<PAGE>
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
- --------------------------------------------------------------------------------
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 (1) 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 (1) 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.
The Alger American Fund:
Alger American Growth Portfolio, Alger American Small Capitalization
Portfolio
Fidelity Variable Insurance Products Fund (VIP):
VIP Equity-Income Portfolio, VIP Growth Portfolio, VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund II (VIP II):
VIP II Asset Manager Portfolio, VIP II Contrafund(R) Portfolio
Fidelity Variable Insurance Products Fund III (VIP III):
VIP III Growth & Income Portfolio, VIP III Growth Opportunities Portfolio
Federated Insurance Series:
Federated American Leaders Fund II, Federated High Income Bond Fund II,
Federated Utility Fund II
GE Investments Funds, Inc.:
Income Fund, International Equity Fund, Mid-Cap Value Equity Fund (formerly
known as Value Equity Fund), Money Market Fund, Premier Growth Equity Fund,
Real Estate Securities Fund, S&P 500(R) Index Fund, Total Return Fund, U.S.
Equity Fund
Goldman Sachs Variable Insurance Trust (VIT):
Goldman Sachs Growth and Income Fund, Goldman Sachs Mid Cap Value Fund
(formerly Mid Cap Equity Fund)
1
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Janus Aspen Series:
Aggressive Growth Portfolio, Balanced Portfolio, Capital Appreciation
Portfolio, Flexible Income Portfolio, Global Life Sciences Portfolio, Global
Technology Portfolio, Growth Portfolio, International Growth Portfolio,
Worldwide Growth Portfolio
Oppenheimer Variable Account Funds:
Oppenheimer Aggressive Growth Fund/VA, Oppenheimer Bond Fund/VA, Oppenheimer
Capital Appreciation Fund/VA, Oppenheimer High Income Fund/VA, Oppenheimer
Multiple Strategies Fund/VA
Salomon Brothers Variable Series Fund Inc:
Salomon Investors Fund, Salomon Strategic Bond Fund, Salomon Total Return
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 May 1, 2000.
2
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Definitions................................................................. 6
Policy Summary.............................................................. 8
Portfolio Annual Expense Table.............................................. 12
Other Policies............................................................. 14
Risk Summary................................................................ 15
GE Life and Annuity Assurance Company....................................... 17
State Regulation........................................................... 17
Separate Account II......................................................... 18
Changes to Separate Account II............................................. 18
The Portfolios.............................................................. 19
Investment Subdivisions.................................................... 19
Your Right to Vote Portfolio Shares........................................ 27
Charges and Deductions...................................................... 28
Premium Charge............................................................. 28
Mortality and Expense Risk Charge.......................................... 28
Monthly Deduction.......................................................... 29
Cost of Insurance.......................................................... 29
Surrender Charge........................................................... 30
Partial Surrender Processing Fee........................................... 32
Transfer Charge............................................................ 32
Other Charges.............................................................. 32
Reduction of Charges for Group Sales....................................... 32
The Policy.................................................................. 34
Applying for a Policy...................................................... 34
Owner...................................................................... 34
Beneficiary................................................................ 34
Changing the Beneficiary................................................... 35
Canceling a Policy......................................................... 35
Premiums.................................................................... 36
General.................................................................... 36
Tax Free Exchanges (1035 Exchanges)........................................ 36
Certain Internal Exchanges................................................. 36
Periodic Premium Plan...................................................... 37
Minimum Premium Payment.................................................... 37
Allocating Premiums........................................................ 37
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
How Your Account Value Varies............................................... 39
Account Value.............................................................. 39
Surrender Value............................................................ 39
Investment Subdivision Values.............................................. 39
Unit Values................................................................ 39
Net Investment Factor...................................................... 40
Transfers................................................................... 41
General.................................................................... 41
Dollar-Cost Averaging...................................................... 41
Portfolio Rebalancing...................................................... 42
Transfers by Third Parties................................................. 43
Death Benefits.............................................................. 44
Amount of Death Proceeds................................................... 44
Death Benefit Options...................................................... 44
Changing the Death Benefit Option.......................................... 45
Changing the Specified Amount.............................................. 45
Surrenders And Partial Surrenders........................................... 47
Surrenders................................................................. 47
Partial Surrenders......................................................... 47
Effect of Partial Surrenders on Account Value and Death Proceeds........... 47
Loans....................................................................... 48
General.................................................................... 48
Preferred Policy Debt...................................................... 48
Interest Rate Charged...................................................... 48
Repayment of Policy Debt................................................... 49
Effect of Policy Loans..................................................... 49
Termination................................................................. 50
Premium to Prevent Termination............................................. 50
Your Policy will Remain in Effect During the Grace Period.................. 50
Reinstatement.............................................................. 50
Payments And Telephone Transactions......................................... 51
Requesting Payments........................................................ 51
Telephone Transactions..................................................... 51
Tax Considerations.......................................................... 52
Federal Tax Matters........................................................ 52
Introduction............................................................... 52
Tax Status of the Policy................................................... 52
Tax Treatment of Policies-- General........................................ 53
Special Rules for Modified Endowment Contracts............................. 55
Income Tax Withholding..................................................... 56
Tax Status of the Company.................................................. 56
Changes in the Law and Other Considerations................................ 56
</TABLE>
4
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<TABLE>
<S> <C>
Other Policy Information.................................................... 57
Optional Payment Plans..................................................... 57
Dividends.................................................................. 58
Incontestability........................................................... 58
Suicide Exclusion.......................................................... 58
Misstatement of Age or Gender.............................................. 58
Written Notice............................................................. 59
Trustee.................................................................... 59
Other Changes.............................................................. 59
Reports.................................................................... 59
Change of Owner............................................................ 60
Supplemental Benefits...................................................... 60
Using the Policy as Collateral............................................. 60
Reinsurance................................................................ 60
Legal Proceedings.......................................................... 61
Additional Information...................................................... 62
Sale of the Policies....................................................... 62
Legal Matters.............................................................. 62
Experts.................................................................... 62
Actuarial Matters.......................................................... 63
Financial Statements....................................................... 63
Executive Officers and Directors........................................... 64
Other Information.......................................................... 65
Hypothetical Illustrations.................................................. 66
</TABLE>
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made.
5
<PAGE>
Definitions
We have tried to make this Prospectus as understandable as possible. However,
in explaining how the Policy works, we have had to use certain terms that have
special meanings. We define these terms below.
Account Value -- The 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 Agreement -- 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 Period -- 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 Date -- 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.
6
<PAGE>
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 ends at the close of
regular trading of the New York Stock Exchange on the next succeeding Valuation
Day.
7
<PAGE>
Policy Summary
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.
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.
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 1) 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. We anticipate revising this allocation procedure
within the second or third quarter of 2000 to allow immediate allocation
during the free look period to the Investment Subdivisions you choose. The
actual practice will be set forth in your policy. See Allocating Premiums.
8
<PAGE>
. The Investment Subdivisions invest in corresponding portfolios of the
following Funds:
The Alger American Fund Goldman Sachs Variable Insurance Trust (VIT)
Alger American Growth Portfolio Goldman Sachs Growth and Income Fund
Alger American Small Goldman Sachs Mid Cap Value Fund
Capitalization Portfolio (formerly Mid-Cap Equity Fund)
Federated Insurance Series
Federated American
Leaders Fund II Janus Aspen Series
Federated High Income Bond Fund II Aggressive Growth Portfolio
Federated Utility Fund II Balanced Portfolio
Capital Appreciation Portfolio
Fidelity Variable Insurance Flexible Income Portfolio
Products Fund Global Life Science
VIP Equity-Income Portfolio Global Technology Portfolio
VIP Growth Portfolio Growth Portfolio
VIP Overseas Portfolio International Growth Portfolio
Worldwide Growth Portfolio
Fidelity Variable Insurance Products
Fund II Oppenheimer Variable Account Funds
VIP II Asset Manager Portfolio Oppenheimer Aggressive Growth Fund/VA
VIP II Contrafund Portfolio Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Fidelity Variable Insurance Funds Oppenheimer High Income Fund/VA
Products Fund III Oppenheimer Multiple Strategies Fund/VA
VIP III Growth & Income Portfolio
VIP III Growth Opportunities
Opportunities Portfolio PBHG Insurance Series Fund, Inc.
PBHG Growth II Portfolio
GE Investments Funds, Inc. PBHG Large Cap Growth Portfolio
Global Income Fund
Income Fund Salomon Brothers Variable Series Funds Inc
International Equity Fund Salomon Investors Fund
Mid-Cap Value Equity Fund Salomon Strategic Bond Fund
(formerly known as Value Salomon Total Return Fund
Equity Fund)
Money Market Fund
Premier Growth Equity Fund
Real Estate Securities Fund
S&P 500 Index Fund
Total Return Fund
U.S. Equity Fund
DEDUCTIONS FROM ASSETS
Not all of these portfolios may be available in all states or in all markets.
. Each Fund deducts management fees and other expenses from its assets. For the
year ended December 31, 1999, the minimum total annual expenses (as a
percentage of average net assets) was .30% and the maximum total annual
expenses (as a percentage of average net assets) was 1.09%. 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.
