at the time of issue.
If you decrease the Specified Amount during the period that surrender charges
apply (other than as a result of partial surrenders or a change from Death
Benefit Option B to Death Benefit Option A), you will be assessed a portion of
the surrender charges to which the Policy is subject. We will deduct the amount
of the surrender charge from your Account Value, and will allocate the charge
among each Investment Subdivision in the same proportion that the Policy's
Account Value in each Investment Subdivision bears to the Account Value in all
Investment Subdivisions. We will base the amount of surrender charge:
(1)first on any surrender charge in effect on the most recent increase and
the amount of reduction to this increase caused by the decrease;
(2)then on any surrender charge in effect on the next most recent increases
successively and the amount of any reduction to each of these increases
caused by the decrease; and
(3)finally on the surrender charge in effect on coverage provided under the
original application and any reduction to this amount caused by the
decrease.
Whenever we deduct a portion of the surrender charges because you decreased the
Specified Amount, we reduce the Policy's remaining surrender charges to reflect
the assessments made.
The total surrender charge for any given Policy Month is the sum of:
o the surrender charge that applies to the initial Specified Amount, adjusted
for any decrease in Specified Amount; plus
o the surrender charges that apply to any increases in Specified Amount,
adjusted for any decrease in Specified Amount.
We disclose the surrender charges on the data pages to your Policy.
We do not assess a surrender charge for partial surrenders, but do assess a
processing fee.
PARTIAL SURRENDER PROCESSING FEE
We deduct a partial surrender processing fee on partial surrenders you make. The
fee equals the lesser of $25 or 2% of the amount surrendered.
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<PAGE>
TRANSFER CHARGE
We assess a $10 transfer charge for each transfer after the first transfer you
make in any calendar month. We take this charge from the amount you transfer.
For purposes of assessing this charge, we consider each transfer request one
transfer, regardless of the number of Investment Subdivisions affected by the
transfer. Multiple transfers within the same Valuation Period are also
considered one transfer for this purpose.
OTHER CHARGES
If you request a projection of illustrative future life insurance under the
Policy and Policy values, we reserve the right to charge a maximum fee of $25
for the cost of preparing the projection.
There are deductions from and expenses paid out of the assets of each portfolio
that are more fully described in each Fund's prospectus.
REDUCTION OF CHARGES FOR GROUP SALES
We may reduce charges and/or deductions for sales of the Policies to a trustee,
employer or similar entity representing a group or to members of the group where
such sales result in savings of sales or administrative expenses. We will base
these discounts on the following:
1.THE SIZE OF THE GROUP. Generally, the sales expenses for each individual
owner for a larger group are less than for a smaller group because more
Policies can be implemented with fewer sales contacts and less
administrative cost.
2.THE TOTAL AMOUNT OF PREMIUM PAYMENTS TO BE RECEIVED FROM A GROUP. Per
Policy sales and other expenses are generally proportionately less on
larger premium payments than on smaller ones.
3.THE PURPOSE FOR WHICH THE POLICIES ARE PURCHASED. Certain types of plans
are more likely to be stable than others. Such stability reduces the number
of sales contacts and administrative and other services required, reduces
sales administration and results in fewer Policy terminations. As a result,
our sales and other expenses are reduced.
4.THE NATURE OF THE GROUP FOR WHICH THE POLICIES ARE BEING PURCHASED.
Certain types of employee and professional groups are more likely to
continue Policy participation for longer periods than are other groups with
more mobile membership. If fewer Policies are terminated in a given group,
our sales and other expenses are reduced.
5.OTHER CIRCUMSTANCES. There may be other circumstances of which we are not
presently aware, which could result in reduced sales expenses.
If, after we consider the factors listed above, we determine that a group
purchase would result in reduced sales expenses, we may reduce the charges
and/or deductions for each group. Reductions in these charges and/or deductions
will not be unfairly discriminatory against any person, including the affected
Owners and all other owners of policies funded by Separate Account II.
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<PAGE>
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THE POLICY
- --------------------------------------------------------------------------------
APPLYING FOR A POLICY
To purchase a Policy, you and your registered representative must complete an
application and submit it to us at our Home Office. You also must pay an initial
premium of a sufficient amount. SEE Premiums, below. You can submit your initial
premium with your application or at a later date. (If you submit your initial
premium with your application, please remember that we will place your premium
in a non-interest bearing account for a certain amount of time. SEE Allocating
Premiums.) Coverage generally becomes effective as of the Policy Date.
Generally, we will issue a Policy covering Insureds from Age 20 up to Age 85 if
evidence of insurability satisfies our underwriting rules. Required evidence of
insurability may include, among other things, medical examinations of the
Insureds. We may reject an application for any lawful reason.
If you do not pay the full first premium with your application, the insurance
will become effective on the effective date. This date is the date that you pay
your premium and that we deliver your Policy. All persons proposed for insurance
must be insurable on the Policy Date.
If you pay the full first premium with your application, we may give you a
conditional receipt. This means that, subject to our underwriting requirements
and subject to a maximum limitation, your insurance will become effective on the
effective date we specified in the conditional receipt, provided the Insureds
are found to be, on the effective date, insurable at standard premium rates for
the plan and amount of insurance requested in the application. This effective
date will be the latest of (i) the date of completion of the application, (ii)
the date of completion of all medical exams and tests we require, and (iii) the
policy date you requested when that date is later than the date you completed
your application.
OWNER
You have rights in the Policy during the Insureds' lifetimes. If you die before
the Insureds and there is no contingent Owner, ownership will pass to your
estate.
We will treat Joint Owners as having equal undivided interests in the Policy.
All Owners must together exercise any ownership rights in the Policy.
BENEFICIARY
You designate the primary Beneficiaries and contingent Beneficiaries when you
apply for the Policy. You may name one or more primary Beneficiaries or
contingent Beneficiaries. We will pay the proceeds in equal shares to the
survivors in the appropriate Beneficiary class, unless you request otherwise.
Unless an optional payment plan is chosen, we will pay the Death Proceeds in a
lump sum to the primary Beneficiary(ies). If the primary Beneficiary(ies) dies
before the Insureds, we will pay the proceeds to the contingent
Beneficiary(ies). If there is no surviving Beneficiary(ies) we will pay the
proceeds to you or your estate.
CHANGING THE BENEFICIARY
If you reserve the right, you may change the Beneficiary during the Insureds'
lives. To make this change, please write our Home Office. The request and the
change must be in a form
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satisfactory to us and we must actually receive the request. The change will
take effect as of the date you signed the request.
CANCELING A POLICY
You may cancel a Policy during the "free-look period" by returning it to us at
our Home Office or to the agent who sold it. The free-look period expires 10
days after you receive the Policy. The free-look period is longer if required by
state law. If you decide to cancel the Policy during the free-look period, we
will treat the Policy as if it had never been issued. Within seven calendar days
after we receive the returned Policy, we will refund the amount required by
state law. Depending on the state, the amount of the refund may equal the total
of all premiums paid for the Policy or an amount equal to the sum of:
o the total amount of monthly deductions made against Account Value and any
charges deducted from premiums paid (excluding portfolio fees and charges
and mortality and expense risk charges); plus
o Account Value on the date we (or our agent) receive the returned Policy.
- --------------------------------------------------------------------------------
PREMIUMS
- --------------------------------------------------------------------------------
GENERAL
The premium amounts sufficient to fund a Policy depend on a number of factors,
such as the Age, gender (where applicable), and rating class of the proposed
Insureds, the desired Specified Amount, any supplemental benefits, and
investment performance of the Investment Subdivisions. We will usually credit
your initial premium payment to the Policy on the later of the date we approve
your application and the date we receive your payment. We will credit any
subsequent premium payment to the Policy on the Valuation Day we receive it at
our Home Office. After you pay the initial premium, you may make unscheduled
premium payments in any amount and at any time subject to certain restrictions.
The total premiums you pay may not exceed guideline premium limitations for life
insurance set forth in the Code and shown in your Policy. We may reject any
premium, or any portion of a premium, that would result in the Policy being
disqualified as life insurance under the Code. We will refund any rejected
premium along with any interest it accrued. For your convenience, we will
monitor Policies and will attempt to notify you on a timely basis if your Policy
is in jeopardy of becoming a Modified Endowment Contract ("MEC") under the Code.
SEE Tax Considerations.
We reserve the right to limit the number and amount of any unscheduled premium
payment.
TAX FREE EXCHANGES (1035 EXCHANGES)
We will accept as part of your initial premium money from one contract that
qualified for a tax free exchange under Section 1035 of the Code. If you
contemplate such an exchange, you should consult a competent tax advisor to
learn the potential tax effects of such a transaction. We will accept 1035
exchanges even if there is an outstanding loan on the other policy, so long as
the outstanding loan is no more than 40% of the rollover premium.
CERTAIN INTERNAL EXCHANGES
If you replace an existing GE Life and Annuity Assurance Company fixed permanent
joint life insurance policy on the same two lives with this Policy, we may waive
some or all of the
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<PAGE>
surrender charges on the fixed permanent joint life insurance policy, provided
that: 1) the fixed permanent joint life insurance policy has a positive
surrender value at the time of the exchange; and 2) the entire account value in
the fixed permanent joint life insurance policy is rolled over into the Policy.
If you qualify, the maximum amount of surrender charges we will waive on the
fixed permanent joint life insurance policy equals the following, based on the
initial Specified Amount of this Policy. (1) If the initial Specified Amount on
this Policy is $500,000 or more, the maximum amount of surrender charge we will
waive on the fixed permanent joint life insurance policy equals: Surrender
Charge (new) + .035 Account Value, where Surrender Charge (new) is the initial
(first Policy Month) surrender charge of this Policy and Account Value is the
account value of the fixed permanent joint life insurance policy at the time of
the exchange. (2) If the initial Specified Amount on this Policy is at least
$250,000 but less than $500,000, the maximum amount of surrender charge we will
waive on the fixed permanent joint life insurance policy equals: Surrender
Charge (new) + .065 Account Value, where Surrender Charge (new) is the initial
(first Policy Month) surrender charge of this Policy and Account Value is the
account value of the fixed permanent joint life insurance policy at the time of
the exchange. Please contact us for more details.
PERIODIC PREMIUM PLAN
When you apply for a Policy, you may select a periodic premium payment plan.
Under this plan, you may choose to receive a premium notice either annually,
semi-annually, or quarterly. You can also arrange for annual, semi-annual,
quarterly or monthly premium payments paid via automatic deduction from your
bank account or any other similar account we accept. You are not required to pay
premiums in accordance with this premium plan; you can pay more or less than
planned or skip a planned premium payment entirely. You can change the amount of
planned premiums and payment arrangements, or switch between frequencies,
whenever you want by providing satisfactory instructions to our Home Office.
This change will be effective upon our receipt of the instructions. Depending on
the Account Value at the time of an increase in the Specified Amount and the
amount of the increase requested, a change in your periodic premium payments may
be advisable. SEE Changing the Specified Amount.
MINIMUM PREMIUM PAYMENT
Generally, the minimum modal premium we will accept is $25 (please keep in mind
that you may have to pay a higher amount to keep the Policy in force). Even if
you pay the minimum premium amount, your Policy may lapse. SEE Premium to
Prevent Termination. For purposes of the minimum premium payment requirements,
we deem any payment to be a planned periodic premium if we receive it within 30
days (before or after) of the scheduled date for a planned periodic premium
payment and the percentage difference between the planned amount and the actual
payment amount is not more than 10%. We will deem all other premium payments to
be unscheduled premium payments. Unless you direct us otherwise, we apply
unscheduled premium payments first to repay any Policy Debt.
ALLOCATING PREMIUMS
When you apply for a Policy, you specify the percentage of your Net Premium we
allocate to each Investment Subdivision. You may only direct your Net Premiums
and Account Value to seven Investment Subdivisions at any given time. You can
change the allocation percentages at
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<PAGE>
any time by writing or calling our Home Office. The change will apply to all
premiums we receive with or after we receive your instructions. Net Premium
allocations must be in percentages totaling 100%, and each allocation percentage
must be a whole number.
Until we approve your application, receive all necessary forms including any
subsequent amendments to the application, and receive the entire initial
premium, we will place any premiums you pay into a non-interest bearing account.
We will then allocate your Net Premium during the free look period as specified
below.
In states that require us to refund your premiums paid upon the exercise of
your free look right, we will allocate all Net Premiums to the Investment
Subdivision investing in the Money Market Fund of GE Investments Funds during
the free look period. Fifteen days following this allocation, we will transfer
the Account Value to the Investment Subdivisions based on the Net Premium
allocation percentages you selected. In other states, we will allocate Net
Premiums to the Investment Subdivisions based on the Net Premium allocation
percentages you specified in your application. SEE How Your Account Value
Varies.
- --------------------------------------------------------------------------------
HOW YOUR ACCOUNT VALUE VARIES
- --------------------------------------------------------------------------------
ACCOUNT VALUE
The Account Value is the entire amount we hold under your Policy for you. The
Account Value serves as a starting point for calculating certain values under a
Policy. It is the sum of the total amount under the Policy in each Investment
Subdivision and the amount held in the General Account to secure Policy Debt.
SEE Loan Benefits. We determine Account Value first on your Policy Date (or on
the date we receive your initial premium, if later) and after that on each
Valuation Day. Your Account Value will vary to reflect the performance of the
Investment Subdivisions to which you have allocated amounts and also will vary
to reflect Policy Debt, charges for monthly deduction, mortality and expense
risk charges, transfers, partial surrenders, Policy loan interest, and Policy
loan repayments. Your Account Value may be more or less than the premiums you
paid.
SURRENDER VALUE
The Surrender Value on a Valuation Day is the Account Value reduced by both any
surrender charge that we would deduct if you surrendered the Policy that day and
any Policy Debt.
INVESTMENT SUBDIVISION VALUES
On any Valuation Day, the value of an Investment Subdivision equals the number
of Investment Subdivision units we credit to the Policy multiplied by the Unit
Value for that day. When you make allocations to an Investment Subdivision,
either by Net Premium allocation, transfer of Account Value, transfer of loan
interest from the General Account, or repayment of a Policy loan, we credit your
Policy with units in that Investment Subdivision. We determine the number of
units by dividing the amount allocated, transferred or repaid to the Investment
Subdivision by the Investment Subdivision's Unit Value for the Valuation Day
when we effect the allocation, transfer or repayment.
The number of units we credit to a Policy will decrease whenever we take the
allocated portion of the monthly deduction, you take a Policy loan or a partial
surrender from the Investment Subdivision, you transfer an amount from the
Investment Subdivision, you take a partial surrender from the Investment
Subdivision, or you surrender the Policy.
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UNIT VALUES
We arbitrarily set the Unit Value for each Investment Subdivision at $10 when we
established the Investment Subdivision. After that, an Investment Subdivision's
Unit Value varies to reflect the investment experience of the underlying
portfolio, and may increase or decrease from one Valuation Day to the next. We
determine Unit Value, after an Investment Subdivision's operations begin, by
multiplying the net investment factor for that Valuation Period by the Unit
Value for the immediately preceding period.
NET INVESTMENT FACTOR
The net investment factor for a Valuation Period is (a) divided by (b), minus
(c), where:
(a) is the result of:
1. the value of the assets at the end of the preceding Valuation
Period; PLUS
2.the investment income and capital gains, realized or unrealized,
credited to those assets at the end of the Valuation Period for which
the net investment factor is being determined; MINUS
3.the capital losses, realized or unrealized, charged against those
assets during the Valuation Period; MINUS
4.any amount charged against the Separate Account for taxes, or any
amount we set aside during the Valuation Period as a provision for
taxes attributable to the operation or maintenance of the Separate
Account; and
(b)is the value of the assets in the Investment Subdivision at the end of
the preceding Valuation Period; and
(c) is a charge no greater than .0019246% for each day in the Valuation
Period. This corresponds to .70% per year.
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TRANSFERS
- --------------------------------------------------------------------------------
GENERAL
You may transfer Account Value among the Investment Subdivisions at any time
after the end of the free look period. Transfer requests may be made in writing
or in any other form acceptable to us. A transfer will take effect as of the end
of the Valuation Period during which we receive your request at our Home Office.
We may defer transfers under the same conditions that we may delay paying
proceeds. SEE Requesting Payments. Currently, there is no limit on the number of
transfers among the Investment Subdivisions, but we reserve the right to limit
the number of transfers to twelve each calendar year. We reserve the right to
modify, restrict, suspend or eliminate the transfer privileges, including
telephone transfer privileges, at any time, for any reason. There is a charge
after the first transfer made in a calendar month. SEE Transfer Charge.
Sometimes, we may not honor your transfer request. We may not honor your
transfer request:
(i) if any Investment Subdivision that would be affected by the transfer is
unable to purchase or redeem shares of the Fund in which the Investment
Subdivision invests;
(ii) if the transfer is a result of more than one trade involving the same
Investment Subdivision within a 30 day period;
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<PAGE>
(iii) if the transfer would adversely affect unit values; or
(iv) if the transfer would adversely affect any portfolio affected by the
transfer.
We also may not honor transfers made by third parties. (SEE Transfers by Third
Parties.)
When thinking about a transfer of AccountValue, you should consider the inherent
risk involved. Frequent transfers based on short-term expectations may increase
the risk that you will make a transfer at an inopportune time.
DOLLAR-COST AVERAGING
The dollar-cost averaging program permits you to systematically transfer on a
monthly or quarterly basis a set dollar amount from the Investment Subdivision
investing in the Money Market portfolio of the GE Investments Funds (the "Money
Market Investment Subdivision") to any combination of other Investment
Subdivisions (as long as the total number of Investment Subdivisions used does
not exceed the maximum number allowed under the Policy). The dollar-cost
averaging method of investment is designed to reduce the risk of making
purchases only when the price of units is high, but you should carefully
consider your financial ability to continue the program over a long enough
period of time to purchase units when their value is low as well as when it is
high. Dollar-cost averaging does not assure a profit or protect against a loss.
You may participate in the dollar-cost averaging program by completing a
dollar-cost averaging agreement or calling our Home Office. To use the
dollar-cost averaging program, you must transfer at least $100 from the Money
Market Investment Subdivision to any other Investment Subdivision. If any
transfer would leave less than $100 in the Money Market Investment Subdivision,
we will transfer the entire amount. Once elected, dollar-cost averaging remains
in effect from the date we receive your request until the value of the
Investment Subdivision from which transfers are being made is depleted, or until
you cancel the program by written request or by telephone if we have your
telephone authorization on file. If you elect the program at time of
application, the dollar-cost averaging program will begin on the 5th day of the
month immediately following the allocation of your Net Premium to the Investment
Subdivisions (SEE "Allocating Premiums" for a description of when this occurs).
There is no additional charge for dollar-cost averaging, and we do not consider
a transfer under this program a transfer for purposes of assessing a transfer
charge, nor for calculating any limit on the maximum number of transfers we may
impose for a calendar year. We reserve the right to discontinue or modify the
dollar-cost averaging program at any time and for any reason.
ASSET ALLOCATION
You may select from five asset allocation model portfolios offered by us, or you
may use a model offered by us as a guide to help you develop your own asset
allocation program. The models designed by us are as follows:
<TABLE>
<CAPTION>
Model Investment and Risk Profile
- ------- ----------------------------
<S> <C>
1 Income
2 Enhanced Income
3 Growth & Income
4 Growth
5 Aggressive Growth
</TABLE>
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<PAGE>
If you elect to participate in the asset allocation program, we will
automatically allocate all premium payments among the Investment Subdivisions
indicated by the model and the portfolios within the model you select. Although
you may use only one model at a time, you may elect to change your selection as
your tolerance for risk, needs, and/or objectives change. You may use a
questionnaire that we offer to determine the model that best meets your risk
tolerance and time horizons. Asset allocation does not guarantee a profit or
protect against a loss.
Because each Investment Subdivision performs differently over time, your
portfolio mix may vary from its initial allocations. You may elect to have the
portfolios automatically rebalanced under our portfolio rebalancing program,
described below.
From time to time, we will review the models and may find that allocation
percentages among the Investment Subdivisions or even some of the Investment
Subdivisions within a particular model need to be changed. We will send you
notice that such a change has been made. Unless you elect to participate in the
new allocation model you will remain in your current designated allocation
model. This change will not be made automatically.
There is no additional charge for the asset allocation program. We reserve the
right to discontinue offering this program at any time and for any reason.
PORTFOLIO REBALANCING
Once you allocate your money among the Investment Subdivisions, the performance
of each Investment Subdivision may cause your allocation to shift. You may
instruct us to automatically rebalance (on a quarterly, semi-annual or annual
basis) your Account Value to return to the percentages specified in your
allocation instructions. You may elect to participate in the portfolio
rebalancing program at any time by completing the portfolio rebalancing
agreement. Your percentage allocations must be in whole percentages. Subsequent
changes to your percentage allocations may be made at any time by writing or
calling our Home Office. Once elected, portfolio rebalancing remains in effect
from the date we receive your request until you instruct us to discontinue
portfolio rebalancing. There is no additional charge for using portfolio
rebalancing, and we do not consider a portfolio rebalancing transfer a transfer
for purposes of assessing a transfer charge, nor for calculating any limit on
the maximum number of transfers we may impose for a calendar year. We reserve
the right to discontinue or modify the portfolio rebalancing program at any time
and for any reason. Portfolio rebalancing does not guarantee a profit or protect
against a loss.
TRANSFERS BY THIRD PARTIES
As a general rule and as a convenience to you, we allow you to give a third
party the right to effect transfers on your behalf. However, when the same third
party makes transfers for many Owners, the result can be simultaneous transfers
involving large amounts of Account Value. Such transfers can disrupt the orderly
management of the portfolios underlying the Policy, can result in higher costs
to Owners, and are generally not compatible with the long-range goals of Owners.
We believe that such simultaneous transfers effected by such third parties are
not in the best interests of all shareholders of the portfolios underlying the
Policies, and the managements of those portfolios share this position.
Therefore, to the extent necessary to reduce the adverse effects of simultaneous
transfers made by third parties who make transfers on behalf of multiple Owners,
we may not honor such
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transfers. Also, we will institute procedures to assure that the transfer
requests that we receive have, in fact, been made by the Owners in whose names
they are submitted. These procedures will not, however, prevent Owners from
making their own transfer requests.
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DEATH BENEFITS
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As long as the Policy remains in force, we will process a claim for Death
Proceeds upon receipt at our Home Office of: (i) the Policy; (ii) satisfactory
proof that both Insureds died while the Policy was in effect; and (iii) proof of
interest of the claimant. SEE Requesting Payments. We will pay the Death
Proceeds to the Beneficiary. No Death Proceeds are available at the death of the
first Insured to die.
AMOUNT OF DEATH PROCEEDS
The amount of Death Proceeds will depend on:
o the Death Benefit determined under the Death Benefit Option in effect on
the date of death of the Last Insured;
o the use of the Account Value;
o any partial surrenders;
o any Policy Debt;
o any additional insurance provided by rider;
o any increase or decrease in existing coverage;
o either Insured's suicide during the first two Policy Years (subject to
state exceptions) or during the first two Policy Years (subject to state
exceptions) following an increase in existing coverage; and
o a misstatement of either Insured's Age or gender.
DEATH BENEFIT OPTIONS
There are two Death Benefit Options available under the Policy. Under Option A,
the Death Benefit equals the greater of:
o the Specified Amount plus the Account Value; or
o the applicable corridor percentage of the Account Value as determined
using the table of percentages shown below.
Under Option B, the Death Benefit equals the greater of:
o the Specified Amount; or
o the applicable corridor percentage of the Account Value as determined
using the table of percentages shown below.
Under both options, we determine the Specified Amount and Account Value on the
date of death of the Last Insured. The corridor percentage is 250% until the
younger Insured attains Age 40 and declines after that as the younger Insured's
Attained Age increases. If the younger Insured was the first to die, the
corridor percentage will depend on the Attained Age that he or she would have
been if still living. If the table of percentages currently in effect becomes
inconsistent with any federal income tax laws and/or regulations, we reserve the
right to change the table.
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<TABLE>
<CAPTION>
Table of Percentages of Account Value
Younger Younger Younger
Insured's Corridor Insured's Corridor Insured's Corridor
Attained Age Percentage Attained Age Percentage Attained Age Percentage
- -------------- ------------ -------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
0-40 250% 54 157% 68 117%
41 243% 55 150% 69 116%
42 236% 56 146% 70 115%
43 229% 57 142% 71 113%
44 222% 58 138% 72 111%
45 215% 59 134% 73 109%
46 209% 60 130% 74 107%
47 203% 61 128% 75-90 105%
48 197% 62 126% 91 104%
49 191% 63 124% 92 103%
50 185% 64 122% 93 102%
51 178% 65 120% 94+ 101%
52 171% 66 119%
53 164% 67 118%
</TABLE>
Under Option A, the Death Benefit will vary directly with the investment
performance of the Account Value. Under Option B, the Death Benefit ordinarily
will not change until the applicable percentage amount of the Account Value
exceeds the Specified Amount or you change the Specified Amount.
CHANGING THE DEATH BENEFIT OPTION
You select the Death Benefit Option when you apply for the Policy. However, you
may change the Option on your Policy at any time by writing to our Home Office.
The effective date of the change will be the Monthly Anniversary Day after we
receive the request for the change. We will send you revised Policy data pages
reflecting the new Option and the effective date of the change. If you request a
change from Option A to Option B, we will increase the Specified Amount by the
Account Value on the effective date of the increase. If you request a change
from Option B to Option A, we will decrease the Specified Amount after the
change by the Account Value on the effective date of the change. A change in the
Death Benefit Option will affect the cost of insurance charges.
CHANGING THE SPECIFIED AMOUNT
After a Policy has been in effect for one year, you may increase or decrease the
Specified Amount. To make a change, you must send a written request and the
Policy to our Home Office. Any change in the Specified Amount may affect the
cost of insurance rate and the net amount at risk, both of which may change your
cost of insurance. SEE Monthly Deduction and Cost of Insurance. Depending on the
Account Value at the time of an increase in the Specified Amount and the amount
of the increase requested, it may be advisable to change your periodic payments
upon an increase in the Specified Amount.
Any change in the Specified Amount will affect the maximum premium limitation.
If a decrease in the Specified Amount causes the premiums to exceed new lower
limitations required by federal tax law, we will withdraw the excess from
Account Value and refund it to you so that the Policy will continue to meet
these requirements. We will withdraw the Account Value that we refund from each
Investment Subdivision in the same proportion that the
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Account Value in that Investment Subdivision bears to the total Account Value in
all Investment Subdivisions under the Policy at the time of the withdrawal
(I.E., on a pro-rata basis).
Any decrease in the Specified Amount will become effective on the Monthly
Anniversary Day after the date we receive the request. The decrease will first
apply to coverage provided by the most recent increase, then to the next most
recent increases successively, then to the coverage under the original
application. During the Continuation Period, we will not allow a decrease unless
the Account Value less any Policy Debt is greater than the surrender charge. The
Specified Amount following a decrease can never be less than the minimum
Specified Amount for the Policy when we issued it. A decrease may cause us to
assess a surrender charge.
While both Insureds are living, you may apply for an increase in Specified
Amount by completing a supplemental application. You will have to submit
evidence satisfactory to us that each Insured is insurable at the same or better
rating class used when the Policy was issued. An increase in Specified Amount
(other than as a result of a change from Death Benefit Option A to Death Benefit
Option B) will subject you to additional surrender charges. SEE Surrender
Charge. Any approved increase will become effective on the date shown in the
supplemental Policy data page. Please note that an increase will not become
effective if the Policy's Surrender Value is too low to cover the monthly
deduction for the Policy Month following the increase.
If there is an increase in the Specified Amount, you will incur a monthly
expense charge of up to $.20 per $1,000 of increase. We currently vary this
charge based on the issue Age of each Insured, and we currently deduct this
charge only during the first ten Policy Years following the increase. This
charge will be included in the monthly deduction. SEE Monthly Deduction and
Surrender Charge.
An increase in the Specified Amount will increase the Continuation Amounts.
A change in your Specified Amount may have federal tax consequences. SEE Tax
Considerations.
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SURRENDERS AND PARTIAL SURRENDERS
- --------------------------------------------------------------------------------
SURRENDERS
You may cancel and surrender your Policy at any time before the death of the
Last Insured. The Policy will terminate on the Valuation Day we receive your
request at our Home Office, and you will not be able to reinstate it.
We will pay you the Surrender Value in a lump sum unless you make other
arrangements. You will incur a surrender charge if you surrender your Policy
during the first 16 Policy Years or to the younger Insured's attained age 100 if
earlier. A surrender may have adverse tax consequences. SEE Tax Considerations.
PARTIAL SURRENDERS
You may make partial surrenders under your Policy if you elected Option A. If
you elected Option B, you only may make partial surrenders after the first
Policy Year. The minimum partial surrender amount is $500. The maximum partial
surrender amount is the lesser of: a) the
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<PAGE>
Surrender Value less $500; and b) the available loan amount (which is equal to
90% of the difference between Account Value and any surrender charges, minus any
Policy Debt).
We will assess a processing fee for each partial surrender. SEE Partial
Surrender Processing Fee. The amount of the partial surrender will equal the
amount you requested to surrender plus the processing fee.
When you request a partial surrender, you can direct how we deduct the surrender
from your Account Value. If you provide no directions, we will deduct the
partial surrender proportionately from the Investment Subdivisions in which you
are invested.
EFFECT OF PARTIAL SURRENDERS ON ACCOUNT VALUE AND DEATH PROCEEDS
A partial surrender will reduce both the Account Value and the Death Proceeds by
the amount of the partial surrender.
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LOANS
- --------------------------------------------------------------------------------
GENERAL
You may borrow up to the following amount:
o 90% of the difference between your Account Value at the end of the
Valuation Period during which we received your loan request and any
surrender charges on the date of the loan;
o less any outstanding Policy Debt.
You may request Policy loans by writing our Home Office.
When we make a loan, we transfer an amount equal to the loan proceeds from your
Account Value in Separate Account II to our General Account and hold it as
"collateral" for the loan. If you do not direct an allocation for this transfer,
we will make it on a pro-rata basis from each Investment Subdivision in which
you have invested. We will credit interest at an annual rate of at least 4% to
the collateral, and we may credit interest at a higher rate on that portion of
the collateral that includes Preferred Policy Debt (see below).
You may repay a loan in part or in full at any time during either Insured's life
while your Policy is in effect. When you repay a loan, we transfer an amount
equal to the repayment from our General Account to Separate Account II and
allocate it as you directed when you repaid the loan. If you provide no
directions, we will allocate the amount according to your standing instructions
for Net Premium allocations.
PREFERRED POLICY DEBT
We will designate a portion of Policy loans taken or existing on or after the
Preferred Loan Availability Date (as shown on the Policy data pages) as
Preferred Policy Debt. In Policy Years 11 and later, Preferred Policy Debt will
be at least as large as:
o the Account Value less any surrender charge that applies;
o minus the total premiums paid.
We redetermine the amount of Preferred Policy Debt each Policy Month. We reserve
the right to change this practice in our sole discretion.
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We currently credit interest at an annual rate of 6% to that portion of Account
Value transferred to the General Account which equals Preferred Policy Debt. We
reserve the right to change, at our sole discretion, the interest rate we credit
to the amount of Account Value we transferred to the General Account. We
guarantee that Preferred Policy Debt will earn at least a minimum annual
interest rate of 4%.
INTEREST RATE CHARGED
We will charge interest daily on any outstanding Policy loan at an effective
annual rate of 6%. Interest is due and payable at the end of each Policy Year
while a Policy loan is outstanding. If, on any Policy Anniversary, you have not
paid interest accrued since the last Policy Anniversary, we add the amount of
the interest to the loan and this becomes part of your outstanding Policy Debt.
We transfer the interest due from each Investment Subdivision on a pro-rata
basis.
REPAYMENT OF POLICY DEBT
You may repay all or part of your Policy Debt at any time while either Insured
is living and the Policy is in force. We will treat any payments by you other
than planned periodic premiums first as the repayment of any outstanding Policy
Debt. We will treat the portion of the payment in excess of any outstanding
Policy Debt as an unscheduled premium payment. We will first apply any repayment
to reduce the portion of Policy Debt that is not Preferred Policy Debt.
You must send loan repayments to our Home Office. We will credit the repayments
as of the date we receive them. We do not treat a Policy loan repayment as a
premium payment, and a loan repayment is not subject to the premium charge.
EFFECT OF POLICY LOANS
A Policy loan affects the Policy, because we reduce the Death Proceeds and
Surrender Value under the Policy by the amount of any outstanding loan plus
interest you owe on the loan. Repaying the loan causes the Death Proceeds and
Surrender Value to increase by the amount of the repayment. As long as a loan is
outstanding, we hold an amount equal to the loan as collateral. This amount is
not affected by Separate Account II's investment performance. Amounts
transferred from Separate Account II as collateral will affect the Account Value
because we credit such amounts with an interest rate we declare rather than a
rate of return reflecting the investment performance of Separate Account II.
There are risks involved in taking a Policy loan, a few of which include the
potential for a Policy to lapse if projected earnings, taking into account
outstanding loans, are not achieved. A Policy loan may also have possible
adverse tax consequences that could occur if a Policy lapses with loans
outstanding. SEE Tax Considerations.
We will notify you if the sum of your loans plus any interest you owe on the
loans is more than the Account Value less applicable surrender charges, or if
during the Continuation Period, the sum of your loans plus any interest you owe
on the loans is more than the Account Value less any applicable surrender
charges, and the Net Total Premium is less than the Continuation Amount. If you
do not submit a sufficient payment within 61 days from the date of the notice,
your Policy may terminate.
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<PAGE>
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TERMINATION
- --------------------------------------------------------------------------------
PREMIUM TO PREVENT TERMINATION
Generally, if on a Monthly Anniversary Day, the Surrender Value of your Policy
is too low to cover the monthly deduction, a Policy will be in default and a
grace period will begin. In that case, we will mail you notice of the additional
premium necessary to prevent your Policy from terminating. You will have a
61-day grace period from the date we mail the notice to make the required
premium payment.
However, your Policy will not lapse during the Continuation Period, even if your
Surrender Value is too low to cover the monthly deduction, so long as the Net
Total Premium is at least equal to the Continuation Amount. At the end of the
Continuation Period, you may, however, have to make an additional premium
payment to keep the Policy in force.
YOUR POLICY WILL REMAIN IN EFFECT DURING THE GRACE PERIOD
If the death of the Last Insured occurs during the grace period before you pay
the required premium, the Death Proceeds will still be payable to the
Beneficiary, although we will reduce the amount of the Death Proceeds by the
amount of premium that would have been required to keep the Policy in force. If
you have not paid the required premium before the grace period ends, your Policy
will terminate. It will have no value and no benefits will be payable. However,
you may reinstate your policy under certain circumstances.
REINSTATEMENT
If you have not surrendered your Policy, you may reinstate your Policy within
three years after termination, subject to compliance with certain conditions,
including the payment of a necessary premium. You must also submit evidence of
insurability satisfactory to us that each Insured is insurable at the same
rating class used at Policy issue to determine the guaranteed maximum cost of
insurance rate scale. SEE your Policy for further information.
Any termination and subsequent reinstatement of the Policy will reduce the
Continuation Amounts.
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PAYMENTS AND TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
REQUESTING PAYMENTS
You may send your written requests for payment to our Home Office or give them
to one of our authorized agents. We will ordinarily pay any Death Proceeds, loan
proceeds or surrender or partial surrender proceeds in a lump sum within seven
days after receipt at our Home Office of all the documents required for such a
payment. Other than the Death Proceeds, which we determine as of the date of
death of the Last Insured, the amount we pay is as of the end of the Valuation
Period during which our Home Office receives all required documents. We may pay
your Death Proceeds in a lump sum or under an optional payment plan.
SEE Optional Payment Plans.
Any Death Proceeds that we pay in one lump sum will include interest from the
date of death of the Last Insured to the date of payment. We will pay interest
at a rate we set, or a rate set by law if greater. The minimum interest rate
which we may pay is 2.5%. We will not pay interest beyond one year or any longer
time set by law. We will reduce Death Proceeds by any
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<PAGE>
outstanding Policy Debt and any due and unpaid charges and will increase Death
Proceeds by any benefits added by rider.
We may delay making a payment or processing a transfer request if:
o the disposal or valuation of Separate Account II's assets is not
reasonably practicable because the New York Stock Exchange is closed for
other than a regular holiday or weekend, trading is restricted by the
SEC, or the SEC declares that an emergency exists; or
o the SEC by order permits postponement of payment to protect our Policy
Owners.
We also may defer making payments attributable to a check that has not cleared
the bank on which it is drawn.
TELEPHONE TRANSACTIONS
You may make certain requests under the Policy by telephone provided you sent
written authorization to us at our Home Office. These include requests for
transfers, changes in premium allocation designations, dollar-cost averaging
changes and changes in the portfolio rebalancing program. Our Home Office will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include, among others, requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. Your request for telephone transactions
authorizes us to record telephone calls. If we do not follow reasonable
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. However, if we follow reasonable procedures, we will not be liable
for any losses due to unauthorized or fraudulent instructions.
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TAX CONSIDERATIONS
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
INTRODUCTION
This part of the Prospectus discusses the Federal income tax treatment of the
Policy. The Federal income tax treatment of the Policy is complex and sometimes
uncertain. The Federal income tax rules may vary with your particular
circumstances.
THIS DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. It does not
address all of the Federal income tax rules that may affect you and your Policy.
This discussion also does not address Federal estate or gift tax consequences,
or state or local tax consequences, associated with a Policy. As a result, you
should always consult a tax advisor about the application of tax rules to your
individual situation.
TAX STATUS OF THE POLICY
Federal income tax law generally grants favorable treatment to life insurance:
the proceeds paid on the death of the Last Insured are excluded from the gross
income of the Beneficiary, and the Owner is not taxed on increases in the
Account Value unless amounts are distributed while the Insureds are alive. For
this treatment to apply to your Policy, the premiums paid for your Policy must
not exceed a limit established by the tax law. An increase or decrease in the
Policy's Specified Amount may change this premium limit. Also, due to the
coverage of more
45
<PAGE>
than one Insured under the Policy, there is some uncertainty about how this
limit should be calculated. As a result, we may need to return a portion of your
premiums (with earnings) and impose higher cost of insurance charges in the
future.
We will monitor the premiums paid for your Policy to keep them within the tax
law's limit. However, for your Policy to receive favorable tax treatment as life
insurance, two other requirements must be met:
o The investments of Separate Account II must be "adequately diversified"
in accordance with Internal Revenue Service ("IRS") regulations; and
o your right to choose particular investments for a Policy must be limited.
INVESTMENTS IN SEPARATE ACCOUNT II MUST BE DIVERSIFIED: The IRS has issued
regulations that prescribe standards for determining whether the investments of
Separate Account II, including the assets of the Funds in which Separate Account
II invests, are "adequately diversified." If Separate Account II fails to comply
with these diversification standards, you could be required to pay tax currently
on the excess of the Account Value over the premiums paid for the Policy.
Although we do not control the investments of all of the Funds (the Company only
indirectly controls those of GE Investments Funds, Inc., through an affiliated
company), we expect that the Funds will comply with the IRS regulations so that
Separate Account II will be considered "adequately diversified."
RESTRICTIONS ON THE EXTENT TO WHICH YOU CAN DIRECT THE INVESTMENT OF ACCOUNT
VALUES: Federal income tax law limits your right to choose particular
investments for the Policy. The U.S. Treasury Department stated in 1986 that it
expected to issue guidance clarifying those limits, but it has not yet done so.
Thus, the nature of the limits is currently uncertain. As a result, your right
to allocate Account Values among the Funds may exceed those limits. If so, you
would be treated as the owner of a portion of the assets of Separate Account II
and thus subject to current taxation on the income and gains from those assets.
The Company does not know what limits may be set forth in any guidance that the
Treasury Department may issue, or whether any such limits will apply to existing
Policies. The Company therefore reserves the right to modify the Policy without
your consent to attempt to prevent the tax law from considering you to own a
portion of the assets of Separate Account II.
NO GUARANTEES REGARDING TAX TREATMENT: The Company makes no guarantees regarding
the tax treatment of any Policy or of any transaction involving a Policy.
However, the remainder of this discussion assumes that your Policy will be
treated as a life insurance contract for Federal income tax purposes and that
the tax law will not impose tax on any increase in your Account Value until
there is a distribution from your Policy.
TAX TREATMENT OF POLICIES -- GENERAL
DEATH PROCEEDS AND ACCOUNT VALUE INCREASES: A Policy's treatment as life
insurance for Federal income tax purposes generally has the following results:
o Death Proceeds are excludable from the gross income of the Beneficiary.
o You are not taxed on increases in the Account Value unless amounts are
distributed from the Policy while the Insureds are alive.
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o The taxation of amounts distributed while the Insureds are alive depends
upon whether your Policy is a "modified endowment contract." The term
"modified endowment contract," or "MEC," is defined below.
PARTIAL AND FULL SURRENDERS AND MATURITY PROCEEDS: A partial surrender occurs
when you receive less than the total amount of the Policy's Surrender Value;
receipt of the entire Surrender Value is a full surrender. If your Policy is not
a MEC, you will generally pay tax on the amount of a partial or full surrender
only to the extent it exceeds your "investment in the contract." In a few
states, a maturity value will be paid. Maturity proceeds will be taxable to the
extent the amount received plus Policy Debt exceeds the investment in the
contract. You will be taxed on this amount at ordinary income tax rates, not at
lower capital gains tax rates. Your "investment in the contract" generally
equals the total of the premiums paid for your Policy plus the amount of any
loan that was includible in your income, reduced by any amounts you previously
received from the Policy that you did not include in your income.
SPECIAL RULE FOR CERTAIN CASH DISTRIBUTIONS IN THE FIRST 15 POLICY YEARS: During
the first 15 years after your Policy is issued, if we distribute cash to you and
reduce the Death Benefit (E.G., by decreasing the Policy's Specified Amount) at
the same time, you may be required to pay tax on all or part of the cash
payment, even if it is less than your investment in the contract. This also may
occur if we distribute cash to you up to two years before the proceeds are
reduced, or if the cash payment is made in anticipation of the reduction.
However, you will not be required to pay tax on more than the amount by which
your Account Value exceeds your investment in the contract.
CONSIDERATIONS WHERE INSUREDS LIVE PAST AGE 100: If the Insureds survive beyond
the end of the mortality table used to measure charges under the Policy, which
ends at age 100, the IRS may seek to deny the tax-free treatment of the Death
Proceeds and instead to tax you on the amount by which your Account Value
exceeds your investment in the contract. Because in most states, the Policy
continues to have insurance risk beyond age 100, for which we assess a cost of
insurance charge, we believe that the proceeds will continue to be protected
from taxation. Therefore, we have no current plans to withhold or report taxes
in this situation.
LOANS: If your Policy is not a MEC, a loan received under a Policy (I.E., Policy
Debt) normally will be treated as your indebtedness. Hence, so long as the
Policy remains in force, you will generally not be taxed on any part of a Policy
loan. However, it is possible that you could have additional income for tax
purposes if any of your Policy loan consists of Preferred Policy Debt. If your
Policy terminates (by a full surrender or by a lapse) while the Insureds are
alive, you will be taxed on the amount (if any) by which the Policy Debt plus
any amount received in cash exceeds your investment in the contract.
Generally, interest paid on Policy Debt or other indebtedness related to the
Policy will not be tax deductible, except in the case of certain indebtedness
under a Policy covering a "key person." A tax advisor should be consulted before
taking any Policy loan.
LOSS OF INTEREST DEDUCTION WHERE POLICIES ARE HELD BY OR FOR THE BENEFIT OF
CORPORATIONS, TRUSTS, ETC.: If an entity (such as a corporation or a trust, not
an individual) purchases a Policy or is the beneficiary of a Policy issued after
June 8, 1997, a portion of the interest on indebtedness unrelated to the Policy
may not be deductible by the entity. However, this rule does not apply to a
Policy owned by an entity engaged in a trade or business which covers the life
of only one individual who is:
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<PAGE>
o a 20% owner of the entity, or
o an officer, director, or employee of the trade or business,
at the time first covered by the Policy. This rule also does not apply to a
Policy owned by an entity engaged in a trade or business which covers the joint
lives of the 20% owner of the entity and the owner's spouse at the time first
covered by the Policy. Entities that are considering purchasing the Policy, or
that will be Beneficiaries under a Policy, should consult a tax advisor.
OPTIONAL PAYMENT PLANS: If Death Proceeds under the Policy are paid under one of
the optional payment plans, the Beneficiary will be taxed on a portion of each
payment (at ordinary income tax rates). The Company will notify the Beneficiary
annually of the taxable amount of each payment. However, if the Death Proceeds
are held by the Company under Optional Payment Plan 4 (interest income), the
Beneficiary will be taxed on the interest income as it is credited.
CHANGES AND EXCHANGES: The right to change Owners (see "Change of Owner") and
changes reducing future amounts of Death Proceeds may have tax consequences
depending upon the circumstances of each change. The exchange of one life
insurance contract for another life insurance contract generally is not taxed
(unless cash is distributed or a loan is reduced or forgiven). However, in the
case of the Policy, the other life insurance contract involved in the exchange
must also cover the same two Insureds. The excercise of a Policy Split Option
Rider may result in the taxation of the Policy as if there were a full
surrender.
SPECIAL RULES FOR MODIFIED ENDOWMENT CONTRACTS (MECS)
DEFINITION OF A "MODIFIED ENDOWMENT CONTRACT:" Special rules apply to a Policy
classified as a MEC. A Policy will be classified as a MEC if either of the
following is true:
o If premiums are paid more rapidly than allowed by a "7-pay test" under
the tax law. At your request, we will let you know the amount of premium
that may be paid for your Policy in any year that will avoid MEC
treatment under the 7-pay test.
o If the Policy is received in exchange for another policy that is a MEC.
Due to the coverage of more than one Insured under the Policy, there are special
considerations in applying the 7-pay test. For example, a reduction in the Death
Benefit at any time, such as may occur upon a partial surrender, may cause the
Policy to be a MEC, resulting in the tax treatment described below applying.
Also and more generally, the manner of applying the 7-pay test is somewhat
uncertain in the case of contracts covering more than one Insured.
TAX TREATMENT OF MECS: If a Policy is classified as a MEC, the following
special rules apply:
o A partial surrender will be taxable to you to the extent that the Account
Value exceeds your investment in the contract.
o A loan from the Policy (together with any unpaid interest included in
Policy Debt), and the amount of any assignment or pledge of the Policy,
will be taxed in the same manner as a partial surrender.
o A penalty tax of 10% will be imposed on the amount of any full or partial
surrender, loan and unpaid loan interest included in Policy Debt,
assignment, or pledge on which you must pay tax. However, the penalty tax
does not apply to a distribution made:
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(1) after you attain age 59 1/2,
(2) because you have become disabled, within the meaning of the tax law, or
(3)in substantially equal periodic payments over your life or life
expectancy (or over the joint lives or life expectancies of you and your
beneficiary, within the meaning of the tax law).