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. 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.
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.
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.
10
<PAGE>
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.
11
<PAGE>
Portfolio Annual Expense Table
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, 1999.
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,
1999 (as a percentage of each portfolio's average net assets):
<TABLE>
<CAPTION>
Management Fees Other
(after fee Expenses (after
waivers as reimbursement Total Annual
Portfolio applicable) 12b-1 Fees as applicable) Expenses
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Alger American Fund
Alger American Small
Capitalization
Portfolio 0.85% 0.00% 0.05% 0.90%
Alger American Growth
Portfolio 0.75 0.00 0.04 0.79
Federated Insurance
Series
Federated American
Leaders Fund II 0.75 0.00 0.13 0.88
Federated High Income
Bond Fund II 0.60 0.00 0.19 0.79
Federated Utility Fund
II 0.75 0.00 0.19 0.94
Fidelity Variable
Insurance Products
Fund*/1/
VIP Equity-Income
Portfolio 0.48 0.00 0.09 0.57
VIP Growth Portfolio 0.58 0.00 0.08 0.66
VIP Overseas Portfolio 0.73 0.00 0.18 0.91
Fidelity Variable
Insurance Products Fund
II*/2/
VIP II Asset Manager
Portfolio 0.53 0.00 0.10 0.63
VIP II Contrafund
Portfolio 0.58 0.00 0.09 0.67
Fidelity Variable
Insurance Products Fund
III*/3/
VIP III Growth & Income
Portfolio 0.48 0.00 0.12 0.60
VIP III Growth
Opportunities
Portfolio 0.58 0.00 0.11 0.69
GE Investments Funds/4/,
Inc.
Income Fund 0.50 0.00 0.07 0.57
International Equity
Fund 1.00 0.00 0.08 1.08
Mid-Cap Value Equity
Fund (formerly known
as Value Equity Fund) 0.65 0.00 0.06 0.71
Money Market Fund 0.24 0.00 0.06 0.30
Premier Growth Equity
Fund 0.65 0.00 0.03 0.68
Real Estate Securities
Fund 0.85 0.00 0.09 0.94
S&P 500 Index Fund 0.35 0.00 0.04 0.39
Total Return Fund 0.50 0.00 0.06 0.56
US Equity Fund 0.55 0.00 0.06 0.61
Goldman Sachs Variable
Insurance Trust/5/
(VIT)
Goldman Sachs Growth
and Income Fund 0.75 0.00 0.25 1.00
Goldman Sachs Mid Cap
Value Fund (formerly
known as Mid Cap
Equity Fund) 0.80 0.00 0.25 1.05
</TABLE>
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<TABLE>
<CAPTION>
Management Fees Other
(after fee Expenses (after
waivers as reimbursement Total Annual
Portfolio applicable) 12b-1 Fees as applicable) Expenses
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Aspen Series/6/
Aggressive Growth
Portfolio -
Institutional Shares 0.65% 0.00% 0.02% 0.67%
Balanced Portfolio -
Institutional Shares 0.65 0.00 0.02 0.67
Capital Appreciation
Portfolio -
Institutional Shares 0.65 0.00 0.04 0.69
Flexible Income
Portfolio -
Institutional Shares 0.65 0.00 0.07 0.72
Global Life Sciences
Portfolio - Service
Shares 0.65 0.25 0.19 1.09
Global Technology
Portfolio - Service
Shares 0.65 0.25 0.13 1.03
Growth Portfolio -
Institutional Shares 0.65 0.00 0.02 0.67
International Growth
Portfolio -
Institutional Shares 0.65 0.00 0.11 0.76
Worldwide Growth
Portfolio -
Institutional Shares 0.65 0.00 0.05 0.70
Oppenheimer Variable
Account Funds
Oppenheimer Aggressive
Growth Fund/VA 0.66 0.00 0.01 0.67
Oppenheimer Bond
Fund/VA 0.72 0.00 0.01 0.73
Oppenheimer Capital
Appreciation Fund/VA 0.68 0.00 0.02 0.70
Oppenheimer High Income
Fund/VA 0.74 0.00 0.01 0.75
Oppenheimer Multiple
Strategies Fund/VA 0.72 0.00 0.01 0.73
Salomon Brothers
Variable Trust Series
Fund/7/ Inc
Salomon Investors Fund
Inc. 0.70 0.00 0.28 0.98
Salomon Strategic Bond
Fund 0.80 0.00 0.20 1.00
Salomon Total Return
Fund 0.75 0.00 0.25 1.00
</TABLE>
* 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.
/1/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 expenses of the portfolios of
the Variable Insurance Products Fund during 1999 for the VIP Equity-Income
Portfolio would have been total annual expenses of .56%, consisting of .48%
management fees and .08% other expenses; for VIP Overseas Portfolio total
annual expenses of .87%, consisting of .73% management fees and .14% other
expenses; for VIP Growth Portfolio total annual expenses of .65%, consisting
of .58% management fees and .07% other expenses.
/2/A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, certain funds, or FMR on behalf of certain
funds, have entered into arrangements with their custodian whereby credits
realized as a result of uninvested cash balances were used to reduce
custodian expenses. With reimbursements, the expenses of the portfolios of
the Variable Insurance Products Fund II during 1999 for VIP II Asset Manager
Portfolio would have been total annual expenses of .62%, consisting of .53%
management fees and .09% other expenses; for VIP II Contrafund Portfolio
total annual expenses of .65%, consisting of .58% management fees and .07%
other expenses.
/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 expenses of the portfolios of
the Variable Insurance Products Fund III during 1999 for VIP III Growth &
Income Portfolio would have been total annual expenses of .59%, consisting
of .48% management fees and .11% other expenses; for VIP III Growth
Opportunities Portfolio, total annual expenses of .68%, consisting of .58%
management fees and .10% other expenses.
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/4/ GE Asset Management Incorporated ("GEAM") has voluntarily agreed to waive a
portion of its management fee for the Money Market Fund. Absent this
waiver, the total annual expenses of the Fund would have been 0.50%,
consisting of 0.44% in management fees and 0.06% in other expenses. Also,
GEAM voluntarily limited other expenses for the GE Premier Growth Equity
Fund for the period from May 1, 1999 through April 30, 2000, which
limitation was discontinued effective May 1, 2000. Absent that expense
limitation, the total annual expenses of the Fund would have been 0.72%,
consisting of 0.65% in management fees and 0.07% in other expenses.
/5/ Goldman Sachs Asset Management has voluntarily agreed to reduce or limited
certain other expenses (excluding management fees, taxes, interest,
brokerage fees, litigation, indemnification and other extraordinary
expenses) to the extent such expenses exceed 0.25% of each Fund's
respective average daily net assets. The investment advisor may modify or
discontinue any or the limitations. Absent reimbursements, the expenses
during 1999 for Growth and Income Fund would have been total annual
expenses of 1.22%, consisting of .75% management fees and .47% other
expenses; and for Mid Cap Value Fund total annual expenses of 1.22%,
consisting of .80% management fees and .42% other expenses
/6/ Janus Aspen Series expenses (except for the Global Technology and Global
Life Sciences Portfolios) are based upon expenses for the fiscal year ended
December 31, 1999, restated to reflect a reduction in the management fees
for Growth, Aggressive Growth, Capital Appreciation, International Growth,
Worldwide Growth, Balanced, and Income Portfolios. Expenses for Global
Technology and Global Life Sciences Portfolios are based on the estimated
expenses that those Portfolios expect to incur in their initial fiscal
year. All expenses are shown without the effect of expense offset
arrangements.
The 12b-1 fee deducted for the Janus Aspen Series (Service Shares) covers
certain distribution and shareholder support services provided by the
companies selling variable contracts investing in the Janus Aspen Series
portfolios. The 12b-1 fee assessed against the Janus Aspen Series (Service
Shares) held for the Policies will be remitted to Capital Brokerage
Corporation, the principal underwriter for the Policies.
/7/Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of Salomon Brothers Variable Series Fund during 1999 for
Investors Fund would have been total annual expenses of 1.15%, consisting of
.70% management fees and .45% other expenses; for Strategic Bond Fund total
annual expenses of 1.48%, consisting of .75% management fees and .73% other
expenses; for Total Return Fund total annual expenses of 1.65%, consisting
of .80% managements fees and .85% other expenses.
OTHER POLICIES
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.
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.
14
<PAGE>
Risk Summary
INVESTMENT RISK
Your Account Value is subject to the risk that investment performance 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 TERMINATION
If the Surrender Value of your Policy is too low to pay 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 PARTIAL SURRENDERS
The Policy permits you to take partial surrenders. However, if you selected
Option B, you may only make 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 Proceeds. Federal
income taxes and a penalty tax may apply to partial surrenders.
EFFECTS OF POLICY LOANS
A Policy loan, whether or not repaid, will affect 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.
COMPARISON WITH OTHER INSURANCE POLICIES
The Policy is similar in many ways to universal life insurance. As with
universal life insurance:
. the Owner pays premiums for insurance coverage on the Insureds;
. the Policy provides for the accumulation of Surrender Value that is payable
if the Owner surrenders the Policy during the Insureds' lifetimes;
. 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.
16
<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 principally offer life insurance
and annuity policies. We may do business in 49 states and the District of
Columbia. Our principal offices are at 6610 West Broad Street, Richmond,
Virginia 23230. Before January 1, 1999, our name was The Life Insurance Company
of Virginia.
General Electric Capital Assurance Company ("GE Capital Assurance") owns the
majority of our capital stock, and Federal Home Life Insurance Company
("Federal") and Phoenix Group Holdings, Inc. own the remainder. GE Capital
Assurance and Federal are indirectly owned by GE Financial Assurance Holdings,
Inc which is a wholly owned subsidiary of General Electric Capital Corporation
("GE Capital"). GE Capital, a New York corporation, is a diversified financial
services company whose subsidiaries consist of specialty insurance, equipment
management, and commercial and consumer financing businesses. GE Capital's
indirect parent, General Electric Company, founded more than one hundred years
ago by Thomas Edison, is the world's largest manufacturer of jet engines,
engineering plastics, medical diagnostic equipment, and large electric power
generation equipment.
GNA Corporation, a direct wholly owned subsidiary of GE Financial Assurance
Holdings, Inc., directly owns the stock of Capital Brokerage Corporation (the
principal underwriter for the Policies and a broker/dealer registered with the
U.S. Securities and Exchange Commission).
We are a member of the Insurance Marketplace Standards Association ("IMSA"). We
may use the IMSA membership logo and language in our advertisements, as
outlined in IMSA's Marketing and Graphics Guidelines. Companies that belong to
IMSA subscribe to a set of ethical standards covering the various aspects of
sales and service for individually sold life insurance and annuities.
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 1 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.
17
<PAGE>
Separate Account II
We established GE Life & Annuity Separate Account II as a separate investment
account on August 21, 1986. Separate Account II currently has forty 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 1940 (the "1940 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. The new Investment Subdivisions may be limited to certain
classes of Policies, and the new portfolios may have higher fees and charges
than the portfolios they replaced. 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 1940 Act and applicable law.
We may also, where permitted by law:
. create new separate accounts;
. 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;
. add new Investment Subdivisions to or remove Investment Subdivisions from
Separate Account II, or combine Investment Subdivisions;
. remove existing Funds;
. substitute new Funds for any existing Fund which we determine is no longer
appropriate in light of the purposes of the Separate Account;
. deregister Separate Account II under the 1940 Act; and
. operate Separate Account II under the direction of a committee or in another
form.
18
<PAGE>
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.
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 40 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-
Adviser, as
Investment Subdivision Investment Objective applicable)
- -----------------------------------------------------------------------------
<S> <C> <C>
THE ALGER AMERICAN FUND
Alger American Growth Seeks long-term capital Fred Alger
Portfolio appreciation by focusing on Management, Inc.
growing companies that
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.
- -----------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Federated Insurance Series
Fidelity Variable Insurance Products Fund
(VIP)
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- -----------------------------------------------------------------------------
<S> <C> <C>
Alger American Small Seeks long-term capital Fred Alger
Capitalization Portfolio appreciation by focusing on Management, Inc.
small, fast-growing companies
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.
- -----------------------------------------------------------------------------
FEDERATED INSURANCE SERIES
Federated American Seeks long-term growth of Federated
Leaders Fund II capital with a secondary Investment
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.
- -----------------------------------------------------------------------------
Federated High Income Seeks high current income by Federated
Bond Fund II investing primarily in a Investment
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.
- -----------------------------------------------------------------------------
Federated Utility Fund II Seeks high current income and Federated
moderate capital appreciation Investment
by investing primarily in Management Company
equity and debt securities of
utility companies.
- -----------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND (VIP)
VIP Equity-Income Seeks reasonable income and Fidelity Management
Portfolio will consider the potential & Research Company;
for capital appreciation. The (beginning
fund also seeks a yield, which January 1, 2001,
exceeds the composite yield on FMR Co., Inc. will
the securities comprising the subadvise.)
S&P 500 by investing primarily
in income-producing equity
securities and by investing in
domestic and foreign issuers.
- -----------------------------------------------------------------------------
VIP Growth Portfolio Seeks capital appreciation by Fidelity Management
investing primarily in common & Research Company;
stocks of companies believed (beginning
to have above-average growth January 1, 2001,
potential FMR Co., Inc. will
subadvise.)
- -----------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Fidelity Variable Insurance Products Fund II (VIP II)
Fidelity Variable Insurance Products Fund III (VIP III)
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- -------------------------------------------------------------------------------
<S> <C> <C>
VIP Overseas Portfolio Seeks long-term growth of Fidelity Management
capital by investing at least & Research Company
65% of total assets in foreign (subadvised by
securities, primarily in Fidelity Management
common stocks. & Research (U.K.)
Inc., Fidelity
Management &
Research (Far
East), Inc.,
Fidelity
International
Investment
Advisors, Fidelity
International
Investment Advisors
(U.K.) Limited
and Fidelity
Investments Japan
Limited; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise.)
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II (VIP II)
VIP II Asset Manager Seeks high total return with Fidelity Management
Portfolio reduced risk over the long- & Research Company
term by allocating assets (subadvised by
among stocks, bonds and short- Fidelity Management
term instruments. & Research (U.K.)
Inc., Fidelity
Management &
Research (Far East)
Inc., Fidelity
Investments, Japan
Limited and
Fidelity Investment
Money Management,
Inc.; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise.)
- -------------------------------------------------------------------------------
VIP II Contrafund Seeks long-term capital Fidelity Management
Portfolio appreciation by investing & Research Company
mainly in common stocks and in (subadvised by
securities of companies whose Fidelity Management
value is believed to have not & Research (U.K.)
been fully recognized by the Inc., Fidelity
public. This fund invests in Management &
domestic and foreign issuers. Research (Far East)
This fund also invests in Inc. and Fidelity
"growth" stocks or "value" Investments Japan
stocks or both. Limited; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise.)
- -------------------------------------------------------------------------------
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III (VIP III)
VIP III Growth & Income Seeks high total return Fidelity Management
Portfolio through a combination of & Research Company
current income and capital (subadvised by
appreciation by investing a Fidelity Management
majority of assets in common & Research (U.K.)
stocks with a focus on those Inc., Fidelity
that pay current dividends and Management &
show potential for capital Research (Far East)
appreciation. Inc. and Fidelity
Investments Japan
Limited; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise.)
- -------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
GE Investments Funds, Inc.
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- -----------------------------------------------------------------------------
<S> <C> <C>
VIP III Growth Seeks to provide capital Fidelity Management
Opportunities Portfolio growth by investing primarily & Research Company
in common stock and other (subadvised by
types of securities, including Fidelity Management
bonds, which may be lower- & Research (U.K.)
quality debt securities. Inc., Fidelity
Management &
Research (Far East)
Inc. and Fidelity
Investments Japan
Limited; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise)
- -----------------------------------------------------------------------------
GE INVESTMENTS FUNDS, INC.
Income Fund Objective of providing maximum GE Asset Management
income consistent with prudent Incorporated
investment management and
preservation of capital by
investing primarily in income-
bearing debt securities and
other income bearing
instruments.
- -----------------------------------------------------------------------------
International Equity Fund Objective of providing long- GE Asset Management
term growth of capital by Incorporated
investing primarily in foreign
equity and equity-related
securities which the Adviser
believes have long-term
potential for capital growth.
- -----------------------------------------------------------------------------
Mid-Cap Value Equity Fund Objective of providing long GE Asset Management
(formerly known as Value term growth of capital by Incorporated
Equity Fund) investing primarily in common (Subadvised by NWQ
stock and other equity Investment
securities of companies that Management Company)
the investment adviser
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.
- -----------------------------------------------------------------------------
Money Market Fund Objective of providing highest GE Asset Management
level of current income as is Incorporated
consistent with high liquidity
and safety of principal by
investing in various types of
good quality money market
securities.
- -----------------------------------------------------------------------------
Premier Growth Equity Objective of providing long- GE Asset Management
Fund term growth of capital as well Incorporated
as future (rather than
current) income by investing
primarily in growth-oriented
equity securities.
- -----------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- -------------------------------------------------------------------------------
<S> <C> <C>
Real Estate Securities Objective of providing maximum GE Asset Management
Fund total return through current Incorporated
income and capital (Subadvised by
appreciation by investing Seneca Capital
primarily in securities of Management, L.L.C.)
U.S. issuers that are
principally engaged in or
related to the real estate
industry including those that
own significant real estate
assets. The portfolio will not
invest directly in real
estate.
- -------------------------------------------------------------------------------
S&P 500 Index Fund/1/ Objective of providing capital GE Asset Management
appreciation and accumulation Incorporated
of income that corresponds to (Subadvised by
the investment return of the State Street Global
Standard & Poor's 500 Advisors)
Composite Stock Price Index
through investment in common
stocks comprising the Index.