SPECIAL RULES IF YOU OWN MORE THAN ONE MEC: All MECs that we (or any of our
affiliates) issue to you within the same calendar year will be combined to
determine the amount of any distribution from the Policy that will be taxable to
you.
INTERPRETATIVE ISSUES: The tax law's rules relating to MECs are complex and open
to considerable variation in interpretation. You should consult your tax advisor
before making any decisions regarding changes in coverage under or distributions
from your Policy.
INCOME TAX WITHHOLDING
We may be required to withhold and pay to the IRS a part of the taxable portion
of each distribution made under a Policy. However, in many cases, the recipient
may elect not to have any amounts withheld. You are responsible for payment of
all taxes and early distribution penalties, regardless of whether you request
that no taxes be withheld or if we do not withhold a sufficient amount of taxes.
At the time you request a distribution from the Policy, we will send you forms
that explain the withholding requirements.
TAX STATUS OF THE COMPANY
Under existing Federal income tax law, we do not expect to incur any Federal
income tax liability on the income or gains in Separate Account II. Based upon
this expectation, we do not impose a charge for Federal income taxes. If Federal
income tax law changes and we are required to pay taxes on some or all of the
income and gains earned by Separate Account II, we may impose a charge for those
taxes.
We may also incur state and local taxes, in addition to premium taxes for which
a deduction from premiums is currently made. At present, these taxes are not
significant. If there is a material change in state or local tax laws, we may
impose a charge for any taxes attributable to Separate Account II.
CHANGES IN THE LAW AND OTHER CONSIDERATIONS
This discussion is based on our understanding of the Federal income tax law
existing on the date of this Prospectus. Congress, the IRS, and the courts may
modify these laws at any time, and may do so retroactively. Any person
concerned about the tax implications of ownership of a Policy should consult a
competent tax advisor.
- --------------------------------------------------------------------------------
OTHER POLICY INFORMATION
- --------------------------------------------------------------------------------
OPTIONAL PAYMENT PLANS
The Policy currently offers the following five optional payment plans as
alternatives to the payment of Death Proceeds or Surrender Value in a lump sum:
PLAN 1 -- INCOME FOR A FIXED PERIOD. We will make equal periodic payments for a
fixed period not longer than 30 years. Payments can be annual, semi-annual,
quarterly, or monthly. If
49
<PAGE>
the payee dies before the end of the fixed period, we will discount the amount
of the remaining guaranteed payments to the date of the payee's death at a
yearly rate of 3%. We will pay the discounted amount in one sum to the payee's
estate unless otherwise provided.
PLAN 2 -- LIFE INCOME. We will make equal monthly payments 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 l0, l5, or 20 years. If
the payee dies before the end of the guaranteed period, we will discount the
amount of remaining payments for the minimum period at the same interest rate
used to calculate the monthly income. We will pay the discounted amount in one
sum to the payee's estate unless otherwise provided.
PLAN 3 -- INCOME OF A DEFINITE AMOUNT. We will make equal periodic payments of a
definite amount. Payments can be annual, semi-annual, quarterly, or monthly. The
amount paid each year must be at least $120 for each $1,000 of proceeds.
Payments will continue until the proceeds are exhausted. The last payment will
equal the amount of any unpaid proceeds. If the payee dies, we will pay the
amount of the remaining proceeds with earned interest in one sum to the payee's
estate unless otherwise provided.
PLAN 4 -- INTEREST INCOME. We will make periodic payments of interest earned
from the proceeds left with us. Payments can be annual, semi-annual, quarterly
or monthly and will begin at the end of the first period chosen. If the payee
dies, we will pay the amount of remaining proceeds and any earned but unpaid
interest in one sum to the payee's estate unless otherwise provided.
PLAN 5 -- JOINT LIFE AND SURVIVOR INCOME. We will make equal monthly payments to
two payees for a guaranteed minimum of l0 years. Each payee must be at least 35
years old when payments begin. Payments will continue as long as either payee is
living. If both payees die before the end of the minimum period, we will
discount the amount of the remaining payments for the 10 year period at the same
interest rate used to calculate the monthly income. We will pay the discounted
amount in one sum to the survivor's estate unless otherwise provided.
You may select an optional payment plan during either Insured's life in your
application or by writing our Home Office. We will transfer any amount left with
us for payment under an optional payment plan to our General Account. Payments
under an optional payment plan will not vary with the investment performance of
Separate Account II because they are forms of fixed-benefit annuities. SEE Tax
Treatment of Policies. Amounts allocated to an optional payment plan will earn
interest at 3% compounded annually. Certain conditions and restrictions apply to
payments received under an optional payment plan. For further information,
please review your Policy or contact one of our authorized agents.
DIVIDENDS
The Policy is non-participating. We will not pay dividends on the Policy.
INCONTESTABILITY
The Policy limits our right to contest the Policy as issued, as increased, or as
reinstated, except for material misstatements contained in the application, a
supplemental application, or a reinstatement application, after it has been in
force during the lifetimes of both Insureds for a minimum period, generally for
two years from the Policy Date, effective date of the increase, or the date of
reinstatement. We can only contest the Policy, an increase in Specified Amount,
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<PAGE>
and/or a reinstatement of the Policy if a copy of the application was attached
to the Policy when issued or delivered, or was made a part of the Policy when a
change in coverage or Policy reinstatement went into effect. This provision does
not apply to riders that provide disability benefits (subject to state
exception).
SUICIDE EXCLUSION
If either Insured commits suicide while sane or insane within two years of the
Policy Date (subject to state exception), we will limit the amount of proceeds
we pay under the Policy to all premiums paid, less outstanding Policy Debt and
less amounts paid upon partial surrender of the Policy.
If the first Insured to die commits suicide while sane or insane more than two
years after the Policy Date but within two years after the effective date of an
increase in the Specified Amount (subject to state exception), we will reduce
the Specified Amount to the amount in effect before the increase. We will refund
any monthly deductions made with respect to the increase in a lump sum to the
Owner.
If the Last Insured commits suicide while sane or insane more than two years
after the Policy Date and within two years after an increase in the Specified
Amount became effective (subject to state exception), we will reduce the
Specified Amount to the amount in effect before the increase. The amount payable
with respect to the increase will equal the monthly deductions that were made
for that increase. The amount payable will be treated as Death Proceeds and paid
to the Beneficiary under the same conditions as the initial Specified Amount.
MISSTATEMENT OF AGE OR GENDER
We will adjust the Death Benefit if you misstated either Insured's Age or gender
in your application.
WRITTEN NOTICE
You should send any written notice to us at our Home Office. The notice should
include the Policy number and each Insured's full name. We will send any notice
to the address shown in the application unless an appropriate address change
form has been filed with us.
TRUSTEE
If you name a trustee as the Owner or Beneficiary of the Policy and the trustee
subsequently exercises ownership rights or claims benefits thereunder, we will
have no obligation to verify that a trust is in effect or that the trustee is
acting within the scope of his or her authority. Payment of Policy benefits to
the trustee will release us from all obligations under the Policy to the extent
of the payment. When we make a payment to the trustee, we will have no
obligation to ensure that such payment is applied according to the terms of the
trust agreement.
OTHER CHANGES
At any time, we may make such changes in the Policy as are necessary to assure
compliance at all times with the definition of life insurance prescribed by the
Code.
Also, we may make changes:
o to make the Policy, our operations, or the operation of Separate Account
II conform with any law or regulation issued by any government agency to
which they are subject; or
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<PAGE>
o to reflect a change in the operation of Separate Account II, if allowed
by the Policy.
Only the President or Vice President of GE Life & Annuity has the right to
change the Policy. No agent has the authority to change the Policy or waive any
of its terms. The President or a Vice President of GE Life & Annuity must sign
all endorsements, amendments, or riders to be valid.
REPORTS
We maintain records and accounts of all transactions involving the Policy,
Separate Account II and Policy Debt. Within 30 days after each Policy
Anniversary, we will send you a report showing information about your Policy.
The report will show:
o the Specified Amount;
o the Account Value in each Investment Subdivision;
o the Surrender Value;
o the Policy Debt; and
o the premiums paid and charges made during the Policy Year.
We also will send you an annual and a semi-annual report for each Fund
underlying an Investment Subdivision to which you have allocated Account Value,
as required by the 1940 Act. In addition, when you pay premiums (other than by
pre-authorized checking account deduction), or if you take out a Policy loan,
make transfers or make partial surrenders, you will receive a written
confirmation of these transactions.
CHANGE OF OWNER
You may change the Owner of the Policy by sending a written request on a form
satisfactory to us to our Home Office while either Insured is alive and the
Policy is in force. The change will take effect the date you sign the written
request, but the change will not affect any action we have taken before we
receive the written request. A change of Owner does not change the Beneficiary
designation.
SUPPLEMENTAL BENEFITS
We offer two additional benefit riders. We add the Policy Split Option Rider
automatically to your Policy. This rider allows you to surrender this Policy in
exchange for an individual policy on the life on one Insured or separate
individual policies on the lives of each Insured. The maximum, amount of
insurance available at the time the rider is exercised on either Insured is
equal to one-half the base Policy Specified Amount. There is no additional
charge for this rider, but we will require evidence of insurability when you
exercise this option. SEE Tax Considerations. For further information about this
rider, including information on the terms to which the exchange is subject,
please see your Policy.
You may elect the Four Year Term Rider. This rider protects your estate from the
IRS's "contemplation of death" rules. To avoid inclusion of Policy Death
Proceeds, the Insureds cannot possess any incidence of ownership in the Policy
(I.E., the Policy must be owned by a trust or other third party.) However,
certain situations may call for the Insureds to initially own the Policy when
estate planning documents are drawn. After ownership of the Policy has been
relinquished, the Insureds must live three years for the Death Proceeds to avoid
estate tax
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<PAGE>
inclusion. The Four Year Term Rider provides an extra amount of insurance for
the first four Policy Years to cover the additional estate tax triggered if the
second death occurs within the first three years. We will pay the amount payable
under the rider at the death of the Last Insured. You may only elect the Four
Year Term Rider at the time we issue the Policy. There is an extra charge for
this rider that will be included in your monthly deduction. SEE Tax
Considerations. Please see your Policy for additional information.
Additional rules and limits apply to these supplemental benefits. Please ask
your authorized GE Life & Annuity agent for further information or contact our
Home Office.
USING THE POLICY AS COLLATERAL
You can assign the Policy as collateral security. You must notify us in writing
if you assign the Policy. Any payments we made before the assignment will not be
affected. We are not responsible for the validity of an assignment. An
assignment may affect your rights and the rights of the Beneficiary.
REINSURANCE
We intend to reinsure a portion of the risks assumed under the Policies.
LEGAL PROCEEDINGS
GE Life & Annuity, 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, GE Life & Annuity believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on it or Separate Account II.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
SALE OF THE POLICIES
Our licensed life insurance agents sell the Policies. These agents 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
does business in Indiana, Minnesota, New Mexico, and Texas as GE Capital
Brokerage Corporation.)
Capital Brokerage Corporation, a Washington corporation, located at 6630 W.
Broad Street, Richmond, Virginia 23230, is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. Capital Brokerage Corporation
also serves as principal underwriter for other variable life insurance and
variable annuity policies we issue. However, Capital Brokerage Corporation has
not retained any amounts for acting as principal underwriter of these other
policies.
Our writing agents receive commissions based on a commission schedule and rules.
First-year commissions depend on each Insured's Age, rating class, gender and
the size of the Policy. In the first Policy Year, the agent will receive a
commission of up to 85% of the maximum commissionable premium plus up to 4% of
premiums paid in excess of the maximum commissionable premium. In renewal years,
the agent receives up to 4% of the premiums paid.
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<PAGE>
We may pay a trail commission equal to an annual rate of .20% of Account Value
after the fifth Policy Year.
Agents may also be eligible to receive certain bonuses and allowances, as well
as retirement plan credits, based on commissions earned. Field management of the
Company receives compensation which we may base in part on the level of agent
commissions in their management units. Broker-dealers and their registered
agents will receive first-year and subsequent year commissions equivalent to the
total commissions and benefits received by the field management and writing
agents of the Company. We do not deduct these commissions from premium payments
or Account Value; we pay these commissions.
LEGAL MATTERS
The legal matters in connection with the Policy described in this Prospectus
have been passed on by Patricia L. Dysart, Associate General Counsel and
Assistant Vice President of GE Life & Annuity. Sutherland Asbill & Brennan LLP
of Washington, D.C. has provided advice on matters relating to the federal
securities laws.
YEAR 2000 READINESS DISCLOSURE
Like all financial services providers, we use computer systems that may be
affected by Year 2000 date data processing issues and we rely on service
providers, including banks, custodians, administrators, and investment managers
that may also be affected. In addition, to the extent the Funds invest in
securities of issuers located in foreign countries, the Funds may be affected
not only in the United States, but also in foreign countries. (Please see the
Funds' prospectuses for more information.) Therefore, we have been engaged in a
process to evaluate and develop plans to have our computer systems and critical
applications ready to process Year 2000 date data and to correct or replace
systems and applications with Year 2000 issues. Moreover, we have confirmed that
our service providers are also so engaged, and we are monitoring these other
service providers (particularly those that are critical to our business) for
emerging Year 2000 date data issues.
We have devoted, and will continue to devote, substantial resources to this
effort. In 1998, we spent $2.4 million dollars on this effort, and we have
budgeted an additional $1.8 million dollars on this effort in 1999. Remedial and
other actions we have taken include inventorying our computer systems,
applications and interfaces, assessing ways we might be impacted by Year 2000
issues, and developing a range of solutions specific to particular situations
and implementing appropriate solutions. Most of the systems, applications and
interfaces that were identified as having Year 2000 issues have already been
replaced with different hardware or software or upgraded to new or other
releases of software which is Year 2000 ready. We have also developed a business
continuity plan and have completed testing the plan.
It is difficult to predict with precision whether the outcome of these efforts
will be completely successful. However, as of the date of this Prospectus, we do
not anticipate that you will experience negative effects on your investment, or
on the services provided in connection therewith, as a result of the Company's
Year 2000 transition implementation. We have completed our efforts with respect
to our critical applications, and therefore we believe that our critical
applications are substantially Year 2000 capable. With respect to our
non-critical applications, our goal is to be substantially Year 2000 capable on
or about the end of October 1999. However, there can be no assurance that our
efforts will be totally successful, or that
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<PAGE>
interaction with other service providers will not impair our ability to provide
uninterrupted and complete services to you.
If we are not successful in our Year 2000 transition or implementation, or if
interaction with our service providers is impaired, it is possible that we could
encounter difficulty and/or delays in calculating unit values, redeeming units,
delivering account statements and providing other information, communication and
servicing to our policyholders. In light of our past and current efforts to
address this issue, we do not consider the likelihood of this possibility to be
very high.
EXPERTS
The consolidated balance sheets of The Life Insurance Company of Virginia, now
known as GE Life and Annuity Assurance Company, and subsidiary as of December
31, 1998 and 1997, and the related consolidated statements of income and
comprehensive income, shareholders' interest and cash flows for the years then
ended, the nine month period ended December 31, 1996 and the preacquisition
three month period ended March 31, 1996, and the statements of assets and
liabilities of Life of Virginia Separate Account II, now known as GE Life &
Annuity Separate Account II, as of December 31, 1998 and the related statements
of operations and changes in net assets for each of the years or lesser periods
in the three year period then ended have been included herein and in the
registration statement in reliance upon the reports of KPMG LLP, independent
certified public accountants, appearing elsewhere herein and upon the authority
of such firm as experts in accounting and auditing. Unaudited financial
statements for the six months as of and ended June 30, 1999 for both GE Life and
Annuity Assurance Company and GE Life & Annuity Separate Account II have also
been included herein.
The report of KPMG LLP dated January 22, 1999 with respect to the consolidated
financial statements of The Life Insurance Company of Virginia, now known as GE
Life and Annuity Assurance Company and subsidiary, contains an explanatory
paragraph that states that effective April 1, 1996, General Electric Capital
Corporation acquired all of the outstanding stock of The Life Insurance Company
of Virginia in a business combination accounted for as a purchase. As a result
of the acquisition, the consolidated financial information for the periods after
the acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.
ACTUARIAL MATTERS
Actuarial matters included in this Prospectus have been examined by George E.
Hirko, an actuary of GE Life & Annuity, whose opinion we filed as an exhibit to
the registration statement.
FINANCIAL STATEMENTS
You should distinguish the consolidated financial statements of Life of
Virginia, now GE Life & Annuity, and subsidiary included in this prospectus from
the financial statements of Separate Account II. Please consider the financial
statements of Life of Virginia (now GE Life & Annuity) only as bearing on our
ability to meet our obligations under the Policies. You should not consider the
financial statements of Life of Virginia (now GE Life & Annuity) and subsidiary
as affecting the investment performance of the assets held in Separate Account
II.
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EXECUTIVE OFFICERS AND DIRECTORS
We are managed by a board of directors. The following table sets forth the name,
address and principal occupations during the past five years of each of our
executive officers and directors.
<TABLE>
<CAPTION>
NAME AND POSITION(S)
WITH GE LIFE & ANNUITY* PRINCIPAL OCCUPATIONS LAST FIVE YEARS
- ------------------------- -----------------------------------------------------------------------------------
<S> <C>
Ronald V. Dolan Director, Chairman of the Board, GE Life &
Annuity since 1997; President and Chief Executive
Officer of First Colony Life Insurance Company
1992-1997.
Pamela S. Schutz President, GE Life & Annuity since 5/98;
President of The Harvest Life Insurance Company
9/97-12/98; President, GE Capital Realty Group
2/78-5/97.
Selwyn L. Flournoy, Jr. Director, GE Life & Annuity since 5/89; Senior Vice President, GE Life & Annuity,
since 1980; Chief Financial Officer 1980-1998.
Robert D. Chinn Director, GE Life & Annuity, since 1997;
Senior Vice President Agency, GE Life & Annuity,
since 1/92.
Leon E. Roday Senior Vice President & Director, GE Life & Annuity since 6/99;Senior Vice
President & Director, GE Financial Assurance since 1996. LeBoeuf, Lamb, Greene
& MacRae, L.L.P. 1982-1996.
Geoffrey S. Stiff Senior Vice President, GE Life & Annuity,
since 3/99; Director, GE Life & Annuity, since 5/96;
Vice President, GE Life & Annuity 5/96-3/99;
Director of GNA since April, 1994; Senior Vice
President, Chief Financial Officer and Treasurer of
GNA since May, 1993; Senior Vice President,
Controller and Treasurer of GNA Investors Trust
since 1993.
Donita M. King Senior Vice President, General Counsel and Secretary, GE Life & Annuity since
3/99, Assistant General Counsel, Prudential Insurance Company of America,
3/89-3/99.
Richard P. McKenney Manager of Finance since 10/96, GE
Financial Assurance/GE Life and Annuity Assurance
Company; Chief Financial Officer since 10/98; GE
Capital Audit Staff Manager, 8/95-10/96; GE
Corporate Audit Staff, 7/93-8/95.
Jerry G. Overman Treasurer, GE Life and Annuity Assurance Company since 1979.
Kelly L. Groh Vice President and Controller/Sr. Finance Analyst, GE Life and Annuity Assurance
Company since 3/96; Staff Accountant, Price Waterhouse, 9/90-3/96.
</TABLE>
- ----------
* Prior to 1999, GE Life & Annuity was known as Life of Virginia.
The principal business address of each person listed, unless otherwise
indicated, is GE Life and Annuity Assurance Company, 6610 W. Broad Street,
Richmond, Virginia 23230.
The principal business address for Mr. Dolan is First Colony Life Insurance
Company, 700 Main Street, Post Office 1280, Lynchburg, VA 24505-1280.
OTHER INFORMATION
We have filed a Registration Statement with the SEC, under the Securities Act of
1933 as amended, for the Policies being offered here. This Prospectus does not
contain all the information in the Registration Statement, its amendments and
exhibits. Please refer to the Registration Statement for further information
about Separate Account II, the Company, and the Policies offered. Statements in
this Prospectus about the content of Policies and other legal instruments are
summaries. For the complete text of those Policies and instruments, please refer
to those documents as filed with the SEC and available on the SEC's website at
http://www.sec gov.
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HYPOTHETICAL ILLUSTRATIONS
- --------------------------------------------------------------------------------
To show you how the Policy works, we have included some hypothetical
illustrations for a Policy issued to a male Insured, age 55, and a female
Insured, age 55. These illustrations show how Account Values, Surrender Values,
and death benefits under the two Death Benefit options available under a Policy
vary over time assuming the following:
o The initial and planned premium of each illustration are allocated
completely to Separate Account II and remain there over the entire
period;
o The Insureds both qualify for the Preferred No Nicotine Use
classification;
o There are no withdrawals and no supplemental benefits;
o There is no Policy Debt; and
o The portfolios earn gross (that is, before deductions for investment
management fees and other operating expenses of the portfolios) annual
rates of return of 0%, 6%, and 12%.
It is important to understand that the illustrations assume a level rate of
return for all years. The values of your Policy would be different from those
shown if the hypothetical returns averaged 0%, 6%, or 12% but fluctuated over
and under those averages for the years shown.
The illustrations reflect an average annual charge of 0.78% of the average daily
net assets of the portfolios for investment management fees and other operating
expenses. We calculated these fees based on an average of the expense ratios of
each of the portfolios (in some cases, we estimated those fees) for the latest
year of operations. The average daily charge for the portfolio expenses reflects
voluntary expense agreements between certain of the portfolios and their
investment managers. These expense agreements could terminate at any time. SEE
"Portfolio Annual Expense Table." If these agreements terminate, the values
shown on the following pages would be less.
The illustrations reflect a premium charge, the .70% mortality and expense risk
charge to Separate Account II, and the monthly deduction. The monthly deduction
is taken from the policy Account Value each month. The monthly deduction
illustrated consists of the cost of insurance charge, the policy charge of $5,
and an expense charge of up to $0.20 per $1,000 of initial Specified Amount. Our
current charges and the maximum charges we have a contractual right to charge
are reflected in separate illustrations on the following pages. SEE "Charges and
Deductions." After deduction of estimated portfolio expenses and the mortality
and expense risk charge, the illustrated gross annual investment rates of return
of 0%, 6% and 12% correspond to approximate net annual rates of return for the
Investment Subdivisions of -1.48%, 4.52% and 10.52%, respectively.
All of the illustrations reflect the fact that no charges for Federal or state
income taxes are currently made against Separate Account II. To produce after
tax returns of 0%, 6%, or 12% if we were to make such charges in the future,
Separate Account II would have to earn a sufficient amount in excess of 0%, 6%,
or 12% to cover any tax charges. The Surrender Values shown in the illustrations
reflect the fact that we deduct a Surrender Charge for the first 16 Policy Years
(and for 16 Policy Years after you increase the Specified Amount). SEE "Charges
and Deductions."
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<PAGE>
Each illustration also has a column labeled "Premiums Accumulated at 5% Interest
Per Year." This column shows the amount that would accumulate if the premium
payments were invested to earn interest, after taxes, of 5% per year, compounded
annually.
Upon request, we will furnish you a personalized illustration based upon the
proposed Insureds' circumstances. Such illustrations will reflect the current
cost of insurance charges and the guaranteed maximum cost of insurance charges,
and may assume different hypothetical rates of return than those shown in the
following illustrations.
The investment rates of return we have chosen to use in the illustrations are
hypothetical only, and you should understand that they do not represent actual
past or future rates of return. The actual rates of return under a Policy may be
more or less than the hypothetical rates of return in the illustrations.
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<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $250,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 5,100
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH MAXIMUM RETURN WITH MAXIMUM RETURN WITH MAXIMUM
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% ------------------------------- ------------------------------- ------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,355 0 3,956 253,956 0 4,216 254,216 0 4,476 254,476
2 10,978 1,826 7,826 257,826 2,594 8,594 258,594 3,393 9,393 259,393
3 16,882 5,604 11,604 261,604 7,134 13,134 263,134 8,792 14,792 264,792
4 23,081 9,286 15,286 265,286 11,838 17,838 267,838 14,715 20,715 270,715
5 29,590 12,864 18,864 268,864 16,703 22,703 272,703 21,208 27,208 277,208
6 36,424 16,329 22,329 272,329 21,726 27,726 277,726 28,321 34,321 284,321
7 43,600 20,270 25,670 275,670 27,502 32,902 282,902 36,705 42,105 292,105
8 51,135 24,072 28,872 278,872 33,418 38,218 288,218 45,811 50,611 300,611
9 59,047 27,712 31,912 281,912 39,457 43,657 293,657 55,692 59,892 309,892
10 67,355 31,166 34,766 284,766 45,596 49,196 299,196 66,398 69,998 319,998
15 115,553 44,590 45,190 295,190 76,702 77,302 327,302 134,333 134,933 384,933
20 177,068 44,518 44,518 294,518 100,578 100,578 350,578 228,611 228,611 478,611
25 255,579 19,099 19,099 269,099 101,288 101,288 351,288 350,824 350,824 600,824
30 355,780 * * * 45,677 45,677 295,677 488,104 488,104 738,104
35 483,665 * * * * * * 594,323 594,323 844,323
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume that the planned premium of $5,100 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the maximum expense charges and cost
of insurance rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values and benefits
of an actual Policy with the listed specifications could never be less than
those shown, and in some cases may be greater than those shown.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
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<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $250,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 5,100
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH CURRENT RETURN WITH CURRENT RETURN WITH CURRENT
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% ------------------------------- ------------------------------- -------------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- --------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,355 0 4,427 254,427 0 4,704 254,704 0 4,981 254,981
2 10,978 2,779 8,779 258,779 3,612 9,612 259,612 4,478 10,478 260,478
3 16,882 7,057 13,057 263,057 8,731 14,731 264,731 10,541 16,541 266,541
4 23,081 11,260 17,260 267,260 14,069 20,069 270,069 17,230 23,230 273,230
5 29,590 15,386 21,386 271,386 19,633 25,633 275,633 24,607 30,607 280,607
6 36,424 19,432 25,432 275,432 25,429 31,429 281,429 32,740 38,740 288,740
7 43,600 23,997 29,397 279,397 32,066 37,466 287,466 42,306 47,706 297,706
8 51,135 28,476 33,276 283,276 38,947 43,747 293,747 52,786 57,586 307,586
9 59,047 32,864 37,064 287,064 46,077 50,277 300,277 64,270 68,470 318,470
10 67,355 37,153 40,753 290,753 53,459 57,059 307,059 76,853 80,453 330,453
15 115,553 57,527 58,127 308,127 94,999 95,599 345,599 161,325 161,925 411,925
20 177,068 70,659 70,659 320,659 139,580 139,580 389,580 291,614 291,614 541,614
25 255,579 73,773 73,773 323,773 184,712 184,712 434,712 494,390 494,390 744,390
30 355,780 60,091 60,091 310,091 222,058 222,058 472,058 807,232 807,232 1,057,232
35 483,665 17,888 17,888 267,888 234,755 234,755 484,755 1,284,690 1,284,690 1,534,690
</TABLE>
(1) The values illustrated assume that the planned premium of $5,100 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although GE Life & Annuity anticipates
deducting these charges for the forseeable future, these charges are not
guaranteed and could be raised at the discretion of GE Life & Annuity.
Accordingly, even if the assumed hypothetical gross annual investment return
were earned, the values and benefits under an actual Policy with the listed
specifications may be less than those shown if the cost of insurance charges
were increased.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
60
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $250,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 3,800
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH MAXIMUM RETURN WITH MAXIMUM RETURN WITH MAXIMUM
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% ------------------------------- ------------------------------- ------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- --------- ----------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,990 0 2,778 250,000 0 2,966 250,000 0 3,154 250,000
2 8,180 0 5,488 250,000 38 6,038 250,000 612 6,612 250,000
3 12,578 2,125 8,125 250,000 3,216 9,216 250,000 4,399 10,399 250,000
4 17,197 4,685 10,685 250,000 6,498 12,498 250,000 8,545 14,545 250,000
5 22,047 7,162 13,162 250,000 9,883 15,883 250,000 13,080 19,080 250,000
6 27,140 9,547 15,547 250,000 13,366 19,366 250,000 18,038 24,038 250,000
7 32,487 12,432 17,832 250,000 17,541 22,941 250,000 24,054 29,454 250,000
8 38,101 15,203 20,003 250,000 21,799 26,599 250,000 30,564 35,364 250,000
9 43,996 17,842 22,042 250,000 26,125 30,325 250,000 37,604 41,804 250,000
10 50,186 20,327 23,927 250,000 30,501 34,101 250,000 45,214 48,814 250,000
15 86,098 29,567 30,167 250,000 52,370 52,970 250,000 93,644 94,244 250,000
20 131,933 26,941 26,941 250,000 68,232 68,232 250,000 164,635 164,635 250,000
25 190,431 * * * 67,699 67,699 250,000 283,364 283,364 297,532
30 265,091 * * * 17,640 17,640 250,000 478,408 478,408 502,328
35 360,378 * * * * * * 780,559 780,559 819,587
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume that the planned premium of $3,800 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the maximum expense charges and cost
of insurance rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values and benefits
of an actual Policy with the listed specifications could never be less than
those shown, and in some cases may be greater than those shown.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
61
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $250,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 3,800
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH CURRENT RETURN WITH CURRENT RETURN WITH CURRENT
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% ------------------------------- ------------------------------- -------------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- --------- ----------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 3,990 0 3,229 250,000 0 3,433 250,000 0 3,638 250,000
2 8,180 402 6,402 250,000 1,014 7,014 250,000 1,650 7,650 250,000
3 12,578 3,519 9,519 250,000 4,746 10,746 250,000 6,074 12,074 250,000
4 17,197 6,578 12,578 250,000 8,635 14,635 250,000 10,952 16,952 250,000
5 22,047 9,579 15,579 250,000 12,687 18,687 250,000 16,329 22,329 250,000
6 27,140 12,519 18,519 250,000 16,906 22,906 250,000 22,256 28,256 250,000
7 32,487 15,996 21,396 250,000 21,896 27,296 250,000 29,388 34,788 250,000
8 38,101 19,407 24,207 250,000 27,062 31,862 250,000 37,185 41,985 250,000
9 43,996 22,748 26,948 250,000 32,407 36,607 250,000 45,715 49,915 250,000
10 50,186 26,013 29,613 250,000 37,933 41,533 250,000 55,048 58,648 250,000
15 86,098 41,720 42,320 250,000 69,270 69,870 250,000 118,114 118,714 250,000
20 131,933 51,331 51,331 250,000 102,902 102,902 250,000 217,139 217,139 250,000
25 190,431 53,175 53,175 250,000 140,157 140,157 250,000 380,741 380,741 399,778
30 265,091 41,345 41,345 250,000 182,747 182,747 250,000 647,810 647,810 680,201
35 360,378 536 536 250,000 237,442 237,442 250,000 1,079,427 1,079,427 1,133,398
</TABLE>
(1) The values illustrated assume that the planned premium of $3,800 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although GE Life & Annuity anticipates
deducting these charges for the forseeable future, these charges are not
guaranteed and could be raised at the discretion of GE Life & Annuity.
Accordingly, even if the assumed hypothetical gross annual investment return
were earned, the values and benefits under an actual Policy with the listed
specifications may be less than those shown if the cost of insurance charges
were increased.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
62
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $1,000,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 19,400
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH MAXIMUM RETURN WITH MAXIMUM RETURN WITH MAXIMUM
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% --------------------------------- --------------------------------- -----------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- ----------- ----------- --------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,370 0 15,670 1,015,670 0 16,694 1,016,694 0 17,720 1,017,720
2 41,759 6,997 30,997 1,030,997 10,029 34,029 1,034,029 13,187 37,187 1,037,187
3 64,216 21,961 45,961 1,045,961 28,007 52,007 1,052,007 34,557 58,557 1,058,557
4 87,797 36,540 60,540 1,060,540 46,628 70,628 1,070,628 58,001 82,001 1,082,001
5 112,557 50,706 74,706 1,074,706 65,887 89,887 1,089,887 83,701 107,701 1,107,701
6 138,555 64,423 88,423 1,088,423 85,770 109,770 1,109,770 111,850 135,850 1,135,850
7 165,853 80,047 101,647 1,101,647 108,651 130,251 1,130,251 145,051 166,651 1,166,651
8 194,515 95,113 114,313 1,114,313 132,085 151,285 1,151,285 181,107 200,307 1,200,307
9 224,611 109,538 126,338 1,126,338 156,001 172,801 1,172,801 220,221 237,021 1,237,021
10 256,212 123,219 137,619 1,137,619 180,306 194,706 1,194,706 262,596 276,996 1,276,996
15 439,555 176,270 178,670 1,178,670 303,292 305,692 1,305,692 531,257 533,657 1,533,657
20 673,553 175,381 175,381 1,175,381 397,000 397,000 1,397,000 903,291 903,291 1,903,291
25 972,201 73,148 73,148 1,073,148 397,598 397,598 1,397,598 1,383,764 1,383,764 2,383,764
30 1,353,359 * * * 172,348 172,348 1,172,348 1,919,036 1,919,036 2,919,036
35 1,839,825 * * * * * * 2,320,984 2,320,984 3,320,984
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume that the planned premium of $19,400 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the maximum expense charges and cost
of insurance rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values and benefits
of an actual Policy with the listed specifications could never be less than
those shown, and in some cases may be greater than those shown.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
63
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $1,000,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option A Premium (Payable Annually) (1) $ 19,400
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH CURRENT RETURN WITH CURRENT RETURN WITH CURRENT
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% --------------------------------- --------------------------------- -----------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- ----------- ----------- --------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,370 0 17,537 1,017,537 0 18,631 1,018,631 0 19,725 1,019,725
2 41,759 10,781 34,781 1,034,781 14,069 38,069 1,038,069 17,490 41,490 1,041,490
3 64,216 27,730 51,730 1,051,730 34,344 58,344 1,058,344 41,500 65,500 1,065,500
4 87,797 44,378 68,378 1,068,378 55,485 79,485 1,079,485 67,985 91,985 1,091,985
5 112,557 60,721 84,721 1,084,721 77,520 101,520 1,101,520 97,192 121,192 1,121,192
6 138,555 76,750 100,750 1,100,750 100,477 124,477 1,124,477 129,396 153,396 1,153,396
7 165,853 94,854 116,454 1,116,454 126,782 148,382 1,148,382 167,295 188,895 1,188,895
8 194,515 112,619 131,819 1,131,819 154,056 173,256 1,173,256 208,814 228,014 1,228,014
9 224,611 130,019 146,819 1,146,819 182,313 199,113 1,199,113 254,303 271,103 1,271,103
10 256,212 147,029 161,429 1,161,429 211,565 225,965 1,225,965 304,144 318,544 1,318,544
15 439,555 227,817 230,217 1,230,217 376,152 378,552 1,378,552 638,676 641,076 1,641,076
20 673,553 279,686 279,686 1,279,686 552,515 552,515 1,552,515 1,154,300 1,154,300 2,154,300
25 972,201 291,535 291,535 1,291,535 730,596 730,596 1,730,596 1,956,275 1,956,275 2,956,275
30 1,353,359 236,237 236,237 1,236,237 876,924 876,924 1,876,924 3,192,582 3,192,582 4,192,582
35 1,839,825 66,898 66,898 1,066,898 923,893 923,893 1,923,893 5,077,544 5,077,544 6,077,544
</TABLE>
(1) The values illustrated assume that the planned premium of $19,400 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although GE Life & Annuity anticipates
deducting these charges for the forseeable future, these charges are not
guaranteed and could be raised at the discretion of GE Life & Annuity.
Accordingly, even if the assumed hypothetical gross annual investment return
were earned, the values and benefits under an actual Policy with the listed
specifications may be less than those shown if the cost of insurance charges
were increased.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
64
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $1,000,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 14,600
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH MAXIMUM RETURN WITH MAXIMUM RETURN WITH MAXIMUM
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% --------------------------------- --------------------------------- -----------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- ----------- ----------- --------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 15,330 0 11,178 1,000,000 0 11,929 1,000,000 0 12,681 1,000,000
2 31,427 0 22,083 1,000,000 286 24,286 1,000,000 2,583 26,583 1,000,000
3 48,328 8,696 32,696 1,000,000 13,069 37,069 1,000,000 17,810 41,810 1,000,000
4 66,074 19,000 43,000 1,000,000 26,273 50,273 1,000,000 34,480 58,480 1,000,000
5 84,708 28,969 52,969 1,000,000 39,889 63,889 1,000,000 52,718 76,718 1,000,000
6 104,273 38,573 62,573 1,000,000 53,902 77,902 1,000,000 72,656 96,656 1,000,000
7 124,817 50,174 71,774 1,000,000 70,689 92,289 1,000,000 96,837 118,437 1,000,000
8 146,388 61,318 80,518 1,000,000 87,810 107,010 1,000,000 123,006 142,206 1,000,000
9 169,037 71,934 88,734 1,000,000 105,209 122,009 1,000,000 151,312 168,112 1,000,000
10 192,819 81,934 96,334 1,000,000 122,813 137,213 1,000,000 181,911 196,311 1,000,000
15 330,799 119,188 121,588 1,000,000 210,876 213,276 1,000,000 376,761 379,161 1,000,000
20 506,901 109,010 109,010 1,000,000 275,161 275,161 1,000,000 662,811 662,811 1,000,000
25 731,656 796 796 1,000,000 274,489 274,489 1,000,000 1,141,609 1,141,609 1,198,690
30 1,018,508 * * * 77,687 77,687 1,000,000 1,927,232 1,927,232 2,023,594
35 1,384,610 * * * * * * 3,144,273 3,144,273 3,301,487
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume that the planned premium of $14,600 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the maximum expense charges and cost
of insurance rates allowable under the Policy. Accordingly, if the assumed
hypothetical gross annual investment return were earned, the values and benefits
of an actual Policy with the listed specifications could never be less than
those shown, and in some cases may be greater than those shown.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
65
<PAGE>
FLEXIBLE PREMIUM JOINT AND LAST SURVIVOR VARIABLE LIFE INSURANCE
<TABLE>
<S> <C> <C>
Male Issue Age 55 Preferred No Nicotine Use Initial Specified Amount $1,000,000
Female Issue Age 55 Preferred No Nicotine Use Initial Premium and Planned
Death Benefit Option B Premium (Payable Annually) (1) $ 14,600
</TABLE>
<TABLE>
<CAPTION>
0% ASSUMED HYPOTHETICAL 6% ASSUMED HYPOTHETICAL 12% ASSUMED HYPOTHETICAL
GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT GROSS ANNUAL INVESTMENT
PREMIUMS RETURN WITH CURRENT RETURN WITH CURRENT RETURN WITH CURRENT
END ACCUMULATED CHARGES (2)(3) CHARGES (2)(3) CHARGES (2)(3)
OF AT 5% --------------------------------- --------------------------------- -----------------------------------
POLICY INTEREST SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH SURRENDER ACCOUNT DEATH
YEAR PER YEAR VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
- -------- ------------ ----------- --------- ----------- ----------- --------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 15,330 0 12,974 1,000,000 0 13,790 1,000,000 0 14,606 1,000,000
2 31,427 1,723 25,723 1,000,000 4,169 28,169 1,000,000 6,714 30,714 1,000,000
3 48,328 14,246 38,246 1,000,000 19,159 43,159 1,000,000 24,476 48,476 1,000,000
4 66,074 26,537 50,537 1,000,000 34,781 58,781 1,000,000 44,060 68,060 1,000,000
5 84,708 38,593 62,593 1,000,000 51,053 75,053 1,000,000 65,650 89,650 1,000,000
6 104,273 50,406 74,406 1,000,000 67,998 91,998 1,000,000 89,447 113,447 1,000,000
7 124,817 64,369 85,969 1,000,000 88,033 109,633 1,000,000 118,074 139,674 1,000,000
8 146,388 78,066 97,266 1,000,000 108,773 127,973 1,000,000 149,374 168,574 1,000,000
9 169,037 91,481 108,281 1,000,000 130,232 147,032 1,000,000 183,612 200,412 1,000,000
10 192,819 104,590 118,990 1,000,000 152,418 166,818 1,000,000 221,081 235,481 1,000,000
15 330,799 167,665 170,065 1,000,000 278,253 280,653 1,000,000 474,266 476,666 1,000,000
20 506,901 206,350 206,350 1,000,000 413,415 413,415 1,000,000 871,954 871,954 1,000,000
25 731,656 213,994 213,994 1,000,000 563,332 563,332 1,000,000 1,528,920 1,528,920 1,605,366
30 1,018,508 167,040 167,040 1,000,000 735,143 735,143 1,000,000 2,601,338 2,601,338 2,731,405
35 1,384,610 4,428 4,428 1,000,000 956,754 956,754 1,004,592 4,334,496 4,334,496 4,551,221
</TABLE>
(1) The values illustrated assume that the planned premium of $14,600 is paid at
the beginning of each Policy Year. Values will be different if premiums are paid
with a different frequency or in different amounts.
(2) The values and benefits are as of the end of the year shown. They assume
that no Policy loans or withdrawals have been made. Excessive loans or
withdrawals may cause this Policy to lapse because of insufficient Account
Value.
(3) The values and benefits are shown using the expense charges and cost of
insurance rates currently in effect. Although GE Life & Annuity anticipates
deducting these charges for the forseeable future, these charges are not
guaranteed and could be raised at the discretion of GE Life & Annuity.
Accordingly, even if the assumed hypothetical Gross annual investment return
were earned, the values and benefits under an actual Policy with the listed
specifications may be less than those shown if the cost of insurance charges
were increased.
We emphasize that the assumed gross annual investment rates of return shown
above and elsewhere in this prospectus are illustrative only and should not be
viewed as a representation of past or future investment rates of return.
Actual gross annual rates of return may be more or less than those shown and
will depend on a number of factors, including investment allocations made to the
investment subdivisions. The gross hypothetical investment rates of return of
0%, 6%, and 12% shown above correspond to net annual rates of -1.48%, 4.52%, and
10.52%. The Surrender Values, Account Values, and Death Benefit for a policy
would be different from those shown if the actual gross annual rates of return
averaged 0%, 6%, and 12% over a period of years, but varied above or below that
average for individual policy years during the period. They would also be
different if you take a loan or withdrawal during the period of time
illustrated. No representation can be made that those assumed gross annual rates
of return can be achieved for any one year or sustained over any period of time.
66
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
TABLE OF CONTENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Statements:
(Unaudited)
Statements of Assets and Liabilities ......... 1
Statements of Operations ..................... 9
Statements of Changes in Net Assets .......... 14
Notes to Financial Statements
(Unaudited) .................................. 25
</TABLE>
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------------------------------------------
S&P 500 MONEY TOTAL INTERNATIONAL REAL ESTATE
INDEX MARKET RETURN EQUITY SECURITIES
FUND FUND FUND FUND FUND
ASSETS ---------------- -------------- -------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Investment in GE Investments Funds,
Inc., at fair value (note 2):
S&P 500 Index Fund (269,481 shares;
cost -- $5,785,752) ..................... $ 7,160,104 -- -- -- --
Money Market Fund (4,710,634
shares; cost -- $4,710,634) ............. -- 4,710,634 -- -- --
Total Return Portolio (271,326 shares;
cost -- $4,105,370) ..................... -- -- 4,246,246 -- --
International Equity Fund (13,861
shares; cost -- $164,650) ............... -- -- -- 174,644 --
Real Estate Securities Fund (33,853
shares; cost -- $447,254) ............... -- -- -- -- 426,883
Receivable from affiliate (note 3) ......... 90 1,078 -- 5 --
Receivable for units sold .................. 5,195 198,247 830 2 43
------------ --------- --------- ------- -------
TOTAL ASSETS .............................. $ 7,165,389 4,909,959 4,247,076 174,651 426,926
============ ========= ========= ======= =======
LIABILITIES
Accrued expenses payable to affiliate
(note 3) .................................. 4,561 21,919 18,365 1,209 1,252
Payable for units withdrawn ................ -- 16,309 -- -- --
------------ --------- --------- ------- -------
TOTAL LIABILITIES ......................... 4,561 38,228 18,365 1,209 1,252
------------ --------- --------- ------- -------
Net assets ................................. $ 7,160,828 4,871,731 4,228,711 173,442 425,674
============ ========= ========= ======= =======
Outstanding units:
Type I (note 2) ........................... 88,829 128,361 106,753 7,300 17,973
============ ========= ========= ======= =======
Net asset value per unit:
Type I .................................... 58.77 17.35 37.81 15.63 16.56
============ ========= ========= ======= =======
Outstanding units: .........................
Type II (note 2) .......................... 33,016 152,430 5,089 3,797 7,732
============ ========= ========= ======= =======
Net asset value per unit:
Type II ................................... 58.77 17.35 37.81 15.63 16.56
============ ========= ========= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
1
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
------------------------------------------------------------------
GLOBAL VALUE U.S. PREMIER
INCOME EQUITY INCOME EQUITY GROWTH EQUITY
FUND FUND FUND FUND FUND
ASSETS ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Investment in GE Investments Funds, Inc., at fair value
(note 2):
Global Income Fund (3,997 shares;
cost -- $40,912) ..................................... 39,050 -- -- -- --
Value Equity Fund (15,781 shares;
cost -- $219,342) .................................... -- 263,390 -- -- --
Income Fund (35,574 shares; cost $434,098) ............. -- -- 430,797 -- --
U.S. Equity Fund (3,516 shares; cost $121,418) ......... -- -- -- 134,431 --
Premier Equity Growth Fund
(3 shares; cost $229) ................................ -- -- -- -- 238
Receivable from affiliate (note 3) ...................... -- -- -- 9 --
Receivable for units sold ............................... 11 4,055 4 75 --
-------- ------- ------- ------- -----
TOTAL ASSETS ........................................... $ 39,061 267,445 430,801 134,515 238
======== ======= ======= ======= =====
LIABILITIES
Accrued expenses payable to affiliate (note 3) .......... 960 1,456 3,927 53 --
Payable for units withdrawn ............................. -- 15 -- -- --
-------- ------- ------- ------- -----
TOTAL LIABILITIES ...................................... 960 1,471 3,927 53 --
-------- ------- ------- ------- -----
Net assets .............................................. $ 38,101 265,974 426,874 134,462 238
======== ======= ======= ======= =====
Outstanding units:
Type I (note 2) ........................................ 2,885 7,493 40,364 48 --
======== ======= ======= ======= =====
Net asset value per unit:
Type I ................................................. 10.71 17.13 10.50 12.18 10.44
======== ======= ======= ======= =====
Outstanding units:
Type II (note 2) ....................................... 672 8,034 290 10,992 23
======== ======= ======= ======= =====
Net asset value per unit:
Type II ................................................ 10.71 17.13 10.50 12.18 10.44
======== ======= ======= ======= =====
</TABLE>
See accompanying notes to unaudited financial statements.