- -------------------------------------------------------------------------------
Total Return Fund Objective of providing the GE Asset Management
highest total return, composed Incorporated
of current income and 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.
- -------------------------------------------------------------------------------
U.S. Equity Fund Objective of providing long- GE Asset Management
term growth of capital through Incorporated
investments primarily in
equity securities of U.S.
companies.
- -------------------------------------------------------------------------------
GOLDMAN SACHS VARIABLE INSURANCE TRUST (VIT)
Goldman Sachs Growth and Seeks long-term growth of Goldman Sachs Asset
Income Fund capital and growth of income, Management
primarily through equity
securities that are considered
to have favorable prospects
for capital appreciation
and/or dividend-paying
ability.
- -------------------------------------------------------------------------------
Goldman Sachs Mid Cap Seeks long-term capital Goldman Sachs Asset
Value Fund (formerly appreciation, primarily Management
known as Mid Cap Equity through equity securities of
Fund) mid- cap 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).
- -------------------------------------------------------------------------------
JANUS ASPEN SERIES
Aggressive Growth Non-diversified portfolio Janus Capital
Portfolio pursuing long-term growth of Corporation
capital. Pursues this
objective by normally
investing at least 50% of its
assets in equity securities
issued by medium-sized
companies.
- -------------------------------------------------------------------------------
</TABLE>
/1/"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 Asset 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>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- ----------------------------------------------------------------------------
<S> <C> <C>
Balanced Portfolio Seeks long term growth of Janus Capital
capital. Pursues this Corporation
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.
- ----------------------------------------------------------------------------
Capital Appreciation Seeks long-term growth of Janus Capital
Portfolio capital. Pursues this Corporation
objective by investing
primarily in common stocks of
companies of any size.
- ----------------------------------------------------------------------------
Flexible Income Portfolio Seeks maximum total return Janus Capital
consistent with preservation Corporation
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.
- ----------------------------------------------------------------------------
Global Life Sciences Seeks long-term growth of Janus Capital
Portfolio capital. The portfolio pursues Corporation
this objective by investing
primarily in equity securities
of U.S. and foreign companies
that the portfolio manager
believes have a life science
orientation. The portfolio
normally invests at least 25%
of its total assets, in the
aggregate, in the following
industry groups: health care;
pharmaceuticals; agriculture;
cosmetics/personal care; and
biotechnology.
- ----------------------------------------------------------------------------
Global Technology Seeks long-term growth of Janus Capital
Portfolio capital. The portfolio pursues Corporation
this objective by investing
primarily in equity securities
of U.S. and Foreign companies
that the portfolio manager
believes will benefit
significantly from advances or
improvements in technology.
- ----------------------------------------------------------------------------
Growth Portfolio Seeks long-term capital growth Janus Capital
consistent with the Corporation
preservation of capital and
pursues its objective by
investing in common stocks of
companies of any size.
Emphasizes larger, more
established issuers.
- ----------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- ------------------------------------------------------------------------------
<S> <C> <C>
International Growth Seeks long-term growth of Janus Capital
Portfolio capital. Pursues this Corporation
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.
- ------------------------------------------------------------------------------
Worldwide Growth Seeks long-term capital growth Janus Capital
Portfolio in a manner consistent with Corporation
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.
- ------------------------------------------------------------------------------
Oppenheimer Aggressive Seeks to achieve capital OppenheimerFunds,
Growth Fund/VA appreciation by investing Inc.
mainly in common stocks of
companies in the United States
believed by the fund's
investment manager,
OppenheimerFunds Inc., to have
significant growth potential.
- ------------------------------------------------------------------------------
Oppenheimer Bond Fund/VA Seeks high level of current OppenheimerFunds,
income and capital, and growth Inc.
when consistent with its
primary objective. Under
normal conditions this fund
will invest at least 65% of
its total assets in investment
grade debt securities.
- ------------------------------------------------------------------------------
Oppenheimer Capital Seeks capital appreciation OppenheimerFunds,
Appreciation Fund/VA from investments in securities Inc.
of well-known and established
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.
- ------------------------------------------------------------------------------
Oppenheimer High Income Seeks high current income from OppenheimerFunds,
Fund/VA investments in high yield Inc.
fixed income 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.
</TABLE>
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- --------------------------------------------------------------------------------
25
<PAGE>
Salomon Brothers Variable Series Funds Inc
<TABLE>
<CAPTION>
Adviser (and Sub-
Adviser, as
Investment Subdivision Investment Objective applicable)
- ----------------------------------------------------------------------------
<S> <C> <C>
Oppenheimer Multiple Seeks total investment return OppenheimerFunds,
Strategies Fund/VA (which includes current income Inc.
and capital 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.
- ----------------------------------------------------------------------------
SALOMON BROTHERS VARIABLE SERIES FUNDS
Salomon Investors Fund Seeks long-term growth of Salomon Brothers
capital with current income as Asset Management
a secondary objective, Inc
primarily through investments
in common stocks of well-known
companies.
- ----------------------------------------------------------------------------
Salomon Strategic Bond Seeks high level of current Salomon Brothers
Fund income with capital Asset Management
appreciation as a secondary Inc
objective, through a globally
diverse portfolio of fixed-
income investments, including
lower-rated fixed income
securities commonly known as
junk bonds.
- ----------------------------------------------------------------------------
Salomon Total Return Fund Seeks to obtain above-average Salomon Brothers
income by primarily investing Asset Management
in a broad variety of Inc.
securities, including stocks,
fixed-income securities and
short-term obligations.
- ----------------------------------------------------------------------------
</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 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.
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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. In addition, our
affiliate, Capital Brokerage Corporations, the principal underwriter for the
Policies will receive 12b-1 fees deducted from portfolio assets for providing
distribution and shareholder support services to the portfolios.
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.
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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:
. the partial surrender, surrender, Policy loan and death benefits under the
Policy;
. investment options, including Net Premium allocations, dollar-cost averaging
and portfolio rebalancing programs;
. administration of various elective options under the Policy; and
. the distribution of various reports to Owners.
The costs and expenses we incur include:
. those associated with underwriting applications, increases in Specified
Amount, and riders;
. various overhead and other expenses associated with providing the services
and benefits provided by the Policy;
. sales and marketing expenses; and
. other costs of doing business, such as Federal, state and local premium and
other taxes and fees.
The risks we assume include:
. that the Insureds may live for a shorter period of time than estimated,
resulting in the payment of greater death benefits than expected; and
. 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.
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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 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:
. the cost of insurance charge (discussed below);
. a policy charge of $5;
. 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);
. 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
. 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
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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 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
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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.
<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.
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<PAGE>
The total surrender charge for any given Policy Month is the sum of:
. the surrender charge that applies to the initial Specified Amount, adjusted
for any decrease in Specified Amount; plus
. 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.
TRANSFER CHARGE
We assess a $10 transfer charge for each transfer after the first transfer you
make in any calendar month. This charge is at cost with no profit to us. 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.
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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 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.
We may also reduce charges and/or deductions for sales of the Policies to
registered representatives who sell the Policies to the extent we realize
savings of sales and administrative expenses. Any such reduction in charges
and/or deductions will be consistent with the standards we use in determining
the reduction in charges and/or deductions for other group arrangements.
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<PAGE>
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.
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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 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:
. 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
. Account Value on the date we (or our agent) receive the returned Policy.
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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. Replacing your existing
coverage with this policy may not be to your advantage. See Tax Considerations.
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. We may allow a higher percentage.
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 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
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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. Subject to our
administrative servicing guidelines, you can change the amount of planned
premiums 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 any time by writing or calling our Home
Office. The change will apply to all premiums we receive with or after we
receive your
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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. We anticipate revising this
allocation procedure within the second or third quarter of 2000 to allow
immediate allocation during the free look period. The actual practice will be
set forth in your policy. Under the revised procedure, once we have issued your
Policy, we will allocate your Net Premium directly to the Investment
Subdivisions you chose. See How Your Account Value Varies.
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<PAGE>
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.
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.
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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. Once we change our allocation procedure
(See Allocating Premiums) we will permit you to make transfers during 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;
(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 Account Value, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that you will make a transfer at an inopportune time.
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
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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.
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
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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 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
AMOUNT OF DEATH PROCEEDS
DEATH BENEFIT OPTIONS
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.
The amount of Death Proceeds will depend on:
. the Death Benefit determined under the Death Benefit Option in effect on the
date of death of the Last Insured;
. the use of the Account Value;
. any partial surrenders;
. any Policy Debt;
. any additional insurance provided by rider;
. any increase or decrease in existing coverage;
. 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
. a misstatement of either Insured's Age or gender.
There are two Death Benefit Options available under the Policy. Under Option A,
the Death Benefit equals the greater of:
. the Specified Amount plus the Account Value; or
. 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:
. the Specified Amount; or
. 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 of Percentages of Account Value
<TABLE>
<CAPTION>
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
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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 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 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:
. 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;
. 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:
. the Account Value less any surrender charge that applies;
. 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.