2
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
----------------------------------------------------------------------
AGGRESSIVE CAPITAL HIGH MULTIPLE
BOND GROWTH APPRECIATION INCOME STRATEGIES
FUND/VA FUND/VA FUND/VA FUND/VA FUND/VA
ASSETS ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Investment in Oppenheimer Variable Account Funds, at
fair value (note 2):
Bond Fund/VA (42,300 shares; cost -- $499,$87) ......... $ 486,450 -- -- -- --
Aggressive Growth Fund/VA (81,734 shares;
cost -- $3,178,148) .................................. -- 4,434,091 -- -- --
Capital Appreciation Fund/VA (96,863 shares;
cost -- $2,903,237) .................................. -- -- 3,947,159 -- --
High Income Fund/VA (187,779 shares;
cost -- $2,076,557) .................................. -- -- -- 2,003,602 --
Multiple Strategies Fund/VA (56,007 shares;
cost -- $877,024) .................................... -- -- -- -- 948,767
Receivable from affiliate (note 3) ...................... -- -- -- -- --
Receivable for units sold ............................... -- 369 1,874 2,358 244
--------- --------- --------- --------- -------
TOTAL ASSETS ........................................... $ 486,450 4,434,460 3,949,033 2,005,960 949,011
========= ========= ========= ========= =======
LIABILITIES
Accrued expenses payable to affiliate (note 3) .......... 1,427 3,361 2,416 1,652 1,430
--------- --------- --------- --------- -------
TOTAL LIABILITIES ...................................... 1,427 3,361 2,416 1,652 1,430
--------- --------- --------- --------- -------
Net assets .............................................. $ 485,023 4,431,099 3,946,617 2,004,308 947,581
========= ========= ========= ========= =======
Outstanding units: Type I (note 2) ...................... 17,942 77,441 59,886 52,509 24,867
========= ========= ========= ========= =======
Net asset value per unit: Type I ........................ 23.30 54.77 59.91 35.40 33.81
========= ========= ========= ========= =======
Outstanding units: Type II (note 2) ..................... 2,875 3,463 5,989 4,110 3,160
========= ========= ========= ========= =======
Net asset value per unit: Type II ....................... 23.30 54.77 59.91 35.40 33.81
========= ========= ========= ========= =======
</TABLE>
See accompanying notes to unaudited financial statements.
3
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SALOMON BROTHERS
GOLDMAN SACHS VARIABLE SERIES
VARIABLE TRUST FUND, INC.
------------------------ ---------------------------------
GROWTH AND MID CAP STRATEGIC
INCOME VALUE BOND INVESTORS TOTAL
FUND FUND FUND FUND RETURN
ASSETS ------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Investment in Goldman Sachs Variable Insurance Trust
Funds, at fair value (note 2):
Growth and Income Fund (1,320 shares;
cost -- $13,822) .......................................... 15,231 -- -- -- --
Mid Cap Equity Fund (5,936 shares; cost -- $50,707) ......... -- 59,356 -- -- --
Investment in Salomon Brothers Variable Series Funds, at
fair value (note 2):
Strategic Bond Fund (206 shares; cost -- $2,064) ............ -- -- 2,071 -- --
Investors Fund (192 shares; cost -- $2,145) ................. -- -- -- 2,441 --
Total Return Fund (1 share; cost -- $9) ..................... -- -- -- -- 6
Receivable from affiliate (note 3) ........................... 2 16 -- -- --
Receivable for units sold .................................... -- -- -- -- --
-------- ------ ----- ----- -----
TOTAL ASSETS ................................................ $ 15,233 59,372 2,071 2,441 6
======== ====== ===== ===== =====
LIABILITIES
Accrued expenses payable to affiliate (note 3) ............... 6 23 1 1 --
-------- ------ ----- ----- -----
TOTAL LIABILITIES ........................................... 6 23 1 1 --
-------- ------ ----- ----- -----
Net assets ................................................... $ 15,227 59,349 2,070 2,440 6
======== ====== ===== ===== =====
Outstanding units: Type I (note 2) ........................... -- 657 -- 119 --
======== ====== ===== ===== =====
Net asset value per unit: Type I ............................. 9.78 9.99 10.14 13.97 11.16
======== ====== ===== ===== =====
Outstanding units: Type II (note 2) .......................... 1,557 5,284 204 56 1
======== ====== ===== ===== =====
Net asset value per unit: Type II ............................ 9.78 9.99 10.14 13.97 11.16
======== ====== ===== ===== =====
</TABLE>
See accompanying notes to unaudited financial statements.
4
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------------
EQUITY
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ---------------- -------------- --------------
<S> <C> <C> <C>
Investment in Variable Insurance Products Fund, at fair value (note 2):
Equity -- Income Portfolio (269,489 shares; cost -- $5,956,825) .......... $ 7,343,577 -- --
Growth Portfolio (184,244 shares; cost -- $6,949,798) .................... -- 8,425,471 --
Overseas Portfolio (118,626 shares; cost -- $2,239,335) .................. -- -- 2,467,419
Receivable from affiliate (note 3) ........................................ -- -- --
Receivable for units sold ................................................. 451 2,378 94
------------ --------- ---------
TOTAL ASSETS ............................................................. $ 7,344,028 8,427,849 2,467,513
============ ========= =========
LIABILITIES
Accrued expenses payable to affiliate (note 3) ............................ 5,985 4,759 1,863
------------ --------- ---------
TOTAL LIABILITIES ........................................................ 5,985 4,759 1,863
------------ --------- ---------
Net assets ................................................................ $ 7,338,043 8,423,090 2,465,650
============ ========= =========
Outstanding units: Type I (note 2) ........................................ 138,024 118,571 82,166
============ ========= =========
Net asset value per unit: Type I .......................................... 50.08 67.82 29.01
============ ========= =========
Outstanding units: Type II (note 2) ....................................... 8,503 5,626 2,827
============ ========= =========
Net asset value per unit: Type II ......................................... 50.08 67.82 29.01
============ ========= =========
</TABLE>
5
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS VARIABLE INSURANCE PRODUCT FUND
FUND II III
------------------------------ ---------------------------------
ASSET GROWTH &
MANAGER CONTRAFUND INCOME GROWTH OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS --------------- -------------- ----------- ---------------------
<S> <C> <C> <C> <C>
Investment in Variable Insurance Products Fund II,
at fair value (note 2):
Asset Manager Portfolio (272,556 shares;
cost -- $4,330,845) .............................. 4,821,509 -- -- --
Contrafund Portfolio (170,611 shares;
cost -- $3,735,562) .............................. -- 4,452,956 -- --
Investment in Variable Insurance Products Fund III,
at fair value (note 2):
Growth & Income Portfolio (41,138 shares;
cost -- $616,987) ................................ -- -- 703,456 --
Growth Opportunities Portfolio 17,004 shares;
cost -- $350,232) ................................ -- -- -- 401,985
Receivable from affiliate (note 3) .................. -- -- -- --
Receivable for units sold ........................... 106 2,942 329 15
--------- --------- ------- -------
TOTAL ASSETS ....................................... $ 4,821,615 4,455,898 703,785 402,000
=========== ========= ======= =======
LIABILITIES
Accrued expenses payable to affiliate (note 3) ...... 2,927 4,085 1,513 1,343
----------- --------- ------- -------
TOTAL LIABILITIES .................................. 2,927 4,085 1,513 1,343
----------- --------- ------- -------
Net assets .......................................... $ 4,818,688 4,451,813 702,272 400,657
=========== ========= ======= =======
Outstanding units: Type I (note 2) .................. 155,911 120,741 19,047 17,510
=========== ========= ======= =======
Net asset value per unit: Type I .................... 30.52 29.70 17.19 16.20
=========== ========= ======= =======
Outstanding units: Type II (note 2) ................. 1,975 29,152 21,807 7,222
=========== ========= ======= =======
Net asset value per unit: Type II ................... 30.52 29.70 17.19 16.20
=========== ========= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
6
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED INSURANCE SERIES
-----------------------------------------
AMERICAN HIGH
LEADERS INCOME BOND UTILITY
FUND II FUND II FUND II
ASSETS -------------- ------------- ------------
<S> <C> <C> <C>
Investments in Federated Investors
Insurance Series, at fair value (note 2):
American Leaders Fund II (21,170
shares; cost -- $437,380) ................ $ 464,479 -- --
High Income Bond Fund II (23,473
shares; cost -- $250,374) ................ -- 241,070 --
Utility Fund II (21,138 shares;
cost -- $276,248) ........................ -- -- 307,131
Investment in Alger American, at fair value
(note 2):
Small Capitalization Portfolio (37,292
shares; cost -- $1,564,694) .............. -- -- --
Growth Portfolio (44,330 shares;
cost -- $2,390,582) ...................... -- -- --
Investment in PBHG Insurance Series Fund
Inc., at fair value (note 2):
PBHG Large Cap Portfolio (7,282
shares; cost -- $101,393) ................ -- -- --
PBHG Growth II Portfolio (7,205 shares;
cost -- $77,870) ......................... -- -- --
Receivable from affiliate (note 3) .......... -- -- 4
Receivable for units sold ................... -- 30 --
---------- ------- -------
TOTAL ASSETS ............................... $ 464,479 241,100 307,135
========== ======= =======
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 1,402 1,185 659
Payable for units withdrawn ................. -- -- --
---------- ------- -------
TOTAL LIABILITIES .......................... 1,402 1,185 659
---------- ------- -------
Net assets .................................. $ 463,077 239,915 306,476
========== ======= =======
Outstanding units: Type I (note 2) .......... 12,838 10,191 11,894
========== ======= =======
Net asset value per unit: Type I ............ 19.08 15.98 19.86
========== ======= =======
Outstanding units: Type II (note 2) ......... 11,432 4,822 3,538
========== ======= =======
Net asset value per unit: Type II ........... 9.08 15.98 19.86
========== ======= =======
<CAPTION>
PBHG INSURANCE
ALGER AMERICAN FUND SERIES FUND, INC.
------------------------------- -------------------------
SMALL PBHG LARGE PBHG
CAPITALIZATION GROWTH CAP GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ---------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
Investments in Federated Investors
Insurance Series, at fair value (note 2):
American Leaders Fund II (21,170
shares; cost -- $437,380) ................ -- -- -- --
High Income Bond Fund II (23,473
shares; cost -- $250,374) ................ -- -- -- --
Utility Fund II (21,138 shares;
cost -- $276,248) ........................ -- -- -- --
Investment in Alger American, at fair value
(note 2):
Small Capitalization Portfolio (37,292
shares; cost -- $1,564,694) .............. 1,625,186 -- -- --
Growth Portfolio (44,330 shares;
cost -- $2,390,582) ...................... -- 2,475,399 -- --
Investment in PBHG Insurance Series Fund
Inc., at fair value (note 2):
PBHG Large Cap Portfolio (7,282
shares; cost -- $101,393) ................ -- -- 120,445 --
PBHG Growth II Portfolio (7,205 shares;
cost -- $77,870) ......................... -- -- -- 104,833
Receivable from affiliate (note 3) .......... -- -- -- 8
Receivable for units sold ................... 50 360 1 --
--------- --------- ------- -------
TOTAL ASSETS ............................... 1,625,236 2,475,759 120,446 104,841
========= ========= ======= =======
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 2,492 2,155 1,412 1,469
Payable for units withdrawn ................. 158 622 -- --
--------- --------- ------- -------
TOTAL LIABILITIES .......................... 2,650 2,777 1,412 1,469
--------- --------- ------- -------
Net assets .................................. 1,622,586 2,472,982 119,034 103,372
========= ========= ======= =======
Outstanding units: Type I (note 2) .......... 106,682 77,296 5,225 3,483
========= ========= ======= =======
Net asset value per unit: Type I ............ 13.92 23.04 16.29 14.33
========= ========= ======= =======
Outstanding units: Type II (note 2) ......... 9,883 30,038 2,082 3,731
========= ========= ======= =======
Net asset value per unit: Type II ........... 13.92 23.04 16.29 14.33
========= ========= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
7
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
AS OF JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
----------------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS ---------------- -------------- --------------
<S> <C> <C> <C>
Investment in Janus Aspen Series, at fair
value (note 2):
Aggressive Growth Portfolio (131,366
shares; cost -- $3,750,750) ............... $ 4,547,880 -- --
Growth Portfolio (157,065 shares;
cost -- $3,129,683) ....................... -- 4,286,309 --
Worldwide Growth Portfolio (190,886
shares; cost -- $4,721,231) ............... -- -- 6,249,622
Balanced Portfolio (72,923 shares;
cost -- $1,433,058) ....................... -- -- --
Flexible Income Portfolio (15,420
shares; cost -- $185,940) ................. -- -- --
International Growth Portfolio
(30,312 shares; cost -- $992,741) ......... -- -- --
Capital Appreciation Portfolio (46,905
shares; cost -- $1,122,814) ............... -- -- --
Receivable from affiliate (note 3) .......... -- -- 28
Receivable for units sold ................... 994 -- 2,953
------------ --------- ---------
TOTAL ASSETS ............................... $ 4,548,874 4,286,309 6,252,603
============ ========= =========
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 6,765 2,538 3,560
Payable for units withdrawn ................. -- 126 1,860
------------ --------- ---------
TOTAL LIABILITIES .......................... 6,765 2,664 5,420
------------ --------- ---------
Net assets .................................. $ 4,542,109 4,283,645 6,247,183
============ ========= =========
Outstanding units: Type I (note 2) .......... 123,652 122,416 193,460
============ ========= =========
Net asset value per unit: Type I ............ 30.12 28.39 27.49
============ ========= =========
Outstanding units: Type II (note 2) ......... 27,148 28,470 33,793
============ ========= =========
Net asset value per unit: Type II ........... 30.12 28.39 27.49
============ ========= =========
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS -------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Investment in Janus Aspen Series, at fair
value (note 2):
Aggressive Growth Portfolio (131,366
shares; cost -- $3,750,750) ............... -- -- -- --
Growth Portfolio (157,065 shares;
cost -- $3,129,683) ....................... -- -- -- --
Worldwide Growth Portfolio (190,886
shares; cost -- $4,721,231) ............... -- -- -- --
Balanced Portfolio (72,923 shares;
cost -- $1,433,058) ....................... 1,819,432 -- -- --
Flexible Income Portfolio (15,420
shares; cost -- $185,940) ................. -- 178,251 -- --
International Growth Portfolio
(30,312 shares; cost -- $992,741) ......... -- -- 1,099,482 --
Capital Appreciation Portfolio (46,905
shares; cost -- $1,122,814) ............... -- -- -- 1,173,085
Receivable from affiliate (note 3) .......... -- -- 8 --
Receivable for units sold ................... 870 -- 432 22,900
--------- ------- --------- ---------
TOTAL ASSETS ............................... 1,820,302 178,251 1,099,922 1,195,985
========= ======= ========= =========
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 1,843 1,180 1,549 7,036
Payable for units withdrawn ................. -- -- 2,669 --
--------- ------- --------- ---------
TOTAL LIABILITIES .......................... 1,843 1,180 4,218 7,036
--------- ------- --------- ---------
Net assets .................................. 1,818,459 177,071 1,095,704 1,188,949
========= ======= ========= =========
Outstanding units: Type I (note 2) .......... 60,601 7,497 30,889 26,135
========= ======= ========= =========
Net asset value per unit: Type I ............ 22.16 13.57 17.61 24.73
========= ======= ========= =========
Outstanding units: Type II (note 2) ......... 21,460 5,552 31,331 21,942
========= ======= ========= =========
Net asset value per unit: Type II ........... 22.16 13.57 17.61 24.73
========= ======= ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
8
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
------------------------------------------------------------------------------
S&P 500 MONEY TOTAL INTERNATIONAL REAL ESTATE
INDEX MARKET RETURN EQUITY SECURITIES
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $ -- 104,913 -- --
Expenses -- Mortality and expense risk
charges (note 3) ...................... 22,342 16,525 15,110 574 1,417
--------- --------- ------- ----- ------
Net investment income (expense) .......... (22,342) 88,388 (15,110) (574) (1,417)
--------- --------- ------- ----- ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ................ 176,225 2 1,390 1,002 (9,416)
Unrealized appreciation (depreciation) on
investments ........................... 528,951 (2) 271,344 7,927 44,016
--------- --------- ------- ----- ------
Net realized and unrealized gain (loss) on
investments ........................... 705,176 -- 272,734 8,929 34,600
--------- --------- ------- ----- ------
Increase (decrease) in net assets from
operations ............................ $ 682,834 88,388 257,624 8,355 33,183
========= ========= ======= ===== ======
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
------------------------------------------------------------------------------
GLOBAL VALUE U.S. PREMIER
INCOME EQUITY INCOME EQUITY GROWTH EQUITY
FUND FUND FUND FUND FUND
--------------- --------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $ -- -- -- -- --
Expenses -- Mortality and expense risk
charges (note 3) ........................... 135 829 1,569 309 --
-------- ------ ------ ------ -----
Net investment income (expense) .............. (135) (829) (1,569) (309) --
-------- ------ ------ ------ -----
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... (31) 12,062 90 1,532 --
Unrealized appreciation (depreciation) on
investments ................................ (2,847) 32,829 (8,247) 9,712 9
-------- ------ ------ ------ -----
Net realized and unrealized gain (loss) on
investments ................................ (2,878) 44,891 (8,157) 11,244 9
-------- ------ ------ ------ -----
Increase (decrease) in net assets from
operations ................................. $ (3,013) 44,062 (9,726) 10,935 9
======== ====== ====== ====== =====
</TABLE>
See accompanying notes to unaudited financial statements.
9
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
------------------------------------------------------------------------------
AGGRESSIVE CAPITAL HIGH MULTIPLE
BOND GROWTH APPRECIATION INCOME STRATEGIES
FUND/VA FUND/VA FUND/VA FUND/VA FUND/VA
--------------- --------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $ 24,061 -- 141,537 129,252 73,700
Expenses -- Mortality and expense risk
charges (note 3) ........................... 1,748 14,767 12,795 7,093 3,249
---------- ------ ------- ------- ------
Net investment income (expense) .............. 22,313 (14,767) 128,742 122,159 70,451
---------- ------- ------- ------- ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... (13) 127,652 90,864 (1,917) 5,233
Unrealized appreciation (depreciation) on
investments ................................ (32,379) 661,355 292,390 (56,086) (5,554)
---------- ------- ------- ------- ------
Net realized and unrealized gain (loss) on
investments ................................. (32,392) 789,007 383,254 (58,003) (321)
---------- ------- ------- ------- ------
Increase (decrease) in net assets from
operations .................................. $ (10,079) 774,240 511,996 64,156 70,130
========== ======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE SALOMON BROTHERS VARIABLE
INSURANCE TRUST SERIES FUND, INC.
------------------------------- ------------------------------------------------
GROWTH AND MID CAP STRATEGIC TOTAL
INCOME VALUE BOND INVESTORS RETURN
FUND FUND FUND FUND FUND
--------------- --------------- ---------------- --------------- ---------------
SIX MONTHS SIX MONTHS PERIOD FROM SIX MONTHS PERIOD FROM
ENDED 6/30/99 ENDED 6/30/99 3/02 - 6/30/99 ENDED 6/30/99 6/16 - 6/30/99
--------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $ -- -- -- -- --
Expenses -- Mortality and expense risk
charges (note 3) ........................... 46 268 2 7 --
------ ----- ------ ---- ----
Net investment income (expense) .............. (46) (268) (2) (7) --
------ ----- ------ ---- ----
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) .................... 411 87 (5) 2 3
Unrealized appreciation (depreciation) on
investments ................................ 914 6,328 7 244 (3)
------ ----- ------ ---- ----
Net realized and unrealized gain (loss) on
investments ................................. 1,325 6,415 2 246 --
------ ----- ------ ---- ----
Increase (decrease) in net assets from
operations .................................. $1,279 6,147 -- 239 --
====== ===== ====== ==== ====
</TABLE>
See accompanying notes to unaudited financial statements.
10
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
--------------------------------------------------
EQUITY INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $ 325,013 882,287 85,791
Expenses -- Mortality and expense risk charges (note 3) ......... 24,860 28,940 7,909
--------- --------- -------
Net investment income ............................................ 300,153 853,347 77,882
--------- --------- -------
Net realized and unrealized gain (loss) on investments:
Net realized gain ............................................... 155,932 278,841 13,924
Unrealized appreciation (depreciation) on investments ........... 334,382 (102,978) 68,972
--------- --------- -------
Net realized and unrealized gain (loss) on investments ........... 490,314 175,863 82,896
--------- --------- -------
Increase in net assets from operations ........................... $ 790,467 1,029,210 160,778
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCT FUND III
------------------------------- ---------------------------------------
ASSET MANGER CONTRAFUND GROWTH & INCOME GROWTH OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ----------------- ---------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ 348,731 153,638 8,496 8,712
Expenses -- Mortality and expense risk charges
(note 3) ..................................... 17,095 14,597 2,009 1,239
---------- ------- ------ ------
Net investment income ........................... 331,636 139,041 6,487 7,473
---------- ------- ------ ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ............................. 26,599 216,813 7,683 3,134
Unrealized appreciation (depreciation) on
investments .................................. (132,567) 50,760 28,103 13,012
---------- ------- ------ ------
Net realized and unrealized gain (loss) on
investments ................................... (105,968) 267,573 35,786 16,146
---------- ------- ------ ------
Increase in net assets from operations .......... $ 225,668 406,614 42,273 23,619
========== ======= ====== ======
</TABLE>
See accompanying notes to unaudited financial statements.
11
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED INSURANCE SERIES
--------------------------------------------------------
AMERICAN LEADERS HIGH INCOME BOND UTILITY
FUND II FUND II FUND II
------------------ ------------------ --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
------------------ ------------------ --------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $ 35,467 16,812 18,977
Expenses -- Mortality and expense risk charges (note 3) ......... 1,410 751 970
-------- ------- -------
Net investment income (expense) .................................. 34,057 16,061 18,007
-------- ------- -------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ........................................ 8,964 (195) 2,083
Unrealized appreciation (depreciation) on investments ........... 1,608 (12,406) (10,583)
-------- ------- -------
Net realized and unrealized gain (loss) on investments ........... 10,572 (12,601) (8,500)
-------- ------- -------
Increase in net assets from operations ........................... $ 44,629 3,460 9,507
======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
ALGER AMERICAN PBHG INSURANCE SERIES FUND, INC.
-------------------------------------- --------------------------------
PBHG LARGE
SMALL CAPITALIZATION GROWTH CAP GROWTH PBHG GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------------- --------------- --------------- ---------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
---------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Income-- Dividends ............................... $ 183,620 226,416 -- --
Expenses -- Mortality and expense risk charges
(note 3) ........................................ 4,679 8,017 334 320
--------- -------- ----- ------
Net investment income (expense) .................... 178,941 218,399 (334) (320)
--------- -------- ----- ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ......................... 8,916 374,659 1,923 1,537
Unrealized appreciation (depreciation) on
investments ..................................... (14,740) (306,511) 5,310 18,440
--------- -------- ----- ------
Net realized and unrealized gain (loss) on
investments ...................................... (5,824) 68,148 7,233 19,977
--------- -------- ----- ------
Increase in net assets from operations ............. $ 173,117 286,547 6,899 19,657
========= ======== ===== ======
</TABLE>
See accompanying notes to unaudited financial statements.
12
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------------------
AGGRESSIVE GROWTH WORLDWIDE GROWTH
PORTFOLIO GROWTH PORTFOLIO PORTFOLIO
------------------- ------------------ -----------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
------------------- ------------------ -----------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $ 176,415 26,560 11,433
Expenses -- Mortality and expense risk charges (note 3) ......... 12,369 13,487 20,580
--------- ------- -------
Net investment income (expense) .................................. 164,046 13,073 (9,147)
--------- ------- -------
Net realized and unrealized gain (loss) on investments:
Net realized gain ............................................... 437,217 218,037 136,620
Unrealized appreciation (depreciation) on investments ........... 257,581 324,905 532,137
--------- ------- -------
Net realized and unrealized gain (loss) on investments ........... 694,798 542,942 668,757
--------- ------- -------
Increase (decrease) in net assets from operations ................ $ 858,844 556,015 659,610
========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
---------------------------------------------------------------------------
FLEXIBLE
BALANCED INCOME INTERNATIONAL GROWTH CAPITAL APPRECIAION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ---------------------- --------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends .............................. $ 18,960 6,287 2,819 2,365
Expenses -- Mortality and expense risk charges
(note 3) ........................................ 5,783 509 3,621 2,425
-------- ------ ------ ------
Net investment income (expense) .................... 13,177 5,778 (802) (60)
-------- ------ ------ ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ................................ 43,866 84 18,523 57,385
Unrealized appreciation (depreciation) on
investments ..................................... 111,789 (7,769) 73,202 4,146
-------- ------ ------ ------
Net realized and unrealized gain (loss) on
investments ...................................... 155,655 (7,685) 91,725 61,531
-------- ------ ------ ------
Increase (decrease) in net assets from operations .. $168,832 (1,907) 90,923 61,471
======== ====== ====== ======
</TABLE>
See accompanying notes to unaudited financial statements.
13
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-------------------------------
S&P 500 MONEY
INDEX MARKET
FUND FUND
-------------- ----------------
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/99 6/30/99
-------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................. $ (22,342) 88,388
Net realized gain (loss) ........................ 176,225 2
Unrealized appreciation (depreciation)
on investments ................................ 528,951 (2)
----------- ----------
Increase (decrease) in net assets from
operations ...................................... 682,834 88,388
----------- ----------
From capital transactions:
Net premiums .................................... 1,139,949 3,152,872
Loan interest ................................... (220) (2,873)
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits ............................... (10,152) --
Surrenders ................................... (64,998) (10,526)
Loans ........................................ (69,555) (132,482)
Cost of insurance and administrative
expense (note 3) ............................ (336,165) (220,160)
Transfer gain (loss) and transfer fees ....... 3,837 (1,354)
Interfund transfers ............................. 507,618 (2,073,725)
----------- ----------
Increase (decrease) in net assets from capital
transactions .................................... 1,170,314 711,752
----------- ----------
Increase (decrease) in net assets ................ 1,853,148 800,140
Net assets at beginning of year .................. 5,307,680 4,071,591
----------- ----------
Net assets at end of year ........................ $ 7,160,828 4,871,731
=========== ==========
<CAPTION>
GE INVESTMENTS FUNDS, INC.
------------------------------------------------------
TOTAL INTERNATIONAL REAL ESTATE GLOBAL
RETURN EQUITY SECURITIES INCOME
FUND FUND FUND FUND
------------ --------------- ------------- -----------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
6/30/99 6/30/99 6/30/99 6/30/99
------------ --------------- ------------- -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................. (15,110) (574) (1,417) (135)
Net realized gain (loss) ........................ 1,390 1,002 (9,416) (31)
Unrealized appreciation (depreciation)
on investments ................................ 271,344 7,927 44,016 (2,847)
--------- ------- ------- ------
Increase (decrease) in net assets from
operations ...................................... 257,624 8,355 33,183 (3,013)
--------- ------- ------- ------
From capital transactions:
Net premiums .................................... 127,620 69,319 57,526 5,725
Loan interest ................................... (236) 14 25 --
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits ............................... (1,626) -- -- --
Surrenders ................................... (13,983) (613) (5,036) (1,142)
Loans ........................................ (9,471) (87) (414) --
Cost of insurance and administrative
expense (note 3) ............................ (203,631) (12,489) (26,608) (2,656)
Transfer gain (loss) and transfer fees ....... (357) 132 (194) 80
Interfund transfers ............................. (4,932) (6,938) 23,146 2,976
--------- ------- ------- ------
Increase (decrease) in net assets from capital
transactions .................................... (106,616) 49,338 48,445 4,983
--------- ------- ------- ------
Increase (decrease) in net assets ................ 151,008 57,693 81,628 1,970
Net assets at beginning of year .................. 4,077,703 115,749 344,046 36,131
--------- ------- ------- ------
Net assets at end of year ........................ 4,228,711 173,442 425,674 38,101
========= ======= ======= ======
</TABLE>
See accompanying notes to unaudited financial statements.
14
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
---------------------------------------------------------------
VALUE U.S. PREMIER
EQUITY INCOME EQUITY GROWTH EQUITY
FUND FUND FUND FUND
------------ -------------- ------------- ---------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED PERIOD FROM
6/30/99 6/30/99 6/30/99 6/09 - 6/30/99
------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ............................. $ (829) (1,569) (309) --
Net realized gain (loss) .................................... 12,06 90 1,532 --
Unrealized appreciation (depreciation)
on investments ............................................ 32,829 (8,247) 9,712 9
--------- ------- ------- ----
Increase (decrease) in net assets from
operations .................................................. 44,062 (9,726) 10,935 9
--------- ------- ------- ----
From capital transactions:
Net premiums ................................................ 37,800 31,555 76,874 15
Loan interest ............................................... 46 (2) -- --
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ........................................... -- -- -- --
Surrenders ............................................... (3,934) (3,376) (8) --
Loans .................................................... (18,939) (2,305) -- --
Cost of insurance and administrative
expense (note 3) ........................................ (16,559) (16,477) (9,696) (21)
Transfer gain (loss) and transfer fees ................... (841) (142) (512) (1)
Interfund transfers ......................................... 11,993 (6,197) 5,924 236
--------- ------- ------- ----
Increase (decrease) in net assets from capital
transactions ................................................ 9,566 3,056 72,582 229
--------- ------- ------- ----
Increase (decrease) in net assets ............................ 53,628 (6,670) 83,517 238
Net assets at beginning of year .............................. 212,346 433,544 50,945 --
--------- ------- ------- ----
Net assets at end of year .................................... $ 265,974 426,874 134,462 238
========= ======= ======= ====
</TABLE>
See accompanying notes to unaudited financial statements.
15
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
OPPENHEIMER
VARIABLE ACCOUNT
FUNDS
---------------
BOND
FUND/VA
---------------
SIX MONTHS
ENDED 6/30/99
---------------
<S> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .................................... $ 22,313
Net realized gain (loss) ........................................... (13)
Unrealized appreciation (depreciation) on investments .............. (32,379)
---------
Increase (decrease) in net assets from operations ................... (10,079)
---------
From capital transactions:
Net premiums ....................................................... 56,764
Loan interest ...................................................... 105
Transfers (to) from the general account of GE Life & Annuity:
Death benefits .................................................. --
Surrenders ...................................................... (10,866)
Loans ........................................................... (92)
Cost of insurance and administrative expense (note 3) (32,109)
Transfer gain (loss) and transfer fees .......................... 221
Transfers (to) from the Guarantee Account (note 1) .............. --
Interfund transfers ................................................ 10,630
---------
Increase (decrease) in net assets from capital transactions ......... 24,653
---------
Increase (decrease) in net assets ................................... 14,574
Net assets at beginning of period ................................... 470,449
---------
Net assets at end of period ......................................... $ 485,023
=========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
----------------------------------------------
AGGRESSIVE CAPITAL HIGH
GROWTH APPRECIATION INCOME
FUND/VA FUND/VA FUND/VA
--------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .................................... (14,767) 128,742 122,159
Net realized gain (loss) ........................................... 127,652 90,864 (1,917)
Unrealized appreciation (depreciation) on investments .............. 661,355 292,390 (56,086)
--------- --------- ---------
Increase (decrease) in net assets from operations ................... 774,240 511,996 64,156
--------- --------- ---------
From capital transactions:
Net premiums ....................................................... 360,018 456,221 229,862
Loan interest ...................................................... 1,046 911 112
Transfers (to) from the general account of GE Life & Annuity:
Death benefits .................................................. (1,395) -- --
Surrenders ...................................................... (69,094) (61,054) (35,430)
Loans ........................................................... (164,809) (25,957) (32,446)
Cost of insurance and administrative expense (note 3) (164,146) (146,672) (88,771)
Transfer gain (loss) and transfer fees .......................... (1,107) 709 24
Transfers (to) from the Guarantee Account (note 1) .............. -- -- (4)
Interfund transfers ................................................ (130,601) (18,410) 12,197
--------- --------- ---------
Increase (decrease) in net assets from capital transactions ......... (170,088) 205,748 85,544
--------- --------- ---------
Increase (decrease) in net assets ................................... 604,152 717,744 149,700
Net assets at beginning of period ................................... 3,826,947 3,228,873 1,854,608
--------- --------- ---------
Net assets at end of period ......................................... 4,431,099 3,946,617 2,004,308
========= ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
16
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE GOLDMAN SACHS
ACCOUNT FUNDS (CONTINUED) VARIABLE INSURANCE TRUST
--------------------------- ------------------------------
MULTIPLE GROWTH AND MID CAP
STRATEGIES INCOME VALUE
FUND/VA FUND FUND
--------------------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .............................. $ 70,451 (46) (268)
Net realized gain (loss) ..................................... 5,233 411 87
Unrealized appreciation (depreciation) on investments ........ (5,554) 914 6,328
--------- ------ -------
Increase (decrease) in net assets from operations ............. 70,130 1,279 6,147
--------- ------ -------
From capital transactions:
Net premiums ................................................. 97,444 5,339 894
Loan interest ................................................ 387 -- --
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ............................................. -- -- --
Surrenders ................................................. (7,402) -- --
Loans ...................................................... (8,051) -- --
Cost of insurance and administrative expense (note 3) ...... (34,057) (1,495) (1,951)
Transfer gain (loss) and transfer fees ..................... (31) 21 38
Transfers (to) from the Guarantee Account (note 1) ......... -- -- --
Interfund transfers .......................................... (16,896) (350) (38,987)
--------- ------ -------
Increase (decrease) in net assets from capital transactions ... 31,394 3,515 (40,006)
--------- ------ -------
Increase (decrease) in net assets ............................. 101,524 4,794 (33,859)
Net assets at beginning of period ............................. 846,057 10,433 93,208
--------- ------ -------
Net assets at end of period ................................... $ 947,581 15,227 59,349
========= ====== =======
</TABLE>
See accompanying notes to unaudited financial statements.
17
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
SALOMON BROTHERS VARIABLE SERIES FUND, INC.
------------------------------------------------
STRATEGIC TOTAL
BOND INVESTORS RETURN
FUND FUND FUND
-------------- --------------- -------------
PERIOD FROM SIX MONTHS PERIOD FROM
3/02-6/30/99 ENDED 6/30/99 6/16-6/30/99
-------------- --------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .................................... $ (2) (7) --
Net realized gain (loss) ........................................... (5) 2 3
Unrealized appreciation (depreciation) on investments .............. 7 244 (3)
------- ------ -----
Increase (decrease) in net assets from operations ................... -- 239 --
------- ------ -----
From capital transactions:
Net premiums ....................................................... 2,144 102 18
Loan interest ...................................................... -- -- --
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ................................................... -- -- --
Surrenders ....................................................... -- -- --
Loans ............................................................ -- -- --
Cost of insurance and administrative expense (note 3) ............ (253) (171) (12)
Transfer gain (loss) and transfer fees ........................... 1 15 --
Transfers (to) from the Guarantee Account (note 1) ............... -- -- --
Interfund transfers ................................................ 178 725 --
------- ------ -----
Increase (decrease) in net assets from capital transactions ......... 2,070 671 6
------- ------ -----
Increase (decrease) in net assets ................................... 2,070 910 6
Net assets at beginning of period ................................... -- 1,530 --
------- ------ -----
Net assets at end of period ......................................... $ 2,070 2,440 6
======= ====== =====
</TABLE>
See accompanying notes to unaudited financial statements.
18
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
--------------------------------------------------
EQUITY
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............................................. $ 300,153 853,347 77,882
Net realized gain .................................................. 155,932 278,841 13,924
Unrealized appreciation (depreciation) on investments .............. 334,382 (102,978) 68,972
----------- --------- ---------
Increase in net assets from operations .............................. 790,467 1,029,210 160,778
----------- --------- ---------
From capital transactions:
Net premiums ....................................................... 835,151 665,508 227,168
Loan interest ...................................................... (348) (732) 485
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ................................................... (3,378) (3,783) (1,410)
Surrenders ....................................................... (82,543) (159,249) (17,651)
Loans ............................................................ (76,342) (89,792) (28,033)
Cost of insurance and administrative expense (note 3) ............ (307,961) (297,687) (82,502)
Transfer gain (loss) and transfer fees ........................... (694) (4,289) (736)
Interfund transfers ................................................ (529,397) (542,349) 163,634
----------- --------- ---------
Increase (decrease) in net assets from capital transactions ......... (165,512) (432,373) 260,955
----------- --------- ---------
Increase in net assets .............................................. 624,955 596,837 421,733
Net assets at beginning of year ..................................... 6,713,088 7,826,253 2,043,917
----------- --------- ---------
Net assets at end of year ........................................... $ 7,338,043 8,423,090 2,465,650
=========== ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
19
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCT FUND III
------------------------------- ------------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .......................................... $ 331,636 139,041 6,487 7,473
Net realized gain .............................................. 26,599 216,813 7,683 3,134
Unrealized appreciation (depreciation) on investments .......... (132,567) 50,760 28,103 13,012
---------- --------- --------- -------
Increase in net assets from operations .......................... 225,668 406,614 42,273 23,619
From capital transactions:
Net premiums ................................................... 232,605 548,682 174,727 69,139
Loan interest .................................................. 661 (819) (1) 145
Transfers (to) from the general account of GE Life & Annuity:
Death benefits .............................................. -- -- -- --
Surrenders .................................................. (20,576) (59,463) (1,010) (391)
Loans ....................................................... (26,132) (37,431) (590) --
Cost of insurance and administrative expense (note 3) (145,228) (196,301) (40,723) (25,342)
Transfer gain (loss) and transfer fees ...................... 448 (12,733) (11,307) (213)
Interfund transfers ............................................ (85,121) 171,404 129,499 47,374
---------- --------- --------- -------
Increase (decrease) in net assets from capital transactions ..... (43,343) 413,339 250,595 90,712
---------- --------- --------- -------
Increase in net assets .......................................... 182,325 819,953 292,868 114,331
Net assets at beginning of year ................................. 4,636,363 3,631,860 409,404 286,326
---------- --------- --------- -------
Net assets at end of year ....................................... $4,818,688 4,451,813 702,272 400,657
========== ========= ========= =======
</TABLE>
See accompanying notes to unaudited financial statements.
20
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FEDERATED INSURANCE SERIES
--------------------------------------------------
AMERICAN HIGH
LEADERS INCOME BOND UTILITY
FUND II FUND II FUND II
--------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................. $ 34,057 16,061 18,007
Net realized gain (loss) ........................................ 8,964 (195) 2,083
Unrealized appreciation (depreciation) on investments ........... 1,608 (12,406) (10,583)
--------- ------- -------
Increase in net assets from operations ........................... 44,629 3,460 9,507
--------- ------- -------
From capital transactions:
Net premiums .................................................... 168,924 58,537 60,918
Loan interest ................................................... 53 (149) (12)
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ................................................ -- -- --
Surrenders .................................................... (9,572) (2,492) (1,117)
Loans ......................................................... 22 (105) (11,098)
Cost of insurance and administrative expense (note 3) ......... (26,956) (13,665) (12,849)
Transfer gain (loss) and transfer fees (note 3) ............... (869) 104 (1,432)
Transfers (to) from the Guarantee Account (note 1) ............ -- -- --
Interfund transfers ............................................. (31,168) 33,516 14,641
--------- ------- -------
Increase in net assets from capital transactions ................. 100,434 75,746 49,051
--------- ------- -------
Increase in net assets ........................................... 145,063 79,206 58,558
Net assets at beginning of year .................................. 318,014 160,709 247,918
--------- ------- -------
Net assets at end of year ........................................ $ 463,077 239,915 306,476
========= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
21
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
PBHG INSURANCE SERIES FUND,
ALGER AMERICAN INC.
-------------------------------- ------------------------------
SMALL PBHG LARGE PBHG
CAPITALIZATION GROWTH CAP GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
---------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... $ 178,941 218,399 (334) (320)
Net realized gain (loss) .................................. 8,916 374,659 1,923 1,537
Unrealized appreciation (depreciation) on investments ..... (14,740) (306,511) 5,310 18,440
---------- --------- ------- -------
Increase in net assets from operations ..................... 173,117 286,547 6,899 19,657
---------- --------- ------- -------
From capital transactions:
Net premiums .............................................. 121,768 488,668 26,531 19,285
Loan interest ............................................. 24 51 141 --
Transfers (to) from the general account of GE Life &
Annuity:
Death benefits ......................................... -- -- -- --
Surrenders ............................................. (15,864) (14,794) (513) (2,400)
Loans .................................................. (21,689) (7,387) (33) --
Cost of insurance and administrative expense
(note 3) .............................................. (59,022) (100,505) (9,086) (5,655)
Transfer gain (loss) and transfer fees (note 3) ........ (637) (1,453) (119) (213)
Transfers (to) from the Guarantee Account (note 1) ..... (4) (4) -- --
Interfund transfers ....................................... 255,498 (4,647) 16,859 3,820
---------- --------- ------- -------
Increase in net assets from capital transactions ........... 280,074 359,929 33,780 14,837
---------- --------- ------- -------
Increase in net assets ..................................... 453,191 646,476 40,679 34,494
Net assets at beginning of year ............................ 1,169,395 1,826,506 78,355 68,878
---------- --------- ------- -------
Net assets at end of year .................................. $1,622,586 2,472,982 119,034 103,372
========== ========= ======= =======
</TABLE>
See accompanying notes to unaudited financial statements.
22
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
----------------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................. $ 164,046 13,073 (9,147)
Net realized gain ............................................... 437,217 218,037 136,620
Unrealized appreciation (depreciation) on investments ........... 257,581 324,905 532,137
----------- --------- ---------
Increase (decrease) in net assets from operations ................ 858,844 556,015 659,610
----------- --------- ---------
From capital transactions:
Net premiums .................................................... 469,026 659,526 813,903
Loan interest ................................................... 698 (594) (1,179)
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ................................................. -- (1,667) --
Surrenders ..................................................... (33,164) (37,553) (55,508)
Loans .......................................................... (140,210) (42,186) (59,174)
Cost of insurance and administrative expense (note 3) .......... (155,804) (177,548) (284,020)
Transfer gain (loss) and transfer fees ......................... 7,649 2,758 1,399
Interfund transfers ............................................. 1,003,064 (33,179) 71,927
----------- --------- ---------
Increase in net assets from capital transactions ................. 1,151,259 369,557 487,348
----------- --------- ---------
Increase in net assets ........................................... 2,010,103 925,572 1,146,958
Net assets at beginning of period ................................ 2,532,006 3,358,073 5,100,225
----------- --------- ---------
Net assets at end of period ...................................... $ 4,542,109 4,283,645 6,247,183
=========== ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
23
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- --------------- --------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99 ENDED 6/30/99
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... $ 13,177 5,778 (802) (60)
Net realized gain ......................................... 43,866 84 18,523 57,385
Unrealized appreciation (depreciation) on investments ..... 111,789 (7,769) 73,202 4,146
---------- ------- --------- ---------
Increase (decrease) in net assets from operations .......... 168,832 (1,907) 90,923 61,471
---------- ------- --------- ---------
From capital transactions:
Net premiums .............................................. 226,819 44,574 140,622 271,036
Loan interest ............................................. (96) -- 49 (4)
Transfers (to) from the general account of GE Life & Annuity:
Death benefits ......................................... -- -- -- --
Surrenders ............................................. (11,408) (4,556) (8,148) (303)
Loans .................................................. (3,751) -- (28,129) (2,592)
Cost of insurance and administrative expense
(note 3) .............................................. (85,471) (11,367) (52,141) (39,278)
Transfer gain (loss) and transfer fees ................. (251) 13 2,597 (1,027)
Interfund transfers ....................................... 204,601 51,070 112,945 667,422
---------- ------- --------- ---------
Increase in net assets from capital transactions ........... 330,443 79,734 167,795 895,254
---------- ------- --------- ---------
Increase in net assets ..................................... 499,275 77,827 258,718 956,725
Net assets at beginning of period .......................... 1,319,184 99,244 836,986 232,224
---------- ------- --------- ---------
Net assets at end of period ................................ $1,818,459 177,071 1,095,704 1,188,949
========== ======= ========= =========
</TABLE>
See accompanying notes to unaudited financial statements.
24
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
(1) DESCRIPTION OF ENTITY
GE Life & Annuity Separate Account II (the Account) is a separate
investment account established in 1986 by GE Life and Annuity Assurance Company
(GE Life & Annuity) under the laws of the Commonwealth of Virginia. The Account
operates as a unit investment trust under the Investment Company Act of 1940.
The Account is used to fund certain benefits for flexible premium variable life
insurance policies issued by GE Life & Annuity. GE Life and Annuity Assurance
Company is a stock life insurance company operating under a charter granted by
the Commonwealth of Virginia on March 21, 1871. A majority of the capital stock
of GE Life & Annuity is owned by General Electric Capital Assurance Company. The
remaining portion is owned by GE Financial Assurance Holdings, Inc. General
Electric Capital Assurance Company and GE Financial Assurance Holdings, Inc. are
indirect, wholly-owned subsidiaries of General Electric Capital Company ("GE
Capital"). GE Capital, a diversified financial services company, is a
wholly-owned subsidiary of General Electric Company (GE), a New York
corporation. Prior to April 1, 1996, GE Life & Annuity was an indirect
wholly-owned subsidiary of Aon Corporation (Aon).
During first quarter of 1999, a new subdivision was added to the Account,
for both Type I and Type II policies (see note 2). The Premier Growth Equity
Fund invests solely in a designated portfolio of the GE Investments Funds, Inc
and is a series type mutual fund.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) UNIT CLASS
There are two unit classes included in the Account. Type I units are sold
under policy form P1096. Type II units are sold under policy form P1250. Type II
unit sales began in the first half of 1998.
(B) INVESTMENTS
Investments are stated at fair value which is based on the underlying net
asset value per share of the respective portfolios or funds. Purchases and sales
of investments are recorded on the trade date and income distributions are
recorded on the ex-dividend date. Realized gains and losses on investments are
determined on the average cost basis. The units and unit values are disclosed as
of the last business day in the applicable year or period.
The aggregate cost of the investments acquired and the aggregate proceeds
of investments sold, for the six months or lesser period ended June 30, 1999,
were:
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- ----------------------------------- -------------- --------------
<S> <C> <C>
GE Investment Funds, Inc.:
S&P 500 Index .................... $ 2,310,138 $ 1,152,064
Money Market ..................... 8,191,449 7,559,918
Total Return ..................... 153,717 276,589
International Equity ............. 74,833 25,663
Real Estate Securities ........... 132,063 85,084
Global Income .................... 8,706 3,954
Value Equity ..................... 117,916 113,036
Income ........................... 34,554 33,191
U.S. Equity ...................... 91,492 19,272
Premier Growth Equity ............ 251 21
Oppenheimer Variable Account Funds:
Bond ............................. 119,213 56,866
Capital Appreciation ............. $ 415,558 $ 603,363
</TABLE>
25
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- --------------------------------------------- ------------ ------------
<S> <C> <C>
Aggressive Growth .......................... $ 415,558 $ 603,363
Capital Appreciation ....................... 730,005 395,897
High Income ................................ 410,263 205,780
Multiple Strategies ........................ 176,994 76,198
Variable Insurance Products Fund:
Equity-Income .............................. 1,357,794 1,223,810
Growth ..................................... 2,619,100 2,195,707
Overseas ................................... 560,145 220,924
Variable Insurance Products Fund II:
Asset Manager .............................. 606,417 316,447
Contrafund ................................. 2,089,937 1,530,747
Variable Insurance Products Fund III:
Growth & Income ............................ 346,322 78,004
Growth Opportunties ........................ 136,058 37,870
Goldman Sachs Variable Insurance Trust:
Growth and Income .......................... 8,288 4,823
Mid Cap Value .............................. 8,227 48,533
Janus Aspen Series:
Aggressive Growth .......................... 3,138,628 1,823,158
Growth ..................................... 1,250,413 858,654
Worldwide Growth ........................... 1,131,974 657,363
Balanced ................................... 582,361 215,005
Flexible Income ............................ 110,351 23,884
International Growth ....................... 499,595 329,004
Capital Appreciation ....................... 2,927,006 2,051,769
Federated Insurance Series:
Utility Fund II ............................ 132,820 58,779
High Income Bond Fund II ................... 115,654 23,890
American Leaders Fund II ................... 250,900 116,252
The Alger American Fund:
Small Capitalization ....................... 666,835 207,343
Growth ..................................... 3,331,952 2,751,445
PBHG Insurance Series Fund, Inc.:
PBHG Large Cap Growth ...................... 49,567 16,096
PBHG Growth II ............................. 30,340 15,057
Salomon Brothers Variable Series Funds, Inc.:
Strategic Bond ............................. 2,322 253
Investors .................................. 890 218
Total Return ............................... 18 12
</TABLE>
26
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(C) CAPITAL TRANSACTIONS
The increase (decrease) in outstanding units from capital transactions for
the six months or lesser period ended June 30, 1999 is as follows:
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
--------------------------
S&P 500 MONEY
INDEX MARKET
FUND FUND
------------- -----------
<S> <C> <C>
Type I Units
Units outstanding at December 31, 1998 .......................... 85,784 117,698
------ -------
From capital transactions:
Net premiums .................................................. 6,936 17,021
Loan Interest ................................................. (4) (178)
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ............................................... (176) --
Surrenders ................................................... (1,080) (587)
Loans ........................................................ (753) (2,917)
Cost of insurance ............................................ (3,751) (6,079)
Interfund transfers ........................................... 1,873 3,403
------ -------
Net increase (decrease) in units resulting from capital
transactions .................................................. 3,045 10,663
------ -------
Units outstanding at June 30, 1999 .............................. 88,829 128,361
====== =======
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------
TOTAL INTERNATIONAL REAL ESTATE
RETURN EQUITY SECURITIES
FUND FUND FUND
------------ --------------- ------------
<S> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 .......................... 110,519 7,412 17,514
------- ------ ------
From capital transactions:
Net premiums .................................................. 2,221 622 2,793
Loan Interest ................................................. (6) 1 2
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ............................................... (44) -- --
Surrenders ................................................... (381) (37) (332)
Loans ........................................................ (258) (5) (27)
Cost of insurance ............................................ (5,086) (274) (1,268)
Interfund transfers ........................................... (212) (419) (709)
------- ------ ------
Net increase (decrease) in units resulting from capital
transactions .................................................. (3,766) (112) 459
------- ------ ------
Units outstanding at June 30, 1999 .............................. 106,753 7,300 17,973
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
---------------------------------------------------
GLOBAL VALUE
INCOME EQUITY INCOME U.S. EQUITY
FUND FUND FUND FUND
-------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 3,010 5,086 40,200 18
----- ------ ------ ---
From capital transactions:
Net premiums .............................................. 111 709 2,115 64
Loan Interest ............................................. -- 3 -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- -- -- --
Surrenders .............................................. (101) (245) (242) --
Loans ................................................... -- (6) (165) --
Cost of insurance ....................................... (135) (385) (1,107) (42)
Interfund transfers ....................................... -- 2,331 (437) 8
----- ------ ------ ---
Net increase (decrease) in units resulting from capital
transactions .............................................. (125) 2,407 164 30
----- ------ ------ ---
Units outstanding at June 30, 1999 ......................... 2,885 7,493 40,364 48
===== ====== ====== ===
</TABLE>
27
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
---------------------------------------------------------------
AGGRESSIVE CAPITAL HIGH MULTIPLE
BOND GROWTH APPRECIATION INCOME STRATEGIES
FUND/VA FUND/VA FUND/VA FUND/VA FUND/VA
----------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 17,239 81,128 59,419 52,371 24,858
------ ------ ------ ------ ------
From capital transactions:
Net premiums .............................................. 1,949 6,693 4,813 4,876 1,378
Loan Interest ............................................. 4 21 16 3 8
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ......................................... -- (28) -- -- --
Surrenders ............................................. (461) (1,376) (1,057) (1,019) (158)
Loans .................................................. (4) (3,283) (449) (933) (172)
Cost of insurance ...................................... (761) (3,086) (2,070) (2,301) (642)
Interfund transfers ....................................... (24) (2,628) (786) (488) (405)
------- ------ ------ ------ ------
Net increase (decrease) in units resulting from capital
transactions .............................................. 703 (3,687) 467 138 9
------ ------ ------ ------ ------
Units outstanding at June 30, 1999 ......................... 17,942 77,441 59,886 52,509 24,867
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE SALOMON BROTHERS VARIABLE
INSURANCE TRUST SERIES FUND, INC.
------------------------ --------------------------
GROWTH AND MID CAP
INCOME VALUE INVESTORS
FUND FUND FUND
------------ --------- --------------------------
<S> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 81 -- 126
----- ---- ----
From capital transactions: .................................
Net premiums .............................................. -- -- --
Loan Interest ............................................. -- -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ......................................... -- -- --
Surrenders ............................................. -- -- --
Loans .................................................. -- -- --
Cost of insurance ...................................... (8) (3) (7)
Interfund transfers ....................................... (73) 660 --
----- ---- ----
Net increase (decrease) in units resulting from capital
transactions .............................................. (81) 657 (7)
----- ---- ----
Units outstanding at June 30, 1999 ......................... -- 657 119
===== ==== ====
</TABLE>
28
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE
VARIABLE INSURANCE PRODUCTS FUND PRODUCTS FUND II
------------------------------------- -----------------------
EQUITY ASSET
INCOME GROWTH OVERSEAS MANGER CONTRAFUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ................ 144,137 129,808 75,355 158,102 119,940
------- ------- ------ ------- -------
From capital transactions:
Net premiums ......................................... 16,671 7,250 5,638 7,113 5,947
Loan Interest ........................................ (8) (12) 16 22 (16)
Transfers (to) from the general acct. of
GE Life & Annuity:
Death benefits .................................... (79) (63) (48) -- --
Surrenders ........................................ (1,903) (2,630) (600) (699) (1,182)
Loans ............................................. (1,787) (1,453) (954) (888) (483)
Cost of insurance ................................. (6,518) (4,480) (2,478) (4,829) (3,178)
Interfund transfers .................................. (12,489) (9,849) 5,237 (2,910) (287)
------- ------- ------ ------- -------
Net increase (decrease) in units resulting from capital
transactions ......................................... (6,113) (11,237) 6,811 (2,191) 801
------- ------- ------ ------- -------
Units outstanding at June 30, 1999 .................... 138,024 118,571 82,166 155,911 120,741
======= ======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS
FUND III
--------------------------
GROWTH & GROWTH
INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO
----------- --------------
<S> <C> <C>
Type I Units
Units outstanding at December 31, 1998 .............................. 16,824 16,281
------ ------
From capital transactions:
Net premiums ....................................................... 2,152 1,603
Loan Interest ...................................................... -- 10
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ................................................... -- --
Surrenders ....................................................... (61) (26)
Loans ............................................................ (36) --
Cost of insurance ................................................ (1,062) (953)
Interfund transfers ................................................ 1,230 595
------ ------
Net increase (decrease) in units resulting from capital transactions 2,223 1,229
------ ------
Units outstanding at June 30, 1999 .................................. 19,047 17,510
====== ======
</TABLE>
29
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
FEDERATED INSURANCE SERIES ALGER AMERICAN FUND
----------------------------------- -----------------------------
HIGH
AMERICAN INCOME SMALL
LEADERS BOND UTILITY CAPITALIZATION GROWTH
FUND II FUND II FUND II PORTFOLIO PORTFOLIO
---------- ------------ ----------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 13,408 9,252 11,455 89,097 85,556
------ ------- ------- ------- -------
From capital transactions:
Net premiums .............................................. 1,530 1,522 1,037 7,011 10,036
Loan Interest ............................................. 2 (9) (1) 2 3
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- -- -- -- --
Surrenders .............................................. (431) (155) (59) (1,223) (707)
Loans ................................................... 2 (7) -- (1,672) (372)
Cost of insurance ....................................... (691) (549) (495) (3,788) (3,477)
Interfund transfers ..................................... (982) 137 (43) 17,255 (13,743)
------ ------- ------- ------- -------
Net increase (decrease) in units resulting from capital
transactions .............................................. (570) 939 439 17,585 (8,260)
------ ------- ------- ------- -------
Units outstanding at June 30, 1999 ......................... 12,838 10,191 11,894 106,682 77,296
====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PBHG INSURANCE SERIES
FUND,
INC.
-------------------------
PBHG LARGE PBHG
CAP GROWTH GROWTH II
PORTFOLIO PORTFOLIO
------------ ----------
<S> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ................................... 4,470 2,779
----- -----
From capital transactions:
Net premiums ............................................................ 674 1,212
Loan Interest ........................................................... 9 --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ........................................................ -- --
Surrenders ............................................................ (33) (192)
Loans ................................................................. -- --
Cost of insurance ..................................................... (274) (291)
Interfund transfers ..................................................... 379 (25)
----- -----
Net increase (decrease) in units resulting from capital transactions ..... 755 704
----- -----
Units outstanding at June 30, 1999 ....................................... 5,225 3,483
===== =====
</TABLE>
30
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 97,529 127,165 189,590 53,591
------ ------- ------- ------
From capital transactions:
Net premiums .............................................. 7,294 14,333 16,264 3,668
Loan Interest ............................................. 24 (26) (46) (5)
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- (72)
Surrenders .............................................. (1,140) (1,560) (2,101) (476)
Loans ................................................... (4,823) (1,781) (1,035) (56)
Cost of insurance ....................................... (3,956) (5,462) (8,427) (2,520)
Interfund transfers ....................................... 28,724 (10,181) (785) 6,399
------ ------- ------- ------
Net increase (decrease) in units resulting from capital
transactions .............................................. 26,123 (4,749) 3,870 7,010
------ ------- ------- ------
Units outstanding at June 30, 1999 ......................... 123,652 122,416 193,460 60,601
======= ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
---------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO
----------- --------------- -------------
<S> <C> <C> <C>
Type I Units
Units outstanding at December 31, 1998 ..................... 6,812 30,755 8,215
----- ------ ------
From capital transactions:
Net premiums .............................................. 1,051 4,799 1,119
Loan Interest ............................................. -- 4 --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- -- --
Surrenders .............................................. (333) (616) (12)
Loans ................................................... -- (303) (102)
Cost of insurance ....................................... (612) (2,327) (556)
Interfund transfers ....................................... 579 (1,423)
----- ------ ------
Net increase (decrease) in units resulting from capital
transactions .............................................. 685 134 17,920
----- ------ ------
Units outstanding at June 30, 1999 ......................... 7,497 30,889 26,135
===== ====== ======
</TABLE>
31
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------------------------------
S&P 500 MONEY TOTAL INTERNATIONAL REAL ESTATE
INDEX MARKET RETURN EQUITY SECURITIES
FUND FUND FUND FUND FUND
----------- ------------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ..................... 15,084 121,526 4,217 409 5,002
------ -------- ----- ----- -----
From capital transactions:
Net premiums .............................................. 13,399 164,355 1,263 3,916 993
Loan Interest ............................................. -- -- -- -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... (51) (61) -- -- --
Loans .................................................... (474) (4,880) -- -- --
Cost of insurance ........................................ (2,175) (6,977) (469) (528) (483)
Interfund transfers ....................................... 7,233 (121,533) 78 -- 2,220
------ -------- ----- ----- -----
Net increase (decrease) in units resulting from capital
transactions .............................................. 17,932 30,904 872 3,388 2,730
------ -------- ----- ----- -----
Units outstanding at June 30, 1999 ......................... 33,016 152,430 5,089 3,797 7,732
====== ======== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
----------------------------------------------------------------
GLOBAL VALUE U.S. PREMIER
INCOME EQUITY INCOME EQUITY GROWTH EQUITY
FUND FUND FUND FUND FUND
-------- ----------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ..................... 110 10,103 204 4,739 --
---- ------ --- ------- ----
From capital transactions:
Net premiums .............................................. 397 1,939 193 6,546 1
Loan Interest ............................................. -- -- -- -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- -- -- -- --
Surrenders .............................................. -- -- -- (1) --
Loans ................................................... -- (1,383) -- -- --
Cost of insurance ....................................... (100) (762) (97) (793) (2)
Interfund transfers ....................................... 265 (1,863) (10) 501 24
---- ------ --- ------- ----
Net increase (decrease) in units resulting from capital
transactions .............................................. 562 (2,069) 86 6,253 23
---- ------ --- ------- ----
Units outstanding at June 30, 1999 ......................... 672 8,034 290 10,992 23
==== ====== === ======= ====
</TABLE>
32
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------------------------
AGGRESSIVE CAPITAL HIGH MULTIPLE
BOND GROWTH APPRECIATION INCOME STRATEGIES
FUND/VA FUND/VA FUND/VA FUND/VA FUND/VA
--------- ------------ -------------- --------- -----------
<S> <C> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ..................... 2,536 3,128 2,782 1,810 2,190
----- ----- ----- ----- -----
From capital transactions:
Net premiums .............................................. 468 498 3,212 1,718 1,034
Loan Interest ............................................. -- -- -- -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits ........................................... -- -- -- -- --
Surrenders ............................................... -- -- -- -- --
Loans .................................................... -- -- (1) -- --
Cost of insurance ........................................ (612) (191) (489) (249) (127)
Interfund transfers ....................................... 483 28 485 831 63
----- ----- ------ ----- -----
Net increase (decrease) in units resulting from capital
transactions .............................................. 339 335 3,207 2,300 970
----- ----- ------ ----- -----
Units outstanding at June 30, 1999 ......................... 2,875 3,463 5,989 4,110 3,160
===== ===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN SACHS VARIABLE SALOMON BROTHERS VARIABLE
INSURANCE TRUST SERIES FUND, INC.
------------------------ ---------------------------------
GROWTH AND MID CAP STRATEGIC TOTAL
INCOME VALUE BOND INVESTORS RETURN
FUND FUND FUND FUND FUND
------------ ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ..................... 1,092 10,851 -- -- --
----- ------ --- ---- ----
From capital transactions:
Net premiums .............................................. 585 107 211 7 3
Loan Interest ............................................. -- -- -- -- --
Transfers (to) from the general acct. of GE Life & Annuity:
Death benefits .......................................... -- -- -- -- --
Surrenders .............................................. -- -- -- -- --
Loans ................................................... -- -- -- -- --
Cost of insurance ....................................... (156) (231) (25) (6) (2)
Interfund transfers ....................................... 36 (5,443) 18 55 --
----- ------ --- ---- ----
Net increase (decrease) in units resulting from capital
transactions .............................................. 465 (5,567) 204 56 1
----- ------ --- ---- ----
Units outstanding at June 30, 1999 ......................... 1,557 5,284 204 56 1
===== ====== === ==== ====
</TABLE>
33
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND
-----------------------------------
EQUITY
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- -----------
<S> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ....... 6,380 1,770 571
----- ----- -----
From capital transactions:
Net premiums ............................... 2,711 3,600 2,256
Loan Interest .............................. -- -- --
Transfers (to) from the general acct. of
GE Life & Annuity:
Death benefits ........................... -- -- --
Surrenders ............................... (27) (21) --
Loans .................................... -- (40) --
Cost of insurance ........................ (651) (449) (355)
Interfund transfers ........................ 90 766 355
----- ----- -----
Net increase (decrease) in units resulting
from capital transactions .................. 2,123 3,856 2,256
----- ----- -----
Units outstanding at June 30, 1999 ........... 8,503 5,626 2,827
===== ===== =====
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCTS FUND III
------------------------ --------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ....... 1,278 15,627 8,796 2,482
----- ------ ----- -----
From capital transactions:
Net premiums ............................... 788 8,863 8,038 2,956
Loan Interest .............................. -- -- -- --
Transfers (to) from the general acct. of
GE Life & Annuity:
Death benefits ........................... -- -- -- --
Surrenders ............................... -- (25) -- --
Loans .................................... -- (470) -- --
Cost of insurance ........................ (107) (1,344) (1,335) (729)
Interfund transfers ........................ 16 6,501 6,308 2,513
----- ------ ------ -----
Net increase (decrease) in units resulting
from capital transactions .................. 697 13,525 13,011 4,740
----- ------ ------ -----
Units outstanding at June 30, 1999 ........... 1,975 29,152 21,807 7,222
===== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
FEDERATED INSURANCE SERIES
------------------------------------
AMERICAN HIGH
LEADERS INCOME BOND UTILITY
FUND II FUND II FUND II
------------ ------------- ---------
<S> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ......... 5,255 1,037 1,350
------ ----- -----
From capital transactions:
Net premiums ................................. 7,317 2,130 2,146
Loan Interest ................................ -- -- --
Transfers (to) from the general acct. of
GE Life & Annuity:
Death benefits ............................. -- -- --
Surrenders ................................. (1) -- --
Loans ...................................... (2) -- (575)
Cost of insurance .......................... (629) (303) (184)
Interfund transfers .......................... (508) 1,958 801
------- ----- -----
Net increase (decrease) in units resulting
from capital transactions .................... 6,177 3,785 2,188
------- ----- -----
Units outstanding at June 30, 1999 ............. 11,432 4,822 3,538
======= ===== =====
<CAPTION>
PBHG INSURANCE
ALGER AMERICAN FUND SERIES FUND, INC.
---------------------------- -----------------------
SMALL PBHG LARGE PBHG
CAPITALIZATION GROWTH CAP GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 ......... 5,744 6,090 665 3,215
----- ----- ----- -----
From capital transactions:
Net premiums ................................. 2,424 13,175 1,027 341
Loan Interest ................................ -- -- -- --
Transfers (to) from the general acct. of
GE Life & Annuity:
Death benefits ............................. -- -- -- --
Surrenders ................................. -- (34) -- --
Loans ...................................... -- -- (2) --
Cost of insurance .......................... (778) (1,430) (309) (167)
Interfund transfers .......................... 2,493 12,237 701 342
----- ------ ------ -----
Net increase (decrease) in units resulting
from capital transactions .................... 4,139 23,948 1,417 516
----- ------ ------ -----
Units outstanding at June 30, 1999 ............. 9,883 30,038 2,082 3,731
===== ====== ====== =====
</TABLE>
34
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- -----------
<S> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 .......... 11,987 10,349 18,923
------ ------ ------
From capital transactions:
Net premiums .................................. 10,141 12,413 15,210
Loan Interest ................................. -- -- --
Transfers (to) from the general acct. of GE
Life & Annuity:
Death benefits .............................. -- -- --
Surrenders .................................. -- (51) (54)
Loans ....................................... -- (32) (1,252)
Cost of insurance ........................... (1,610) (1,927) (2,581)
Interfund transfers ........................... 6,630 7,718 3,547
------ ------ ------
Net increase (decrease) in units resulting from
capital transactions .......................... 15,161 18,121 14,870
------ ------ ------
Units outstanding at June 30, 1999 .............. 27,148 28,470 33,793
====== ====== ======
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Type II Units
Units outstanding at December 31, 1998 .......... 12,867 432 21,361 3,549
------ ----- ------ ------
From capital transactions:
Net premiums .................................. 7,032 2,197 4,704 10,082
Loan Interest ................................. -- -- -- --
Transfers (to) from the general acct. of GE
Life & Annuity:
Death benefits .............................. -- -- -- --
Surrenders .................................. (63) -- -- --
Loans ....................................... (121) -- (1,471) --
Cost of insurance ........................... (1,514) (218) (1,302) (1,047)
Interfund transfers ........................... 3,259 3,141 8,039 9,358
------ ----- ------ ------
Net increase (decrease) in units resulting from
capital transactions .......................... 8,593 5,120 9,970 18,393
------ ----- ------ ------
Units outstanding at June 30, 1999 .............. 21,460 5,552 31,331 21,942
====== ===== ====== ======
</TABLE>
(D) FEDERAL INCOME TAXES
The Account is not taxed separately because the operations of the Account
are part of the total operations of GE Life & Annuity. GE Life & Annuity is
taxed as a life insurance company under the Internal Revenue Code (the Code). GE
Life & Annuity is included in the General Electric Capital Assurance Company
consolidated federal income tax return. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains of the
Account.
(E) USE OF ESTIMATES
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect amounts and disclosures reported therein. Actual results could differ
from those estimates.
(3) RELATED PARTY TRANSACTIONS
Net premiums transferred from GE Life & Annuity to the Account represent
gross premiums recorded by GE Life & Annuity on its flexible premium variable
life insurance policies, less deductions of 7.5% retained as compensation for
certain distribution expenses and premium taxes. In addition, there is a
deferred sales charge of up to 45% of the first year's premiums. This charge
will be deducted from the policy's cash value in equal installments at the
beginning of each of the policy years two through ten with any remaining
installments deducted at policy lapse or surrender.
For Type I policies, if a policy is surrendered or lapses during the first
nine years, a charge is made by GE Life & Annuity to cover the expenses of
issuing the policy. The charge is a stated percentage of the insurance amount
and varies by the age of the policyholder when issued and period of time that
the policy has been in force. A charge equal to the lesser of $25 or 2% of the
amount paid on a partial surrender will be made to compensate GE Life & Annuity
for the costs incurred in connection with the partial surrender.
A charge based on the policy specified amount of insurance, death benefit
option, cash values, duration, the insured's sex, issue age and risk class is
deducted from the policy cash values each month to compensate GE Life & Annuity
for the cost of insurance and any benefits added by rider. In addition, GE Life
& Annuity charges the Account for the mortality and expense risk that GE Life &
Annuity assumes. This charge is deducted daily at an effective annual rate of
.70% of the net assets of the Account. For policies issued on or after May 1,
1993, GE Life & Annuity will deduct a monthly administrative charge of $6 from
the policy cash value and for policies issued prior to May 1, 1993, GE Life &
Annuity will deduct a monthly administrative charge of $5 from the policy cash
value.
35
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(3) RELATED PARTY TRANSACTIONS -- Continued
GE Investments Funds, Inc. (the Fund) is an open-end diversified
management investment company.
Capital Brokerage Corporation, an affiliate of GE Life & Annuity, is a
Washington Corporation registered with the Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Capital Brokerage Corporation serves as
principal underwriter for variable life insurance policies and annuities issued
by GE Life & Annuity.
GE Investment Management Incorporated (Investment Advisor), a wholly-owned
subsidiary of GE, currently serves as investment advisor to GE Investments
Funds, Inc. As compensation for its services, the Investment Advisor is paid an
investment advisory fee by the Fund based on the average daily net assets at an
effective annual rate of .35% for the S&P 500 Index Fund, .50% for the Money
Market, Income Fund and Total Return Funds, 1.00% for the International Equity
Fund, .85% for the Real Estate Securities Fund, .60% for the Global Income Fund,
.55% for the U.S. Equity Fund, and .65% for the Value Equity and Premier Growth
Equity Funds. Prior to May 1, 1997, Aon Advisors, Inc. served as investment
advisor to the Fund and was subject to the same compensation arrangement as GE
Investment Management Incorporated.
Certain officers and directors of GE Life & Annuity are also officers and
directors of Capital Brokerage Corporation.
36
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
TABLE OF CONTENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report ................... 1
Financial Statements:
Statements of Assets and Liabilities .......... 2
Statements of Operations ...................... 8
Statements of Changes in Net Assets ........... 19
Notes to Financial Statements .................. 32
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Policyholders
Life of Virginia Separate Account II
and
The Board of Directors
The Life Insurance Company of Virginia:
We have audited the accompanying statements of assets and liabilities of
Life of Virginia Separate Account II (the Account) (comprising the GE
Investments Funds, Inc. -- S&P 500 Index, Money Market, Total Return,
International Equity, Real Estate Securities, Global Income, Value Equity,
Income, and U.S. Equity Funds; the Oppenheimer Variable Account Funds -- Bond,
Capital Appreciation, Growth, High Income and Multiple Strategies Funds; the
Variable Insurance Products Fund -- Equity-Income, Growth and Overseas
Portfolios; the Variable Insurance Products Fund II -- Asset Manager and
Contrafund Portfolios; the Variable Insurance Products Fund III -- Growth &
Income and Growth Opportunities Portfolios; the Federated Investors Insurance
Series -- American Leaders, High Income Bond and Utility Funds II; the Alger
American Fund -- Small Cap and Growth Portfolios; the PBHG Insurance Series Fund
- -- PBHG Large Cap Growth and PBHG Growth II Portfolios; the Janus Aspen Series
- -- Aggressive Growth, Growth, Worldwide Growth, Balanced, Flexible Income,
International Growth and Capital Appreciation Portfolios; the Goldman Sachs
Variable Insurance Trust Fund -- Growth and Income and Mid Cap Equity Funds; and
the Salomon Brothers Variable Series Investors Fund) as of December 31, 1998 and
the related statements of operations and changes in net assets for the
aforementioned funds and the GE Investments Funds, Inc. Government Securities
Fund; the Oppenheimer Variable Account Money Fund; the Variable Insurance
Products Fund -- Money Market and High Income Portfolios; and the Neuberger &
Berman Advisers Management Trust -- Balanced, Bond and Growth Portfolios, of
Life of Virginia Separate Account II for each of the years or lesser periods in
the three year period then ended. These financial statements are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the underlying mutual funds or their transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each of the respective
portfolios constituting Life of Virginia Separate Account II as of December 31,
1998 and the results of their operations and changes in their net assets for
each of the years or lesser periods in the three year period then ended in
conformity with generally accepted accounting principles.
KPMG LLP
Richmond, Virginia
February 12, 1999
1
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-------------------------------------------------------------
S&P 500 MONEY TOTAL INTERNATIONAL
INDEX MARKET RETURN EQUITY
FUND FUND FUND FUND
ASSETS --------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Investment in GE
Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund
(223,402 shares;
cost -- $4,451,453)............. $ 5,296,854 -- -- --
Money Market Fund
(4,079,103 shares;
cost -- $4,079,100)............. -- 4,079,103 -- --
Total Return Fund
(279,426 shares;
cost -- $4,226,852)............. -- -- 4,096,383 --
International Equity Fund
(9,802 shares;
cost -- $114,478)............... -- -- -- 116,545
Real Estate Securities
Fund (29,793 shares;
cost -- $409,691)............... -- -- -- --
Global Income Fund
(3,531 shares;
cost -- $36,192)................ -- -- -- --
Value Equity Fund
(15,742 shares;
cost -- $202,399)............... -- -- -- --
Income Fund
(35,461 shares;
cost -- $432,645)............... -- -- -- --
U.S. Equity Fund
(1,521 shares;
cost -- $47,666)................ -- -- -- --
Receivable from affiliate ......... 77 1,752 -- --
Receivable for units sold ......... 16,301 12,648 184 368
----------- --------- --------- -------
TOTAL ASSETS ................... 5,313,232 4,093,503 4,096,567 116,913
----------- --------- --------- -------
LIABILITIES
Accrued expenses payable to
affiliate (note 3) ............... 5,552 21,761 18,864 1,164
Payable for units
withdrawn ........................ -- 151 -- --
----------- --------- --------- -------
TOTAL LIABILITIES .............. 5,552 21,912 18,864 1,164
----------- --------- --------- -------
Net assets attributable
to variable life
policyholders .................... $ 5,307,680 4,071,591 4,077,703 115,749
=========== ========= ========= =======
Outstanding units:
Type I (note 2) .................. 85,784 117,698 110,519 7,412
=========== ========= ========= =======
Net asset value per unit:
Type I ........................... $ 52.62 17.02 35.54 14.80
=========== ========= ========= =======
Outstanding units:
Type II (note 2) ................. 15,084 121,526 4,217 409
=========== ========= ========= =======
Net asset value per unit:
Type II .......................... $ 52.62 17.02 35.54 14.80
=========== ========= ========= =======
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------------------------------
REAL ESTATE GLOBAL VALUE U.S.
SECURITIES INCOME EQUITY INCOME EQUITY
FUND FUND FUND FUND FUND
ASSETS ------------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Investment in GE
Investments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund
(223,402 shares;
cost -- $4,451,453)............. -- -- -- -- --
Money Market Fund
(4,079,103 shares;
cost -- $4,079,100)............. -- -- -- -- --
Total Return Fund
(279,426 shares;
cost -- $4,226,852)............. -- -- -- -- --
International Equity Fund
(9,802 shares;
cost -- $114,478)............... -- -- -- -- --
Real Estate Securities
Fund (29,793 shares;
cost -- $409,691)............... 345,304 -- -- -- --
Global Income Fund
(3,531 shares;
cost -- $36,192)................ -- 37,177 -- -- --
Value Equity Fund
(15,742 shares;
cost -- $202,399)............... -- -- 213,619 -- --
Income Fund
(35,461 shares;
cost -- $432,645)............... -- -- -- 437,591 --
U.S. Equity Fund
(1,521 shares;
cost -- $47,666)................ -- -- -- -- 50,966
Receivable from affiliate ......... -- -- -- -- --
Receivable for units sold ......... -- -- -- 127 --
------- ------ ------- ------- ------
TOTAL ASSETS ................... 345,304 37,177 213,619 437,718 50,966
------- ------ ------- ------- ------
LIABILITIES
Accrued expenses payable to
affiliate (note 3) ............... 1,254 1,046 1,267 4,174 21
Payable for units
withdrawn ........................ 4 -- 6 -- --
------- ------ ------- ------- ------
TOTAL LIABILITIES .............. 1,258 1,046 1,273 4,174 21
------- ------ ------- ------- ------
Net assets attributable
to variable life
policyholders .................... 344,046 36,131 212,346 433,544 50,945
======= ====== ======= ======= ======
Outstanding units:
Type I (note 2) .................. 17,514 3,010 5,086 40,200 18
======= ====== ======= ======= ======
Net asset value per unit:
Type I ........................... 15.28 11.58 13.98 10.73 10.71
======= ====== ======= ======= ======
Outstanding units:
Type II (note 2) ................. 5,002 110 10,103 204 4,739
======= ====== ======= ======= ======
Net asset value per unit:
Type II .......................... 15.28 11.58 13.98 10.73 10.71
======= ====== ======= ======= ======
</TABLE>
2
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
----------------------------
CAPITAL
BOND APPRECIATION
FUND FUND
ASSETS ------------- --------------
<S> <C> <C>
Investment in Oppenheimer Variable Account Funds, at fair value (note 2):
Bond Fund (37,053 shares;
cost -- $437,253)............................................ $ 456,495 --
Capital Appreciation Fund (85,498 shares;
cost -- $3,238,301).......................................... -- 3,832,888
Growth Fund (88,077 shares; cost -- $2,478,265)................ -- --
High Income Fund (168,523 shares;
cost -- $1,873,991).......................................... -- --
Multiple Strategies Fund (49,753 shares;
cost -- $770,994)............................................ -- --
Receivable for units sold ...................................... 15,535 --
--------- ---------
TOTAL ASSETS ................................................ 472,030 3,832,888
--------- ---------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ................. 1,581 4,553
Payable for units withdrawn .................................... -- 1,388
--------- ---------
TOTAL LIABILITIES ........................................... 1,581 5,941
--------- ---------
Net assets attributable to variable life policyholders ......... $ 470,449 3,826,947
========= =========
Outstanding units: Type I (note 2) ............................. 17,239 81,128
========= =========
Net asset value per unit: Type I ............................... $ 23.79 45.42
========= =========
Outstanding units: Type II (note 2) ............................ 2,536 3,128
========= =========
Net asset value per unit: Type II .............................. $ 23.79 45.42
========= =========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------
HIGH MULTIPLE
GROWTH INCOME STRATEGIES
FUND FUND FUND
ASSETS -------------- -------------- -----------
<S> <C> <C> <C>
Investment in Oppenheimer Variable Account Funds, at
fair value (note 2):
Bond Fund (37,053 shares;
cost -- $437,253)............................................ -- -- --
Capital Appreciation Fund (85,498 shares;
cost -- $3,238,301).......................................... -- -- --
Growth Fund (88,077 shares; cost -- $2,478,265)................ 3,229,796 -- --
High Income Fund (168,523 shares;
cost -- $1,873,991).......................................... -- 1,857,122 --
Multiple Strategies Fund (49,753 shares;
cost -- $770,994)............................................ -- -- 848,291
Receivable for units sold ...................................... 2,404 10 398
--------- --------- -------
TOTAL ASSETS ................................................ 3,232,200 1,857,132 848,689
--------- --------- -------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ................. 3,327 2,341 1,668
Payable for units withdrawn .................................... -- 183 964
--------- --------- -------
TOTAL LIABILITIES ........................................... 3,327 2,524 2,632
--------- --------- -------
Net assets attributable to variable life policyholders ......... 3,228,873 1,854,608 846,057
========= ========= =======
Outstanding units: Type I (note 2) ............................. 59,419 52,371 24,858
========= ========= =======
Net asset value per unit: Type I ............................... 51.91 34.23 31.28
========= ========= =======
Outstanding units: Type II (note 2) ............................ 2,782 1,810 2,190
========= ========= =======
Net asset value per unit: Type II .............................. 51.91 34.23 31.28
========= ========= =======
</TABLE>
3
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
-------------------------------------------------
EQUITY-
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS --------------- -------------- --------------
<S> <C> <C> <C>
Investment in Variable Insurance Products Fund, at fair value (note 2):
Equity-Income Portfolio (264,330 shares; cost -- $5,666,908).......... $ 6,719,278 -- --
Growth Portfolio (174,420 shares; cost -- $6,247,564)................. -- 7,826,215 --
Overseas Porfolio (102,010 shares; cost -- $1,886,189)................ -- -- 2,045,301
Receivable for units sold ............................................. 1,772 6,427 1,058
----------- --------- ---------
TOTAL ASSETS ....................................................... 6,721,050 7,832,642 2,046,359
----------- --------- ---------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ........................ 7,686 6,389 2,438
Payable for units withdrawn ........................................... 276 -- 4
----------- --------- ---------
TOTAL LIABILITIES .................................................. 7,962 6,389 2,442
----------- --------- ---------
Net assets attributable to variable life policyholders ................ $ 6,713,088 7,826,253 2,043,917
=========== ========= =========
Outstanding units: Type I (note 2) .................................... 144,137 129,808 75,355
=========== ========= =========
Net asset value per unit: Type I ...................................... $ 44.60 59.48 26.92
=========== ========= =========
Outstanding units: Type II (note 2) ................................... 6,380 1,770 571
=========== ========= =========
Net asset value per unit: Type II ..................................... $ 44.60 59.48 26.92
=========== ========= =========
</TABLE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE VARIABLE INSURANCE
PRODUCTS FUND II PRODUCTS FUND III
------------------------------ --------------------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS --------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Investment in Variable Insurance Products Fund II, at fair value
(note 2):
Asset Manager Portfolio (255,369 shares; cost -- $4,014,285)......... $ 4,637,506 -- -- --
Contrafund Portfolio (148,371 shares; cost -- $2,959,558)............ -- 3,626,193 -- --
Investment in Variable Insurance Product Fund III, at fair value (note 2):
Growth & Income Portfolio (24,728 shares; cost -- $340,986).......... -- -- 399,352 --
Growth Opportunities Portfolio (12,572 shares; cost --
$248,910).......................................................... -- -- -- 287,651
Receivable from affiliate ............................................ 112 72 86 --
Receivable for units sold ............................................ 3,004 10,286 11,319 104
----------- --------- ------- -------
TOTAL ASSETS ...................................................... 4,640,622 3,636,551 410,757 287,755
----------- --------- ------- -------
LIABILITIES
Accrued expenses payable to affiliate (note 3) ....................... 4,202 4,691 1,353 1,355
Payable for units withdrawn .......................................... 57 -- -- 74
----------- --------- ------- -------
TOTAL LIABILITIES ................................................. 4,259 4,691 1,353 1,429
----------- --------- ------- -------
Net assets attributable to variable life policyholders ............... $ 4,636,363 3,631,860 409,404 286,326
=========== ========= ======= =======
Outstanding units: Type I (note 2) ................................... 158,102 119,940 16,824 16,281
=========== ========= ======= =======
Net asset value per unit: Type I ..................................... $ 29.09 26.79 15.98 15.26
=========== ========= ======= =======
Outstanding units: Type II (note 2) .................................. 1,278 15,627 8,796 2,482
=========== ========= ======= =======
Net asset value per unit: Type II .................................... $ 29.09 26.79 15.98 15.26
=========== ========= ======= =======
</TABLE>
4
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES
----------------------------------------
AMERICAN HIGH
LEADERS INCOME BOND UTILITY
FUND II FUND II FUND II
ASSETS ------------- ------------- ------------
<S> <C> <C> <C>
Investments in Federated Investors Insurance
Series, at fair value (note 2):
American Leaders Fund II (14,726 shares;
cost -- $293,767)......................... $ 319,259 -- --
High Income Bond Fund II (14,827
shares; cost -- $158,805)................. -- 161,908 --
Utility Fund II (15,821 shares;
cost -- $200,123)......................... -- -- 241,590
Investment in Alger American, at fair value
(note 2):
Small Cap Portfolio (26,644 shares;
cost -- $1,096,285)....................... -- -- --
Growth Portfolio (34,324 shares;
cost -- $1,435,416)....................... -- -- --
Investment in PBHG Insurance Series Fund,
at fair value (note 2):
PBHG Large Cap Growth Portfolio (5,165
shares; cost -- $66,000).................. -- -- --
PBHG Growth II Portfolio (5,982 shares;
cost -- $61,050).......................... -- -- --
Receivable from affiliate ................... -- -- 16
Receivable for units sold ................... 79 -- 7,027
--------- ------- -------
TOTAL ASSETS ............................. 319,338 161,908 248,633
--------- ------- -------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 1,324 1,196 715
Payable for units withdrawn ................. -- 3 --
--------- ------- -------
TOTAL LIABILITIES ........................ 1,324 1,199 715
--------- ------- -------
Net assets attributable to variable life
policyholders .............................. $ 318,014 160,709 247,918
========= ======= =======
Outstanding units: Type I (note 2) .......... 13,408 9,252 11,455
========= ======= =======
Net asset value per unit: Type I ............ $ 17.04 15.62 19.36
========= ======= =======
Outstanding units: Type II (note 2) ......... 5,255 1,037 1,350
========= ======= =======
Net asset value per unit: Type II ........... $ 17.04 15.62 19.36
========= ======= =======
<CAPTION>
PBHG INSURANCE
ALGER AMERICAN FUND SERIES FUND
----------------------------- ----------------------
PBHG
SMALL LARGE CAP PBHG
CAP GROWTH GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS -------------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Investments in Federated Investors Insurance
Series, at fair value (note 2):
American Leaders Fund II (14,726 shares;
cost -- $293,767)......................... -- -- -- --
High Income Bond Fund II (14,827
shares; cost -- $158,805)................. -- -- -- --
Utility Fund II (15,821 shares;
cost -- $200,123)......................... -- -- -- --
Investment in Alger American, at fair value
(note 2):
Small Cap Portfolio (26,644 shares;
cost -- $1,096,285)....................... 1,171,518 -- -- --
Growth Portfolio (34,324 shares;
cost -- $1,435,416)....................... -- 1,826,744 -- --
Investment in PBHG Insurance Series Fund,
at fair value (note 2):
PBHG Large Cap Growth Portfolio (5,165
shares; cost -- $66,000).................. -- -- 79,742 --
PBHG Growth II Portfolio (5,982 shares;
cost -- $61,050).......................... -- -- -- 69,574
Receivable from affiliate ................... -- -- -- 72
Receivable for units sold ................... 464 2,159 -- 432
--------- --------- ------ ------
TOTAL ASSETS ............................. 1,171,982 1,828,903 79,742 70,078
--------- --------- ------ ------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 2,587 2,397 1,365 1,196
Payable for units withdrawn ................. -- -- 22 4
--------- --------- ------ ------
TOTAL LIABILITIES ........................ 2,587 2,397 1,387 1,200
--------- --------- ------ ------
Net assets attributable to variable life
policyholders .............................. 1,169,395 1,826,506 78,355 68,878
========= ========= ====== ======
Outstanding units: Type I (note 2) .......... 89,097 85,556 4,470 2,779
========= ========= ====== ======
Net asset value per unit: Type I ............ 12.33 19.93 15.26 11.49
========= ========= ====== ======
Outstanding units: Type II (note 2) ......... 5,744 6,090 665 3,215
========= ========= ====== ======
Net asset value per unit: Type II ........... 12.33 19.93 15.26 11.49
========= ========= ====== ======
</TABLE>
5
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
---------------------------------------------
AGGRESSIVE WORLDWIDE
GROWTH GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS --------------- -------------- --------------
<S> <C> <C> <C>
Investment in Janus Aspen Series, at fair
value (note 2):
Aggressive Growth Portfolio (91,976
shares; cost -- $1,998,064)............... $ 2,537,613 -- --
Growth Portfolio (142,379 shares;
cost -- $2,519,886)....................... -- 3,351,607 --
Worldwide Growth Portfolio (175,533
shares; cost -- $4,110,001)............... -- -- 5,106,255
Balanced Portfolio (57,619 shares;
cost -- $1,021,835)....................... -- -- --
Flexible Income Portfolio (8,248 shares;
cost -- $99,389).......................... -- -- --
International Growth Portfolio (39,359
shares; cost -- $803,626)................. -- -- --
Capital Appreciation Portfolio (11,851
shares; cost -- $190,191)................. -- -- --
Receivable from affiliate ................... -- 235 --
Receivable for units sold ................... 164 9,645 1,128
----------- --------- ---------
TOTAL ASSETS ............................. 2,537,777 3,361,487 5,107,383
----------- --------- ---------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 5,771 3,414 5,187
Payable for units withdrawn ................. -- -- 1,971
----------- --------- ---------
TOTAL LIABILITIES ........................ 5,771 3,414 7,158
----------- --------- ---------
Net assets attributable to variable life
policyholders .............................. $ 2,532,006 3,358,073 5,100,225
=========== ========= =========
Outstanding units: Type I (note 2) .......... 97,529 127,165 189,590
=========== ========= =========
Net asset value per unit: Type I ............ $ 23.12 24.42 24.46
=========== ========= =========
Outstanding units: Type II (note 2) ......... 11,987 10,349 18,923
=========== ========= =========
Net asset value per unit: Type II ........... $ 23.12 24.42 24.46
=========== ========= =========
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
ASSETS -------------- ----------- --------------- -------------
<S> <C> <C> <C> <C>
Investment in Janus Aspen Series, at fair
value (note 2):
Aggressive Growth Portfolio (91,976
shares; cost -- $1,998,064)............... -- -- -- --
Growth Portfolio (142,379 shares;
cost -- $2,519,886)....................... -- -- -- --
Worldwide Growth Portfolio (175,533
shares; cost -- $4,110,001)............... -- -- -- --
Balanced Portfolio (57,619 shares;
cost -- $1,021,835)....................... 1,296,421 -- -- --
Flexible Income Portfolio (8,248 shares;
cost -- $99,389).......................... -- 99,469 -- --
International Growth Portfolio (39,359
shares; cost -- $803,626)................. -- -- 837,165 --
Capital Appreciation Portfolio (11,851
shares; cost -- $190,191)................. -- -- -- 236,316
Receivable from affiliate ................... 1,120 -- 13 --
Receivable for units sold ................... 23,638 980 1,436 1,358
--------- ------ ------- -------
TOTAL ASSETS ............................. 1,321,179 100,449 838,614 237,674
--------- ------- ------- -------
LIABILITIES
Accrued expenses payable to affiliate
(note 3) ................................... 1,995 1,186 1,628 5,442
Payable for units withdrawn ................. -- 19 -- 8
--------- ------- ------- -------
TOTAL LIABILITIES ........................ 1,995 1,205 1,628 5,450
--------- ------- ------- -------
Net assets attributable to variable life
policyholders .............................. 1,319,184 99,244 836,986 232,224
========= ======= ======= =======
Outstanding units: Type I (note 2) .......... 53,591 6,812 30,755 8,215
========= ======= ======= =======
Net asset value per unit: Type I ............ 19.85 13.70 16.06 19.74
========= ======= ======= =======
Outstanding units: Type II (note 2) ......... 12,867 432 21,361 3,549
========= ======= ======= =======
Net asset value per unit: Type II ........... 19.85 13.70 16.06 19.74
========= ======= ======= =======
</TABLE>
6
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS SALOMON BROTHERS
VARIABLE INSURANCE VARIABLE SERIES
TRUST FUND FUND
-------------------------- -----------------
GROWTH AND MID CAP
INCOME EQUITY INVESTORS
FUND FUND FUND
ASSETS ------------ ----------- -----------------
<S> <C> <C> <C>
Investment in Goldman Sachs Variable Insurance Trust Fund, at fair
value (note 2):
Growth and Income Fund (999 shares; cost -- $9,946).............. $ 10,441 -- --
Mid Cap Equity Fund (10,881 shares; cost -- $90,926)............. -- 93,247 --
Investment in Salomon Brothers Variable Series Fund, at fair value
(note 2):
Investors Fund (138 shares; cost -- $1,472)...................... -- -- 1,525
Dividends receivable ............................................. -- -- 6
-------- ------ -----
TOTAL ASSETS .................................................. 10,441 93,247 1,531
-------- ------ -----
LIABILITIES
Accrued expenses payable to affiliate (note 3) ................... 8 39 1
Payable for units withdrawn ...................................... -- -- --
-------- ------ -----
TOTAL LIABILITIES ............................................. 8 39 1
-------- ------ -----
Net assets attributable to variable life policyholders ........... $ 10,433 93,208 1,530
======== ====== =====
Outstanding units: Type I (note 2) ............................... 81 -- 126
======== ====== =====
Net asset value per unit: Type I ................................. $ 8.89 8.59 12.16
======== ====== =====
Outstanding units: Type II (note 2) .............................. 1,092 10,851 --
======== ====== =====
Net asset value per unit: Type II ................................ $ 8.89 8.59 12.16
======== ====== =====
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
--------------------------------------------------------------------------
S&P 500 GOVERNMENT
INDEX SECURITIES
FUND FUND
----------------------------------------- ------------------------------
PERIOD ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 11, DECEMBER 31,
1998 1997 1996 1997 1996
------------- --------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ 198,642 88,899 751,436 -- 31,170
Expenses -- Mortality and expense risk charges
(note 3) .................................... 27,391 17,405 9,854 2,085 2,175
---------- ------- -------- ------ -------
Net investment income (loss) ................... 171,251 71,494 741,582 (2,085) 28,995
---------- ------- -------- ------ -------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ...................... 200,588 18,179 65,600 1,254 289
Unrealized appreciation (depreciation) on
investments ................................. 637,587 504,771 (498,697) 18,064 (28,379)
---------- ------- -------- ------ -------
Net realized and unrealized gain (loss) on
investments ................................... 838,175 522,950 (433,097) 19,318 (28,090)
---------- ------- -------- ------ -------
Increase in net assets from operations ......... $1,009,426 594,444 308,485 17,233 905
========== ======= ======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-------------------------------------------------------------------------------
MONEY MARKET TOTAL RETURN
FUND FUND
--------------------------------------- ---------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $161,959 107,705 97,157 207,758 456,798 846,101
Expenses -- Mortality and expense risk
charges (note 3) ............................ 21,006 13,717 15,476 26,306 24,218 20,200
-------- -------- -------- ------- ------- --------
Net investment income (loss) ................... 140,953 93,988 81,681 181,452 432,580 825,901
-------- -------- -------- ------- ------- --------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ...................... 517 298,840 (325,593) (62,109) (54,073) 68,427
Unrealized appreciation (depreciation)
on investments .............................. (517) (300,439) 345,223 423,954 123,159 (708,053)
-------- -------- -------- ------- ------- --------
Net realized and unrealized gain (loss) on
investments ................................... -- (1,599) 19,630 361,845 69,086 (639,626)
-------- -------- -------- ------- ------- --------
Increase in net assets from operations ......... $140,953 92,389 101,311 543,297 501,666 186,275
======== ======== ======== ======= ======= ========
</TABLE>
8
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
---------------------------------------------------------------------------
INTERNATIONAL REAL ESTATE
EQUITY FUND SECURITIES FUND
----------------------------------- -------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
--------- ----------- --------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $ 5,942 8,566 1,884 25,938 20,680 1,678
Expenses -- Mortality and expense risk
charges (note 3) ...................... 648 399 152 1,889 814 57
------- ----- ----- ------ ------ -----
Net investment income .................... 5,294 8,167 1,732 24,049 19,866 1,621
------- ----- ----- ------ ------ -----
Net realized and unrealized (loss) gain on
investments:
Net realized gain (loss) ................ 93 654 510 (13,410) 2,800 381
Unrealized appreciation (depreciation) on
investments ........................... 8,003 (5,290) (839) (64,135) (2,725) 2,468
------- ------ ----- ------- ------ -----
Net realized and unrealized (loss) gain on
investments ............................. 8,096 (4,636) (329) (77,545) 75 2,849
------- ------ ----- ------- ------ -----
Increase (decrease) in net assets from
operations .............................. $13,390 3,531 1,403 (53,496) 19,941 4,470
======= ====== ===== ======= ====== =====
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------------------
GLOBAL VALUE
INCOME EQUITY
FUND FUND
----------------------------- -----------------------------
PERIOD FROM PERIOD FROM
JUNE 18, JUNE 17,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends ................. $2,100 461 6,079 115
Expenses -- Mortality and
expense risk charges (note 3) ..... 354 30 526 17
------ ---- ------ ----
Net investment income ................ 1,746 431 5,553 98
------ ---- ------ ----
Net realized and unrealized (loss)
gain on investments:
Net realized gain (loss) ............ 3,656 35 (305) (9)
Unrealized appreciation
(depreciation) on investments...... 1,314 (329) 11,219 1
------ ---- ------ ----
Net realized and unrealized (loss)
gain on investments ................. 4,970 (294) 10,914 (8)
------ ---- ------ ----
Increase (decrease) in net assets
from operations ..................... $6,716 137 16,467 90
====== ==== ====== ====
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------
U.S.