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
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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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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 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 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:
. 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
. 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 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:
. The investments of Separate Account II must be "adequately diversified" in
accordance with Internal Revenue Service ("IRS") regulations; and
. 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
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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:
. Death Proceeds are excludable from the gross income of the Beneficiary.
. You are not taxed on increases in the Account Value unless amounts are
distributed from the Policy while the Insureds are alive.
. 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.
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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:
. a 20% owner of the entity, or
. an officer, director, or employee of the trade or business,
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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 RUILES DFOR MODIFIED ENDOWMWNR CONTRACTS (MEC)
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:
. 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.
. 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:
. A partial surrender will be taxable to you to the extent that the Account
Value exceeds your investment in the contract.
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<PAGE>
. 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.
. 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:
(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 (not less frequently than
annually) 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.
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<PAGE>
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 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 10, 15, 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 10 years. Each payee must be at least
35 years old when payments begin. Payments will continue as long as either
payee is living. If both payees die before the end of the minimum period, we
will discount the amount of the remaining payments for the 10 year period at
the same 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
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<PAGE>
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, 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.
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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:
. 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
. 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:
. the Specified Amount;
. the Account Value in each Investment Subdivision;
. the Surrender Value;
. the Policy Debt; and
. 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.
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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 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.
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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.
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<PAGE>
ADDITIONAL INFORMATION
SALE OF THE POLICIES
Policies are sold by appropriately licensed agents who we appoint to solicit
applications on our behalf. 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. One of these broker/dealers is Terra Securities
Corporation, which is an affiliate of ours.
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
does business in Indiana, Minnesota, New Mexico, and Texas as GE Capital
Brokerage Corporation.) 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.
We pay sales commissions and other expenses associated with the promotion and
sales of the Policies to broker/dealers. First-year commissions depend on each
Insured's Age, rating class, gender and the size of the Policy. In the first
Policy Year, the broker/dealer 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 broker/dealer receives up
to 4% of the premiums paid.
We may also pay override payments, expense allowances, bonuses, wholesaler fees
and training allowances. Registered representatives earn commissions from the
broker/dealer with which they are affiliated and such arrangements may vary. In
addition, registered representatives who meet specified production levels may
qualify, under sales incentive programs adopted by us, to receive non-cash
compensation such as expense-paid trips, expense-paid educational seminars and
merchandise.
Capital Brokerage will receive 12b-1 fees against the Janus Aspen Series
(Service Shares) as compensation for providing certain distribution and
shareholder support services.
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.
EXPERTS
The consolidated financial statements of GE Life and Annuity Assurance Company
and subsidiary as of December 31, 1999 and 1998, and for each of the years in
the three-year period ended December 31, 1999, and the financial statements of
GE Life
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& Annuity Separate Account II as of December 31, 1999 and for each of the years
or lesser periods in the three-year period ended December 31, 1999, have been
included herein in reliance upon the reports of KPMG LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The report of KPMG LLP dated January 21, 2000 with respect to the consolidated
financial statements of GE Life and Annuity Assurance Company and subsidiary,
contains an explanatory paragraph that states that the Company changed its
method of accounting for insurance-related assessments in 1999.
ACTUARIAL MATTERS
Actuarial matters included in this prospectus have been examined by Paul Haley,
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 GE Life &
Annuity included in this prospectus from the financial statements of Separate
Account II. Please consider the financial statements of GE Life & Annuity only
as bearing on our ability to meet our obligations under the Policies. You
should not consider the financial statements of GE Life & Annuity 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>
Positions and Offices with Depositor for Last Five
Name Years
- -------------------------------------------------------------------------------
<C> <S>
Michael D. Fraizer Chairman of the Board and Chief Executive Officer of
GE Life and Annuity Assurance Company since 1996;
President of GE Capital Commercial Real Estate
Company. 1993-1996.
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. Senior
Vice President, Investments GE Life & Annuity since
1999; Director GE Life & Annuity, 5/96; Director, GNA,
4/94.
Selwyn L. Flournoy, Jr. Director, GE Life & Annuity since 5/89; Senior Vice
President, GE Life & Annuity, since 1980; Chief
Financial Officer 1980-1998
Victor C. Moses Senior Vice President, Investments GE Life & Annuity
since 1999; Director GE Life & Annuity, 5/96;
Director, GNA, 4/94; Senior Vice President, Business
Development and Chief Actuary of GNA since May, 1993.
Thomas M. Stinson Director and Senior Vice President, GE Life and
Annuity Assurance Company, since 4/00. President;
Personal Financial Services, General Manager, Home
Depot Credit Card Services 1989-1999.
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.
Gary T. Prizzia Treasurer, GE Life and Annuity Assurance/GE Financial
Assurance Company since 1/00. Treasurer/Risk Manager,
Budapest Bank, 10/96-01/00.
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>
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. Fraizer and Mr. Roday is GE Life and
Annuity Assurance Company, 6604 W. Broad Street, Richmond, Virginia 23230.
The principal business address for Mr. Stinson is GE Life and Annuity Assurance
Company, 6630 W. Broad Street, Richmond, Virginia 23230.
The principal business address for Mr. Prizzia is GE Life and Annuity Assurance
Company, 6620 W. Broad Street, Richmond, Virginia 23230.
The principal business address for Mr. Moses is GNA Corporation, Two Union
Square, 601 Union Street, Seattle, WA 98101.
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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:
. The initial and planned premium of each illustration are allocated completely
to Separate Account II and remain there over the entire period;
. The Insureds both qualify for the Preferred No Nicotine Use classification;
. There are no withdrawals and no supplemental benefits;
. There is no Policy Debt; and
. 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 0.76% 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 -1.46%, 4.54% and 10.54%,
respectively.
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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."
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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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
Accumulated Charges (2)(3) Charges (2)(3) Charges (2)(3)
End of At 5% ------------------------ ------------------------- -------------------------
Policy Interest Surrender Cash Death Surrender Cash Death Surrender Cash 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 3,957 253,957 0 4,217 254,217 0 4,477 254,477
2 10,978 1,828 7,828 257,828 2,596 8,596 258,596 3,396 9,396 259,396
3 16,882 5,609 11,609 261,609 7,140 13,140 263,140 8,798 14,798 264,798
4 23,081 9,294 15,294 265,294 11,847 17,847 267,847 14,725 20,725 270,725
5 29,590 12,876 18,876 268,876 16,717 22,717 272,717 21,224 27,224 277,224
6 36,424 16,345 22,345 272,345 21,746 27,746 277,746 28,345 34,345 284,345
7 43,600 20,291 25,691 275,691 27,529 32,929 282,929 36,739 42,139 292,139
8 51,135 24,098 28,898 278,898 33,453 38,253 288,253 45,859 50,659 300,659
9 59,047 27,745 31,945 281,945 39,503 43,703 293,703 55,755 59,955 309,955
10 67,355 31,206 34,806 284,806 45,653 49,253 299,253 66,481 70,081 320,081
15 115,553 44,669 45,269 295,269 76,843 77,443 327,443 134,587 135,187 385,187
20 177,068 44,639 44,639 294,639 100,853 100,853 350,853 229,239 229,239 479,239
25 255,579 19,247 19,247 269,247 101,744 101,744 351,744 352,195 352,195 602,195
30 355,780 * * * 46,336 46,336 296,336 490,857 490,857 740,857
35 483,665 * * * * * * 599,517 599,517 849,517
- ------------------------------------------------------------------------------------------------
</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 hypothetic 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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The death
benefit and account value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment 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
Accumulated Charges (2)(3) Charges (2)(3) Charges (2)(3)
End of At 5% ------------------------ ------------------------- -----------------------------
Policy Interest Surrender Cash Death Surrender Cash Death Surrender Cash 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 4,705 254,705 0 4,982 254,982
2 10,978 2,782 8,782 258,782 3,615 9,615 259,615 4,481 10,481 260,481
3 16,882 7,063 13,063 263,063 8,737 14,737 264,737 10,548 16,548 266,548
4 23,081 11,269 17,269 267,269 14,079 20,079 270,079 17,241 23,241 273,241