INCOME EQUITY
FUND FUND
----------------------------- -------------
PERIOD FROM PEROD FROM
DECEMBER 12, JUNE 10,
YEAR ENDED 1997 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ................. 24,441 992 869
Expenses -- Mortality and
expense risk charges (note 3) ..... 2,902 116 47
------ ---- -----
Net investment income ................ 21,539 876 822
------ ---- -----
Net realized and unrealized (loss)
gain on investments:
Net realized gain (loss) ............ 3,321 (838) 144
Unrealized appreciation
(depreciation) on investments...... 4,423 523 3,300
------ ---- -----
Net realized and unrealized (loss)
gain on investments ................. 7,744 (315) 3,444
------ ---- -----
Increase (decrease) in net assets
from operations ..................... 29,283 561 4,266
====== ==== =====
</TABLE>
9
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
------------------------------------------------------------------
MONEY FUND BOND FUND
------------------------------ ---------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, YEAR ENDED DECEMBER 31,
1997 1996 1998 1997 1996
-------------- ------------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $27 224 10,101 17,586 16,705
Expenses -- Mortality and
expense risk charges (note 3) ......... 4 31 2,597 1,872 1,790
--- --- ------ ------ ------
Net investment income .................... 23 193 7,504 15,714 14,915
--- --- ------ ------ ------
Net realized and unrealized gain on
investments:
Net realized gain ....................... -- -- 2,899 276 128
Unrealized appreciation
(depreciation) on investments ......... -- -- 11,167 5,965 (3,916)
--- --- ------ ------ ------
Net realized and unrealized gain
(loss) on investments ................... -- -- 14,066 6,241 (3,788)
--- --- ------ ------ ------
Increase in net assets from
operations .............................. $23 193 21,570 21,955 11,127
=== === ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------------------
CAPITAL APPRECIATION FUND GROWTH FUND
------------------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
---------- ------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $ 91,445 119,431 99,449 230,257 94,465 72,782
Expenses -- Mortality and
expense risk charges (note 3) ......... 23,632 19,370 13,659 18,652 13,535 7,950
-------- ------- ------ ------- ------ ------
Net investment income .................... 67,813 100,061 85,790 211,605 80,930 64,832
-------- ------- ------ ------- ------ ------
Net realized and unrealized gain on
investments:
Net realized gain ....................... 93,644 264,595 128,677 89,327 112,639 59,611
Unrealized appreciation
(depreciation) on investments ......... 277,402 (89,502) 103,509 270,706 226,521 113,315
-------- ------- ------- ------- ------- -------
Net realized and unrealized gain
(loss) on investments ................... 371,046 175,093 232,186 360,033 339,160 172,926
-------- ------- ------- ------- ------- -------
Increase in net assets from
operations .............................. $438,859 275,154 317,976 571,638 420,090 237,758
======== ======= ======= ======= ======= =======
</TABLE>
10
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS (CONTINUED)
-------------------------------------------------------------------------
HIGH INCOME FUND MULTIPLE STRATEGIES FUND
------------------------------------ ----------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
------------ --------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ..................... $ 82,820 105,625 78,385 44,673 45,313 33,554
Expenses -- Mortality and expense
risk charges (note 3) ................. 12,578 8,770 5,650 5,281 4,459 3,353
--------- ------- ------ ------ ------ ------
Net investment income .................... 70,242 96,855 72,735 39,392 40,854 30,201
--------- ------- ------ ------ ------ ------
Net realized and unrealized gain
(loss) on investments:
Net realized gain ....................... 3,380 11,476 8,045 10,586 26,553 22,006
Unrealized appreciation
(depreciation) on investments ......... (81,675) 28,520 28,139 (5,312) 27,703 14,047
--------- ------- ------ ------ ------ ------
Net realized and unrealized gain
(loss) on investments ................... (78,295) 39,996 36,184 5,274 54,256 36,053
--------- ------- ------ ------ ------ ------
Increase (decrease) in net assets from
operations .............................. $ (8,053) 136,851 108,919 44,666 95,110 66,254
========= ======= ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
----------------------------------------------------------------
MONEY MARKET PORTFOLIO HIGH INCOME PORTFOLIO
------------------------------- ------------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................................... $31,897 17,813 16,812 24,435
Expenses -- Mortality and expense risk charges
(note 3) ............................................. 1,948 2,449 1,461 1,779
------- ------ ------ ------
Net investment income ................................... 29,949 15,364 15,351 22,656
------- ------ ------ ------
Net realized and unrealized gain on investments:
Net realized gain ...................................... -- -- 41,295 7,114
Unrealized appreciation (depreciation) on
investments .......................................... -- -- (23,320) 1,632
------- ------ ------- ------
Net realized and unrealized gain on investments ......... -- -- 17,975 8,746
------- ------ ------- ------
Increase in net assets from operations .................. $29,949 15,364 33,326 31,402
======= ====== ======= ======
</TABLE>
11
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND (CONTINUED)
--------------------------------------------------------------------
EQUITY-INCOME PORTFOLIO GROWTH PORTFOLIO
------------------------------- ------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- --------- --------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends .................................... $353,139 339,803 85,939 703,742 135,480 213,091
Expenses -- Mortality and expense risk
charges (note 3) ..................................... 42,003 30,384 17,180 42,284 30,276 25,014
-------- ------- ------- --------- ------- --------
Net investment income ................................... 311,136 309,419 68,759 661,458 105,204 188,077
-------- ------- ------- --------- ------- --------
Net realized and unrealized gain on investments:
Net realized gain ...................................... 235,107 125,398 98,124 728,950 193,439 342,839
Unrealized appreciation (depreciation)
on investments ....................................... 97,581 539,549 149,934 630,736 566,792 (104,224)
-------- ------- ------- --------- ------- --------
Net realized and unrealized gain on investments ......... 332,688 664,947 248,058 1,359,686 760,231 238,615
-------- ------- ------- --------- ------- --------
Increase in net assets from operations .................. $643,824 974,366 316,817 2,021,144 865,435 426,692
======== ======= ======= ========= ======= ========
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND VARIABLE INSURANCE PRODUCTS
(CONTINUED) FUND II
---------------------------------- ------------------------------
OVERSEAS PORTFOLIO ASSET MANAGER PORTFOLIO
---------------------------------- ------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- ------------ --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......................... $138,226 155,793 36,638 527,602 417,972 183,395
Expenses -- Mortality and expense risk
charges (note 3) .......................... 14,004 12,638 11,528 30,684 26,984 19,647
-------- ------- ------ ------- ------- -------
Net investment income (expense) .............. 124,222 143,155 25,110 496,918 390,988 163,748
-------- ------- ------ ------- ------- -------
Net realized and unrealized gain (loss)
on investments:
Net realized gain ........................... 98,578 95,087 39,291 58,132 68,861 105,006
Unrealized appreciation (depreciation)
on investments ............................ (8,287) (45,710) 126,664 32,734 222,652 98,064
-------- ------- ------- ------- ------- -------
Net realized and unrealized gain on
investments ................................. 90,291 49,377 165,955 90,866 291,513 203,070
-------- ------- ------- ------- ------- -------
Increase in net assets from operations ....... $214,513 192,532 191,065 587,784 682,501 366,818
======== ======= ======= ======= ======= =======
</TABLE>
12
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
II (CONTINUED) VARIABLE INSURANCE PRODUCTS FUND III
--------------------------------- ----------------------------------------------------------
GROWTH OPPORTUNITIES
CONTRAFUND PORTFOLIO GROWTH & INCOME PORTFOLIO PORTFOLIO
--------------------------------- ----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
MAY 30, MAY 30,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997 1998 1997
----------- --------- ----------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ......... $122,810 33,739 2,964 337 -- 3,673 --
Expenses -- Mortality
and expense risk
charges (note 3) .......... 18,320 11,153 4,608 1,403 45 1,223 148
-------- ------- ------- ------ ------ ------ -----
Net investment income
(expense) ................... 104,490 22,586 (1,644) (1,066) (45) 2,450 (148)
-------- ------- ------- ------ ------ ------ -----
Net realized and unrealized
gain (loss) on
investments:
Net realized gain ........... 228,313 198,947 14,028 2,566 1,642 3,612 472
Unrealized appreciation
(depreciation) on
investments ............... 398,426 135,687 119,895 59,468 (1,102) 35,308 3,433
-------- ------- ------- ------ ------ ------ -----
Net realized and unrealized
gain on investments ......... 626,739 334,634 133,923 62,034 540 38,920 3,905
-------- ------- ------- ------ ------ ------ -----
Increase in net assets from
operations .................. $731,229 357,220 132,279 60,968 495 41,370 3,757
======== ======= ======= ====== ====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
----------------------------------------------------------------------------------------
BALANCED BOND GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
----------------------------- ----------------------------- ----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ................ $ 16,310 41,530 4,664 7,068 11,458 13,580
Expenses -- Mortality and
expense risk charges (note 3)..... 1,723 1,799 462 581 982 1,005
--------- ------ ----- ----- ------ ------
Net investment income ............... 14,587 39,731 4,202 6,487 10,476 12,575
--------- ------ ----- ----- ------ ------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ........... 36,568 4,564 (162) 38 37,624 4,264
Unrealized appreciation
(depreciation) on investments..... (14,898) (28,989) (48) (3,678) (18,849) (6,024)
--------- ------- ----- ------ ------- ------
Net realized and unrealized gain
(loss) on investments .............. 21,670 (24,425) (210) (3,640) 18,775 (1,760)
--------- ------- ----- ------ ------- ------
Increase in net assets from
operations ......................... $ 36,257 15,306 3,992 2,847 29,251 10,815
========= ======= ===== ====== ======= ======
</TABLE>
13
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES
-------------------------------------------------------------------------
HIGH
AMERICAN INCOME
LEADERS BOND
FUND II FUND II
-------------------------------------- --------------------------------
PERIOD FROM
AUGUST 14,
YEAR ENDED DECEMBER 1996 TO
31, DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
----------- -------- ------------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ 8,939 148 9 4,007 3,619 1,592
Expenses -- Mortality and expense risk
charges (note 3) ............................ 1,280 113 2 979 656 127
------- ----- -- ------ ----- -----
Net investment income .......................... 7,659 35 7 3,028 2,963 1,465
------- ----- -- ------ ----- -----
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss) ...................... (245) 598 4 1,890 836 51
Unrealized appreciation (depreciation) on
investments ................................. 22,437 3,025 29 (3,246) 5,274 1,038
------- ----- -- ------ ----- -----
Net realized and unrealized gain (loss) on
investments ................................... 22,192 3,623 33 (1,356) 6,110 1,089
------- ----- -- ------ ----- -----
Increase in net assets from operations ......... $29,851 3,658 40 1,672 9,073 2,554
======= ===== == ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES
--------------------------------
UTILITY
FUND II
--------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
---------- -------- --------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $11,781 4,929 2,283
Expenses -- Mortality and expense risk charges (note 3) ......... 1,381 860 364
------- ----- -----
Net investment income ............................................ 10,400 4,069 1,919
------- ----- -----
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ........................................ 5,077 1,782 2,332
Unrealized appreciation (depreciation) on investments ........... 11,499 25,287 700
------- ------ -----
Net realized and unrealized gain (loss) on investments ........... 16,576 27,069 3,032
------- ------ -----
Increase in net assets from operations ........................... $26,976 31,138 4,951
======= ====== =====
</TABLE>
14
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
------------------------------------
SMALL
CAP
PORTFOLIO
------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ........................................... $ 119,910 23,157 502
Expenses -- Mortality and expense risk charges
(note 3) .................................................... 6,707 5,518 1,659
--------- ------ -----
Net investment income (expense) ................................ 113,203 17,639 (1,157)
--------- ------ ------
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ...................................... (65,245) 109,665 4,156
Unrealized appreciation (depreciation) on investments ......... 102,269 (21,855) (4,745)
--------- ------- ------
Net realized and unrealized gain (loss) on investments ......... 37,024 87,810 (589)
--------- ------- ------
Increase (decrease) in net assets from operations .............. $ 150,227 105,449 (1,746)
========= ======= ======
<CAPTION>
ALGER AMERICAN FUND
-------------------------------
GROWTH
PORTFOLIO
-------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------- --------- -----------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ........................................... 159,255 10,016 3,815
Expenses -- Mortality and expense risk charges
(note 3) .................................................... 8,116 7,350 2,350
------- ------ -----
Net investment income (expense) ................................ 151,139 2,666 1,465
------- ------ -----
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ...................................... 60,482 103,893 1,107
Unrealized appreciation (depreciation) on investments ......... 293,124 100,012 (1,956)
------- ------- ------
Net realized and unrealized gain (loss) on investments ......... 353,606 203,905 (849)
------- ------- ------
Increase (decrease) in net assets from operations .............. 504,745 206,571 616
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
PBHG INSURANCE
SERIES FUND
----------------------------------------------------------
PBHG
LARGE CAP PBHG
GROWTH GROWTH II
PORTFOLIO PORTFOLIO
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
MAY 30, MAY 30,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................................... $ -- -- -- --
Expenses -- Mortality and expense risk charges
(note 3) .................................................... 327 63 239 43
------- --- ----- ----
Net investment income (expense) ................................ (327) (63) (239) (43)
------- --- ----- ----
Net realized and unrealized gain (loss) on investments:
Net realized gain (loss) ...................................... 3,310 584 (197) 34
Unrealized appreciation (depreciation) on investments ......... 13,650 92 8,666 (142)
------- --- ----- ----
Net realized and unrealized gain (loss) on investments ......... 16,960 676 8,469 (108)
------- --- ----- ----
Increase (decrease) in net assets from operations .............. $16,633 613 8,230 (151)
======= === ===== ====
</TABLE>
15
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------------------------------------------------
AGGRESSIVE GROWTH
GROWTH PORTFOLIO PORTFOLIO
----------------------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
------------ ------------ ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ -- -- 9,052 146,566 47,255 21,456
Expenses -- Mortality and expense risk
charges (note 3) ............................ 13,622 10,376 6,061 16,642 11,319 5,068
--------- ------- ------ ------- ------- -------
Net investment income (expense) ................ (13,622) (10,376) 2,991 129,924 35,936 16,388
--------- ------- ------ ------- ------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain ............................. 171,826 202,593 49,684 115,203 94,811 21,606
Unrealized appreciation (depreciation) on
investments ................................. 488,613 (21,456) (6,584) 576,941 155,268 67,602
--------- ------- ------ ------- ------- -------
Net realized and unrealized gain on
investments ................................... 660,439 181,137 43,100 692,144 250,079 89,208
--------- ------- ------ ------- ------- -------
Increase in net assets from operations ......... $ 646,817 170,761 46,091 822,068 286,015 105,596
========= ======= ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------
WORLDWIDE
GROWTH PORTFOLIO
-----------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
----------- --------- ---------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ............................................. $153,063 35,818 17,129
Expenses -- Mortality and expense risk charges (note 3) ......... 28,493 16,118 6,046
-------- ------ ------
Net investment income (expense) .................................. 124,570 19,700 11,083
-------- ------ ------
Net realized and unrealized gain (loss) on investments:
Net realized gain ............................................... 233,014 89,852 102,324
Unrealized appreciation (depreciation) on investments ........... 623,292 251,916 66,974
-------- ------- -------
Net realized and unrealized gain on investments .................. 856,306 341,768 169,298
-------- ------- -------
Increase in net assets from operations ........................... $980,876 361,468 180,381
======== ======= =======
</TABLE>
16
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------------------------
FLEXIBLE
BALANCED INCOME
PORTFOLIO PORTFOLIO
-------------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1998 1997 1996 1998 1997 1996
---------- -------- -------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $ 42,674 12,092 3,497 4,495 3,492 541
Expenses -- Mortality and expense risk
charges (note 3) ............................ 6,290 2,145 931 459 240 34
-------- ------ ----- ----- ----- ---
Net investment income (expense) ................ 36,384 9,947 2,566 4,036 3,252 507
-------- ------ ----- ----- ----- ---
Net realized and unrealized gain on investments:
Net realized gain ............................. 24,529 8,229 2,098 1,687 305 13
Unrealized appreciation (depreciation) on
investments ................................. 216,533 41,009 14,575 (74) 72 83
-------- ------ ------ ----- ----- ---
Net realized and unrealized gain on
investments ................................... 241,062 49,238 16,673 1,613 377 96
-------- ------ ------ ----- ----- ---
Increase in net assets from operations ......... $277,446 59,185 19,239 5,649 3,629 603
======== ====== ====== ===== ===== ===
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
-----------------------------------------------------------------------
INTERNATIONAL CAPITAL
GROWTH APPRECIATION
PORTFOLIO PORTFOLIO
-------------------------------------- ------------------------------
PERIOD FROM PERIOD FROM
JULY 9, MAY 21,
YEAR ENDED DECEMBER 1996 TO YEAR ENDED 1997 TO
31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997
---------- -------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Dividends ........................... $12,343 1,716 136 132 27
Expenses -- Mortality and expense risk
charges (note 3) ............................ 3,678 1,442 40 1,351 34
------- ------ ----- ------ ----
Net investment income (expense) ................ 8,665 274 96 (1,219) (7)
------- ------ ----- ------ ----
Net realized and unrealized gain on investments:
Net realized gain ............................. 40,482 5,037 152 28,363 106
Unrealized appreciation (depreciation) on
investments ................................. 16,463 16,037 1,040 45,429 697
------- ------ ----- ------ ----
Net realized and unrealized gain on
investments ................................... 56,945 21,074 1,192 73,792 803
------- ------ ----- ------ ----
Increase in net assets from operations ......... $65,610 21,348 1,288 72,573 796
======= ====== ===== ====== ====
</TABLE>
17
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENTS OF OPERATIONS -- CONTINUED
<TABLE>
<CAPTION>
GOLDMAN SACHS SALOMON BROTHERS
VARIABLE INSURANCE VARIABLE SERIES
TRUST FUND FUND
------------------------------- -----------------
GROWTH AND MID CAP
INCOME EQUITY INVESTORS
FUND FUND FUND
-------------- -------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, AUGUST 28, DECEMBER 8,
1998 TO 1998 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998
-------------- -------------- -----------------
<S> <C> <C> <C>
Investment income:
Income -- Dividends ........................................... $ 95 408 6
Expenses -- Mortality and expense risk charges
(note 3) .................................................... 19 117 1
---- ----- --
Net investment income .......................................... 76 291 5
---- ----- --
Net realized and unrealized gain (loss) on investments:
Net realized gain ............................................. 120 3,047 --
Unrealized appreciation (depreciation) on investments ......... 496 2,320 53
---- ----- --
Net realized and unrealized gain (loss) on investments ......... 616 5,367 53
---- ----- --
Increase in net assets from operations ......................... $692 5,658 58
==== ===== ==
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------
S&P 500
INDEX
FUND
-----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................ $ 171,251 71,494 741,582
Net realized gain (loss) ....................................... 200,588 18,179 65,600
Unrealized appreciation (depreciation) on investments .......... 637,587 504,771 (498,697)
---------- ------- --------
Increase in net assets from operations ...................... 1,009,426 594,444 308,485
---------- ------- --------
From capital transactions:
Net premiums ................................................... 1,553,985 496,133 308,147
Loan interest .................................................. (667) (2,663) (455)
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- (146,232) (1,955)
Surrenders .................................................... 2,166 (28,437) (15,204)
Loans ......................................................... (28,223) (12,720) (16,280)
Cost of insurance and administrative expense (note 3) ......... (453,919) (235,713) (158,228)
Transfer gain (loss) and transfer fees ........................ (111,502) (793) 109
Interfund transfers ............................................ (71,575) 954,081 289,390
---------- -------- --------
Increase (decrease) in net assets from capital
transactions ............................................... 890,265 1,023,656 405,524
---------- --------- --------
Increase (decrease) in net assets ............................... 1,899,691 1,618,100 714,009
Net assets at beginning of year ................................. 3,407,989 1,789,889 1,075,880
---------- --------- ---------
Net assets at end of year ....................................... $5,307,680 3,407,989 1,789,889
========== ========= =========
<CAPTION>
GE INVESTMENTS FUNDS, INC.
----------------------------
GOVERNMENT
SECURITIES
FUND
----------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................ (2,085) 28,995
Net realized gain (loss) ....................................... 1,254 289
Unrealized appreciation (depreciation) on investments .......... 18,064 (28,379)
-------- -------
Increase in net assets from operations ...................... 17,233 905
-------- -------
From capital transactions:
Net premiums ................................................... 36,517 37,229
Loan interest .................................................. 290 878
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- --
Surrenders .................................................... (15,385) (3,155)
Loans ......................................................... (4,137) (2,302)
Cost of insurance and administrative expense (note 3) ......... (23,090) (23,586)
Transfer gain (loss) and transfer fees ........................ (675) (75)
Interfund transfers ............................................ (322,397) (18,963)
-------- -------
Increase (decrease) in net assets from capital
transactions ............................................... (328,877) (9,974)
-------- -------
Increase (decrease) in net assets ............................... (311,644) (9,069)
Net assets at beginning of year ................................. 311,644 320,713
-------- -------
Net assets at end of year ....................................... -- 311,644
======== =======
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------------
MONEY MARKET
FUND
-----------------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ...................... $ 140,953 93,988 81,681
Net realized gain (loss) ............................. 517 298,840 (325,593)
Unrealized appreciation (depreciation) on
investments ......................................... (517) (300,439) 345,223
------------- ---------- ----------
Increase in net assets from operations ............ 140,953 92,389 101,311
------------- ---------- ----------
From capital transactions:
Net premiums ......................................... 5,316,844 3,634,434 5,619,954
Loan interest ........................................ 2,567 (3,118) (1,840)
Transfers (to) from the general account of Life of
Virginia:
Death benefits ...................................... (1,231) (15,944) (1,302)
Surrenders .......................................... (127,487) (10,646) (7,042)
Loans ............................................... (92,788) (5,231) (59,410)
Cost of insurance and administrative expense
(note 3) .......................................... (379,891) (284,457) (257,113)
Transfer gain (loss) and transfer fees .............. (24,254) (233,325) (28,760)
Interfund transfers .................................. (3,025,038) (3,317,791) (4,363,145)
------------- ---------- ----------
Increase (decrease) in net assets from capital
transactions ..................................... 1,668,722 (236,078) 901,342
------------- ---------- ----------
Increase (decrease) in net assets ..................... 1,809,675 (143,689) 1,002,653
Net assets at beginning of year ....................... 2,261,916 2,405,605 1,402,952
------------- ---------- ----------
Net assets at end of year ............................. $ 4,071,591 2,261,916 2,405,605
============= ========== ==========
<CAPTION>
GE INVESTMENTS FUNDS, INC.
---------------------------------------
TOTAL RETURN
FUND
---------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ...................... 181,452 432,580 825,901
Net realized gain (loss) ............................. (62,109) (54,073) 68,427
Unrealized appreciation (depreciation) on
investments ......................................... 423,954 123,159 (708,053)
--------- --------- ---------
Increase in net assets from operations ............ 543,297 501,666 186,275
--------- --------- ---------
From capital transactions:
Net premiums ......................................... 252,081 169,809 143,160
Loan interest ........................................ (327) (299) (178)
Transfers (to) from the general account of Life of
Virginia:
Death benefits ...................................... (21,333) (7,452) (25,232)
Surrenders .......................................... (16,053) (14,564) (14,027)
Loans ............................................... (8,458) (3,824) (6,948)
Cost of insurance and administrative expense
(note 3) .......................................... (385,697) (357,384) (339,757)
Transfer gain (loss) and transfer fees .............. 26,522 39,224 125,446
Interfund transfers .................................. 84,003 (2,809) 124,895
--------- --------- ---------
Increase (decrease) in net assets from capital
transactions ..................................... (69,262) (177,299) 7,359
--------- --------- ---------
Increase (decrease) in net assets ..................... 474,035 324,367 193,634
Net assets at beginning of year ....................... 3,603,668 3,279,301 3,085,667
--------- --------- ---------
Net assets at end of year ............................. 4,077,703 3,603,668 3,279,301
========= ========= =========
</TABLE>
19
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
(CONTINUED)
-----------------------------------
INTERNATIONAL
EQUITY FUND
-----------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ----------- ----------
<S> <C> <C> <C>
Increase in net assets
From operations:
Net investment income .......................................... $ 5,294 8,167 1,732
Net realized gain (loss) ....................................... 93 654 510
Unrealized appreciation (depreciation) on investments .......... 8,003 (5,290) (839)
--------- ------ ------
Increase in net assets from operations ...................... 13,390 3,531 1,403
From capital transactions:
Net premiums ................................................... 27,099 23,197 18,822
Loan interest .................................................. 1 4 7
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- -- --
Surrenders .................................................... (497) (904) (1,403)
Loans ......................................................... (733) (289) (229)
Cost of insurance and administrative expense (note 3) ......... (10,088) (5,480) (3,119)
Transfer gain (loss) and transfer fees ........................ 303 (1,837) 86
Interfund transfers ............................................ 10,770 22,059 10,273
--------- ------ ------
Increase in net assets from capital transactions ............ 26,855 36,750 24,437
--------- ------ ------
Increase in net assets .......................................... 40,245 40,281 25,840
Net assets at beginning of period ............................... 75,504 35,223 9,383
--------- ------ ------
Net assets at end of period ..................................... $ 115,749 75,504 35,223
========= ====== ======
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
--------------------------------------
REAL ESTATE
SECURITIES FUND
-------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------- ----------- ----------
<S> <C> <C> <C>
Increase in net assets
From operations:
Net investment income .......................................... 24,049 19,866 1,621
Net realized gain (loss) ....................................... (13,410) 2,800 381
Unrealized appreciation (depreciation) on investments .......... (64,135) (2,725) 2,468
------- ------- ------
Increase in net assets from operations ...................... (53,496) 19,941 4,470
From capital transactions:
Net premiums ................................................... 210,779 79,557 15,327
Loan interest .................................................. (6) 2 --
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- -- --
Surrenders .................................................... (3,842) (692) (347)
Loans ......................................................... (660) (874) --
Cost of insurance and administrative expense (note 3) ......... (49,575) (17,806) (1,892)
Transfer gain (loss) and transfer fees ........................ (872) 300 190
Interfund transfers ............................................ 41,309 89,769 12,060
------- ------- ------
Increase in net assets from capital transactions ............ 197,133 150,256 25,338
------- ------- ------
Increase in net assets .......................................... 143,637 170,197 29,808
Net assets at beginning of period ............................... 200,409 30,212 404
------- ------- ------
Net assets at end of period ..................................... 344,046 200,409 30,212
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-----------------------------------------------------------
GLOBAL VALUE
INCOME EQUITY
FUND FUND
----------------------------- -----------------------------
PERIOD FROM PERIOD FROM
JUNE 18, JUNE 17,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase in net assets
From operations:
Net investment income ............... $ 1,746 431 5,553 98
Net realized gain (loss) ............ 3,656 35 (305) (9)
Unrealized appreciation
(depreciation) on investments....... 1,314 (329) 11,219 1
-------- ------ ------- --------
Increase in net assets from
operations ...................... 6,716 137 16,467 90
From capital transactions:
Net premiums ........................ 15,696 1,293 108,124 5,797
Loan interest ....................... -- -- 34 2
Transfers (to) from the general
account of Life of Virginia:
Death benefits ..................... -- -- -- --
Surrenders ......................... -- -- (2,851) --
Loans .............................. -- (243) (1,112) --
Cost of insurance and
administrative expense
(note 3) ......................... (4,405) (373) (13,611) (1,002)
Transfer gain (loss) and
transfer fees .................... 128 (9) (3,719) 35
Interfund transfers ................. 8,773 8,418 95,455 8,637
-------- ------ ------- --------
Increase in net assets from
capital transactions ............ 20,192 9,086 182,320 13,469
-------- ------ ------- --------
Increase in net assets ............... 26,908 9,223 198,787 13,559
Net assets at beginning of period .... 9,223 -- 13,559 --
-------- ------ ------- --------
Net assets at end of period .......... $ 36,131 9,223 212,346 13,559
======== ====== ======= ========
<CAPTION>
GE INVESTMENTS FUNDS, INC. (CONTINUED)
-------------------------------------------
U.S.
INCOME EQUITY
FUND FUND
----------------------------- -------------
PERIOD FROM PERIOD FROM
DECEMBER 12, JUNE 10,
YEAR ENDED 1997 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998
-------------- -------------- -------------
<S> <C> <C> <C>
Increase in net assets
From operations:
Net investment income ............... 21,539 876 822
Net realized gain (loss) ............ 3,321 (838) 144
Unrealized appreciation
(depreciation) on investments....... 4,423 523 3,300
------- ------- ------
Increase in net assets from
operations ...................... 29,283 561 4,266
From capital transactions:
Net premiums ........................ 59,967 735 30,322
Loan interest ....................... (75) 12 --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ..................... -- -- --
Surrenders ......................... (29,103) -- (80)
Loans .............................. (665) -- --
Cost of insurance and
administrative expense
(note 3) ......................... (32,512) (1,655) (2,198)
Transfer gain (loss) and
transfer fees .................... (444) (30) 172
Interfund transfers ................. 29,042 378,428 18,463
------- ------- ------
Increase in net assets from
capital transactions ............ 26,210 377,490 46,679
------- ------- ------
Increase in net assets ............... 55,493 378,051 50,945
Net assets at beginning of period .... 378,051 -- --
------- ------- ------
Net assets at end of period .......... 433,544 378,051 50,945
======= ======= ======
</TABLE>
20
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT
FUNDS
----------------------------
MONEY
FUND
----------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31,
1997 1996
-------------- -------------
<S> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............................................. $ 23 193
Net realized gain .................................................. -- --
Unrealized appreciation (depreciation) on investments .............. -- --
------- -------
Increase in net assets from operations .......................... 23 193
From capital transactions:
Net premiums ....................................................... 111 --
Loan interest ...................................................... -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................... -- --
Surrenders ........................................................ -- --
Loans ............................................................. -- --
Cost of insurance and administrative expense (note 3) ............. (205) (997)
Transfer gain (loss) and transfer fees ............................ 15 (8)
Transfers (to) from the Guarantee Account .......................... -- --
Interfund transfers ................................................ (651) (10,491)
------- -------
Increase (decrease) in net assets from capital transactions ..... (730) (11,496)
------- -------
Increase (decrease) in net assets ................................... (707) (11,303)
Net assets at beginning of year ..................................... 707 12,010
------- -------
Net assets at end of year ........................................... $ -- 707
======= =======
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
---------------------------------------
BOND
FUND
---------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .............................................. 7,504 15,714 14,915
Net realized gain .................................................. 2,899 276 128
Unrealized appreciation (depreciation) on investments .............. 11,167 5,965 (3,916)
------- ------- -------
Increase in net assets from operations .......................... 21,570 21,955 11,127
From capital transactions:
Net premiums ....................................................... 164,138 56,837 41,062
Loan interest ...................................................... (39) (13) (2)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................... -- -- --
Surrenders ........................................................ (17,769) (17,569) (3,478)
Loans ............................................................. (1,348) (2,018) --
Cost of insurance and administrative expense (note 3) ............. (40,698) (23,294) (21,145)
Transfer gain (loss) and transfer fees ............................ 188 (1,279) 6
Transfers (to) from the Guarantee Account .......................... -- -- --
Interfund transfers ................................................ 51,994 (12,046) 50,864
------- ------- -------
Increase (decrease) in net assets from capital transactions ..... 156,466 618 67,307
------- ------- -------
Increase (decrease) in net assets ................................... 178,036 22,573 78,434
Net assets at beginning of year ..................................... 292,413 269,840 191,406
------- ------- -------
Net assets at end of year ........................................... 470,449 292,413 269,840
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
----------------------------------------
CAPITAL
APPRECIATION
FUND
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .................................... $ 67,813 100,061 85,790
Net realized gain ........................................ 93,644 264,595 128,677
Unrealized appreciation (depreciation) on investments..... 277,402 (89,502) 103,509
---------- --------- ---------
Increase in net assets from operations ................ 438,859 275,154 317,976
From capital transactions:
Net premiums ............................................. 826,696 794,773 615,934
Loan interest ............................................ 171 305 (174)
Transfers (to) from the general account of Life of Virginia:
Death benefits .......................................... -- (313) --
Surrenders .............................................. (139,804) (41,954) (128,744)
Loans ................................................... (62,192) (38,517) (8,425)
Cost of insurance and administrative expense
(note 3) .............................................. (336,566) (307,499) (242,592)
Transfer gain (loss) and transfer fees .................. 2,879 13,531 6,908
Transfers (to) from the Guarantee Account ................ (257) -- --
Interfund transfers ...................................... (1,915) 61,532 270,794
---------- --------- ---------
Increase (decrease) in net assets from capital
transactions ......................................... 289,012 481,858 513,701
---------- --------- ---------
Increase (decrease) in net assets ......................... 727,871 757,012 831,677
Net assets at beginning of year ........................... 3,099,076 2,342,064 1,510,387
---------- --------- ---------
Net assets at end of year ................................. $3,826,947 3,099,076 2,342,064
========== ========= =========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-----------------------------------------
GROWTH
FUND
-----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .................................... 211,605 80,930 64,832
Net realized gain ........................................ 89,327 112,639 59,611
Unrealized appreciation (depreciation) on investments..... 270,706 226,521 113,315
--------- --------- ---------
Increase in net assets from operations ................ 571,638 420,090 237,758
From capital transactions:
Net premiums ............................................. 687,713 460,957 310,615
Loan interest ............................................ (398) (541) (155)
Transfers (to) from the general account of Life of Virginia:
Death benefits .......................................... -- -- (3,934)
Surrenders .............................................. (137,732) (69,141) (18,216)
Loans ................................................... (10,897) (12,664) (21,680)
Cost of insurance and administrative expense
(note 3) .............................................. (260,178) (176,831) (107,526)
Transfer gain (loss) and transfer fees .................. (93) (4,635) (1,119)
Transfers (to) from the Guarantee Account ................ -- -- --
Interfund transfers ...................................... 100,907 180,805 266,465
--------- --------- ---------
Increase (decrease) in net assets from capital
transactions ......................................... 379,322 377,950 424,450
--------- --------- ---------
Increase (decrease) in net assets ......................... 950,960 798,040 662,208
Net assets at beginning of year ........................... 2,277,913 1,479,873 817,665
--------- --------- ---------
Net assets at end of year ................................. 3,228,873 2,277,913 1,479,873
========= ========= =========
</TABLE>
21
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
(CONTINUED)
-----------------------------------------
HIGH
INCOME
FUND
-----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ......................................... $ 70,242 96,855 72,735
Net realized gain (loss) ...................................... 3,380 11,476 8,045
Unrealized appreciation (depreciation) on investments ......... (81,675) 28,520 28,139
---------- --------- --------
Increase (decrease) in net assets from operations .......... (8,053) 136,851 108,919
---------- --------- --------
From capital transactions:
Net premiums .................................................. 464,843 359,877 311,435
Loan interest ................................................. (313) (10) 16
Transfers (to) from the general account of Life of Virginia:
Death benefits ............................................... (3,028) -- (18,532)
Surrenders ................................................... (91,485) (19,540) (7,723)
Loans ........................................................ (16,569) (25,149) (133,614)
Cost of insurance and administrative expense (note 3) ........ (190,705) (162,386) 559
Transfer gain (loss) and transfer fees ....................... 2,861 944 111,802
Interfund transfers ........................................... 46,306 367,417 --
---------- --------- --------
Increase (decrease) in net assets from capital
transactions .............................................. 211,910 521,153 263,943
---------- --------- --------
Increase in net assets ......................................... 203,857 658,004 372,862
Net assets at beginning of year ................................ 1,650,751 992,747 619,885
---------- --------- --------
Net assets at end of year ...................................... $1,854,608 1,650,751 992,747
========== ========= ========
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
(CONTINUED)
-------------------------------------
MULTIPLE
STRATEGIES
FUND
-------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ......................................... 39,392 40,854 30,201
Net realized gain (loss) ...................................... 10,586 26,553 22,006
Unrealized appreciation (depreciation) on investments ......... (5,312) 27,703 14,047
------- ------- --------
Increase (decrease) in net assets from operations .......... 44,666 95,110 66,254
------- ------- --------
From capital transactions:
Net premiums .................................................. 235,155 132,071 122,291
Loan interest ................................................. (157) (129) (18)
Transfers (to) from the general account of Life of Virginia:
Death benefits ............................................... -- -- (17,498)
Surrenders ................................................... (8,552) (51,445) (183,972)
Loans ........................................................ (9,879) (4,961) (729)
Cost of insurance and administrative expense (note 3) ........ (68,755) (65,223) (50,034)
Transfer gain (loss) and transfer fees ....................... (109) (84) 6,336
Interfund transfers ........................................... (12,778) (13,534) 87,158
------- ------- --------
Increase (decrease) in net assets from capital
transactions .............................................. 134,925 (3,305) (36,466)
------- ------- --------
Increase in net assets ......................................... 179,591 91,805 29,788
Net assets at beginning of year ................................ 666,466 574,661 544,873
------- ------- --------
Net assets at end of year ...................................... 846,057 666,466 574,661
======= ======= ========
</TABLE>
22
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
----------------------------------------------------------
MONEY MARKET PORTFOLIO HIGH INCOME PORTFOLIO
----------------------------- ----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .......................................... $ 29,949 15,364 15,351 22,656
Net realized gain .............................................. -- -- 41,295 7,114
Unrealized appreciation (depreciation) on investments .......... -- -- (23,320) 1,632
--------- -------- -------- --------
Increase in net assets from operations .......................... 29,949 15,364 33,326 31,402
--------- -------- -------- --------
From capital transactions:
Net premiums ................................................... -- 1,850 208 --
Loan interest .................................................. (34) (14) (41) (22)
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- -- -- --
Surrenders .................................................... (2) (19,871) (2,471) (36,177)
Loans ......................................................... (1,093) (1,250) (1,664) (2,449)
Cost of insurance and administrative expense (note 3) ......... (18,137) (30,816) (16,918) (30,421)
Transfer gain (loss) and transfer fees ........................ (15,912) (5,041) 1,294 (553)
Interfund transfers ............................................ (310,424) (89,691) (226,946) (34,288)
--------- -------- -------- --------
Increase (decrease) in net assets from capital transactions ..... (345,602) (144,833) (246,538) (103,910)
--------- -------- -------- --------
Increase (decrease) in net assets ............................... (315,653) (129,469) (213,212) (72,508)
Net assets at beginning of year ................................. 315,653 445,122 213,212 285,720
--------- -------- -------- --------
Net assets at end of year ....................................... $ -- 315,653 -- 213,212
========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
----------------------------------------
EQUITY-INCOME PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ........................................ $ 311,136 309,419 68,759
Net realized gain ............................................ 235,107 125,398 98,124
Unrealized appreciation (depreciation) on investments ........ 97,581 539,549 149,934
---------- --------- ---------
Increase in net assets from operations ........................ 643,824 974,366 316,817
---------- --------- ---------
From capital transactions:
Net premiums ................................................. 1,528,326 1,111,418 923,240
Loan interest ................................................ (659) 623 (54)
Transfers (to) from the general account of Life of Virginia:
Death benefits .............................................. (4,313) (276) (22,109)
Surrenders .................................................. (292,782) (74,706) (120,408)
Loans ....................................................... (48,745) (43,806) (12,984)
Cost of insurance and administrative expense
(note 3) .................................................. (625,045) (475,456) (336,646)
Transfer gain (loss) and transfer fees ...................... 3,459 21,702 18,395
Interfund transfers .......................................... 111,431 662,909 643,935
---------- --------- ---------
Increase (decrease) in net assets from capital transactions.... 671,672 1,202,408 1,093,369
---------- --------- ---------
Increase (decrease) in net assets ............................. 1,315,496 2,176,774 1,410,186
Net assets at beginning of year ............................... 5,397,592 3,220,818 1,810,632
---------- --------- ---------
Net assets at end of year ..................................... $6,713,088 5,397,592 3,220,818
========== ========= =========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
---------------------------------------
GROWTH PORTFOLIO
---------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ........................................ 661,458 105,204 188,077
Net realized gain ............................................ 728,950 193,439 342,839
Unrealized appreciation (depreciation) on investments ........ 630,736 566,792 (104,224)
--------- --------- ---------
Increase in net assets from operations ........................ 2,021,144 865,435 426,692
--------- --------- ---------
From capital transactions:
Net premiums ................................................. 1,067,020 1,063,353 928,744
Loan interest ................................................ (3,767) (786) (476)
Transfers (to) from the general account of Life of Virginia:
Death benefits .............................................. (2,159) (12,511) (24,929)
Surrenders .................................................. (303,094) (119,903) (179,684)
Loans ....................................................... (67,251) (102,452) (72,457)
Cost of insurance and administrative expense
(note 3) .................................................. (550,302) (468,850) (419,528)
Transfer gain (loss) and transfer fees ...................... (32,108) (321) 34,069
Interfund transfers .......................................... 735,023 127,136 (78,376)
--------- --------- ---------
Increase (decrease) in net assets from capital transactions.... 843,362 485,666 187,363
--------- --------- ---------
Increase (decrease) in net assets ............................. 2,864,506 1,351,101 614,055
Net assets at beginning of year ............................... 4,961,747 3,610,646 2,996,591
--------- --------- ---------
Net assets at end of year ..................................... 7,826,253 4,961,747 3,610,646
========= ========= =========
</TABLE>
23
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND (CONTINUED)
----------------------------------------
OVERSEAS PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... $ 124,222 143,155 25,110
Net realized gain ......................................... 98,578 95,087 39,291
Unrealized appreciation (depreciation) on investments ..... (8,287) (45,710) 126,664
---------- --------- ---------
Increase in net assets from operations ................. 214,513 192,532 191,065
---------- --------- ---------
From capital transactions:
Net premiums .............................................. 357,948 366,213 455,202
Loan interest ............................................. (1,149) (656) (10)
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- (264) (3,636)
Surrenders ............................................... (94,164) (78,977) (76,054)
Loans .................................................... (10,363) (29,580) (29,577)
Cost of insurance and administrative expense
(note 3) ............................................... (172,299) (181,619) (199,651)
Transfer gain (loss) and transfer fees ................... 3,188 2,923 5,668
Transfers (to) from the Guarantee Account ................. -- -- --
Interfund transfers ....................................... 7,063 (292,022) (2,943)
---------- --------- ---------
Increase (decrease) in net assets from capital
transactions .......................................... 90,224 (213,982) 148,999
---------- --------- ---------
Increase (decrease) in net assets .......................... 304,737 (21,450) 340,064
Net assets at beginning of period .......................... 1,739,180 1,760,630 1,420,566
---------- --------- ---------
Net assets at end of period ................................ $2,043,917 1,739,180 1,760,630
========== ========= =========
<CAPTION>
VARIABLE INSURANCE
PRODUCTS FUND II
----------------------------------------
ASSET MANAGER PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... 496,918 390,988 163,748
Net realized gain ......................................... 58,132 68,861 105,006
Unrealized appreciation (depreciation) on investments ..... 32,734 222,652 98,064
--------- --------- ---------
Increase in net assets from operations ................. 587,784 682,501 366,818
--------- --------- ---------
From capital transactions:
Net premiums .............................................. 513,149 644,004 695,446
Loan interest ............................................. (263) (381) (44)
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (4,354) -- (22,120)
Surrenders ............................................... (197,464) (122,367) (107,389)
Loans .................................................... (31,787) (29,206) 70
Cost of insurance and administrative expense
(note 3) ............................................... (311,542) (329,030) (341,676)
Transfer gain (loss) and transfer fees ................... 689 12,971 (36)
Transfers (to) from the Guarantee Account ................. -- -- --
Interfund transfers ....................................... (89,254) 430,161 (462,667)
--------- --------- ---------
Increase (decrease) in net assets from capital
transactions .......................................... (120,826) 606,152 (238,416)
--------- --------- ---------
Increase (decrease) in net assets .......................... 466,958 1,288,653 128,402
Net assets at beginning of period .......................... 4,169,405 2,880,752 2,752,350
--------- --------- ---------
Net assets at end of period ................................ 4,636,363 4,169,405 2,880,752
========= ========= =========
</TABLE>
24
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND II
-----------------------------------------
CONTRAFUND PORTFOLIO
-----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)....... $ 104,490 22,586 (1,644)
Net realized gain .................... 228,313 198,947 14,028
Unrealized appreciation
(depreciation) on investments ....... 398,426 135,687 119,895
---------- --------- ---------
Increase in net assets from
operations ........................ 731,229 357,220 132,279
---------- --------- ---------
From capital transactions:
Net premiums ......................... 947,585 617,546 331,802
Loan interest ........................ (583) (140) 107
Transfers (to) from the general
account of Life of Virginia:
Death benefits ...................... (3,241) (5,439) --
Surrenders .......................... (118,374) (90,538) (8,625)
Loans ............................... (45,386) (13,250) (4,921)
Cost of insurance and adminis-
trative expense (note 3) ........... (322,452) (207,378) (91,674)
Transfer gain (loss) and
transfer fees ...................... 26,399 17,537 1,153
Transfers (to) from the Guarantee
Account ............................. (102) -- --
Interfund transfers .................. 403,462 292,298 398,084
---------- --------- ---------
Increase (decrease) in net
assets from capital
transactions ....................... 887,308 610,636 625,926
---------- --------- ---------
Increase (decrease) in net assets ..... 1,618,537 967,856 758,205
Net assets at beginning of period ..... 2,013,323 1,045,467 287,262
---------- --------- ---------
Net assets at end of period ........... $3,631,860 2,013,323 1,045,467
========== ========= =========
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND III
----------------------------------------------------------
GROWTH OPPORTUNITIES
GROWTH & INCOME PORTFOLIO PORTFOLIO
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
MAY 30, MAY 30,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)....... (1,066) (45) 2,450 (148)
Net realized gain .................... 2,566 1,642 3,612 472
Unrealized appreciation
(depreciation) on investments ....... 59,468 (1,102) 35,308 3,433
------- ------ ------- ------
Increase in net assets from
operations ........................ 60,968 495 41,370 3,757
------- ------ ------- ------
From capital transactions:
Net premiums ......................... 202,919 5,448 71,954 6,899
Loan interest ........................ -- -- (31) --
Transfers (to) from the general
account of Life of Virginia:
Death benefits ...................... -- -- -- --
Surrenders .......................... (2,976) -- (448) --
Loans ............................... 2,468 -- (6,446) --
Cost of insurance and adminis-
trative expense (note 3) ........... (31,238) (1,504) (24,940) (1,447)
Transfer gain (loss) and
transfer fees ...................... 4,369 1,159 976 860
Transfers (to) from the Guarantee
Account ............................. -- -- -- --
Interfund transfers .................. 125,535 41,761 132,314 61,508
------- ------ ------- ------
Increase (decrease) in net
assets from capital
transactions ....................... 301,077 46,864 173,379 67,820
------- ------ ------- ------
Increase (decrease) in net assets ..... 362,045 47,359 214,749 71,577
Net assets at beginning of period ..... 47,359 -- 71,577 --
------- ------ ------- ------
Net assets at end of period ........... 409,404 47,359 286,326 71,577
======= ====== ======= ======
</TABLE>
25
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
----------------------------------------------------------------------------------------
BALANCED PORTFOLIO BOND PORTFOLIO GROWTH PORTFOLIO
----------------------------- ----------------------------- ----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31, DECEMBER 11, DECEMBER 31,
1997 1996 1997 1996 1997 1996
-------------- -------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .................. $ 14,587 39,731 4,202 6,487 10,476 12,575
Net realized gain (loss) ............... 36,568 4,564 (162) 38 37,624 4,264
Unrealized appreciation
(depreciation) on investments ......... (14,898) (28,989) (48) (3,678) (18,849) (6,024)
----------- --------- ------- ------- -------- -------
Increase in net assets from
operations ......................... 36,257 15,306 3,992 2,847 29,251 10,815
----------- --------- ------- ------- -------- -------
From capital transactions:
Net premiums ........................... 321 -- -- -- 578 30
Loan interest .......................... (32) (7) -- -- (111) (118)
Transfers (to) from the general
account of Life of Virginia:
Death benefits ........................ -- (16,809) -- -- -- --
Surrenders ............................ (12,775) (3,543) (61) -- (3,450) --
Loans ................................. (1,513) -- -- -- (1,168) (4,361)
Cost of insurance and adminis-
trative expense (note 3) ............ (11,724) (16,515) (1,655) (3,975) (6,896) (8,829)
Transfer gain (loss) and transfer
fees ................................ (153) (143) (1,438) (55) 2,241 273
Interfund transfers .................... (254,395) (26,358) (80,382) (11,128) (154,994) (24,783)
----------- --------- ------- ------- -------- -------
Decrease in net assets from capital
transactions ........................ (280,271) (63,375) (83,536) (15,158) (163,800) (37,788)
----------- --------- ------- ------- -------- -------
Decrease in net assets .................. (244,014) (48,069) (79,544) (12,311) (134,549) (26,973)
Net assets at beginning of year ......... 244,014 292,083 79,544 91,855 134,549 161,522
----------- --------- ------- ------- -------- -------
Net assets at end of year ............... $ -- 244,014 -- 79,544 -- 134,549
=========== ========= ======= ======= ======== =======
</TABLE>
26
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
-------------------------------------
AMERICAN LEADERS FUND II
-------------------------------------
PERIOD FROM
AUGUST 14,
1996 TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
1998 1997 1996
----------- ----------- -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .......................................... $ 7,659 35 7
Net realized gain (loss) ....................................... (245) 598 4
Unrealized appreciation (depreciation) on investments .......... 22,437 3,025 29
--------- ------ -----
Increase in net assets from operations ...................... 29,851 3,658 40
--------- ------ -----
From capital transactions:
Net premiums ................................................... 161,541 26,104 941
Loan interest .................................................. 25 -- --
Transfers (to) from the general account of Life of Virginia:
Surrenders .................................................... (6,132) -- --
Loans ......................................................... (1,072) -- --
Cost of insurance (note 3) .................................... (31,404) (3,533) (101)
Transfer gain (loss) and transfer fees ........................ (1,069) 46 (1)
Interfund transfers ............................................ 120,045 17,684 1,391
--------- ------ -----
Increased in net assets from capital transactions ........... 241,934 40,301 2,230
--------- ------ -----
Increase in net assets .......................................... 271,785 43,959 2,270
Net assets at beginning of period ............................... 46,229 2,270 --
--------- ------ -----
Net assets at end of period ..................................... $ 318,014 46,229 2,270
========= ====== =====
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
------------------------------------
HIGH INCOME BOND FUND II
-----------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income .......................................... 3,028 2,963 1,465
Net realized gain (loss) ....................................... 1,890 836 51
Unrealized appreciation (depreciation) on investments .......... (3,246) 5,274 1,038
------- ------ ------
Increase in net assets from operations ...................... 1,672 9,073 2,554
------- ------ ------
From capital transactions:
Net premiums ................................................... 76,550 41,464 18,547
Loan interest .................................................. 60 -- --
Transfers (to) from the general account of Life of Virginia:
Surrenders .................................................... (3,973) -- --
Loans ......................................................... (3,721) (3,068) --
Cost of insurance (note 3) .................................... (21,339) (9,342) (3,746)
Transfer gain (loss) and transfer fees ........................ (94) 332 362
Interfund transfers ............................................ 16,748 20,749 9,630
------- ------ ------
Increased in net assets from capital transactions ........... 64,231 50,135 24,793
------- ------ ------
Increase in net assets .......................................... 65,903 59,208 27,347
Net assets at beginning of period ............................... 94,806 35,598 8,251
------- ------ ------
Net assets at end of period ..................................... 160,709 94,806 35,598
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FEDERATED INVESTORS INSURANCE SERIES
----------------------------------------
UTILITY FUND II
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ ----------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income ......................................... $ 10,400 4,069 1,919
Net realized gain (loss) ...................................... 5,077 1,782 2,332
Unrealized appreciation (depreciation) on investments ......... 11,499 25,287 700
--------- ------- ------
Increase in net assets from operations ..................... 26,976 31,138 4,951
--------- ------- ------
From capital transactions:
Net premiums .................................................. 81,174 43,641 27,264
Loan interest ................................................. 7 -- --
Transfers (to) from the general account of Life of Virginia:
Surrenders ................................................... (2,124) -- (60)
Loans ........................................................ (315) -- --
Cost of insurance (note 3) ................................... (19,854) (10,455) (6,249)
Transfer gain (loss) and transfer fees ....................... (312) (196) (372)
Interfund transfers ........................................... (910) 11,808 236
--------- ------- ------
Increase in net assets from capital transactions ........... 57,666 44,798 20,819
--------- ------- ------
Increase in net assets ......................................... 84,642 75,936 25,770
Net assets at beginning of period .............................. 163,276 87,340 61,570
--------- ------- ------
Net assets at end of period .................................... $ 247,918 163,276 87,340
========= ======= ======
</TABLE>
27
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
ALGER AMERICAN FUND
--------------------------------------
SMALL CAP PORTFOLIO
--------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -----------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... $ 113,203 17,639 (1,157)
Net realized gain (loss) .................................. (65,245) 109,665 4,156
Unrealized appreciation (depreciation) on investments ..... 102,269 (21,855) (4,745)
---------- ------- -------
Increase (decrease) in net assets from operations ...... 150,227 105,449 (1,746)
---------- ------- -------
From capital transactions:
Net premiums .............................................. 367,472 293,677 151,593
Loan interest ............................................. 94 1,571 (3,345)
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (743) -- --
Surrenders ............................................... (24,987) (3,177) (1,160)
Loans .................................................... (29,830) (3,833) (13,496)
Cost of insurance (note 3) ............................... (108,923) (88,074) (37,209)
Transfer gain (loss) and transfer fees ................... 8,000 22,932 9,170
Interfund transfers ....................................... (11,610) 69,375 281,412
---------- ------- -------
Increase in net assets from capital transactions ....... 199,473 292,471 386,965
---------- ------- -------
Increase (decrease) in net assets .......................... 349,700 397,920 385,219
Net assets at beginning of period .......................... 819,695 421,775 36,556
---------- ------- -------
Net assets at end of period ................................ $1,169,395 819,695 421,775
========== ======= =======
<CAPTION>
ALGER AMERICAN FUND
----------------------------------------
GROWTH PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... 151,139 2,666 1,465
Net realized gain (loss) .................................. 60,482 103,893 1,107
Unrealized appreciation (depreciation) on investments ..... 293,124 100,012 (1,956)
-------- --------- ---------
Increase (decrease) in net assets from operations ...... 504,745 206,571 616
-------- --------- ---------
From capital transactions:
Net premiums .............................................. 322,362 338,476 180,079
Loan interest ............................................. 79 578 31
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (828) -- --
Surrenders ............................................... (132,389) (17,220) (1,243)
Loans .................................................... 10,255 (5,609) (956)
Cost of insurance (note 3) ............................... (130,212) (109,328) (34,162)
Transfer gain (loss) and transfer fees ................... 6,290 (92,300) 6,248
Interfund transfers ....................................... 381,092 (862,640) 1,232,717
-------- --------- ---------
Increase in net assets from capital transactions ....... 456,649 (748,043) 1,382,714
-------- --------- ---------
Increase (decrease) in net assets .......................... 961,394 (541,472) 1,383,330
Net assets at beginning of period .......................... 865,112 1,406,584 23,254
-------- --------- ---------
Net assets at end of period ................................ 1,826,506 865,112 1,406,584
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PBHG INSURANCE SERIES FUND
----------------------------------------------------------
LARGE CAP GROWTH PORTFOLIO GROWTH II PORTFOLIO
----------------------------- ----------------------------
PERIOD FROM PERIOD FROM
MAY 30, MAY 30,
YEAR ENDED 1997 TO YEAR ENDED 1997 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................ $ (327) (63) (239) (43)
Net realized gain (loss) ....................................... 3,310 584 (197) 34
Unrealized appreciation (depreciation) on investments .......... 13,650 92 8,666 (142)
-------- ------ ------ ------
Increase (decrease) in net assets from operations ........... 16,633 613 8,230 (151)
-------- ------ ------ ------
From capital transactions:
Net premiums ................................................... 38,098 4,425 19,247 10,354
Loan interest .................................................. 15 -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- -- -- --
Surrenders .................................................... (949) (181) (286) --
Loans ......................................................... (6,899) -- -- --
Cost of insurance (note 3) .................................... (9,007) (1,384) (8,107) (1,598)
Transfer gain (loss) and transfer fees ........................ (239) 401 (1,497) (24)
Interfund transfers ............................................ 14,195 22,634 30,191 12,519
-------- ------ ------ ------
Increase in net assets from capital transactions ............ 35,214 25,895 39,548 21,251
-------- ------ ------ ------
Increase (decrease) in net assets ............................... 51,847 26,508 47,778 21,100
Net assets at beginning of period ............................... 26,508 -- 21,100 --
-------- ------ ------ ------
Net assets at end of period ..................................... $ 78,355 26,508 68,878 21,100
======== ====== ====== ======
</TABLE>
28
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
AGGRESSIVE GROWTH PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .......................... $ (13,622) (10,376) 2,991
Net realized gain ........................................ 171,826 202,593 49,684
Unrealized appreciation (depreciation) on investments..... 488,613 (21,456) (6,584)
---------- --------- ---------
Increase in net assets from operations ................ 646,817 170,761 46,091
---------- --------- ---------
From capital transactions:
Net premiums ............................................. 624,199 525,446 440,252
Loan interest ............................................ 113 (1,809) 50
Transfers (to) from the general account of Life of
Virginia: ...............................................