5 29,590 15,399 21,399 271,399 19,648 25,648 275,648 24,625 30,625 280,625
6 36,424 19,450 25,450 275,450 25,452 31,452 281,452 32,767 38,767 288,767
7 43,600 24,021 29,421 279,421 32,096 37,496 287,496 42,344 47,744 297,744
8 51,135 28,506 33,306 283,306 38,987 43,787 293,787 52,839 57,639 307,639
9 59,047 32,901 37,101 287,101 46,129 50,329 300,329 64,341 68,541 318,541
10 67,355 37,198 40,798 290,798 53,524 57,124 307,124 76,946 80,546 330,546
15 115,553 57,620 58,220 308,220 95,163 95,763 345,763 161,616 162,216 412,216
20 177,068 70,811 70,811 320,811 139,911 139,911 389,911 292,351 292,351 542,351
25 255,579 73,989 73,989 323,989 185,302 185,302 435,302 496,052 496,052 746,052
30 355,780 60,360 60,360 310,360 223,015 223,015 473,015 810,716 810,716 1,060,716
35 483,665 18,181 18,181 268,181 236,201 236,201 486,201 1,291,633 1,291,633 1,541,633
- -----------------------------------------------------------------------------------------------------
</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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The Death
Benefit and Account Value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
69
<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
Accumulated Charges (2)(3) Charges (2)(3) Charges (2)(3)
End of At 5% ------------------------ ------------------------ -------------------------
Policy Interest Surrender Cash Death Surrender Cash Death Surrender Cash 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 2,779 250,000 0 2,967 250,000 0 3,155 250,000
2 8,180 0 5,490 250,000 40 6,040 250,000 614 6,614 250,000
3 12,578 2,129 8,129 250,000 3,220 9,220 250,000 4,403 10,403 250,000
4 17,197 4,691 10,691 250,000 6,505 12,505 250,000 8,552 14,552 250,000
5 22,047 7,170 13,170 250,000 9,893 15,893 250,000 13,092 19,092 250,000
6 27,140 9,559 15,559 250,000 13,380 19,380 250,000 18,056 24,056 250,000
7 32,487 12,447 17,847 250,000 17,560 22,960 250,000 24,079 29,479 250,000
8 38,101 15,222 20,022 250,000 21,824 26,624 250,000 30,598 35,398 250,000
9 43,996 17,866 22,066 250,000 26,158 30,358 250,000 37,649 41,849 250,000
10 50,186 20,356 23,956 250,000 30,542 34,142 250,000 45,272 48,872 250,000
15 86,098 29,623 30,223 250,000 52,471 53,071 250,000 93,826 94,426 250,000
20 131,933 27,028 27,028 250,000 68,437 68,437 250,000 165,111 165,111 250,000
25 190,431 * * * 68,087 68,087 250,000 284,490 284,490 298,714
30 265,091 * * * 18,416 18,416 250,000 480,660 480,660 504,693
35 360,378 * * * * * * 784,848 784,848 824,090
- -----------------------------------------------------------------------------------------------
</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 hypothetic 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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The Death
Benefit and Account Value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
70
<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 Cash Death Surrender Cash Death Surrender Cash 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 3,230 250,000 0 3,434 250,000 0 3,639 250,000
2 8,180 404 6,404 250,000 1,016 7,016 250,000 1,652 7,652 250,000
3 12,578 3,523 9,523 250,000 4,750 10,750 250,000 6,079 12,079 250,000
4 17,197 6,585 12,585 250,000 8,643 14,643 250,000 10,960 16,960 250,000
5 22,047 9,588 15,588 250,000 12,698 18,698 250,000 16,342 22,342 250,000
6 27,140 12,532 18,532 250,000 16,922 22,922 250,000 22,275 28,275 250,000
7 32,487 16,013 21,413 250,000 21,918 27,318 250,000 29,416 34,816 250,000
8 38,101 19,430 24,230 250,000 27,092 31,892 250,000 37,224 42,024 250,000
9 43,996 22,776 26,976 250,000 32,445 36,645 250,000 45,767 49,967 250,000
10 50,186 26,046 29,646 250,000 37,980 41,580 250,000 55,116 58,716 250,000
15 86,098 41,789 42,389 250,000 69,391 69,991 250,000 118,328 118,928 250,000
20 131,933 51,445 51,445 250,000 103,151 103,151 250,000 217,694 217,694 250,000
25 190,431 53,342 53,342 250,000 140,622 140,622 250,000 381,997 381,997 401,097
30 265,091 41,575 41,575 250,000 183,593 183,593 250,000 650,450 650,450 682,972
35 360,378 840 840 250,000 239,055 239,055 251,008 1,084,702 1,084,702 1,138,937
- ----------------------------------------------------------------------------------------------------
</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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The death
benefit and account value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
71
<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 Cash Death Surrender Cash Death Surrender Cash 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 15,673 1,015,673 0 16,698 1,016,698 0 17,724 1,017,724
2 41,759 7,007 31,007 1,031,007 10,039 34,039 1,034,039 13,198 37,198 1,037,198
3 64,216 21,980 45,980 1,045,980 28,028 52,028 1,052,028 34,580 58,580 1,058,580
4 87,797 36,572 60,572 1,060,572 46,664 70,664 1,070,664 58,041 82,041 1,082,041
5 112,557 50,753 74,753 1,074,753 65,942 89,942 1,089,942 83,765 107,765 1,107,765
6 138,555 64,487 88,487 1,088,487 85,849 109,849 1,109,849 111,946 135,946 1,135,946
7 165,853 80,131 101,731 1,101,731 108,759 130,359 1,130,359 145,187 166,787 1,166,787
8 194,515 95,219 114,419 1,114,419 132,227 151,427 1,151,427 181,294 200,494 1,200,494
9 224,611 109,669 126,469 1,126,469 156,183 172,983 1,172,983 220,472 237,272 1,237,272
10 256,212 123,377 137,777 1,137,777 180,533 194,933 1,194,933 262,923 277,323 1,277,323
15 439,555 176,582 178,982 1,178,982 303,851 306,251 1,306,251 532,262 534,662 1,534,662
20 673,553 175,858 175,858 1,175,858 398,087 398,087 1,398,087 905,774 905,774 1,905,774
25 972,201 73,730 73,730 1,073,730 399,401 399,401 1,399,401 1,389,184 1,389,184 2,389,184
30 1,353,359 * * * 174,948 174,948 1,174,948 1,929,914 1,929,914 2,929,914
35 1,839,825 * * * * * * 2,341,483 2,341,483 3,341,483
- ---------------------------------------------------------------------------------------------------------
</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 hypothetic 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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed
past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
the gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. the death
benefit and account value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. no representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
72
<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 Cash Death Surrender Cash Death Surrender Cash 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 17,541 1,017,541 0 18,634 1,018,634 0 19,729 1,019,729
2 41,759 10,792 34,792 1,034,792 14,080 38,080 1,038,080 17,501 41,501 1,041,501
3 64,216 27,751 51,751 1,051,751 34,367 58,367 1,058,367 41,525 65,525 1,065,525
4 87,797 44,413 68,413 1,068,413 55,524 79,524 1,079,524 68,029 92,029 1,092,029
5 112,557 60,772 84,772 1,084,772 77,581 101,581 1,101,581 97,263 121,263 1,121,263
6 138,555 76,821 100,821 1,100,821 100,565 124,565 1,124,565 129,503 153,503 1,153,503
7 165,853 94,949 116,549 1,116,549 126,902 148,502 1,148,502 167,447 189,047 1,189,047
8 194,515 112,738 131,938 1,131,938 154,214 173,414 1,173,414 209,023 228,223 1,228,223
9 224,611 130,167 146,967 1,146,967 182,517 199,317 1,199,317 254,583 271,383 1,271,383
10 256,212 147,207 161,607 1,161,607 211,821 226,221 1,226,221 304,512 318,912 1,318,912
15 439,555 228,186 230,586 1,230,586 376,801 379,201 1,379,201 639,827 642,227 1,642,227
20 673,553 280,289 280,289 1,280,289 553,829 553,829 1,553,829 1,157,217 1,157,217 2,157,217
25 972,201 292,387 292,387 1,292,387 732,931 732,931 1,732,931 1,962,854 1,962,854 2,962,854
30 1,353,359 237,302 237,302 1,237,302 880,713 880,713 1,880,713 3,206,369 3,206,369 4,206,369
35 1,839,825 68,053 68,053 1,068,053 929,612 929,612 1,929,612 5,105,015 5,105,015 6,105,015
- ---------------------------------------------------------------------------------------------------------
</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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
the gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The death
benefit and account value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
73
<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
Accumulated Charges (2)(3) Charges (2)(3) Charges (2)(3)
End of At 5% --------------------------- --------------------------- -----------------------------
Policy Interest Surrender Cash Death Surrender Cash Death Surrender Cash 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 11,180 1,000,000 0 11,931 1,000,000 0 12,684 1,000,000
2 31,427 0 22,090 1,000,000 294 24,294 1,000,000 2,591 26,591 1,000,000
3 48,328 8,710 32,710 1,000,000 13,084 37,084 1,000,000 17,827 41,827 1,000,000
4 66,074 19,022 43,022 1,000,000 26,298 50,298 1,000,000 34,509 58,509 1,000,000
5 84,708 29,002 53,002 1,000,000 39,928 63,928 1,000,000 52,764 76,764 1,000,000
6 104,273 38,619 62,619 1,000,000 53,958 77,958 1,000,000 72,725 96,725 1,000,000
7 124,817 50,234 71,834 1,000,000 70,766 92,366 1,000,000 96,935 118,535 1,000,000
8 146,388 61,394 80,594 1,000,000 87,912 107,112 1,000,000 123,141 142,341 1,000,000
9 169,037 72,027 88,827 1,000,000 105,339 122,139 1,000,000 151,491 168,291 1,000,000
10 192,819 82,047 96,447 1,000,000 122,976 137,376 1,000,000 182,146 196,546 1,000,000
15 330,799 119,412 121,812 1,000,000 211,282 213,682 1,000,000 377,495 379,895 1,000,000
20 506,901 109,361 109,361 1,000,000 275,984 275,984 1,000,000 664,725 664,725 1,000,000
25 731,656 1,262 1,262 1,000,000 276,052 276,052 1,000,000 1,146,122 1,146,122 1,203,428
30 1,018,508 * * * 80,818 80,818 1,000,000 1,936,271 1,936,271 2,033,084
35 1,384,610 * * * * * * 3,161,496 3,161,496 3,319,571
- ---------------------------------------------------------------------------------------------------------
</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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The Death
Benefit and Account Value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
74
<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 12,977 1,000,000 0 13,792 1,000,000 0 14,609 1,000,000
2 31,427 1,731 25,731 1,000,000 4,178 28,178 1,000,000 6,723 30,723 1,000,000
3 48,328 14,261 38,261 1,000,000 19,176 43,176 1,000,000 24,495 48,495 1,000,000
4 66,074 26,563 50,563 1,000,000 34,810 58,810 1,000,000 44,093 68,093 1,000,000
5 84,708 38,631 62,631 1,000,000 51,098 75,098 1,000,000 65,702 89,702 1,000,000
6 104,273 50,459 74,459 1,000,000 68,063 92,063 1,000,000 89,525 113,525 1,000,000
7 124,817 64,438 86,038 1,000,000 88,122 109,722 1,000,000 118,186 139,786 1,000,000
8 146,388 78,155 97,355 1,000,000 108,891 128,091 1,000,000 149,529 168,729 1,000,000
9 169,037 91,590 108,390 1,000,000 130,383 147,183 1,000,000 183,820 200,620 1,000,000
10 192,819 104,722 119,122 1,000,000 152,608 167,008 1,000,000 221,353 235,753 1,000,000
15 330,799 167,939 170,339 1,000,000 278,737 281,137 1,000,000 475,125 477,525 1,000,000
20 506,901 206,806 206,806 1,000,000 414,414 414,414 1,000,000 874,180 874,180 1,000,000
25 731,656 214,667 214,667 1,000,000 565,199 565,199 1,000,000 1,533,961 1,533,961 1,610,659
30 1,018,508 167,963 167,963 1,000,000 738,541 738,541 1,000,000 2,611,931 2,611,931 2,742,527
35 1,384,610 5,649 5,649 1,000,000 963,176 963,176 1,011,335 4,355,668 4,355,668 4,573,451
- ----------------------------------------------------------------------------------------------------------
</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.