Death benefits .......................................... (826) -- (155)
Surrenders .............................................. (129,710) (39,796) (55,525)
Loans ................................................... (41,049) (7,351) (9,797)
Cost of insurance and administrative expense
(note 3) .............................................. (220,183) (186,650) (128,435)
Transfer gain (loss) and transfer fees .................. 18,812 45,321 5,450
Transfers (to) from the Guarantee Account ................ -- -- --
Interfund transfers ...................................... (391,359) 436,211 161,707
---------- --------- ---------
Increase (decrease) in net assets from capital
transactions ......................................... (140,003) 771,372 413,547
---------- --------- ---------
Increase in net assets .................................... 506,814 942,133 459,638
Net assets at beginning of period ......................... 2,025,192 1,083,059 623,421
---------- --------- ---------
Net assets at end of period ............................... $2,532,006 2,025,192 1,083,059
========== ========= =========
<CAPTION>
JANUS ASPEN SERIES
GROWTH PORTFOLIO
----------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) .......................... 129,924 35,936 16,388
Net realized gain ........................................ 115,203 94,811 21,606
Unrealized appreciation (depreciation) on investments..... 576,941 155,268 67,602
--------- --------- ---------
Increase in net assets from operations ................ 822,068 286,015 105,596
--------- --------- ---------
From capital transactions:
Net premiums ............................................. 731,597 531,252 350,437
Loan interest ............................................ 114 514 59
Transfers (to) from the general account of Life of
Virginia: ...............................................
Death benefits .......................................... (857) -- (151)
Surrenders .............................................. (112,392) (19,282) (67,362)
Loans ................................................... (5,077) (17,285) (5,035)
Cost of insurance and administrative expense
(note 3) .............................................. (247,297) (173,865) (88,814)
Transfer gain (loss) and transfer fees .................. 537 8,623 5,548
Transfers (to) from the Guarantee Account ................ -- -- --
Interfund transfers ...................................... 208,382 231,416 454,994
--------- --------- ---------
Increase (decrease) in net assets from capital
transactions ......................................... 575,007 561,373 649,676
--------- --------- ---------
Increase in net assets .................................... 1,397,075 847,388 755,272
Net assets at beginning of period ......................... 1,960,998 1,113,610 358,338
--------- --------- ---------
Net assets at end of period ............................... 3,358,073 1,960,998 1,113,610
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
WORLDWIDE GROWTH PORTFOLIO
---------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................... $ 124,570 19,700 11,083
Net realized gain ................................................. 233,014 89,852 102,324
Unrealized appreciation (depreciation) on investments ............. 623,292 251,916 66,974
---------- --------- ---------
Increase in net assets from operations ......................... 980,876 361,468 180,381
---------- --------- ---------
From capital transactions:
Net premiums ...................................................... 1,375,973 822,511 381,650
Loan interest ..................................................... (462) 740 270
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................... (1,493) -- --
Surrenders ....................................................... (169,492) (35,503) (40,322)
Loans ............................................................ (55,021) (11,414) (19,483)
Cost of insurance and administrative expense (note 3) ............ (464,790) (279,525) (115,529)
Transfer gain (loss) and transfer fees ........................... 552 3,261 8,504
Transfers (to) from the Guarantee Account ......................... (100) -- --
Interfund transfers ............................................... 355,363 795,994 610,432
---------- --------- ---------
Increase (decrease) in net assets from capital transactions .... 1,040,530 1,296,064 825,522
---------- --------- ---------
Increase in net assets ............................................. 2,021,406 1,657,532 1,005,903
Net assets at beginning of period .................................. 3,078,819 1,421,287 415,384
---------- --------- ---------
Net assets at end of period ........................................ $5,100,225 3,078,819 1,421,287
========== ========= =========
</TABLE>
29
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
BALANCED PORTFOLIO
---------------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
-------------- ----------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................ $ 36,384 9,947 2,566
Net realized gain .............................................. 24,529 8,229 2,098
Unrealized appreciation (depreciation) on investments .......... 216,533 41,009 14,575
---------- ------- -------
Increase in net assets from operations ...................... 277,446 59,185 19,239
---------- ------- -------
From capital transactions:
Net premiums ................................................... 389,374 73,161 19,054
Loan interest .................................................. (51) 6 --
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ -- -- --
Surrenders .................................................... (8,613) (6,904) --
Loans ......................................................... (17,190) (577) --
Cost of insurance (note 3) .................................... (100,651) (31,146) (11,055)
Transfer gain (loss) and transfer fees ........................ 3,680 305 1,193
Interfund transfers ............................................ 143,125 369,258 63,919
---------- ------- -------
Increase in net assets from capital transactions ............ 409,674 404,103 73,111
---------- ------- -------
Increase in net assets .......................................... 687,120 463,288 92,350
Net assets at beginning of period ............................... 632,064 168,776 76,426
---------- ------- -------
Net assets at end of period ..................................... $1,319,184 632,064 168,776
========== ======= =======
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
FLEXIBLE INCOME PORTFOLIO
----------------------------------
YEAR ENDED DECEMBER 31,
1998 1997 1996
------------ ------------ --------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ................................ 4,036 3,252 507
Net realized gain .............................................. 1,687 305 13
Unrealized appreciation (depreciation) on investments .......... (74) 72 83
------- ------- -----
Increase in net assets from operations ...................... 5,649 3,629 603
------- ------- -----
From capital transactions:
Net premiums ................................................... 44,607 40,176 3,048
Loan interest .................................................. -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ................................................ (1,195) -- --
Surrenders .................................................... (908) -- --
Loans ......................................................... -- -- --
Cost of insurance (note 3) .................................... (16,727) (10,448) (840)
Transfer gain (loss) and transfer fees ........................ (213) 271 1
Interfund transfers ............................................ (2,619) 28,139 6,026
------- ------- -----
Increase in net assets from capital transactions ............ 22,945 58,138 8,235
------- ------- -----
Increase in net assets .......................................... 28,594 61,767 8,838
Net assets at beginning of period ............................... 70,650 8,883 45
------- ------- -----
Net assets at end of period ..................................... 99,244 70,650 8,883
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
JANUS ASPEN SERIES (CONTINUED)
--------------------------------------------------------------------
CAPITAL APPRECIATION
INTERNATIONAL GROWTH PORTFOLIO PORTFOLIO
--------------------------------------- ----------------------------
PERIOD FROM PERIOD FROM
JULY 9, MAY 21,
1996 TO YEAR ENDED 1997 TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996 1998 1997
----------- ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense) ........................... $ 8,665 274 96 (1,219) (7)
Net realized gain ......................................... 40,482 5,037 152 28,363 106
Unrealized appreciation (depreciation) on investments ..... 16,463 16,037 1,040 45,429 697
--------- ------- ------ ------- ------
Increase in net assets from operations ................. 65,610 21,348 1,288 72,573 796
--------- ------- ------ ------- ------
From capital transactions:
Net premiums .............................................. 375,304 137,587 19,750 106,588 1,504
Loan interest ............................................. 8 7 -- 300 --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (645) -- -- -- --
Surrenders ............................................... (19,180) (3,539) -- (374) --
Loans .................................................... (432) (462) -- -- --
Cost of insurance (note 3) ............................... (76,148) (30,132) (1,705) (25,927) (1,135)
Transfer gain (loss) and transfer fees ................... 2,743 1,187 (43) (8,962) 4
Interfund transfers ....................................... 168,918 140,874 34,648 79,406 7,451
--------- ------- ------ ------- ------
Increase in net assets from capital transactions ......... 450,568 245,522 52,650 151,031 7,824
--------- ------- ------ ------- ------
Increase in net assets ..................................... 516,178 266,870 53,938 223,604 8,620
Net assets at beginning of period .......................... 320,808 53,938 -- 8,620 --
--------- ------- ------ ------- ------
Net assets at end of period ................................ $ 836,986 320,808 53,938 232,224 8,620
========= ======= ====== ======= ======
</TABLE>
30
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GOLDMAN SACHS SALOMON BROTHERS
VARIABLE INSURANCE VARIABLE SERIES
TRUST FUND BROTHERS
----------------------------- -----------------
GROWTH AND MID CAP
IMCOME EQUITY INVESTORS
FUND FUND FUND
-------------- -------------- -----------------
PERIOD FROM PERIOD FROM PERIOD FROM
OCTOBER 1, AUGUTST 28, DECEMBER 8,
1998 TO 1998 TO 1998 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1998 1998
-------------- -------------- -----------------
<S> <C> <C> <C>
Increase in net assets
From operations:
Net investment income .......................................... $ 76 291 5
Net realized gain .............................................. 120 3,047 --
Unrealized appreciation on investments ......................... 496 2,320 53
-------- ------ -----
Increase in net assets from operations ...................... 692 5,658 58
-------- ------ -----
From capital transactions:
Net premiums ................................................... 9,253 6,190 --
Loan interest .................................................. -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ............................................... -- -- --
Surrenders ................................................... -- -- --
Loans ........................................................ -- -- --
Cost of insurance (note 3) ................................... (294) (1,091) --
Transfer gain (loss) and transfer fees ....................... (2) (3,036) --
Interfund transfers ............................................ 784 85,487 1,472
-------- ------ -----
Increase in net assets from capital transactions ............ 9,741 87,550 1,472
-------- ------ -----
Increase in net assets .......................................... 10,433 93,208 1,530
Net assets at beginning of period ............................... -- -- --
-------- ------ -----
Net assets at end of period ..................................... $ 10,433 93,208 1,530
======== ====== =====
</TABLE>
See accompanying notes to financial statements.
31
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) DESCRIPTION OF ENTITY
Life of Virginia Separate Account II (the Account) is a separate investment
account established in 1986 by The Life Insurance Company of Virginia (Life of
Virginia) under the laws of the Commonwealth of Virginia. The Account operates
as a unit investment trust under the Investment Company Act of 1940. The Account
is used to fund certain benefits for flexible premium variable life insurance
policies issued by Life of Virginia. The Life Insurance Company of Virginia is a
stock life insurance company operating under a charter granted by the
Commonwealth of Virginia on March 21, 1871. Eighty percent of the capital stock
of Life of Virginia is owned by General Electric Capital Assurance Company. The
remaining 20% is owned by GE Financial Assurance Holdings, Inc. General Electric
Capital Assurance Company and GE Financial Assurance Holdings, Inc. are
indirect, wholly-owned subsidiaries of General Electric Capital Company ("GE
Capital"). GE Capital, a diversified financial services company, is a
wholly-owned subsidiary of General Electric Company (GE), a New York
corporation. Prior to April 1, 1996, Life of Virginia was an indirect
wholly-owned subsidiary of Aon Corporation (Aon).
In October 1998, three new investment subdivisions were added to the
Account for both Type I and Type II policies (see note 2). The Investors Fund,
Strategic Bond Fund, and the Total Return Fund each invest solely in a
designated portfolio of the Salomon Brothers Variable Series Fund. All
designated portfolios described above are series type mutual funds. There were
no amounts issued in either the Strategic Bond or Total Return Funds during
1998.
In May 1998, three new investment subdivisions were added to the Account,
for both Type I and Type II policies. The U.S. Equity Fund invests solely in a
designated portfolio of the GE Investments Funds, Inc. The Mid Cap Equity and
Growth and Income Funds each invest solely in a designated portfolio of the
Goldman Sachs Variable Insurance Trust Fund. All designated portfolios described
above are series type mutual funds.
In May 1997, seven new investment subdivisions were added to the Account.
The Growth & Income Portfolio and Growth Opportunities Portfolio each invest
solely in a designated portfolio of the Variable Insurance Products Fund III.
The Global Income Fund and the Value Equity Fund each invest solely in a
designated portfolio of the GE Investments Funds, Inc. The Capital Appreciation
Portfolio invests solely in a designated portfolio of the Janus Aspen Series.
The Growth II Portfolio and the Large Cap Growth Portfolio each invest solely in
a designated portfolio of the PBHG Insurance Series Fund. All designated
portfolios described above are series type mutual funds.
On December 12, 1997, the Account added the GE Investments Funds, Inc. --
Income Fund as a new investment subdivision and made the following substitutions
of shares held by the investment subdivisions:
<TABLE>
<CAPTION>
BEFORE THE SUBSTITUTION AFTER THE SUBSTITUTION
<S> <C>
Shares of Money Market Portfolio -- Variable Shares of Money Market Fund -- GE Investments
Insurance Products Fund Funds, Inc.
Shares of Money Fund -- Oppenheimer Variable Shares of Money Market Fund -- GE Investments
Account Funds Funds, Inc.
Shares of Government Securities Fund -- GE Shares of Income Fund -- GE Investments Funds,
Investments Funds, Inc. Inc.
Shares of Bond Portfolio -- Neuberger & Berman Shares of Income Fund -- GE Investments Funds,
Advisers Management Trust Inc.
Shares of High Income Portfolio -- Variable Shares of High Income Fund -- Oppenheimer
Insurance Products Fund Variable Account Funds
Shares of Growth Portfolio -- Neuberger & Berman Shares of Growth Portfolio Fund -- Variable
Advisers Management Trust Insurance Products Fund
Shares of Balanced Portfolio -- Neuberger & Shares of Balanced Portfolio -- Janus Aspen Series
Berman Advisers Management Trust
</TABLE>
The foregoing substitutions were carried out pursuant to an order of the
Securities and Exchange Commission (Commission) issued on December 11, 1997,
with the approval of any necessary department of insurance. The effect of such a
share substitution was to replace certain portfolios of Variable Insurance
Products Fund, Oppenheimer Variable Account Funds, GE Investments Funds, Inc.,
and Neuberger & Berman Advisers Management Trust with those of GE Investments
Funds, Inc., Oppenheimer Variable Account Funds, Variable Insurance Products
Fund, and Janus Aspen Series.
32
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(1) DESCRIPTION OF ENTITY -- Continued
In May 1996, two new investment subdivisions were added to the Account. One
of these subdivisions, the International Growth Portfolio, invests solely in a
designated portfolio of the Janus Aspen Series, a series type mutual fund. The
other new subdivision, the American Leaders Fund II, invests solely in a
designated portfolio of the Federated Investors Insurance Series, a series type
mutual fund.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) UNIT CLASS
There are two unit classes included in the Account. Type I units are sold
under policy form P1096. Type II units are sold under policy form P1250. Type II
unit sales began in the first half of 1998.
(B) INVESTMENTS
Investments are stated at fair value which is based on the underlying net
asset value per share of the respective portfolios or funds. Purchases and sales
of investments are recorded on the trade date and income distributions are
recorded on the ex-dividend date. Realized gains and losses on investments are
determined on the average cost basis. The units and unit values are disclosed as
of the last business day in the applicable year or period.
The aggregate cost of the investments acquired and the aggregate proceeds
of investments sold, for the year or period ended December 31, 1998, were:
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- ------------------------------------ ------------- ------------
<S> <C> <C>
GE Investments Funds, Inc.:
S&P 500 Index ..................... $ 3,001,928 1,950,617
Money Market ...................... 20,447,560 18,763,023
Total Return ...................... 1,526,036 1,126,013
International Equity .............. 59,529 26,632
Real Estate Securities ............ 413,138 190,221
Global Income ..................... 77,882 54,911
Value Equity ...................... 233,238 44,064
Income ............................ 143,810 96,065
U.S. Equity ....................... 49,918 2,396
Oppenheimer Variable Account Funds:
Bond .............................. 254,506 105,950
Capital Appreciation .............. 1,499,751 1,136,187
Growth ............................ 1,185,556 589,091
High Income ....................... 724,376 437,362
Multiple Strategies ............... 319,140 138,265
Variable Insurance Products Fund:
Equity-Income ..................... 2,782,789 1,747,261
Growth ............................ 9,144,085 7,631,479
Overseas .......................... 1,372,610 1,151,585
Variable Insurance Products Fund II:
Asset Manager ..................... 1,141,340 756,012
Contrafund ........................ 3,136,522 2,123,389
</TABLE>
33
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
COST OF PROCEEDS
SHARES FROM
FUND/PORTFOLIO ACQUIRED SHARES SOLD
- --------------------------------------- ------------ ------------
<S> <C> <C>
Variable Insurance Products Fund III:
Growth & Income ...................... $ 346,986 57,187
Growth Opportunities ................. 263,696 85,715
Federated Insurance Series:
Utility Fund II ...................... 102,720 41,553
High Income Bond Fund II ............. 139,424 70,243
American Leaders Fund II ............. 363,976 113,117
The Alger American Fund:
Small Cap ............................ 799,877 451,283
Growth ............................... 1,040,147 425,372
PBHG Insurance Series Fund, Inc.:
PBHG Large Cap Growth ................ 75,194 38,532
PBHG Growth II ....................... 76,900 35,458
Janus Aspen Series:
Aggressive Growth .................... 2,561,005 2,643,692
Growth ............................... 1,411,018 696,272
Worldwide Growth ..................... 2,664,473 1,479,862
Balanced ............................. 663,282 238,577
Flexible Income ...................... 110,072 82,610
International Growth ................. 1,537,601 1,073,024
Capital Appreciation ................. 4,295,560 4,141,652
Goldman Sachs Variable Insurance Trust:
Growth and Income .................... 10,132 306
Mid Cap Equity ....................... 92,136 4,257
Salomon Brothers Variable Series Fund:
Investors Fund ....................... 1,472 --
</TABLE>
34
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(C) CAPITAL TRANSACTIONS
The increase (decrease) in outstanding units from capital transactions for
the years or periods ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
--------------------------
S&P 500 GOVERMENT
INDEX SECURITIES
FUND FUND
------------- ------------
<S> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ...................... 41,652 17,289
------ -------
Net premiums ............................................... 10,935 2,279
Loan interest .............................................. (16) 54
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (69) --
Surrenders ............................................... (540) (193)
Loans .................................................... (578) (141)
Cost of insurance and administrative expenses ............ (5,615) (1,444)
Interfund transfers ........................................ 10,270 (1,161)
------ -------
Net increase (decrease) in units from capital transactions .. 14,387 (606)
------ -------
Units outstanding at December 31, 1996 ...................... 56,039 16,683
------ -------
Net premiums ............................................... 12,804 1,856
Loan interest .............................................. (69) 15
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (3,774) --
Surrenders ............................................... (734) (782)
Loans .................................................... (328) (210)
Cost of insurance and administrative expenses ............ (6,083) (1,174)
Interfund transfers ........................................ 24,623 (16,388)
------ -------
Net increase (decrease) in units from capital transactions .. 26,439 (16,683)
------ -------
Units outstanding at December 31, 1997 ...................... 82,478 --
------ -------
Net premiums ............................................... 9,623 --
Loan interest .............................................. (7) --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... -- --
Surrenders ............................................... 23 --
Loans .................................................... (301) --
Cost of insurance and administrative expenses ............ (4,258) --
Transfers (to) from the Guarantee Account .................. -- --
Interfund transfers ........................................ (1,774) --
------ -------
Net increase (decrease) in units from capital transactions .. 3,306 --
------ -------
Units outstanding at December 31, 1998 ...................... 85,784 --
====== =======
<CAPTION>
GE INVESTMENTS FUNDS, INC.
------------------------------------------
MONEY TOTAL INTERNATIONAL
MARKET RETURN EQUITY
FUND FUND FUND
------------ -------------- --------------
<S> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ...................... 94,411 129,923 884
-------- ------- -----
Net premiums ............................................... 364,289 5,129 1,663
Loan interest .............................................. (119) (6) 1
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (84) (904) --
Surrenders ............................................... (456) (503) (124)
Loans .................................................... (3,851) (249) (20)
Cost of insurance and administrative expenses ............ (16,666) (12,173) (276)
Interfund transfers ........................................ (282,823) 4,475 908
-------- ------- -----
Net increase (decrease) in units from capital transactions .. 60,290 (4,231) 2,152
-------- ------- -----
Units outstanding at December 31, 1996 ...................... 154,701 125,692 3,036
-------- ------- -----
Net premiums ............................................... 229,013 6,095 1,752
Loan interest .............................................. (196) (11) --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (1,005) (267) --
Surrenders ............................................... (671) (523) (68)
Loans .................................................... (330) (137) (22)
Cost of insurance and administrative expenses ............ (17,924) (12,827) (414)
Interfund transfers ........................................ (224,564) (101) 1,666
-------- ------- -----
Net increase (decrease) in units from capital transactions .. (15,677) (7,771) 2,914
-------- ------- -----
Units outstanding at December 31, 1997 ...................... 139,024 117,921 5,950
-------- ------- -----
Net premiums ............................................... 112,037 5,873 1,468
Loan interest .............................................. 153 (10) --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................... (73) (662) --
Surrenders ............................................... (7,598) (498) (35)
Loans .................................................... (5,530) (263) (51)
Cost of insurance and administrative expenses ............ (16,515) (11,632) (660)
Transfers (to) from the Guarantee Account .................. -- -- --
Interfund transfers ........................................ (103,800) (210) 740
-------- ------- -----
Net increase (decrease) in units from capital transactions .. (21,326) (7,402) 1,462
-------- ------- -----
Units outstanding at December 31, 1998 ...................... 117,698 110,519 7,412
======== ======= =====
</TABLE>
35
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------------------------
REAL ESTATE GLOBAL VALUE
SECURITIES INCOME EQUITY INCOME U.S. EQUITY
FUND FUND FUND FUND FUND
------------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ............................. 35 -- -- -- --
------ ----- ----- ------ ---
Net premiums ...................................................... 1,148 -- -- -- --
Loan interest ..................................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- -- -- -- --
Surrenders ...................................................... (26) -- -- -- --
Loans ........................................................... -- -- -- -- --
Cost of insurance and administrative expenses ................... (142) -- -- -- --
Interfund transfers ............................................... 903 -- -- -- --
------ ----- ----- ------ ---
Net increase (decrease) in units from capital transactions ......... 1,883 -- -- -- --
------ ----- ----- ------ ---
Units outstanding at December 31, 1996 ............................. 1,918 -- -- -- --
------ ----- ----- ------ ---
Net premiums ...................................................... 4,672 128 444 74 --
Loan interest ..................................................... -- -- -- 1 --
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- -- -- -- --
Surrenders ...................................................... (41) -- -- -- --
Loans ........................................................... (51) (24) -- -- --
Cost of insurance and administrative expenses ................... (1,046) (37) (77) (166) --
Interfund transfers ............................................... 5,271 829 661 37,858 --
------ ----- ----- ------ ---
Net increase (decrease) in units from capital transactions ......... 8,805 896 1,028 37,767 --
------ ----- ----- ------ ---
Units outstanding at December 31, 1997 ............................. 10,723 896 1,028 37,767 --
------ ----- ----- ------ ---
Net premiums ...................................................... 8,323 1,593 2,656 5,943 30
Loan interest ..................................................... -- -- 3 (7) --
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- -- -- -- --
Surrenders ...................................................... (201) -- (211) (2,891) --
Loans ........................................................... (37) -- (84) (66) --
Cost of insurance and administrative expenses ................... (2,557) (464) (648) (3,205) (22)
Transfers (to) from the Guarantee Account ......................... -- -- -- -- --
Interfund transfers ............................................... 1,263 985 2,342 2,659 10
------ ----- ----- ------ ---
Net increase (decrease) in units from capital transactions ......... 6,791 2,114 4,058 2,433 18
------ ----- ----- ------ ---
Units outstanding at December 31, 1998 ............................. 17,514 3,010 5,086 40,200 18
====== ===== ===== ====== ===
</TABLE>
36
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
---------------------------------------
CAPITAL
MONEY BOND APPRECIATION
FUND FUND FUND
--------- ---------- ---------------
<S> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ................... 806 9,633 49,118
---- ------ -------
Net premiums ............................................ -- 4,046 8,958
Loan interest ........................................... -- -- --
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- -- --
Surrenders ............................................ -- (241) (759)
Loans ................................................. -- (100) --
Cost of insurance and administrative expenses ......... (66) (1,736) (4,613)
Interfund transfers ..................................... (695) 1,453 11,095
---- ------ -------
Net increase (decrease) in units from capital
transactions ............................................ (761) 3,422 14,681
---- ------ -------
Units outstanding at December 31, 1996 ................... 45 13,055 63,799
---- ------ -------
Net premiums ............................................ 6 (539) 20,919
Loan interest ........................................... -- -- 8
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- -- (8)
Surrenders ............................................ -- 167 (1,104)
Loans ................................................. -- 19 (1,014)
Cost of insurance and administrative expenses ......... (12) 221 (8,094)
Interfund transfers ..................................... (39) 114 1,620
---- ------ -------
Net increase (decrease) in units from capital
transactions ............................................ (45) (18) 12,327
---- ------ -------
Units outstanding at December 31, 1997 ................... -- 13,037 76,126
---- ------ -------
Net premiums ............................................ -- 4,915 23,331
Loan interest ........................................... -- (2) 5
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- -- --
Surrenders ............................................ -- (776) (4,257)
Loans ................................................. -- (59) (1,894)
Cost of insurance and administrative expenses ......... -- (1,448) (10,077)
Transfers (to) from the Guarantee Account ............... -- -- (8)
Interfund transfers ..................................... -- 1,572 (2,098)
---- ------ -------
Net increase (decrease) in units from capital
transactions ............................................ -- 4,202 5,002
---- ------ -------
Units outstanding at December 31, 1998 ................... -- 17,239 81,128
==== ====== =======
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------
HIGH MULTIPLE
GROWTH INCOME STRATEGIES
FUND FUND FUND
-------------- -------------- -------------
<S> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ................... 30,329 23,001 24,621
------ ------ ------
Net premiums ............................................ 16,813 6,706 5,628
Loan interest ........................................... (5) (3) (1)
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- (85) (805)
Surrenders ............................................ (3,514) (393) (8,467)
Loans ................................................. (230) (468) (34)
Cost of insurance and administrative expenses ......... (6,622) (2,322) (2,303)
Interfund transfers ..................................... 7,391 5,754 4,012
------ ------ ------
Net increase (decrease) in units from capital
transactions ............................................ 13,833 9,189 (1,970)
------ ------ ------
Units outstanding at December 31, 1996 ................... 44,162 32,190 22,651
------ ------ ------
Net premiums ............................................ 11,890 10,966 3,690
Loan interest ........................................... (14) -- (4)
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- -- --
Surrenders ............................................ (1,783) (595) (1,437)
Loans ................................................. (327) (766) (139)
Cost of insurance and administrative expenses ......... (4,561) (4,949) (1,822)
Interfund transfers ..................................... 4,663 11,197 (378)
------ ------ ------
Net increase (decrease) in units from capital
transactions ............................................ 9,868 15,853 (90)
------ ------ ------
Units outstanding at December 31, 1997 ................... 54,030 48,043 22,561
------ ------ ------
Net premiums ............................................ 12,058 11,931 5,523
Loan interest ........................................... (8) (9) (5)
Transfers (to) from the general account of Life of
Virginia:
Death benefits ........................................ -- (88) --
Surrenders ............................................ (2,931) (2,666) (277)
Loans ................................................. (232) (483) (320)
Cost of insurance and administrative expenses ......... (5,205) (5,457) (2,167)
Transfers (to) from the Guarantee Account ............... -- -- --
Interfund transfers ..................................... 1,707 1,100 (457)
------ ------ ------
Net increase (decrease) in units from capital
transactions ............................................ 5,389 4,328 2,297
------ ------ ------
Units outstanding at December 31, 1998 ................... 59,419 52,371 24,858
====== ====== ======
</TABLE>
37
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS
FUND
-----------------------------
MONEY HIGH
MARKET INCOME
PORTFOLIO PORTFOLIO
-------------- --------------
<S> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ............................. 29,874 12,687
------ ------
Net premiums ...................................................... 127 --
Loan interest ..................................................... (1) (1)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- --
Surrenders ...................................................... (1,370) (1,514)
Loans ........................................................... (86) (103)
Cost of insurance and administrative expenses ................... (2,125) (1,273)
Interfund transfers ............................................... (6,185) (1,435)
------ ------
Net increase (decrease) in units from capital transactions ......... (9,640) (4,326)
------ ------
Units outstanding at December 31, 1996 ............................. 20,234 8,361
------ ------
Net premiums ...................................................... -- 6
Loan interest ..................................................... (2) (1)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- --
Surrenders ...................................................... -- (83)
Loans ........................................................... (67) (56)
Cost of insurance and administrative expenses ................... (1,113) (571)
Interfund transfers ............................................... (19,052) (7,656)
------ ------
Net increase (decrease) in units from capital transactions ......... (20,234) (8,361)
------ ------
Units outstanding at December 31, 1997 ............................. -- --
------ ------
Net premiums ...................................................... -- --
Loan interest ..................................................... -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. -- --
Surrenders ...................................................... -- --
Loans ........................................................... -- --
Cost of insurance and administrative expenses ................... -- --
Transfers (to) from the Guarantee Account ......................... -- --
Interfund transfers ............................................... -- --
------ ------
Net increase (decrease) in units from capital transactions ......... -- --
------ ------
Units outstanding at December 31, 1998 ............................. -- --
======= ======
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------------
EQUITY-
INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO
--------------- ----------- --------------
<S> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ............................. 64,967 97,450 73,566
-------- -------- --------
Net premiums ...................................................... 31,658 34,244 23,922
Loan interest ..................................................... (2) (18) (1)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. (758) (919) (191)
Surrenders ...................................................... (4,129) (6,625) (3,997)
Loans ........................................................... (445) (2,672) (1,554)
Cost of insurance and administrative expenses ................... (11,544) (15,468) (10,492)
Interfund transfers ............................................... 22,081 (2,890) (155)
-------- -------- --------
Net increase (decrease) in units from capital transactions ......... 36,861 5,652 7,532
-------- -------- --------
Units outstanding at December 31, 1996 ............................. 101,828 103,102 81,098
-------- -------- --------
Net premiums ...................................................... 30,443 27,236 14,830
Loan interest ..................................................... 17 (20) (27)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. (8) (320) (11)
Surrenders ...................................................... (2,046) (3,071) (3,198)
Loans ........................................................... (1,200) (2,624) (1,198)
Cost of insurance and administrative expenses ................... (13,023) (12,010) (7,354)
Interfund transfers ............................................... 18,157 3,258 (11,825)
-------- -------- --------
Net increase (decrease) in units from capital transactions ......... 32,340 12,449 (8,783)
-------- -------- --------
Units outstanding at December 31, 1997 ............................. 134,168 115,551 72,315
-------- -------- --------
Net premiums ...................................................... 33,122 17,733 14,458
Loan interest ..................................................... (16) (69) (49)
Transfers (to) from the general account of Life of Virginia:
Death benefits .................................................. (107) (39) --
Surrenders ...................................................... (7,257) (5,525) (3,976)
Loans ........................................................... (1,208) (1,226) (438)
Cost of insurance and administrative expenses ................... (15,042) (9,854) (7,205)
Transfers (to) from the Guarantee Account ......................... -- -- --
Interfund transfers ............................................... 477 13,237 250
-------- -------- --------
Net increase (decrease) in units from capital transactions ......... 9,969 14,257 3,040
-------- -------- --------
Units outstanding at December 31, 1998 ............................. 144,137 129,808 75,355
======== ======== ========
</TABLE>
38
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
ADVISERS
VARIABLE INSURANCE VARIABLE INSURANCE MANAGEMENT
PRODUCTS FUND II PRODUCTS FUND III TRUST
------------------------------- --------------------------- -------------
ASSET GROWTH & GROWTH
MANAGER CONTRAFUND INCOME OPPORTUNITIES BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------------- --------------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ............. 147,342 20,548 -- -- 18,119
------- ------ ------ ------- ------
Net premiums ...................................... 34,545 22,057 -- -- --
Loan interest ..................................... (2) 7 -- -- --
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (1,099) -- -- -- --
Surrenders ...................................... (5,334) (573) -- -- --
Loans ........................................... 3 (327) -- -- --
Cost of insurance and administrative
expenses ....................................... (16,972) (6,094) -- -- (1,013)
Interfund transfers ............................... (22,982) 26,464 -- -- (2,836)
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... (11,841) 41,534 -- -- (3,849)
------- ------ ------ ------- ------
Units outstanding at December 31, 1996 ............. 135,501 62,082 -- -- 14,270
------- ------ ------ ------- ------
Net premiums ...................................... 30,613 36,387 454 598 17
Loan interest ..................................... (18) (8) -- -- (2)
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. -- (320) -- -- --
Surrenders ...................................... (5,817) (5,335) -- -- (651)
Loans ........................................... (1,388) (781) -- -- (77)
Cost of insurance and administrative
expenses ....................................... (15,641) (12,219) (125) (125) (597)
Interfund transfers ............................... 20,449 17,222 3,484 5,332 (12,960)
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... 28,198 34,946 3,813 5,805 (14,270)
------- ------ ------ ------- ------
Units outstanding at December 31, 1997 ............. 163,699 97,028 3,813 5,805 --
------- ------ ------ ------- ------
Net premiums ...................................... 16,997 30,522 8,879 2,947 --
Loan interest ..................................... (9) (26) -- (2) --
Transfers (to) from the general account of Life of
Virginia:
Death benefits .................................. (155) (144) -- -- --
Surrenders ...................................... (7,043) (5,242) (219) (3) --
Loans ........................................... (1,134) (1,902) (19) (483) --
Cost of insurance and administrative
expenses ....................................... (11,046) (13,480) (1,697) (1,664) --
Transfers (to) from the Guarantee Account ......... -- (5) -- -- --
Interfund transfers ............................... (3,207) 13,189 6,067 9,681 --
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... (5,597) 22,912 13,011 10,476 --
------- ------ ------ ------- ------
Units outstanding at December 31, 1998 ............. 158,102 119,940 16,824 16,281 --
======= ======= ====== ======== =======
</TABLE>
39
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
FEDERATED INVESTORS
ADVISERS MANAGEMENT TRUST INSURANCE SERIES
---------------------------- ----------------------------------------
AMERICAN
BOND GROWTH LEADERS HIGH INCOME UTILITY
PORTFOLIO PORTFOLIO FUND II FUND II FUND II
-------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ............. 7,610 11,178 -- 691 5,014
------- ------ ------ ------- ------
Net premiums ...................................... -- -- 86 1,470 1,811
Loan interest ..................................... (4) -- -- -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits .................................. -- (687) -- -- --
Surrenders ...................................... -- (145) -- -- (4)
Loans ........................................... (143) -- -- -- --
Cost of insurance and administrative
expenses ....................................... (290) (676) (9) (297) (415)
Interfund transfers ............................... (815) (1,078) 128 763 16
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... (1,252) (2,586) 205 1,936 1,408
------- ------ ------ ------- ------
Units outstanding at December 31, 1996 ............. 6,358 8,592 205 2,627 6,422
------- ------ ------ ------- ------
Net premiums ...................................... -- 30 1,922 2,964 3,027
Loan interest ..................................... -- (6) -- -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits .................................. -- -- -- -- --
Surrenders ...................................... (5) (179) -- -- --
Loans ........................................... -- (60) -- (219) --
Cost of insurance and administrative
expenses ....................................... (128) (357) (260) (668) (725)
Interfund transfers ............................... (6,225) (8,020) 1,302 1,484 819
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... (6,358) (8,592) 2,964 3,561 3,121
------- ------ ------ ------- ------
Units outstanding at December 31, 1997 ............. -- -- 3,169 6,188 9,543
------- ------ ------ ------- ------
Net premiums ...................................... -- -- 6,297 3,841 3,173
Loan interest ..................................... -- -- 2 4 --
Transfers (to) from the general account of
Life of Virginia:
Death benefits .................................. -- -- -- -- --
Surrenders ...................................... -- -- (394) (254) (121)
Loans ........................................... -- -- (69) (238) (18)
Cost of insurance and administrative
expenses ....................................... -- -- (1,728) (1,274) (1,035)
Transfers (to) from the Guarantee Account ......... -- -- -- -- --
Interfund transfers ............................... -- -- 6,131 985 (87)
------- ------ ------ ------- ------
Net increase (decrease) in units from capital
transactions ...................................... -- -- 10,239 3,064 1,912
------- ------ ------ ------- ------
Units outstanding at December 31, 1998 ............. -- -- 13,408 9,252 11,455
======= ====== ====== ======= ======
</TABLE>
40
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
PBHG INSURANCE
ALGER AMERICAN FUND SERIES FUND
----------------------- -----------------------
LARGE CAP
SMALL CAP GROWTH GROWTH GROWTH II
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ................... 3,893 2,410 -- --
----- ----- ----- -----
Net premiums ............................................ 15,849 16,630 -- --
Loan interest ........................................... (350) 3 -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- --
Surrenders ............................................ (121) (115) -- --
Loans ................................................. (1,411) (88) -- --
Cost of insurance and administrative expenses ......... (3,890) (3,155) -- --
Interfund transfers ..................................... 29,422 113,835 -- --
------ ------- -- --
Net increase (decrease) in units from capital
transactions ............................................ 39,499 127,110 -- --
------ ------- ----- -----
Units outstanding at December 31, 1996 ................... 43,392 129,520 -- --
------ ------- ----- -----
Net premiums ............................................ 35,801 33,924 391 960
Loan interest ........................................... 192 58 -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- --
Surrenders ............................................ (387) (1,726) (16) --
Loans ................................................. (467) (562) -- --
Cost of insurance and administrative expenses ......... (10,737) (10,957) (122) (148)
Interfund transfers ..................................... 8,457 (86,458) 2,001 1,160
------- ------- ----- -----
Net increase (decrease) in units from capital
transactions ............................................ 32,859 (65,721) 2,254 1,972
------- ------- ----- -----
Units outstanding at December 31, 1997 ................... 76,251 63,799 2,254 1,972
------- ------- ----- -----
Net premiums ............................................ 32,605 17,385 2,279 1,203
Loan interest ........................................... 9 5 1 --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ (72) (53) -- --
Surrenders ............................................ (2,415) (8,436) (57) (16)
Loans ................................................. (2,883) 653 (569) --
Cost of insurance and administrative expenses ......... (10,216) (7,880) (608) (565)
Transfers (to) from the Guarantee Account ............... -- -- -- --
Interfund transfers ..................................... (4,182) 20,083 1,170 185
------- ------- ----- -----
Net increase (decrease) in units from capital
transactions ............................................ 12,846 21,757 2,216 807
------- ------- ----- -----
Units outstanding at December 31, 1998 ................... 89,097 85,556 4,470 2,779
======= ======= ===== =====
<CAPTION>
JANUS ASPEN SERIES
------------------------
AGGRESIVE
GROWTH GROWTH
PORTFOLIO PORTFOLIO
----------- ------------
<S> <C> <C>
Type I Units:
Units outstanding at December 31, 1995 ................... 43,113 28,327
------ ------
Net premiums ............................................ 7,091 50,232
Loan interest ........................................... -- 6
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- (18)
Surrenders ............................................ -- (6,335)
Loans ................................................. -- (1,118)
Cost of insurance and administrative expenses ......... (4,114) (14,654)
Interfund transfers ..................................... 23,785 18,450
------ -------
Net increase (decrease) in units from capital
transactions ............................................ 26,762 46,563
------ -------
Units outstanding at December 31, 1996 ................... 69,875 74,890
------ -------
Net premiums ............................................ 33,956 31,979
Loan interest ........................................... (117) 31
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- --
Surrenders ............................................ (2,572) (1,161)
Loans ................................................. (475) (1,040)
Cost of insurance and administrative expenses ......... (12,062) (10,466)
Interfund transfers ..................................... 28,188 13,930
------- -------
Net increase (decrease) in units from capital
transactions ............................................ 46,918 33,273
------- -------
Units outstanding at December 31, 1997 ................... 116,793 108,163
------- -------
Net premiums ............................................ 24,642 27,838
Loan interest ........................................... 6 6
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ (43) (45)
Surrenders ............................................ (6,780) (5,890)
Loans ................................................. (2,146) (267)
Cost of insurance and administrative expenses ......... (10,966) (12,198)
Transfers (to) from the Guarantee Account ............... -- --
Interfund transfers ..................................... (23,977) 9,558
------- -------
Net increase (decrease) in units from capital
transactions ............................................ (19,264) 19,002
------- -------
Units outstanding at December 31, 1998 ................... 97,529 127,165
======= =======
</TABLE>
41
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
-----------------------------------------------------------------------
FLEXIBLE INTERNATIONAL CAPITAL
WORLD WIDE BALANCED INCOME GROWTH APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ----------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at
December 31, 1995 ................. 33,799 7,183 4 -- --
------ ----- ------ ----- -----
Net premiums ...................... 30,707 3,070 287 1,725 --
Loan interest ..................... 5 2 -- -- --
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (13) -- -- -- --
Surrenders ....................... (5,903) (324) -- -- --
Loans ............................ (441) (157) -- -- --
Cost of insurance and
administrative expenses......... (7,782) (929) (79) (149) --
Interfund transfers ............... 39,868 4,910 568 3,026 --
------ ----- --- ----- -----
Net increase (decrease) in units
from capital transactions ......... 56,441 6,572 776 4,602 --
------ ----- --- ----- -----
Units outstanding at
December 31, 1996 ................. 90,240 13,755 780 4,602 --
------ ------ --- ----- -----
Net premiums ...................... 45,089 5,204 3,339 10,507 131
Loan interest ..................... 41 -- -- 1 --
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... -- -- -- -- --
Surrenders ....................... (1,946) (491) -- (270) --
Loans ............................ (626) (41) -- (35) --
Cost of insurance and
administrative expenses......... (15,323) (2,215) (868) (2,301) (99)
Interfund transfers ............... 43,635 26,265 2,338 10,760 652
------- ------ ----- ------ ---
Net increase (decrease) in units
from capital transactions ......... 70,870 28,722 4,809 18,662 684
------- ------ ----- ------ ---
Units outstanding at
December 31, 1997 ................. 161,110 42,477 5,589 23,264 684
------- ------ ----- ------ ---
Net premiums ...................... 47,797 12,861 2,801 8,858 4,038
Loan interest ..................... (21) (3) -- -- 22
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... (68) -- (84) (39) --
Surrenders ....................... (7,737) (520) (64) (1,149) (27)
Loans ............................ (2,519) (1,038) -- (26) --
Cost of insurance and
administrative expenses......... (20,085) (5,313) (1,139) (3,657) (1,554)
Transfers (to) from the
Guarantee Account ................ (5) -- -- -- --
Interfund transfers ............... 11,118 5,127 (291) 3,504 5,052
--------- -------- ------ ------ ------
Net increase (decrease) in units
from capital transactions ......... 28,480 11,114 1,223 7,491 7,531
--------- -------- ------ ------ ------
Units outstanding at
December 31, 1998 ................. 189,590 53,591 6,812 30,755 8,215
========= ======== ====== ====== ======
<CAPTION>
GOLDMAN SACHS SALOMON
VARIABLE BROTHERS
INSURANCE VARIABLE SERIES
TRUST FUND FUND
--------------- ----------------
GROWTH
AND INCOME INVESTORS
FUND FUND
--------------- ----------------
<S> <C> <C>
Type I Units:
Units outstanding at
December 31, 1995 ................. -- --
-- --
Net premiums ...................... -- --
Loan interest ..................... -- --
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... -- --
Surrenders ....................... -- --
Loans ............................ -- --
Cost of insurance and
administrative expenses......... -- --
Interfund transfers ............... -- --
-- --
Net increase (decrease) in units
from capital transactions ......... -- --
-- --
Units outstanding at
December 31, 1996 ................. -- --
-- --
Net premiums ...................... -- --
Loan interest ..................... -- --
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... -- --
Surrenders ....................... -- --
Loans ............................ -- --
Cost of insurance and
administrative expenses......... -- --
Interfund transfers ............... -- --
-- --
Net increase (decrease) in units
from capital transactions ......... -- --
-- --
Units outstanding at
December 31, 1997 ................. -- --
-- --
Net premiums ...................... -- --
Loan interest ..................... -- --
Transfers (to) from the
general account of Life of
Virginia:
Death benefits ................... -- --
Surrenders ....................... -- --
Loans ............................ -- --
Cost of insurance and
administrative expenses......... (13) --
Transfers (to) from the
Guarantee Account ................ -- --
Interfund transfers ............... 94 126
--- ---
Net increase (decrease) in units
from capital transactions ......... 81 126
--- ---
Units outstanding at
December 31, 1998 ................. 81 126
=== ===
</TABLE>
42
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-------------------------------------------------------------
S&P 500 GOVERMENT MONEY TOTAL INTERNATIONAL
INDEX SECURITIES MARKET RETURN EQUITY
FUND FUND FUND FUND FUND
----------- ------------ ------------ -------- --------------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ................... -- -- -- -- --
------ ------ ------- ----- ---
Net premiums ............................................ 14,211 -- 203,673 1,858 444
Loan interest ........................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- -- --
Surrenders ............................................ -- -- -- -- --
Loans ................................................. -- -- -- -- --
Cost of insurance and administrative expenses ......... (1,193) -- (6,092) (323) (44)
Interfund transfers ..................................... 2,066 -- (76,055) 2,682 9
------ ------ ------- ----- ---
Net increase in units from capital transactions .......... 15,084 -- 121,526 4,217 409
------ ------ ------- ----- ---
Units outstanding at December 31, 1998 ................... 15,084 -- 121,526 4,217 409
====== ====== ======= ===== ===
</TABLE>
<TABLE>
<CAPTION>
GE INVESTMENTS FUNDS, INC.
-----------------------------------------------------------------
REAL ESTATE GLOBAL VALUE
SECURITIES INCOME EQUITY INCOME U.S. EQUITY
FUND FUND FUND FUND FUND
------------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ................... -- -- -- -- --
----- ------ ------- ------ ----
Net premiums ............................................ 4,046 134 5,572 14 3,071
Loan interest ........................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- -- --
Surrenders ............................................ (16) -- (6) -- (8)
Loans ................................................. -- -- -- -- --
Cost of insurance and administrative expenses ......... (252) (24) (386) (24) (203)
Interfund transfers ..................................... 1,224 -- 4,923 214 1,879
----- ------ ------- ------ ------
Net increase in units from capital transactions .......... 5,002 110 10,103 204 4,739
----- ------ ------- ------ ------
Units outstanding at December 31, 1998 ................... 5,002 110 10,103 204 4,739
===== ====== ======= ====== ======
</TABLE>
43
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
-------------------------------------------------------------
CAPITAL HIGH MULTIPLE
BOND APPRECIATION GROWTH INCOME STRATEGIES
FUND FUND FUND FUND FUND
-------- -------------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ................... -- -- -- -- --
----- ----- ----- ----- -----
Net premiums ............................................ 2,180 1,554 2,669 1,658 2,207
Loan interest ........................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- -- --
Surrenders ............................................ -- -- -- -- --
Loans ................................................. -- -- -- -- --
Cost of insurance and administrative expenses ......... (319) (145) (343) (103) (63)
Interfund transfers ..................................... 675 1,719 456 255 46
----- ----- ----- ----- -----
Net increase in units from capital transactions .......... 2,536 3,128 2,782 1,810 2,190
----- ----- ----- ----- -----
Units outstanding at December 31, 1998 ................... 2,536 3,128 2,782 1,810 2,190
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
VARIABLE INSURANCE PRODUCTS FUND
------------------------------------------------------------------
MONEY HIGH EQUITY-
MARKET INCOME INCOME GROWTH OVERSEAS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ................... -- -- -- -- --
------ ------ ----- ----- ---
Net premiums ............................................ -- -- 4,605 1,787 590
Loan interest ........................................... -- -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ........................................ -- -- -- -- --
Surrenders ............................................ -- -- -- (2) --
Loans ................................................. -- -- -- -- --
Cost of insurance and administrative expenses ......... -- -- (436) (186) (63)
Interfund transfers ..................................... -- -- 2,211 171 44
------ ------ ----- ------ ---
Net increase in units from capital transactions .......... -- -- 6,380 1,770 571
------ ------ ----- ------ ---
Units outstanding at December 31, 1998 ................... -- -- 6,380 1,770 571
====== ====== ===== ====== ===
</TABLE>
44
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
VARIABLE INSURANCE
PRODUCTSFUND II
------------------------
ASSET
MANAGER CONTRAFUND
PORTFOLIO PORTFOLIO
----------- ------------
<S> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 .................. -- --
----- ------
Net premiums ........................................... 1,321 11,842
Loan interest .......................................... -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ....................................... -- --
Surrenders ........................................... -- (35)
Loans ................................................ -- (123)
Cost of insurance and administrative
expenses ............................................ (67) (904)
Interfund transfers .................................... 24 4,847
----- ------
Net increase in units from capital transactions ......... 1,278 15,627
----- ------
Units outstanding at December 31, 1998 .................. 1,278 15,627
===== ======
<CAPTION>
VARIABLE INSURANCE FEDERATED INVESTORS
PRODUCTSFUND III INSURANCE SERIES
--------------------------- --------------------
GROWTH & GROWTH AMERICAN
INCOME OPPORTUNITIES LEADERS
PORTFOLIO PORTFOLIO FUND II
----------- --------------- --------------------
<S> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 .................. -- -- --
----- ----- -----
Net premiums ........................................... 6,034 2,476 3,993
Loan interest .......................................... -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ....................................... -- -- --
Surrenders ........................................... -- (31) --
Loans ................................................ 201 -- --
Cost of insurance and administrative
expenses ............................................ (599) (208) (282)
Interfund transfers .................................... 3,160 245 1,544
----- ----- -----
Net increase in units from capital transactions ......... 8,796 2,482 5,255
----- ----- -----
Units outstanding at December 31, 1998 .................. 8,796 2,482 5,255
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
FEDERATED INVESTORS
INSURANCE SERIES ALGER AMERICAN FUND
------------------------- ------------------------
HIGH INCOME UTILITY SMALL CAP GROWTH
FUND II FUND II PORTFOLIO PORTFOLIO
------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 .................. -- -- -- --
----- ----- ----- -----
Net premiums ........................................... 1,042 1,404 2,957 2,770
Loan interest .......................................... -- -- -- --
Transfers (to) from the general account of Life of Virginia:
Death benefits ....................................... -- -- -- --
Surrenders ........................................... -- -- -- --
Loans ................................................ -- -- -- --
Cost of insurance and administrative
expenses ............................................ (90) (89) (317) (366)
Interfund transfers .................................... 85 35 3,104 3,686
----- ----- ----- -----
Net increase in units from capital transactions ......... 1,037 1,350 5,744 6,090
----- ----- ----- -----
Units outstanding at December 31, 1998 .................. 1,037 1,350 5,744 6,090
===== ===== ===== =====
</TABLE>
45
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
<TABLE>
<CAPTION>
JANUS ASPEN SERIES
--------------------------------------------------------------------
AGGRESSIVE FLEXIBLE
GROWTH GROWTH WORLD WIDE BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ......... -- -- -- -- --
----- ----- ------ ------ ---
Net premiums .................................. 8,732 9,826 15,030 10,226 365
Loan interest ................................. -- -- -- -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits .............................. -- -- -- -- --
Surrenders .................................. -- (23) (22) -- --
Loans ....................................... -- -- -- -- --
Cost of insurance and administrative
expenses ................................... (594) (753) (1,180) (735) (44)
Interfund transfers ........................... 3,849 1,299 5,095 3,376 111
----- ----- ------ ------ ---
Net increase in units from capital
transactions .................................. 11,987 10,349 18,923 12,867 432
------ ------ ------ ------ ---
Units outstanding at December 31, 1998 ......... 11,987 10,349 18,923 12,867 432
====== ====== ====== ====== ===
</TABLE>
<TABLE>
<CAPTION>
GOLDMAN SACHS
PBHG INSURANCE VARIABLE INSURANCE
JANUS ASPEN SERIES SERIES FUND, INC. TRUST FUND
------------------------------ ------------------------ -----------------------
INTERNATIONAL CAPITAL PBHG LARGE PBHG GROWTH MID CAP
GROWTH APPRECIATION CAP GROWTH GROWTH II AND INCOME EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO FUND FUND
--------------- -------------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31, 1997 ........ -- -- -- -- -- --
------ ----- ---- ------ ----- ------
Net premiums ................................. 15,053 3,233 812 367 1,115 742
Loan interest ................................ -- -- -- -- -- --
Transfers (to) from the general account of
Life of Virginia:
Death benefits ............................. -- -- -- -- -- --
Surrenders ................................. -- -- (20) (8) -- --
Loans ...................................... -- -- -- -- -- --
Cost of insurance and administrative
expenses .................................. (999) (279) (127) (74) (23) (131)
Interfund transfers .......................... 7,307 595 -- 2,930 -- 10,240
------ ----- ---- ------ ----- ------
Net increase in units from capital
transactions ................................. 21,361 3,549 665 3,215 1,092 10,851
------ ----- ---- ------ ----- ------
Units outstanding at December 31, 1998 ........ 21,361 3,549 665 3,215 1,092 10,851
====== ===== ==== ====== ===== ======
</TABLE>
(D) FEDERAL INCOME TAXES
The Account is not taxed separately because the operations of the Account
are part of the total operations of Life of Virginia. Life of Virginia is taxed
as a life insurance company under the Internal Revenue Code (the Code). Life of
Virginia is included in the General Electric Capital Assurance Company
consolidated federal income tax return. Under existing federal income tax law,
no taxes are payable on the investment income or on the capital gains of the
Account.
46
<PAGE>
LIFE OF VIRGINIA SEPARATE ACCOUNT II
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
(E) USE OF ESTIMATES
Financial statements prepared in conformity with generally accepted
accounting principles require management to make estimates and assumptions that
affect amounts and disclosures reported therein. Actual results could differ
from those estimates.
(3) RELATED PARTY TRANSACTIONS
Net premiums transferred from Life of Virginia to the Account represent
gross premiums recorded by Life of Virginia on its flexible premium variable
life insurance policies, less deductions of 7.5% retained as compensation for
certain distribution expenses and premium taxes. In addition, there is a
deferred sales charge of up to 45% of the first year's premiums. This charge
will be deducted from the policy's cash value in equal installments at the
beginning of each of the policy years two through ten with any remaining
installments deducted at policy lapse or surrender.
For Type 1 policies, if a policy is surrendered or lapses during the first
nine years, a charge is made by Life of Virginia to cover the expenses of
issuing the policy. The charge is a stated percentage of the insurance amount
and varies by the age of the policyholder when issued and period of time that
the policy has been in force. A charge equal to the lesser of $25 or 2% of the
amount paid on a partial surrender will be made to compensate Life of Virginia
for the costs incurred in connection with the partial surrender.
A charge based on the policy specified amount of insurance, death benefit
option, cash values, duration, the insured's sex, issue age and risk class is
deducted from the policy cash values each month to compensate Life of Virginia
for the cost of insurance and any benefits added by rider. In addition, Life of
Virginia charges the Account for the mortality and expense risk that Life of
Virginia assumes. This charge is deducted daily at an effective annual rate of
.70% of the net assets of the Account. For policies issued on or after May 1,
1993, Life of Virginia will deduct a monthly administrative charge of $6 from
the policy cash value and for policies issued prior to May 1, 1993, Life of
Virginia will deduct a monthly administrative charge of $5 from the policy cash
value.
GE Investments Funds, Inc. (the Fund) is an open-end diversified
management investment company.
Capital Brokerage Corporation, an affiliate of Life of Virginia, is a
Washington Corporation registered with the Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Capital Brokerage Corporation serves as
principal underwriter for variable life insurance policies and annuities issued
by Life of Virginia.
GE Investment Management Incorporated (Investment Advisor), a wholly-owned
subsidiary of GE, currently serves as investment advisor to GE Investments
Funds, Inc. As compensation for its services, the Investment Advisor is paid an
investment advisory fee by the Fund based on the average daily net assets at an
effective annual rate of .35% for the S&P 500 Index Fund, .50% for the Money
Market, Income Fund and Total Return Funds, 1.00% for the International Equity
Fund, .85% for the Real Estate Securities Fund, .60% for the Global Income Fund,
.65% for the Value Equity Fund and .55% for the U.S. Equity Fund. Prior to May
1, 1997, Aon Advisors, Inc. served as investment advisor to the Fund and was
subject to the same compensation arrangement as GE Investment Management
Incorporated.
Certain officers and directors of Life of Virginia are also officers and
directors of Capital Brokerage Corporation.
(4) SUBSEQUENT EVENT
Effective January 1, 1999, The Life Insurance Company of Virginia merged
with The Harvest Life Insurance Company to form GE Life and Annuity Assurance
Company. Concurrently, the Account changed its name to GE Life & Annuity
Separate Account II. Neither of these events have an impact on net assets or
unit values.
47
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDING JUNE 30, 1999
(UNAUDITED)
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
TABLE OF CONTENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Statements:
(Unaudited)
Consolidated Statement of Current and Retained Earnings ......... 1
Consolidated Statement of Financial Position .................... 2
Consolidated Statement of Cash Flows ............................ 3
Notes to Consolidated Financial Statements
(Unaudited) ..................................................... 4
</TABLE>
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CURRENT AND RETAINED EARNINGS
(IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
-----------------
(UNAUDITED)
<S> <C>
REVENUES:
Net investment income ...................................................... $ 304.2
Net realized investment gains .............................................. 14.8
Premiums ................................................................... 63.9
Cost of insurance .......................................................... 65.7
Variable product fees ...................................................... 38.9
Other income ............................................................... 10.3
--------
TOTAL REVENUES .............................................................. 497.8
--------
BENEFITS AND EXPENSES:
Interest credited .......................................................... 206.3
Benefits & other changes in policy reserves ................................ 97.6
Commissions ................................................................ 76.9
General expenses ........................................................... 55.5
Amortization of intangibles, net ........................................... 30.1
Change in deferred acquisition costs, net .................................. ( 63.1)
Interest expense ........................................................... 0.7
--------
TOTAL BENEFITS AND EXPENSES ................................................. 404.0
--------
EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE ..... 93.8
Provision for income taxes .................................................. 34.7
--------
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ...................... 59.1
Cumulative effect of accounting change, net of tax .......................... 5.0
--------
NET EARNINGS ................................................................ 64.1
Retained earnings at beginning of period .................................... 40.5
--------
RETAINED EARNINGS AT END OF PERIOD .......................................... $ 104.6
========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF POSITION
(IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------
(UNAUDITED)
<S> <C>
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value ..................................... $ 7,685.5
Equity securities available-for-sale, at fair value:
Common stocks ......................................................................... 5.3
Preferred stocks, non-redeemable ...................................................... 38.2
Investment in subsidiary .............................................................. 2.6
Mortgage loans, net of valuation allowance of $21.9.................................... 792.1
Policy loans .......................................................................... 206.3
Real estate owned ..................................................................... 2.5
Other invested assets ................................................................. 249.0
----------
TOTAL INVESTMENTS ........................................................................ 8,981.5
----------
Cash ..................................................................................... --
Accrued investment income ................................................................ 166.6
Deferred acquisition costs ............................................................... 417.6
Reinsurance recoverable .................................................................. 74.9
Deferred income tax asset ................................................................ 98.7
Intangible assets ........................................................................ 511.9
Other assets ............................................................................. 89.6
Separate account assets .................................................................. 6,506.9
----------
TOTAL ASSETS ............................................................................. $ 16,847.7
==========
LIABILITIES AND SHAREHOLDERS' INTEREST
LIABILITIES:
Future annuity and contract benefits ................................................... $ 8,555.1
Liability for policy and contract claims ............................................... 239.4
Other policyholder liabilities ......................................................... 147.0
Accounts payable and accrued expenses .................................................. 130.6
Separate account liabilities ........................................................... 6,506.9
----------
TOTAL LIABILITIES ........................................................................ 15,579.0
----------
Shareholders' interest:
Net unrealized investment gains .......................................................... (31.5)
----------
Accumulated non-owner changes in equity .................................................. (31.5)
Preferred stock, Series A ($1,000 par value, $1,000 redemption and liquidation
value, 200,000 shares
authorized, 120,000 shares issued and outstanding) ..................................... 120.0
Common stock ($1,000 par value, 50,000 authorized, 25,651 shares issued and outstanding) 25.6
Additional paid-in capital ............................................................. 1,050.0
Retained earnings ...................................................................... 104.6
----------
TOTAL SHAREHOLDERS' INTEREST ............................................................. 1,268.7
----------
TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST ............................................. $ 16,847.7
==========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------
(UNAUDITED)
<S> <C>
Cash flows from operating activities:
Net income ................................................................. $ 64.1
Adjustments to reconcile net income to net cash by operating activities:
Cost of insurance and surrender fees ..................................... (88.7)
Increase in future policy benefits ....................................... 249.1
Net realized investment gains ............................................ (14.5)
Net realized real estate losses .......................................... 4.4
Amortization of investment premiums and discounts ........................ (0.3)
Amortization of intangibles .............................................. 31.1
Deferred income tax expense (benefit) .................................... (4.3)
Change in certain assets and liabilities:
Decrease (increase) in:
Accrued investment income .............................................. (25.0)
Deferred acquisition costs ............................................. (63.1)
Other assets, net ...................................................... (28.6)
Increase (decrease) in:
Policy and contract claims ............................................. 85.2
Other policyholder liabilites .......................................... 27.4
Accounts payable and accrued expenses .................................. (0.8)
----------
Net cash provided by operating activities ............................ 236.0
----------
Cash flows from investing activities:
Proceeds from investment securities and other invested assets .............. 715.2
Principal collected on mortgage loans ...................................... 58.4
Purchase of investment securities and other invested assets ................ (1,767.8)
Mortgage loan originations and increase in policy loan balance ............. (107.5)
----------
Net cash provided by (used in) investing activities .................. (1,101.7)
----------
Cash flows from financing activities:
Proceeds from issue of investment contracts ................................ 2,391.1
Redemption and benefit payments on investment contracts .................... (1,536.5)
----------
Net cash provided by (used in) financing activities .................. 854.6
----------
Decrease in cash and equivalents ............................................ (11.1)
Cash and equivalents at beginning of period ................................. 11.1
----------
Cash and equivalents at end of period ....................................... $ --
==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying consolidated year-to-date financial statements represent
GE Life and Annuity Assurance Company and its consolidated subsidiary,
Assigned Settlements Inc. (collectively "the Company"). All significant
intercompany transactions have been eliminated. Effective January 1,
1999, The Harvest Life Insurance Company ("Harvest") merged into The Life
Insurance Company of Virginia with the merged Company renamed GE Life and
Annuity Assurance Company ("GELAAC"). Accordingly, certain balances have
been restated to reflect the merger. Harvest's former parent, Federal
Home Life Insurance Company ("FHLIC"), received common stock of GELAAC in
exchange for its interest in Harvest.
2. The consolidated year-to-date financial statements are unaudited. These
statements include all adjustments (consisting of normal recurring
accruals) considered necessary by management to present a fair statement
of the results of operations, financial position and cash flows. The
results reported in these consolidated financial statements should not be
regarded as necessarily indicative of results that may be expected for the
entire year.
3. A summary of changes in shareholder's interest that do not result directly
from transactions with the shareholder follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
-----------------
(IN MILLIONS)
<S> <C>
Net earnings .................................... $ 64.1
Unrealized gains (losses) on investment securities -- net ... (89.3)
-------
Total ........................................... $ (25.2)
=======
</TABLE>
4. In 1997, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 97-3, ACCOUNTING BY INSURANCE AND OTHER
ENTERPRISES FOR INSURANCE-RELATED ASSESSMENTS. This SOP provided guidance
on accounting by insurance and other enterprises for guaranty-fund and
certain other insurance-related assessments. The SOP requires enterprises
to recognize (1) a liability for assessments when (a) an assessment has
been asserted or information available prior to issuance of the financial
statements indicates it is probable that an assessment will be asserted,
(b) the underlying cause of the asserted or probable assessment has
occurred on or before the date of the financial statements, and (c) the
amount of the loss can be reasonably estimated and (2) an asset for an
amount when it is probable that a paid or accrued assessment will result
in an amount that is recoverable from premium tax offsets or policy
surcharges from in-force policies.
Effective January 1, 1999, the Company adopted SOP 97-3 and has reported
the effect of this adoption as a cumulative effect of a change in
accounting principle amounting to $5 million, net of tax.
5. In June 1998, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES ("the Statement"). The
Statement requires that, upon adoption, all derivative instruments
(including certain derivative instruments embedded in other contracts) be
recognized in the balance sheet at fair value, and that changes in such
fair values be recognized in earnings unless specific hedging criteria are
met. Changes in the values of derivatives that meet these hedging criteria
will ultimately offset related earnings effects of the hedged items;
effects of certain changes in fair value are recorded in equity pending
recognition in earnings. In June 1999, the FASB delayed the required
effective date of the new standard to January 1, 2001. The impact of
adoption will be determined by several factors, including the specific
hedging instruments in place and their relationships to hedged items, as
well as market conditions. Management had not estimated the effects of
adoption, as it believes that such determination will not be meaningful
until closer to the adoption date.
4
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
TABLE OF CONTENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report ......................................... 1
Financial Statements:
Consolidated Balance Sheets ......................................... 2
Consolidated Statements of Income and Comprehensive Income .......... 3
Consolidated Statements of Shareholders' Interest ................... 4
Consolidated Statements of Cash Flows ............................... 6
Notes to Consolidated Financial Statements ........................... 7
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The Life Insurance Company of Virginia:
We have audited the accompanying consolidated balance sheets of The Life
Insurance Company of Virginia (an indirect wholly-owned subsidiary of General
Electric Capital Corporation) and subsidiary as of December 31, 1998 and 1997,
and the related consolidated statements of income and comprehensive income,
shareholders' interest, and cash flows for the years then ended, and the nine
months ended December 31, 1996. We have also audited the pre-acquisition
statements of income and comprehensive income, shareholders' interest and cash
flows for the three months ended March 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Life
Insurance Company of Virginia and subsidiary as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for the years then
ended, the nine months ended December 31, 1996 and the pre-acquisition three
months ended March 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, effective
April 1, 1996, General Electric Capital Corporation acquired all of the
outstanding stock of The Life Insurance Company of Virginia in a business
combination accounted for as a purchase. As a result of the acquisition, the
consolidated financial information for the periods after the acquisition is
presented on a different cost basis than that for the periods before the
acquisition and, therefore, is not comparable.
KPMG LLP
Richmond, Virginia
January 22, 1999
1
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C>
ASSETS 1998 1997
---- ----
Investments:
Fixed maturities available-for-sale, at fair value ...................... $ 6,077.2 $ 5,622.6
Equity securities available-for-sale, at fair value:
Common stocks ......................................................... 6.1 9.6
Preferred stocks, non-redeemable ...................................... 48.3 95.1
Investment in subsidiary .............................................. 2.6 2.6
Mortgage loans, net of valuation allowance
of $20.0 and $17.2 at December 31, 1998 and 1997, respectively ....... 528.1 496.2
Policy loans .......................................................... 198.3 188.4
Real estate owned ..................................................... 2.5 6.9
Other invested assets ................................................. 130.8 49.5
----------- -----------
TOTAL INVESTMENTS ........................................................ 6,993.9 6,470.9
----------- -----------
Cash ..................................................................... 9.6 0.2
Accrued investment income ................................................ 122.8 123.1
Deferred acquisition costs ............................................... 242.0 165.0
Intangible assets ........................................................ 390.0 449.7
Reinsurance recoverable .................................................. 15.3 8.7
Deferred income tax asset ................................................ 41.1 57.4
Other assets ............................................................. 42.5 23.3
Separate account assets .................................................. 5,528.7 4,066.4
----------- -----------
TOTAL ASSETS ............................................................. $ 13,385.9 $ 11,364.7
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' INTEREST 1998 1997
---- ----
LIABILITIES:
Future annuity and contract benefits ............................ $ 6,455.3 $ 5,889.8
Liability for policy and contract claims ........................ 119.6 83.0
Other policyholder liabilities .................................. 86.4 75.2
Accounts payable and accrued expenses ........................... 108.8 101.0
Separate account liabilities .................................... 5,528.7 4,066.4
----------- -----------
TOTAL LIABILITIES ................................................ 12,298.8 10,215.4
----------- -----------
Shareholders' interest:
Net unrealized investment gains .................................. 49.8 74.3
----------- -----------
Accumulated non-owner changes in equity .......................... 49.8 74.3
Preferred stock, Series A ($1,000 par value,
$1,000 redemption and liquidation value; 200,000
authorized, 120,000 shares issued and outstanding) .............. 120.0 --
Common stock ($1,000 par value, 50,000
authorized, 4,000 shares issued and outstanding) .............. 4.0 4.0
Common stock declared but not issued ($1,000
par value, 18,641 shares declared, 50,000 authorized) ......... 18.6 --
Additional paid-in capital ...................................... 917.6 925.9
Retained earnings ............................................... (22.9) 145.1
----------- -----------
TOTAL SHAREHOLDERS' INTEREST ..................................... 1,087.1 1,149.3
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' INTEREST ..................... $ 13,385.9 $ 11,364.7
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(DOLLAR AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,
1998 1997 1996 1996
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Net investment income ................................ $ 482.7 $ 472.5 $ 334.4 $ 112.0
Net realized investment gains ........................ 26.3 13.3 6.0 9.0
Premiums ............................................. 99.9 104.4 65.4 60.0
Cost of insurance .................................... 128.5 127.2 78.3 28.9
Variable product fees ................................ 60.8 44.4 23.1 5.9
Other income ......................................... 17.6 18.5 11.6 4.5
--------- --------- --------- --------
TOTAL REVENUES ........................................ 815.8 780.3 518.8 220.3
--------- --------- --------- --------
BENEFITS AND EXPENSES:
Interest credited .................................... 329.6 323.4 226.0 76.1
Benefits & other changes in policy reserves .......... 172.4 160.8 100.4 89.9
Commissions .......................................... 99.2 117.3 78.5 35.7
General expenses ..................................... 98.5 77.5 49.6 15.3
Amortization of intangibles, net ..................... 49.0 59.6 50.1 0.6
Change in deferred acquisition costs, net ............ (76.2) (101.5) (71.7) (16.2)
Interest expense ..................................... 2.0 -- -- --
--------- --------- --------- --------
TOTAL BENEFITS AND EXPENSES ........................... 674.5 637.1 432.9 201.4
--------- --------- --------- --------
Income before income taxes ............................ 141.3 143.2 85.9 18.9
Provision for income taxes 50.7 52.2 31.8 7.0
--------- --------- --------- --------
NET INCOME ............................................ 90.6 91.0 54.1 11.9
--------- --------- --------- --------
OTHER COMPREHENSIVE INCOME, NET OF TAX:
Unrealized gains (losses) on securities, net ......... (24.5) 54.9 19.4 (91.2)
--------- --------- --------- --------
COMPREHENSIVE INCOME (LOSS) ........................... $ 66.1 $ 145.9 $ 73.5 $ (79.3)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INTEREST
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
DECLARED
PREFERRED STOCK COMMON STOCK BUT NOT ISSUED
----------------------- --------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 ......................... -- $ -- 4,000 $ 4.0 -- $ --
Comprehensive income:
Net income ........................................... -- -- -- -- -- --
Other comprehensive income, net of tax
Unrealized loss on securities, net ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
Total comprehensive income ............................ -- -- -- -- -- --
Capital contribution from parents ..................... -- -- -- -- -- --
----- ------ ----- ------- ----- ------
BALANCES AT MARCH 31, 1996 ............................ -- -- 4,000 4.0 -- --
Comprehensive income:
Net income ........................................... -- -- -- -- -- --
Other comprehensive income, net of tax
Unrealized gain on securities, net ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
Total comprehensive income ............................ -- -- -- -- -- --
Adjustment to reflect purchase method ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
BALANCES AT DECEMBER 31, 1996 ......................... -- -- 4,000 4.0 -- --
Comprehensive income:
Net income ........................................... -- -- -- -- -- --
Other comprehensive income, net of tax
Unrealized gain on securities, net ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
Total comprehensive income ............................ -- -- -- -- -- --
Adjustment to reflect purchase method ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
BALANCES AT DECEMBER 31, 1997 ......................... -- -- 4,000 4.0 -- --
Comprehensive income:
Net income ........................................... -- -- -- -- -- --
Other comprehensive income, net of tax
Unrealized loss on securities, net ................. -- -- -- -- -- --
----- ------ ----- ------- ----- ------
Total comprehensive income ............................ -- -- -- -- -- --
Cash dividend declared and paid ....................... -- -- -- -- -- --
Preferred stock dividend .............................. 120,000 120.0 -- -- -- --
Common stock dividend declared but not issued ......... -- -- -- -- 18,641 18.6
Adjustment to reflect purchase method ................. -- -- -- -- -- --
------- ------ ----- ------- ------ ------
BALANCES AT DECEMBER 31, 1998 ......................... 120,000 $ 120.0 4,000 $ 4.0 18,641 $ 18.6
======= ======= ===== ======= ====== =======
</TABLE>
4
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INTEREST -- CONTINUED
<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL NON-OWNER RETAINED TOTAL
PAID-IN CHANGES EARNINGS SHAREHOLDERS'
CAPITAL IN EQUITY (DEFICIT) INTEREST
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1995 ......................... $ 749.1 $ 103.1 $ (34.3) $ 821.9
Comprehensive income:
Net income ........................................... -- -- 11.9 11.9
Other comprehensive income, net of tax
Unrealized loss on securities, net ................. -- (91.2) -- (91.2)
-------- -------- --------- ---------
Total comprehensive income ............................ -- (91.2) 11.9 (79.3)
Capital contribution from parents ..................... 69.3 -- -- 69.3
-------- -------- --------- ---------
BALANCES AT MARCH 31, 1996 ............................ 818.4 11.9 (22.4) 811.9
Comprehensive income:
Net income ........................................... -- -- 54.1 54.1
Other comprehensive income, net of tax
Unrealized gain on securities, net ................. -- 19.4 -- 19.4
-------- -------- --------- ---------
Total comprehensive income ............................ -- 19.4 54.1 73.5
Adjustment to reflect purchase method ................. 109.7 (11.9) 22.4 120.2
-------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1996 ......................... 928.1 19.4 54.1 1,005.6
Comprehensive income:
Net income ........................................... -- -- 91.0 91.0
Other comprehensive income, net of tax
Unrealized gain on securities, net ................. -- 54.9 -- 54.9
-------- -------- --------- ---------
Total comprehensive income ............................ -- 54.9 91.0 145.9
Adjustment to reflect purchase method ................. (2.2) -- -- (2.2)
-------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1997 ......................... 925.9 74.3 145.1 1,149.3
Comprehensive income:
Net income ........................................... -- -- 90.6 90.6
Other comprehensive income, net of tax
Unrealized loss on securities, net ................. -- (24.5) -- (24.5)
-------- -------- --------- ---------
Total comprehensive income ............................ -- (24.5) 90.6 66.1
Cash dividend declared and paid ....................... -- -- (120.0) (120.0)
Preferred stock dividend .............................. -- -- (120.0) --
Common stock dividend declared but not issued ......... -- -- (18.6) --
Adjustment to reflect purchase method ................. (8.3) -- -- (8.3)
-------- -------- --------- ---------
BALANCES AT DECEMBER 31, 1998 ......................... $ 917.6 $ 49.8 $ (22.9) $ 1,087.1
======== ======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
ENDED ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31, MARCH 31,
1998 1997 1996 1996
------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 90.6 $ 91.0 $ 54.1 $ 11.9
---------- ---------- ---------- --------
Adjustments to reconcile net income to net cash by operating activities:
Cost of insurance and surrender fees ...................... (169.6) (168.8) (89.3) (32.5)
Increase in future policy benefits ........................ 420.4 405.0 277.8 (4.9)
Net realized investment gains ............................. (26.3) (13.3) (6.0) (9.0)
Amortization of investment premiums and discounts ......... 1.9 7.2 6.5 0.7
Amortization of intangibles ............................... 49.5 59.6 50.1 0.6
Deferred income tax expense (benefit) ..................... 29.5 (12.6) (7.9) 10.8
Change in certain assets and liabilities:
Decrease (increase) in:
Accrued investment income ............................... 0.3 (5.3) (37.6) 4.1
Deferred acquisition costs .............................. (76.2) (101.5) (71.7) (16.2)
Other assets, net ....................................... (19.2) (9.3) 28.5 (55.9)
Increase (decrease) in:
Policy and contract claims .............................. 30.8 37.0 29.9 4.6
Other policyholder liabilites ........................... 11.3 (3.6) 71.4 9.8
Accounts payable and accrued expenses ................... 24.7 (99.9) (15.7) 87.5
---------- ---------- ---------- --------
Total adjustments ..................................... 277.1 94.5 236.0 (0.4)
---------- ---------- ---------- --------
Net cash provided by operating activities ............. 367.7 185.5 290.1 11.5
---------- ---------- ---------- --------
Cash flows from investing activities:
Proceeds from investment securities and other
invested assets ........................................... 1,901.6 788.6 1,123.1 299.5
Principal collected on mortgage loans ....................... 116.5 87.1 46.4 8.3
Purchase of investment securities and
other invested assets ..................................... (2,410.4) (1,115.7) (1,280.5) (169.2)
Mortgage loan originations and increase in
policy loan balance ....................................... (161.0) (13.7) (23.7) (40.4)
---------- ---------- ---------- --------
Net cash provided by (used in)
investing activities ................................. (553.3) (253.7) (134.7) 98.2
---------- ---------- ---------- --------
Cash flows from financing activities:
Proceeds from issue of investment contracts ................. 2,224.8 1,894.2 1,098.5 301.9
Redemption and benefit payments on
investment contracts ...................................... (1,909.8) (1,874.6) (1,304.0) (358.8)
Cash dividend to shareholders ............................... (120.0) -- -- (40.0)
Capital contribution ........................................ -- -- 2.8
---------- ---------- ---------- --------
Net cash provided by (used in)
financing activities ................................. 195.0 19.6 (205.5) (94.1)
---------- ---------- ---------- --------
Net increase (decrease) in cash and
cash equivalents ..................................... 9.4 (48.6) (50.1) 15.6
Cash and cash equivalents at beginning of year ............... 0.2 48.8 98.9 83.3
---------- ---------- ---------- --------
Cash and cash equivalents at end of year ..................... $ 9.6 $ 0.2 $ 48.8 $ 98.9
========== ========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(DOLLAR AMOUNTS IN MILLIONS)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the historical
operations and accounts of The Life Insurance Company of Virginia and its
subsidiary, Assigned Settlements Inc. (collectively the "Company" or "Life of
Virginia"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Prior to April 1, 1996, Combined Insurance Company of America ("CICA")
owned 100% or 4,000 shares of Life of Virginia. CICA is a wholly-owned
subsidiary of AON Corporation ("AON"). On April 1, 1996, CICA sold 100% of the
issued and outstanding shares of Life of Virginia to General Electric Capital
Corporation ("GE Capital"). Immediately thereafter, 80% was contributed to
General Electric Capital Assurance Company (the "Parent" or "GECA"). On December
31, 1996, the remaining 20% was contributed to GE Financial Assurance Holdings,
Inc. ("GEFAHI"). GECA is an indirect wholly-owned subsidiary of GEFAHI.
(B) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles ("GAAP") for insurance
companies, which vary in several respects from accounting practices prescribed
or permitted by the Insurance Commissioner of the state where the Company is
domiciled. The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and related disclosures. Actual results could differ from those
estimates.
Certain prior year amounts have been reclassified to conform to current
year presentation.
(C) PRODUCTS
The Company primarily sells variable annuities and universal life insurance
to customers throughout most of the United States. The Company distributes
variable annuities primarily through intermediaries such as stockbrokers and
universal life insurance primarily through career agents and independent
brokers. The Company is also engaged in the sale of traditional individual and
group life products and guaranteed investment contracts. Approximately 21%, 29%,
and 31% of premium and annuity consideration collected, in 1998, 1997, and 1996,
respectively, came from customers residing in the South Atlantic region of the
United States, and approximately 28%, 13%, and 9% of premium and annuity
consideration collected, in 1998, 1997, and 1996, respectively, came from
customers residing in the Mid-Atlantic region of the United States.
Although the Company markets its products through numerous distributors,
approximately 23%, 22%, and 21% of the Company's sales in 1998, 1997, and 1996,
respectively, have been through two specific national stockbrokerage firms. Loss
of all or a substantial portion of the business provided by these stockbrokerage
firms could have a material adverse effect on the business and operations of the
Company. The Company does not believe, however, that the loss of such business
would have a long-term adverse effect because of the Company's competitive
position in the marketplace and the availability of business from other
distributors.
(D) PURCHASE ACCOUNTING METHOD
Upon acquisition of Life of Virginia by GE Capital, Life of Virginia
restated its financial statements in accordance with the purchase method of
accounting. The net purchase price for Life of Virginia and its subsidiary of
$921.6 was allocated according to the fair values of the acquired assets and
liabilities, including the estimated present value of future profits. These
allocated values were dependent upon policies in force and market conditions at
the time of closing.