The hypothetical gross annual investment rates of return shown above and
elsewhere in this prospectus are illustrative only and should not be deemed a
representation of past or future investment rates of return.
Actual investment rates of return may be more or less than those shown and will
depend on a number of factors, including prevailing interest rates, rates of
inflation, and the allocations made by an owner among the investment options.
The gross hypothetical investment rates of return of 0%, 6%, and 12% shown
above correspond to net annual rates of -1.46%, 4.54%, and 10.54%. The death
benefit and account value for a policy will be different from those shown if
the actual investment rate of return averages 0%, 6%, and 12% over a period of
years, but fluctuated above or below those averages for individual policy
years. No representations can be made by GE Life & Annuity or the funds that
these hypothetical investment rates of return can be achieved for any one year
or sustained over any period of time.
75
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
FINANCIAL STATEMENTS
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
Policyholders
GE Life & Annuity Separate Account II
and
The Board of Directors
GE Life and Annuity Assurance Company:
We have audited the accompanying statements of assets and liabilities of GE
Life & Annuity 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, U.S. Equity and Premier Growth Equity Funds; the Oppenheimer Variable
Account Funds--Bond/VA, Capital Appreciation/VA, Aggressive Growth/VA, High
Income/VA and Multiple Strategies/VA 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 Insurance Series--American Leaders, High Income Bond
and Utility Funds II; the Alger American Fund--Small Capitalization and Growth
Portfolios; the PBHG Insurance Series Fund, Inc.--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--Growth
and Income and Mid Cap Value Funds; and the Salomon Brothers Variable Series
Fund Inc.--Strategic Bond, Investors, and Total Return Funds) as of December
31, 1999 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 Funds--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, 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, 1999,
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 GE Life & Annuity Separate Account II as of
December 31, 1999 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.
/s/ KPMG LLP
Richmond, Virginia
February 11, 2000
F-1
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
--------------------------------------------------------
Money Total International Real Estate
S&P 500 Market Return Equity Securities
Index 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
(310,476 shares;
cost -- $6,828,780)... $8,471,462 -- -- -- --
Money Market Fund
(5,406,429 shares;
cost -- $5,406,429)... -- 5,406,429 -- -- --
Total Return Fund
(273,213 shares;
cost -- $4,144,197)... -- -- 4,333,155 -- --
International Equity
Fund (18,342 shares;
cost -- $228,636)..... -- -- -- 265,409 --
Real Estate Securities
Fund (38,812 shares;
cost -- $496,495)..... -- -- -- -- 421,890
Receivable from affili-
ate.................... 39 3,435 -- 4 --
Receivable for units
sold................... 2,304 -- 4,808 -- --
---------- --------- --------- ------- -------
Total assets........... 8,473,805 5,409,864 4,337,963 265,413 421,890
========== ========= ========= ======= =======
Liabilities
Accrued expenses payable
to affiliate (note 3).. 4,515 20,599 19,009 1,476 1,120
Payable for units with-
drawn.................. -- 22,363 -- -- --
---------- --------- --------- ------- -------
Total liabilities...... 4,515 42,962 19,009 1,476 1,120
---------- --------- --------- ------- -------
Net assets attributable
to variable life poli-
cyholders.............. $8,469,290 5,366,902 4,318,954 263,937 420,770
========== ========= ========= ======= =======
Outstanding units: Type
I (note 2)............. 85,301 130,474 102,066 5,973 18,975
========== ========= ========= ======= =======
Net asset value per
unit: Type I........... $ 63.03 17.74 39.97 19.15 15.14
========== ========= ========= ======= =======
Outstanding units: Type
II (note 2)............ 49,069 172,057 5,989 7,809 8,817
========== ========= ========= ======= =======
Net asset value per
unit: Type II.......... $ 63.03 17.74 39.97 19.15 15.14
========== ========= ========= ======= =======
</TABLE>
F-2
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
--------------------------------------
Premier
Global Value U.S. Growth
Income Equity Income Equity 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 (9,097 shares;
cost -- $90,968)..................... 87,238 -- -- -- --
Value Equity Fund (34,520 shares;
cost -- $511,771).................... -- 545,075 -- -- --
Income Fund (35,663 shares;
cost -- $433,590).................... -- -- 410,485 -- --
U.S. Equity Fund (5,739 shares;
cost -- $207,529).................... -- -- -- 217,499 --
Premier Growth Equity Fund (1,537
shares;
cost -- $122,937).................... -- -- -- -- 136,222
Receivable from affiliate.............. -- -- -- 5 --
Receivable for units sold.............. -- 7,715 -- 2,417 1,491
------ ------- ------- ------- -------
Total assets.......................... 87,238 552,790 410,485 219,921 137,713
------ ------- ------- ------- -------
Liabilities
Accrued expenses payable to affiliate
(note 3).............................. 969 1,447 3,897 58 38
Payable for units withdrawn............ -- -- -- -- --
------ ------- ------- ------- -------
Total liabilities..................... 969 1,447 3,897 58 38
------ ------- ------- ------- -------
Net assets attributable to variable
life policyholders.................... 86,269 551,343 406,588 219,863 137,675
====== ======= ======= ======= =======
Outstanding units: Type I (note 2)..... 3,856 9,075 36,722 1,934 5,433
====== ======= ======= ======= =======
Net asset value per unit: Type I....... 10.64 16.28 10.51 12.72 11.80
====== ======= ======= ======= =======
Outstanding units: Type II (note 2).... 4,252 24,791 1,964 15,350 6,234
====== ======= ======= ======= =======
Net asset value per unit: Type II...... 10.64 16.28 10.51 12.72 11.80
====== ======= ======= ======= =======
</TABLE>
F-3
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------------------------
Capital Aggressive High Multiple
Bond Appreciation Growth 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 (55,499
shares; cost --
$649,645).............. $639,345 -- -- -- --
Capital Appreciation
Fund/VA (99,736 shares;
cost --$3,135,504) .... -- 4,970,851 -- -- --
Aggressive Growth
Fund/VA (80,773 shares;
cost -- $3,362,953).... -- -- 6,648,456 -- --
High Income Fund/VA
(196,976 shares; cost--
$2,165,842)............ -- -- -- 2,111,584 --
Multiple Strategies
Fund/VA (56,173 shares;
cost -- $886,784)...... -- -- -- -- 980,781
Receivable for units
sold.................... 107 2,689 397 2,229 31
-------- --------- --------- --------- -------
Total assets............ 639,452 4,973,540 6,648,853 2,113,813 980,812
======== ========= ========= ========= =======
Liabilities
Accrued expenses payable
to affiliate (note 3)... 1,428 2,533 4,363 1,497 1,382
Payable for units with-
drawn................... -- -- -- -- --
-------- --------- --------- --------- -------
Total liabilities....... 1,428 2,533 4,363 1,497 1,382
-------- --------- --------- --------- -------
Net assets attributable
to variable life
policyholders........... $638,024 4,971,007 6,644,490 2,112,316 979,430
======== ========= ========= ========= =======
Outstanding units: Type I
(note 2)................ 19,007 59,418 75,801 52,113 23,951
======== ========= ========= ========= =======
Net asset value per unit:
Type I.................. $ 23.26 73.02 82.81 35.44 34.73
======== ========= ========= ========= =======
Outstanding units: Type
II (note 2)............. 8,423 8,659 4,437 7,489 4,250
======== ========= ========= ========= =======