In addition to revaluing all material tangible assets and liabilities to
their respective estimated fair values as of the closing date of the sale, Life
of Virginia also recorded in its consolidated financial statements the excess of
cost over fair value of net assets acquired (goodwill) as well as the present
value of future profits to be derived from the purchased business. These amounts
were determined in accordance with the purchase method of accounting. This new
basis of accounting resulted in an increase in shareholders' equity of $109.7
(net of purchase accounting adjustments of $8.3 and $2.2 in 1998 and 1997,
7
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
respectively), reflecting the application of the purchase method of accounting.
The Company's consolidated financial statements subsequent to April 1, 1996
reflect this new basis of accounting.
All amounts for periods ended before April 1, 1996 are labeled
"Preacquisition" and are based on the preacquisition historical costs in
accordance with generally accepted accounting principles. The periods ending
after such date are based on fair values at April 1, 1996 (which becomes the new
cost basis) and subsequent costs in accordance with the purchase method of
accounting.
(E) REVENUES
Investment income is recorded when earned. Realized investment gains and
losses are calculated on the basis of specific identification. Premiums on
long-duration insurance products are recognized as earned when due or, in the
case of life contingent immediate annuities, when the contracts are issued.
Premiums received under annuity contracts without significant mortality risk and
premiums received on universal life products are not reported as revenues but as
future annuity and contract benefits. Cost of insurance is charged to universal
life policyholders based upon at risk amounts, and is recognized as revenue when
due. Variable product fees are charged to variable annuity and variable life
policyholders based upon the daily net assets of the policyholders' account
values, and are recognized as revenue when charged. Other income consists
primarily of surrender charges on certain policies. Surrender charges are
recognized as income when the policy is surrendered.
(F) STATEMENTS OF CASH FLOWS
Certificates and other time deposits are classified as short-term
investments on the consolidated balance sheets and considered cash equivalents
on the consolidated statements of cash flows.
(G) INVESTMENTS
The Company has designated its fixed maturities (bonds, notes,
mortgage-backed securities, and redeemable preferred stock) and equity
securities (common and non-redeemable preferred stock) as available-for-sale.
The fair value for fixed maturities and equity securities is based on individual
quoted market prices, where available. For fixed maturities not actively traded,
fair values are estimated using values obtained from independent pricing
services or, in the case of private placements, are estimated by discounting
expected future cash flows using a current market rate applicable to the credit
quality, call features and maturity of the investments, as applicable.
Changes in the market values of investments available-for-sale, net of the
effect on deferred policy acquisition costs, present value of future profits and
deferred federal income taxes are reflected as unrealized investment gains or
losses in a separate component of shareholders' interest and, accordingly, have
no effect on net income but are shown as a component of other comprehensive
income (loss). Unrealized losses that are considered other than temporary are
recognized in earnings through an adjustment to the amortized cost basis of the
underlying securities. Additionally, reserves for mortgage loans and certain
other long-term investments are established based on an evaluation of the
respective investment portfolio, past credit loss experience, and current
economic conditions. Writedowns and the change in reserves are included in
realized investment gains and losses in the consolidated statements of income
and comprehensive income. In general, the Company ceases to accrue investment
income when interest or dividend payments are in arrears.
Investment income on mortgage-backed securities is initially based upon
yield, cash flow and prepayment assumptions at the date of purchase. Subsequent
revisions in those assumptions are recorded using the retrospective method,
whereby the amortized cost of the securities is adjusted to the amount that
would have existed had the revised assumptions been in place at the date of
purchase. The adjustments to amortized cost are recorded as a charge or credit
to investment income. Realized gains and losses are accounted for on the
specific identification method.
Mortgage loans and policy loans are carried at their unpaid principal
balance, net of allowances for estimated uncollectible amounts. Short-term
investments are carried at amortized cost which approximates fair value. Equity
securities are carried at fair value. Investments in limited partnerships are
accounted for under the equity method of accounting. Real estate is carried
generally at cost less accumulated depreciation. Other long-term investments are
carried generally at amortized cost.
8
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
Under certain securities lending transactions, the Company requires the
borrower provide collateral, consisting primarily of cash and government
securities, on a daily basis, in amounts equal to or exceeding 102% of the
market value of the applicable securities loaned.
(H) DEFERRED ACQUISITION COSTS
Acquisition costs include costs and expenses which vary with and are
primarily related to the acquisition of insurance and investment contracts.
Deferred acquisition costs include first-year commissions in excess of
recurring renewal commissions, certain solicitation and printing costs, and
certain support costs such as underwriting and policy issue expenses. For
investments and universal life type contracts, amortization is based on the
present value of anticipated gross profits from investments, interest credited,
surrender and other policy charges, and mortality and maintenance expenses.
Amortization is adjusted retroactively when current or estimates of future gross
profits to be realized are revised. For other long-duration insurance contracts,
the acquisition costs are amortized in relation to the estimated benefit
payments or the present value of expected future premiums.
Deferred acquisition costs are reviewed to determine if they are
recoverable from future income, including investment income, and, if not
considered recoverable, are charged to expense.
(I) INTANGIBLE ASSETS
PRESENT VALUE OF FUTURE PROFITS-In conjunction with the acquisition of the
Company, a portion of the purchase price was assigned to the right to receive
future gross profits arising from existing insurance and investment contracts.
This intangible asset, called present value of future profits (PVFP), represents
the actuarially determined present value of the projected future cash flows from
the acquired policies.
GOODWILL-Goodwill is amortized over a period of 20 years on the
straight-line method. Goodwill in excess of associated expected operating cash
flows is considered to be impaired and is written down to fair value. No such
write-downs have occurred.
(J) FEDERAL INCOME TAXES
Pursuant to the acquisition on April 1, 1996, GE Capital, and AON, the
Company's previous ultimate parent, agreed to file an election to treat the
acquisition of Life of Virginia as an asset acquisition under the provisions of
Internal Revenue Code Section 338(h)(10). As a result of that election, the tax
basis of the Company's assets as of the date of acquisition were revalued based
upon fair market values. The principal effect of the election was to establish a
tax basis of intangibles for the value of the business acquired that is
amortizable for tax purposes over 10-15 years.
Deferred income taxes have been provided for the effects of temporary
differences between financial reporting and tax bases of assets and liabilities
and have been measured using the enacted marginal tax rates and laws that are
currently in effect.
(K) REINSURANCE
Premium revenue, benefits, underwriting, acquisition and insurance expenses
are reported net of the amounts relating to reinsurance ceded to other
companies. Amounts due from reinsurers for incurred future claims are reflected
in the reinsurance recoverable asset. The cost of reinsurance is accounted for
over the terms of the related treaties using assumptions consistent with those
used to account for the underlying reinsured policies.
(L) FUTURE ANNUITY AND CONTRACT BENEFITS
Future annuity and contract benefits consist of the liability for
investment contracts, insurance contracts and accident and health contracts.
Investment contract liabilities are generally equal to the policyholder's
current account value. The liability for insurance and accident and health
contracts is calculated based upon actuarial assumptions as to mortality,
morbidity, interest, expense and withdrawals, with experience adjustments for
adverse deviation where appropriate.
9
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(M) LIABILITY FOR POLICY AND CONTRACT CLAIMS
The liability for policy and contract claims represents the amount needed
to provide for the estimated ultimate cost of settling claims relating to
insured events that have occurred on or before the end of the respective
reporting period. The estimated liability includes requirements for future
payments of (a) claims that have been reported to the insurer, and (b) claims
related to insured events that have occurred but that have not been reported to
the insurer as of the date the liability is estimated.
(N) SEPARATE ACCOUNT ASSETS AND LIABILITIES
The separate account assets and liabilities represent funds held for the
exclusive benefit of the variable annuity and variable life contract owners. The
Company receives mortality risk fees and administration charges from the
variable mutual fund portfolios. The separate account assets are carried at fair
value and are equivalent to the liabilities that represent the policyholders'
equity in those assets.
The Company has periodically transferred capital to the separate accounts
to provide for the initial purchase of investments in new mutual fund
portfolios. As of December 31, 1998, approximately $41.8 of the Company's other
invested assets related to its capital investments in the separate accounts.
(O) INTEREST RATE RISK MANAGEMENT
As a matter of policy, the Company does not engage in derivatives trading,
market-making or other speculative activities.
The Company uses interest rate floors primarily to minimize risk on
investment contracts with minimum guaranteed interest rates. The Company
requires all interest rate floors to be designated and accounted for as hedges
of specific assets, liabilities or committed transactions; resulting payments
and receipts are recognized contemporaneously with effects of hedged
transactions. A payment or receipt arising from early termination of an
effective hedge is accounted for as an adjustment to the basis of the hedged
transaction.
Instruments used as hedges must be effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge at
the inception of the contract. Accordingly, changes in market values of hedged
instruments must be highly correlated with changes in market values of
underlying hedges items both at inception of the hedge and over the life of the
hedge contract. Any instrument designated but ineffective as a hedge is marked
to market and recognized in operations immediately.
(2) INVESTMENTS
(A) GENERAL
The sources of investment income of the Company were as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Fixed maturities .......... $ 415.3 $ 399.5 $ 276.9 $ 93.6
Equity securities ......... 4.9 7.3 8.7 4.2
Mortgage loans ............ 46.5 48.3 41.3 13.5
Policy loan interest ...... 14.0 13.3 9.6 2.9
Other investments ......... 6.7 9.0 3.3 0.1
--------- --------- --------- --------
Gross investment income ... 487.4 477.4 339.8 114.3
Investment expenses ....... (4.7) (4.9) (5.4) (2.3)
--------- --------- --------- --------
Net investment income ..... $ 482.7 $ 472.5 $ 334.4 $ 112.0
========= ========= ========= ========
</TABLE>
10
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) INVESTMENTS -- Continued
Sales proceeds and gross realized investment gains and losses resulting
from the sales of investment securities available-for-sale were as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Sales proceeds .................... $ 1,232.5 $ 387.1 $ 818.4 $ 262.9
=========== ========= ========= =========
Gross realized investment:
Gains ............................ 40.0 18.2 10.0 10.8
Losses ........................... (13.7) (4.9) (4.0) (1.8)
----------- --------- --------- ---------
Net realized investment gains ..... $ 26.3 $ 13.3 $ 6.0 $ 9.0
=========== ========= ========= =========
</TABLE>
The additional proceeds from the investments presented in the consolidated
statements of cash flows result from principal collected on mortgage-backed
securities, maturities, calls and sinking payments.
Net unrealized gains and losses on investment securities classified as
available-for-sale are reduced by deferred income taxes and adjustments to the
present value of future profits and deferred policy acquisition costs that would
have resulted had such gains and losses been realized. Net unrealized gains and
losses on available-for-sale investment securities reflected as a separate
component of shareholders' interest as of December 31, are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net unrealized gains on available-for-sale investment securities before adjustments:
Fixed maturities ...................................................................... $ 112.5 $ 154.5
Equity securities ..................................................................... 5.5 14.6
Other invested assets ................................................................. 2.3 6.4
--------- ---------
Subtotal ............................................................................ 120.3 175.5
--------- ---------
Adjustments to the present value of future profits and deferred acquisition costs: (43.7) (61.2)
Deferred income taxes .................................................................. (26.8) (40.0)
--------- ---------
Net unrealized gains on available-for-sale investment securities: ................... $ 49.8 $ 74.3
========= =========
</TABLE>
Under purchase accounting, the fair value of Life of Virginia's fixed
maturity investments as of April 1, 1996, became Life of Virginia's new cost
basis in such investments. The difference between the new cost basis and
original par is then amortized against investment income over the remaining
effective lives of the fixed maturity investments.
11
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED 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 and equity securities
available-for-sale were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1998 COST GAINS LOSSES VALUE
- ----------------------------------------------------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. government and agencies .......................... $ 36.7 $ 1.3 $ (0.1) $ 37.9
States and municipal .................................. 1.6 0.4 -- 2.0
Non-U.S. government ................................... 3.0 -- (0.4) 2.6
U.S. corporate ........................................ 3,765.9 126.7 (51.8) 3,840.8
Non-U.S. corporate .................................... 291.6 5.9 (7.2) 290.3
Mortgage-backed ....................................... 1,865.9 47.3 (9.6) 1,903.6
---------- -------- --------- ----------
Total fixed maturities .............................. 5,964.7 181.6 (69.1) 6,077.2
Common stocks and non-redeemable preferred stocks ..... 48.9 5.8 (0.3) 54.4
---------- -------- --------- ----------
Total available-for-sale securities ................... $ 6,013.6 $ 187.4 $ (69.4) $ 6,131.6
========== ======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
- ------------------------------------------------------------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Fixed maturites:
U.S. government and agencies ............................ $ 44.3 $ 1.3 $ -- $ 45.6
State and municipal ..................................... 1.8 0.3 -- 2.1
Non-U.S. government ..................................... -- -- -- --
U.S. corporate .......................................... 3,362.1 120.6 (8.1) 3,474.6
Non-U.S. corporate ...................................... 200.1 6.5 (0.3) 206.3
Mortgage-backed ......................................... 1,859.8 39.6 (5.4) 1,894.0
--------- -------- -------- ----------
Total fixed maturities ................................ 5,468.1 168.3 (13.8) 5,622.6
Common stocks and non-redeemable preferred stocks ..... 90.1 14.6 -- 104.7
--------- -------- -------- ----------
Total available-for-sale securities ................... $ 5,558.2 $ 182.9 $ (13.8) $ 5,727.3
========= ======== ========= ==========
</TABLE>
The scheduled maturity distribution of the fixed maturity portfolio at
December 31 follows. Expected maturities may differ from scheduled contractual
maturities because issuers of securities may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
1998
--------------------------
AMORTIZED FAIR
COST VALUE
------------- ------------
<S> <C> <C>
Due in one year or less .............. $ 119.6 $ 120.2
Due one year through five years ...... 1,895.0 1,941.1
Due five years through ten years ..... 1,299.4 1,304.5
Due after ten years .................. 784.8 807.8
---------- ----------
Subtotals ............................ 4,098.8 4,173.6
Mortgage-backed securities ........... 1,865.9 1,903.6
---------- ----------
Totals ............................... $ 5,964.7 $ 6,077.2
========== ==========
</TABLE>
As required by law, the Company has investments on deposit with
governmental authorities and banks for the protection of policyholders of $4.0
and $4.7 as of December 31, 1998 and 1997, respectively.
12
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) INVESTMENTS -- Continued
As of December 31, 1998, approximately 26.6% and 14.8% of the Company's
investment portfolio is comprised of securities issued by the manufacturing and
financial industries, respectively, the vast majority of which are rated
investment grade, and which are senior secured bonds. No other industry group
comprises more than 10% of the Company's investment portfolio. This portfolio is
widely diversified among various geographic regions in the United States, and is
not dependent on the economic stability of one particular region.
As of December 31, 1998, the Company did not hold any fixed maturity
securities which exceeded 10% of shareholders' interest.
The credit quality of the fixed maturity portfolio at December 31, follows.
The categories are based on the higher of the ratings published by Standard &
Poors or Moody's.
<TABLE>
<CAPTION>
1998 1997
---------------------- -----------------------
FAIR FAIR
VALUE PERCENT VALUE PERCENT
------------ --------- ------------ ----------
<S> <C> <C> <C> <C>
Agencies and treasuries ......... $ 270.5 4.5% $ 308.4 5.5%
AAA/Aaa ......................... 1,518.7 25.0 1,464.5 26.0
AA/Aa ........................... 376.6 6.2 320.4 5.7
A/A ............................. 1,201.4 19.8 1,101.4 19.6
BBB/Baa ......................... 1,762.2 29.0 1,862.3 33.1
BB/Ba ........................... 378.3 6.2 306.8 5.5
B/B ............................. 187.4 3.1 76.7 1.4
Not rated ....................... 382.1 6.2 182.1 3.2
--------- ----- ---------- -----
Totals .......................... $ 6,077.2 100.0% $ 5,622.6 100.0%
========= ===== ========== =====
</TABLE>
Bonds with ratings ranging from AAA/Aaa to BBB-/Baa3 are generally regarded
as investment grade securities. Some agencies and treasuries (that is, those
securities issued by the United States government or an agency thereof) are not
rated, but all are considered to be investment grade securities. Finally, some
securities, such as private placements, have not been assigned a rating by any
rating service and are therefore categorized as "not rated." This has neither
positive nor negative implications regarding the value of the security.
(B) MORTGAGE AND REAL ESTATE PORTFOLIO
The Company's mortgage and real estate portfolio is distributed by
geographic location and type. However, the Company has concentration exposures
in certain regions and in certain types as shown in the following two tables.
Geographic distribution as of December 31, 1998:
<TABLE>
<CAPTION>
MORTGAGE REAL ESTATE
---------- ------------
<S> <C> <C>
South Atlantic .............. 38.4 % 100.0%
Pacific ..................... 16.3 --
East North Central .......... 14.7 --
West South Central .......... 10.8 --
Mountain .................... 10.5 --
Other ....................... 9.3 --
---- -----
Totals ...................... 100.0 % 100.0%
======== =====
</TABLE>
13
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(2) INVESTMENTS -- Continued
Type distribution as of December 31, 1998:
<TABLE>
<CAPTION>
MORTGAGE REAL ESTATE
---------- ------------
<S> <C> <C>
Office Building .......... 23.6 % --%
Retail ................... 23.3 100.0
Industrial ............... 22.4 --
Apartments ............... 21.2 --
Other .................... 9.5 --
---- -----
Totals ................... 100.0 % 100.0%
======== =====
</TABLE>
"Impaired" loans are defined under generally accepted accounting principles
as loans for which it is probable that the lender will be unable to collect all
amounts due according to the original contractual terms of the loan agreement.
That definition excludes, among other things, leases or large groups of
smaller-balance homogenous loans, and therefore applies principally to the
Company's commercial loans.
Under these definitions, the Company has two types of "impaired" loans as
of December 31, 1998 and 1997: loans requiring allowances for losses and loans
expected to be fully recoverable because the carrying amount has been reduced
previously through charge-offs or deferral at income recognition ($11.3 and
$23.0, respectively). There was no allowance for losses on these loans as of
December 31, 1998 and 1997. Average investment in impaired loans during 1998 and
1997 was $20.0 and $23.0 and interest income earned on these loans while they
were considered impaired was $1.8 and $2.0 for the years ended 1998 and 1997,
respectively. There were no impaired loans nor related interest income earned on
such loans in 1996.
The following table shows the activity in the allowance for losses during
the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Balance on January 1 ............................ $ 17.2 $ 20.8
Provision charged to operations ................. 1.1 1.1
Amounts written off, net of recoveries .......... 1.7 (4.7)
-------- --------
Balance at December 31 .......................... $ 20.0 $ 17.2
======== ========
</TABLE>
The allowance for losses on mortgage loans at December 31, 1998 and 1997
represented 3.6% and 3.4% of gross mortgage loans, respectively.
The Company had $5.6 and $6.4 of non-income producing mortgage loan
investments as of December 31, 1998 and December 31, 1997, respectively.
14
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(3) DEFERRED ACQUISITION COSTS
Activity impacting deferred policy acquisition costs was as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Unamortized balance -- beginning of
period ...................................... $ 173.2 $ 71.7 $ -- $ 363.9
Costs deferred ............................... 93.6 112.3 74.9 22.2
Amortization, net ............................ (17.4) (10.8) (3.2) (6.0)
--------- -------- ------ ---------
Unamortized balance -- end of period ......... 249.4 173.2 71.7 380.1
Cumulative effect of net unrealized
investment (gains) losses ................... (7.4) (8.2) (1.4) 17.9
--------- -------- ------ ---------
Recorded balance ............................. $ 242.0 $ 165.0 $ 70.3 $ 398.0
========= ======== ======= =========
</TABLE>
(4) INTANGIBLES
(A) PRESENT VALUE OF FUTURE PROFITS (PVFP)
As of April 1, 1996, Life of Virginia established an intangible asset that
represents the present value of future profits ("PVFP"). PVFP reflects the
estimated fair value of the Company's life insurance business in-force and
represents the portion of the cost to acquire the Company that is allocated to
the value of the right to receive future cash flows from insurance contracts
existing at the date of acquisition. Such value is the present value of the
actuarially determined projected cash flows for the acquired policies discounted
at an appropriate rate.
PVFP is amortized, net of accreted interest, in a manner similar to the
amortization of deferred acquisition costs. Interest accretes at rates credited
to policyholders on underlying contracts. Recoverability of PVFP is evaluated
periodically by comparing the current estimate of expected future gross profits
to the unamortized asset balance. If such a comparison indicates that the
expected gross profits will not be sufficient to recover PVFP, the difference is
charged to expense.
Prior to April 1, 1996, Life of Virginia's PVFP was calculated in a similar
manner as the PVFP discussed above and related to policies in-force on April 30,
1986, the date the Company was acquired by AON. Under purchase accounting this
PVFP was removed.
PVFP is further adjusted to reflect the impact of unrealized gains or
losses on fixed maturities classified as available for sale in the investment
portfolios. Such adjustments are not recorded in the Company's net income but
rather as a credit or charge to shareholders' interest, net of applicable income
tax. The components of PVFP are as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31,1996 MARCH 31,1996
------------------- ------------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Unamortized bal. -- beginning of
period ...................................... $ 385.7 $ 438.9 $ -- $ 32.6
Purchase accounting adjustments .............. -- -- 484.0 --
Interest accrued at 6.25%, 6.75% and
6.25% for 1998, 1997, and 1996,
respectively ................................ 24.0 28.4 22.4 0.5
Amortization ................................. (70.4) (81.6) (67.5) (1.1)
--------- --------- ------- --------
Unamortized balance -- end of period ......... 339.3 385.7 438.9 32.0
Cumulative effect of net unrealized
investment (gains) losses ................... (36.3) (53.1) (19.7) --
--------- --------- ------- --------
Recorded balance ............................. $ 303.0 $ 332.6 $ 419.2 $ 32.0
========= ========= ======== ========
</TABLE>
15
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(4) INTANGIBLES -- Continued
The estimated percentage of the December 31, 1998 balance, before the
effect of unrealized investment gains or losses, to be amortized over each of
the next five years is as follows:
<TABLE>
<S> <C>
1999 ........... 11.4 %
2000 ........... 8.3
2001 ........... 7.3
2002 ........... 6.0
2003 ........... 5.0
</TABLE>
(B) GOODWILL
At December 31, 1998 and 1997, total unamortized goodwill was $87.0 and
$117.1, respectively, which is shown net of accumulated amortization and
adjustments of $41.4 and $13.2 for the years ended December 31, 1998 and 1997,
respectively. Goodwill amortization was $2.6, $6.4, and $5.0 for the years
ending December 31, 1998 and 1997, and for the nine month period ending December
31, 1996, respectively. Cumulative adjustments to goodwill totaled $(27.6),
($1.9) and $11.2 for the years ending December 31, 1998 and 1997, and for the
nine month period ending December 31, 1996, respectively. Adjustments relate
primarily to the settlement of purchase price with AON.
(5) REINSURANCE AND CLAIM RESERVES
Life of Virginia is involved in both the cession and assumption of
reinsurance with other companies. Life of Virginia's reinsurance consists
primarily of long-duration contracts that are entered into with financial
institutions and related party reinsurance. Although these reinsurance
agreements contractually obligate the reinsurers to reimburse the Company, they
do not discharge the Company from its primary liabilities and the Company
remains liable to the extent that the reinsuring companies are unable to meet
their obligations.
In order to limit to amount of loss retention, certain policy risks are
reinsured with other insurance companies. The maximum of individual ordinary
life insurance normally retained by the Company on any one life policy is $1.
The Company does not have significant reinsurance contracts with any one
reinsurer that could have a material impact on its results of operations.
A summary of reinsurance activity is as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Direct .................................. $ 333.0 $ 321.3 $ 94.7 $ 73.7
Assumed ................................. 19.2 20.7 59.0 35.0
Ceded ................................... (123.8) (110.4) (10.0) (19.8)
--------- --------- -------- --------
Net premiums earned ..................... $ 228.4 $ 231.6 $ 143.7 $ 88.9
--------- --------- -------- --------
Percentage of amount assumed to net ..... 8% 9% 41% 39%
========= ========= ======== ========
</TABLE>
Due to the nature of the Company's reinsurance contracts, premiums earned
approximate premiums written. The above premium amounts include cost of
insurance charges on universal life policies.
A significant portion of Life of Virginia's ceded premiums relates to group
life and health premiums. Life of Virginia is the primary carrier for the State
of Virginia employees group life and health plan. By statute, Life of Virginia
must reinsure these risks with other Virginia domiciled companies who wish to
participate.
Incurred losses and loss adjustment expenses are net of reinsurance of
$82.3, $72.7, $60.5, and $17.2 for the years ended December 31, 1998 and 1997,
the nine months ended December 31, 1996, and the three months ended March 31,
1996, respectively.
16
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(5) REINSURANCE AND CLAIM RESERVES -- Continued
In connection with the sale of the Company, the following transactions
occurred effective January 1, 1996: single premium deferred annuity liabilities
reinsured with CICA in 1995 were recaptured, guaranteed investment contract
liabilities reinsured with CICA in 1994 were recaptured, other lines of CICA
insurance business inforce were assumed, and other related liabilities of CICA
were assumed. In conjunction with the recapture and assumption, CICA transferred
to Life of Virginia assets with a fair value totaling $842.6. For the three
months ended March 31, 1996, premiums of $33.9, benefits of $46.7, commission
expense of $10.2 and a capital contribution of $69.3 as a result of various
reinsurance transactions.
(6) FUTURE ANNUITY AND CONTRACT BENEFITS
(A) INVESTMENT CONTRACTS
Investment contracts are broadly defined to include contracts without
significant mortality or morbidity risk. Payments received from sales of
investment contracts are recognized by providing a liability equal to the
current account value of the policyholder's contracts. Interest rates credited
to investment contracts are guaranteed for the initial policy term with renewal
rates determined as necessary by management.
(B) INSURANCE CONTRACTS
Insurance contracts are broadly defined to include contracts with
significant mortality and/or morbidity risk. The liability for future benefits
of insurance contracts is the present value of such benefits based on mortality,
morbidity, and other assumptions which were appropriate at the time the policies
were issued or acquired. These assumptions are periodically evaluated for
potential premium deficiencies. Reserves for cancelable accident and health
insurance are based upon unearned premiums, claims incurred but not reported,
and claims in the process of settlement. This estimate is based on the
experience of the insurance industry and the Company, adjusted for current
trends. Any changes in the estimated liability are reflected in income as the
estimates are revised.
The following chart summarizes the major assumptions underlying the
Company's recorded liabilities for future annuity and contract benefits:
<TABLE>
<CAPTION>
MORTALITY/ DECEMBER 31,
WITHDRAWAL MORBIDITY INTEREST RATE -----------------------------
ASSUMPTION ASSUMPTION ASSUMPTION 1998 1997
------------ ----------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Investment Contracts ........................... N/A N/A N/A $ 4,463.3 $ 3,951.4
Limited-payment Contracts ...................... None (a) 3.8-9.3% 14.4 14.0
Company
Traditional life insurance contracts ........... Experience (b) 7.2% 369.0 363.7
Universal life-type contracts .................. N/A N/A N/A 1,605.7 1,557.4
Accident & Health .............................. Company (c) 7.2% 2.9 3.3
Total future annuity and contract benefits ..... Experience $ 6,455.3 $ 5,889.8
=========== ===========
</TABLE>
(a)Either the United States Population Table, 1983 Group Annuitant Mortality
Table or 1983 Individual Annuitant Mortality Table.
(b) Principally modifications of the 1965-70 or 1975-80 Select and Ultimate
Tables.
(c) The 1958 Commissioner's Standard Ordinary Table and 1964 modified and 1987
Commissioner's Disability Tables.
(7) INCOME TAXES
Beginning April 1, 1996, Life of Virginia and its subsidiary have been
included in the life insurance company consolidated federal income tax return of
GECA and are also subject to a separate tax-sharing agreement, as approved by
state insurance regulators, the provisions of which are substantially the same
as the tax-sharing agreement with GE Capital. Prior to April 1, 1996, Life of
Virginia was included in the consolidated federal income tax return of AON and
its principal domestic subsidiaries and in accordance with intercompany policy,
provided taxes on income based on a separate company basis. Amounts payable
17
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES -- Continued
or recoverable related to periods before April 1, 1996, are subject to an
indemnification agreement with AON. As such the Company is not at risk for
income taxes nor entitled to recoveries related to those periods.
The total provision for income taxes consisted of the following components:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Current federal income tax provision
(benefit) ................................. $ 19.9 $ 62.4 $ 38.1 $ (3.6)
Deferred federal income tax provision
(benefit) ................................. 28.7 (12.4) (7.6) 10.3
-------- -------- -------- --------
Subtotal-federal provision ................ 48.6 50.0 30.5 6.7
Current state income tax provision (benefit) 1.3 2.4 1.6 (0.2)
Deferred state income tax provision
(benefit) ................................. 0.8 (0.2) (0.3) 0.5
-------- -------- -------- --------
Subtotal-state provision .................. 2.1 2.2 1.3 0.3
-------- -------- -------- --------
Total income tax provision ................ $ 50.7 $ 52.2 $ 31.8 $ 7.0
======== ======== ======== ========
</TABLE>
The reconciliation of the federal statutory rate to the effective income
tax rate is as follows:
<TABLE>
<CAPTION>
PREACQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Statutory U.S. federal income tax rate .... 35.0 % 35.0 % 35.0 % 35.0 %
State income tax .......................... 0.5 0.5 0.5 0.5
Non-deductible goodwill amortization ...... 0.7 1.6 2.0 0.0
Other, net ................................ (0.3) (0.6) (0.5) 1.5
----- ----- ----- ---
Effective rate ........................... 35.9 % 36.5 % 37.0 % 37.0 %
===== ===== ===== ====
</TABLE>
The components of the net deferred income tax asset (liability) at December
31 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
-------------- -------------
<S> <C> <C>
Assets:
Insurance reserve amounts .................................... $ 147.1 $ 142.9
Deferred acquisition costs ................................... -- 11.8
Other ........................................................ 5.9 24.5
--------- ---------
Total deferred tax assets .................................... 153.0 179.2
--------- ---------
Liabilities:
Net unrealized investment gains on investment securities ..... 26.8 40.0
Investments .................................................. 3.5 2.7
Present value of future profits .............................. 67.1 79.1
Deferred acquisition costs ................................... 14.5 --
--------- ---------
Total deferred tax liabilities .............................. 111.9 121.8
--------- ---------
Net deferred income tax asset ............................... $ 41.1 $ 57.4
========= =========
</TABLE>
18
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(7) INCOME TAXES -- Continued
Based on an analysis of the Company's tax position, management believes it
is more likely than not that the results of future operations and implementation
of tax planning strategies will generate sufficient taxable income enabling the
Company to realize remaining deferred tax assets. Accordingly, no valuation
allowance for deferred tax assets is deemed necessary.
The Company paid (refunded) $19.2, $64.4, $38.6, and $(2.4), for federal
and state income taxes for the year ended December 31, 1998, 1997, the nine
months ended December 31, 1996, and three months ended March 31, 1996,
respectively.
(8) RELATED PARTY TRANSACTIONS
Life of Virginia pays investment advisory fees and other fees to
affiliates. Amounts incurred for these items aggregated $11.5, $11.9, $3.2, and
$3.5 for the years ended December 31, 1998 and 1997, the nine months ended
December 31, 1996, and the three months ended March 31, 1996, respectively. Life
of Virginia charges affiliates for certain services and for the use of
facilities and equipment which aggregated $19.1, $4.6, $2.0, and $1.0, for the
years ended December 31, 1998 and 1997, the nine months ended December 31, 1996,
and the three months ended March 31, 1996, respectively.
Life of Virginia pays interest on outstanding amounts under a credit
funding agreement with GNA Corporation, the parent company of GECA. Interest
expense under this agreement was $2.0 and $0.0 with outstanding borrowings of
$53.9 and $0.0 as of December 31, 1998 and 1997, respectively.
At December 31, 1998 and 1997, Life of Virginia held investments in
securities of certain affiliates amounting to $2.6. Amounts included in net
investment income related to these holdings totaled $0.1, $0.1, $0.1, and $0.2
for the years ended December 31, 1998 and 1997, for the nine months ended
December 31, 1996, and the three months ended March 31, 1996, respectively.
During 1998, Life of Virginia sold $18.5 of third-party preferred stock
investments to an affiliate. This resulted in a gain on sale of $3.9, which is
included in net realized investment gains.
(9) COMMITMENTS AND CONTINGENCIES
(A) MORTGAGE LOAN COMMITMENTS
Life of Virginia has certain investment commitments to provide fixed-rate
loans. The investment commitments, which would be collateralized by related
properties of the underlying investments, involve varying elements of credit and
market risk. Investment commitments outstanding as of December 31, 1998 and
1997, totaled $72.0 and $16.7, respectively.
(B) GUARANTY ASSOCIATION ASSESSMENTS
The Company is required by law to participate in the guaranty associations
of the various states in which they do business. The state guaranty associations
ensure payment of guaranteed benefits, with certain restrictions, to
policyholders of impaired or insolvent insurance companies by assessing all
other companies involved in similar lines of business.
There are currently several unrelated insurance companies which had
substantial amounts of annuity business in the process of liquidation or
rehabilitation. The Company paid assessments of $2.9, $3.8, $0.2 and $1.4 to
various state guaranty associations during 1998, 1997, the nine month period
ended December 31, 1996, and the three month period ended March 31, 1996,
respectively. At December 31, 1998 and 1997, accounts payable and accrued
expenses include $15.4 and $18.2, respectively, related to estimated future
payments.
(C) LEASES
The Company has noncancelable operating leases for certain office space,
equipment and automobiles. Rental expense for all operating leases for the years
ended December 31, 1998 and 1997, for the nine months ended December 31, 1996,
and the three months ended March 31, 1996 amounted to $1.4, $1.3, $2.5, and
$0.8, respectively.
19
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(9) COMMITMENTS AND CONTINGENCIES -- Continued
Future minimum commitments under operating leases that have initial or
remaining noncancelable lease terms in excess of one year at December 31, 1998
are summarized as follows:
<TABLE>
<CAPTION>
MINIMUM LEASE PAYMENTS
-----------------------
<S> <C>
1999 ................................... $ 1.2
2000 ................................... 0.8
2001 ................................... 0.5
2002 ................................... 0.3
2003 ................................... --
Later years ............................ --
-------
Total minimum payments required ........ $ 2.8
=======
</TABLE>
(D) LITIGATION
There is no pending litigation to which the Company is a party or of which
any of the Company's property is the subject which management believes will have
an adverse material impact on the Company's financial condition or results of
operations. In addition, there are no legal proceedings contemplated by any
governmental authorities against the Company of which management has any
knowledge.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has adopted SFAS No. 119, Disclosures About Derivative
Financial Instruments and Fair Value of Financial Instruments. This statement
requires disclosures about the amounts, nature and terms of derivative financial
instruments and modifies existing disclosure requirements for other financial
instruments.
The Company has no derivative financial instruments as defined by SFAS No.
119 as of December 31, 1998 other than mortgage loan commitments of $77.2 and
interest rate floors of $17.2. The notional value of the interest rate floors at
December 31, 1998 was $1,800 and the floors expire from September 2003 to
October 2003.
The fair values of financial instruments presented in the applicable notes
to the Company's consolidated financial statements are estimates of the fair
values at a specific point in time using available market information and
valuation methodologies considered appropriate by management. These estimates
are subjective in nature and involve uncertainties and significant judgment in
the interpretation of current market data. Therefore, the fair values presented
are not necessarily indicative of amounts the Company could realize or settle
currently. The Company does not necessarily intend to dispose of or liquidate
such instruments prior to maturity.
Financial instruments that, as a mater of accounting policy, are reflected
in the accompanying consolidated financial statements at fair value are not
included in the following disclosures. Such items include fixed maturities,
equity securities and certain other invested assets. The carrying value of
policy loans and short-term investments approximate fair value at both December
31, 1998 and 1997.
At December 31, the carrying amounts and fair value of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Mortgage Loans .............................. $ 528.1 $ 590.1 $ 496.2 $ 532.2
Investment type insurance contracts ......... 4,463.3 4,462.6 3,951.4 3,909.0
Interest rate floors ........................ 17.2 12.5 -- --
</TABLE>
The fair value of mortgage loans is estimated by discounting the estimated
future cash flows using interest rates applicable to current loan origination,
adjusted for credit risk.
20
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS -- Continued
The estimated fair value of investment contracts is the amount payable on
demand (cash surrender value) for deferred annuities and the net present value
based on interest rates currently offered on similar contracts for non-life
contingent immediate annuities. Fair value disclosures are not required for
insurance contracts.
(11) RESTRICTIONS ON DIVIDENDS
Insurance companies are restricted by states as to the aggregate amount of
dividends they may pay to their parent in any consecutive twelve-month period
without regulatory approval. Generally, dividends may be paid out of earned
surplus without approval with thirty days prior written notice within certain
limits. The limits are generally based on 10% of the prior year surplus (net of
adjustments in some cases) and prior year statutory income (net gain from
operations, net income adjusted for realized capital gains, or net investment
income). Dividends in excess of the prescribed limits or the Company's earned
surplus require formal state insurance commission approval. The maximum dividend
payout which may be made without prior approval in 1999 is $47.9.
On December 3, 1998, the Company received approval from the Commonwealth of
Virginia for, and declared, a dividend payable in cash, preferred stock and/or
common stock at the election of each shareholder. GEFAHI elected to receive cash
and preferred stock and GECA elected to receive common stock. A cash dividend of
$120 was paid and a Series A preferred stock dividend of $120 was issued to
GEFAHI on December 15, 1998. The Series A preferred stock has a par value of
$1,000 per share, is redeemable at par at the Company's election, and is not
subject to call penalties. Dividends on the preferred stock are cumulative and
payable semi-annually at the annual rate of 8.0% of the par value. The Series A
preferred stock is not convertible into any other security of the Company, and
the holders thereof have no voting rights except with respect to any proposed
changes in the preferences and special rights of such stock. GECA will receive
its dividend in the form of 18,641 shares of newly issued common stock in 1999.
(12) SUPPLEMENTARY FINANCIAL DATA
The Company files financial statements with state insurance regulatory
authorities and the National Association of Insurance Commissioners (NAIC) that
are prepared on an accounting basis prescribed by such authorities (statutory
basis). Statutory accounting practices differ from generally accepted accounting
principles (GAAP) in several respects, causing differences in reported net
income and shareholders' interest. Permitted statutory accounting practices
encompass all accounting practices not so prescribed but that have been
specifically allowed by state insurance authorities. The Company has no
significant permitted accounting practices.
Statutory net income and statutory capital and surplus is summarized below:
<TABLE>
<CAPTION>
PREQUISITION
---------------
NINE MONTHS THREE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 MARCH 31, 1996
------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Statutory net income .................. $ 52.2 $ 73.9 $ 69.7 $ (8.3)
Statutory capital and surplus ......... $ 481.1 $ 522.5 $ 419.1 $ 360.5
</TABLE>
The NAIC adopted Risk Based Capital (RBC) requirements to evaluate the
adequacy of statutory capital and surplus in relation to risks associated with
(i) asset quality, (ii) insurance risk, (iii) interest rate risk, and (iv) other
business factors. The RBC formula is designated as an early warning tool for the
states to identify possible under-capitalized companies for the purpose of
initiating regulatory action. In the course of operations, the Company
periodically monitors its RBC level. At December 31, 1998 and 1997, the Company
exceeded the minimum required RBC levels.
(13) OPERATING SEGMENT INFORMATION
At year-end 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 131, Disclosures About Segments of an Enterprise and
Related Information, which requires segment data to be measured and analyzed on
a basis that is consistent with how business activities are reported internally
to management. Life of Virginia and its affiliated
21
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(13) OPERATING SEGMENT INFORMATION -- Continued
companies, which are subsidiaries of GEFAHI, conduct operations through two
business segments: (1) Wealth Accumulation and Transfer, comprised of products
intended to increase the policyholder's wealth, transfer wealth to beneficiaries
or provide a means for replacing the income of the insured in the event of
premature death, and (2) Wealth and Lifestyle Protection, comprised of products
intended to protect accumulated wealth and income from the financial drain of
unforeseen events. As Life of Virginia sells primarily variable annuity and
universal life policies, it operates in the Wealth Accumulation and Transfer
Segment. Accordingly, no segment data is provided.
(14) ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
During 1998, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. This Statement requires that,
upon adoption, all derivative instruments (including certain derivative
instruments embedded in other contracts) be recognized in the balance sheet at
fair value, and that changes in such fair values be recognized in earnings
unless specific hedging criteria are met. Changes in the values of derivatives
that meet these hedging criteria will ultimately offset related earnings effects
of the hedged items; effects of certain changes in fair value are recorded in
equity pending recognition in earnings. As required in SFAS No. 133, the Company
will adopt the Statement by January 1, 2000. The impact of adoption will be
determined by several factors, including the specific hedging instruments in
place and their relationships to hedged items, as well as market conditions.
Management has not estimated the effects of adoption as it believes that such
determination will not be meaningful until closer to the adoption date.
In December 1997, the American Institute of Certified Public Accountants
issued a new Statement of Position (SOP) 97-3, Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments. This SOP provides guidance on
accounting by insurance and other enterprises for guaranty-fund and certain
other insurance related assessments. The SOP requires enterprises to recognize
(1) a liability for assessments when (a) an assessment has been asserted or
information available prior to issuance of the financial statements indicates it
is probable that an assessment will be asserted, (b) the underlying cause of the
asserted or probable assessment has occurred on or before the date of the
financial statements, and (c) the amount of the loss can be reasonably estimated
and (2) an asset for an amount when it is probable that a paid or accrued
assessment will result in an amount that is recoverable from premium tax offsets
or policy surcharges from in-force policies. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998 and will be
reported in a manner similar to a cumulative effect of a change in accounting
principle in the initial year of adoption. As a result of the adoption of this
SOP, the Company expects to record an asset of approximately $4, net of tax.
(15) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), Reporting Comprehensive Income. This
statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Comprehensive income includes all changes in equity from non-owner sources,
investments by and distributions to owners are excluded. Prior year consolidated
financial statements have been restated to conform to the requirements of SFAS
130.
22
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(15) COMPREHENSIVE INCOME -- Continued
Components of other comprehensive income and related tax effects are shown
below:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------
DECEMBER 31, 1998
------------------------------------
BEFORE-TAX TAX NET-OF-TAX
AMOUNT EFFECT AMOUNT
------------ ---------- ------------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period ............................................... $ (11.4) $ 4.0 $ (7.4)
Less: reclassification adjustment for gains realized in
net income ........................................... (26.3) 9.2 (17.1)
--------- ------- ---------
Net unrealized gains (losses) on securities ........... (37.7) 13.2 (24.5)
--------- ------- ---------
Total other comprehensive income (loss) ................ $ (37.7) $ 13.2 $ (24.5)
========= ======= =========
<CAPTION>
YEAR ENDED
------------------------------------
DECEMBER 31, 1997
------------------------------------
BEFORE-TAX TAX NET-OFTAX
AMOUNT EFFECT AMOUNT
------------ ------------ ----------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period ............................................... $ 97.7 $ (34.2) $ 63.5
Less: reclassification adjustment for gains realized in
net income ........................................... (13.3) 4.7 (8.6)
-------- --------- --------
Net unrealized gains (losses) on securities ........... 84.4 (29.5) 54.9
-------- --------- --------
Total other comprehensive income (loss) ................ $ 84.4 $ (29.5) $ 54.9
======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, 1996
--------------------------------------
BEFORE-TAX TAX NET-OF-TAX
AMOUNT EFFECT AMOUNT
------------ ------------ ------------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period ............................................... $ 35.8 $ (12.5) $ 23.3
Less: reclassification adjustment for gains realized in
net income ........................................... (6.0) 2.1 (3.9)
-------- --------- --------
Net unrealized gains (losses) on securities ........... 29.8 (10.4) 19.4
-------- --------- --------
Total other comprehensive income (loss) ................. $ 29.8 $ (10.4) $ 19.4
======== ========= ========
<CAPTION>
PREACQUISITION
------------------------------------
THREE MONTHS ENDED
MARCH 31, 1996
------------------------------------
BEFORE-TAX TAX NET-OF-TAX
AMOUNT EFFECT AMOUNT
------------ ----------- -----------
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during
period ............................................... $ (131.3) $ 46.0 $ (85.3)
Less: reclassification adjustment for gains realized in
net income ........................................... (9.0) 3.1 (5.9)
---------- -------- ---------
Net unrealized gains (losses) on securities ........... (140.3) 49.1 (91.2)
---------- -------- ---------
Total other comprehensive income (loss) ................. $ (140.3) $ 49.1 $ (91.2)
========== ======== =========
</TABLE>
Components of accumulated non-owner changes in equity are shown below:
<TABLE>
<CAPTION>
ADJUSTMENT ACCUMULATED
UNREALIZED TO REFLECT NON-OWNER
GAINS (LOSSES) PURCHASE CHANGES IN
PREACQUISITION ON SECURITIES METHOD EQUITY
- ------------------------------------------------------------- ---------------- ------------ ------------
<S> <C> <C> <C>
Balance December 31, 1995 ................................... $ 103.1 $ -- $ 103.1
Changes for the three months ended March 31, 1996 ........... (91.2) -- (91.2)
--------- -------- ---------
Balance March 31, 1996 ...................................... 11.9 -- 11.9
POSTACQUISITION
- --------------------------------------------------------------
Changes for the nine months ended December 31, 1996 ......... 19.4 (11.9) 7.5
--------- -------- ---------
Balance December 31, 1996 ................................... 31.3 (11.9) 19.4
Changes for the year ended December 31, 1997 ................ 54.9 -- 54.9
--------- -------- ---------
Balance December 31, 1997 ................................... 86.2 (11.9) 74.3
Changes for the year ended December 31, 1998 ................ (24.5) -- (24.5)
--------- -------- ---------
Balance December 31, 1998 ................................... $ 61.7 $ (11.9) $ 49.8
========= ========= =========
</TABLE>
(16) SUBSEQUENT EVENT
Effective January 1, 1999, The Harvest Life Insurance Company ("Harvest")
merged into The Life Insurance Company of Virginia with the merged Company
renamed GE Life and Annuity Assurance Company ("GELAAC"). Harvest's former
parent, Federal Home Life Insurance Company ("FHLIC"), will receive common stock
of GELAAC in exchange for its interest in Harvest. FHLIC is an indirect
wholly-owned subsidiary of GEFAHI. Following are the proforma results of
operations
23
<PAGE>
THE LIFE INSURANCE COMPANY OF VIRGINIA AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(16) SUBSEQUENT EVENT -- Continued
for the Company for the year ended December 31, 1998 and 1997 as if Harvest had
been a part of Life of Virginia as of January 1, 1997.
<TABLE>
<CAPTION>
PROFORMA RESULTS
AS OF OR FOR THE YEAR ENDING
DECEMBER 31,
-------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Total assets ......... $ 14,785.4 $ 12,735.2
Revenues ............. 939.1 974.4
Net income ........... 105.8 107.3
</TABLE>
24