Net asset value per unit:
Type II................. $ 23.26 73.02 82.81 35.44 34.73
======== ========= ========= ========= =======
</TABLE>
F-4
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Variable Insurance Products Fund Products Fund II Products Fund III
---------------------------------- -------------------- -----------------------
Equity- Asset Growth & Growth
Income Growth Overseas Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Assets ----------- ----------- ---------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment in Variable
Insurance Products
Fund, at fair value
(note 2):
Equity-Income Portfolio
(268,605 shares;
cost-- $6,047,295).... $ 6,905,846 -- -- -- -- -- --
Growth Portfolio
(188,985 shares;
cost -- $7,350,078)... -- 10,380,964 -- -- -- -- --
Overseas Portfolio
(105,202 shares;
cost-- $2,041,700).... -- -- 2,886,747 -- -- -- --
Investment in Variable
Insurance Products Fund
II, at fair value (note
2):
Asset Manager Portfolio
(266,306 shares;
cost-- $4,258,773).... -- -- -- 4,971,925 -- -- --
Contrafund Portfolio
(171,186 shares;
cost-- $3,897,646).... -- -- -- -- 4,990,060 -- --
Investment in Variable
Insurance Product Fund
III, at fair value
(note 2): -- -- -- -- -- -- --
Growth & Income
Portfolio (48,408
shares; cost --
$757,158)............. -- -- -- -- -- 837,454 --
Growth Opportunities
Portfolio (19,469
shares; cost --
$413,198)............. -- -- -- -- -- -- 450,697
Receivable for units
sold................... 4,961 2,466 632 845 738 97 49
----------- ----------- ---------- --------- --------- ------- -------
Total assets........... 6,910,807 10,383,430 2,887,379 4,972,770 4,990,798 837,551 450,746
=========== =========== ========== ========= ========= ======= =======
Liabilities
Accrued expenses payable
to affiliate (note 3).. 5,002 4,772 2,072 2,570 4,079 1,502 1,297
Payable for units with-
drawn.................. -- -- -- -- -- -- --
----------- ----------- ---------- --------- --------- ------- -------
Total liabilities...... 5,002 4,772 2,072 2,570 4,079 1,502 1,297
----------- ----------- ---------- --------- --------- ------- -------
Net assets attributable
to variable life
policyholders.......... $ 6,905,805 10,378,658 2,885,307 4,970,200 4,986,719 836,049 449,449
=========== =========== ========== ========= ========= ======= =======
Outstanding units: Type
I (note 2)............. 134,499 115,121 71,868 151,835 109,523 15,603 15,681
=========== =========== ========== ========= ========= ======= =======
Net asset value per
unit: Type I........... $ 47.09 81.17 38.13 32.09 33.05 17.33 15.80
=========== =========== ========== ========= ========= ======= =======
Outstanding units: Type
II (note 2)............ 12,153 12,742 3,803 3,048 41,361 32,640 12,765
=========== =========== ========== ========= ========= ======= =======
Net asset value per
unit: Type II.......... $ 47.09 81.17 38.13 32.09 33.05 17.33 15.80
=========== =========== ========== ========= ========= ======= =======
</TABLE>
F-5
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
PBHG Insurance
Federated Insurance Series Alger American Fund Series Fund, Inc.
---------------------------- ------------------------ -------------------
PBHG
American High Small Large Cap PBHG
Leaders Income Bond Utility Capitalization Growth Growth Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
Assets -------- ----------- ------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Investments in Federated
Insurance Series, at
fair value (note 2):
American Leaders Fund
II
(28,878 shares; cost
-- $593,008).......... $601,248 -- -- -- -- -- --
High Income Bond Fund
II
(31,144 shares; cost
-- $326,009).......... -- 318,914 -- -- -- -- --
Utility Fund II
(26,481 shares; cost
-- $354,673).......... -- -- 380,008 -- -- -- --
Investment in Alger
American, at fair value
(note 2):
Small Capitalization
Portfolio
(41,921 shares; cost
-- $1,831,455)........ -- -- -- 2,311,918 -- -- --
Growth Portfolio
(50,009 shares; cost
-- $2,728,747)........ -- -- -- -- 3,219,551 -- --
Investment in PBHG
Insurance Series Fund,
Inc., at fair value
(note 2):
PBHG Large Cap Growth
Portfolio
(7,767 shares; cost--
$112,571)............. -- -- -- -- -- 198,139 --
PBHG Growth II Portfo-
lio
(12,303 shares; cost
-- $193,670).......... -- -- -- -- -- -- 283,587
Receivable from affili-
ate.................... -- -- 1 -- -- -- 11
Receivable for units
sold................... -- -- 24 15,660 9,223 -- 570
-------- ------- ------- --------- --------- ------- -------
Total assets........... 601,248 318,914 380,033 2,327,578 3,228,774 198,139 284,168
======== ======= ======= ========= ========= ======= =======
Liabilities
Accrued expenses payable
to affiliate
(note 3)............... 1,335 1,180 642 3,005 2,319 2,163 2,329
Payable for units with-
drawn.................. -- -- -- -- -- -- --
-------- ------- ------- --------- --------- ------- -------
Total liabilities...... 1,335 1,180 642 3,005 2,319 2,163 2,329
-------- ------- ------- --------- --------- ------- -------
Net assets attributable
to variable life
policyholders.......... $599,913 317,734 379,391 2,324,573 3,226,455 195,976 281,839
======== ======= ======= ========= ========= ======= =======
Outstanding units: Type
I (note 2)............. 16,635 11,900 12,001 113,855 79,133 5,461 4,820
======== ======= ======= ========= ========= ======= =======
Net asset value per
unit: Type I........... $ 18.05 15.87 19.55 17.56 26.47 25.04 22.62
======== ======= ======= ========= ========= ======= =======
Outstanding units: Type
II (note 2)............ 16,602 8,121 7,406 18,524 42,758 2,366 7,640
======== ======= ======= ========= ========= ======= =======
Net asset value per
unit: Type II.......... $ 18.05 15.87 19.55 17.56 26.47 25.04 22.62
======== ======= ======= ========= ========= ======= =======
</TABLE>
F-6
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
Janus Aspen Series
-----------------------------------------------------------------------------
Aggressive Worldwide Flexible International Capital
Growth Growth Growth Balanced Income Growth Appreciation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in Janus
Aspen Series, at fair
value (note 2):
Aggressive Growth Port-
folio
(143,167 shares;
cost -- $4,864,207)... $8,545,625 -- -- -- -- -- --
Growth Portfolio
(206,232 shares;
cost -- $4,779,113)... -- 6,939,716 -- -- -- -- --
Worldwide Growth Port-
folio
(201,797 shares;
cost -- $5,372,653)... -- -- 9,635,806 -- -- -- --
Balanced Portfolio
(84,084 shares;
cost -- $1,751,502)... -- -- -- 2,347,630 -- -- --
Flexible Income Portfo-
lio
(17,825 shares; cost
-- $211,588).......... -- -- -- -- 203,559 -- --
International Growth
Portfolio
(59,726 shares;
cost -- $1,352,720)... -- -- -- -- -- 2,309,613 --
Capital Appreciation
Portfolio
(66,811 shares;
cost -- $1,656,707)... -- -- -- -- -- -- 2,216,124
Receivable from affili-
ate.................... -- -- 27 -- -- 10 --
Receivable for units
sold................... 3,499 17,184 1,809 1,674 -- 56 8,813
---------- --------- --------- --------- ------- --------- ---------
Total assets........... 8,549,124 6,956,900 9,637,642 2,349,304 203,559 2,309,679 2,224,937
========== ========= ========= ========= ======= ========= =========
Liabilities
Accrued expenses payable
to affiliate
(note 3)............... 11,162 3,056 4,354 1,959 1,198 2,489 9,403
Payable for units with-
drawn.................. -- -- -- -- -- -- --
---------- --------- --------- --------- ------- --------- ---------
Total liabilities...... 11,162 3,056 4,354 1,959 1,198 2,489 9,403
---------- --------- --------- --------- ------- --------- ---------
Net assets attributable
to variable life
policyholders.......... $8,537,962 6,953,844 9,633,288 2,347,345 202,361 2,307,190 2,215,534
========== ========= ========= ========= ======= ========= =========
Outstanding units: Type
I (note 2)............. 119,651 150,399 192,606 63,165 5,993 34,317 22,233
========== ========= ========= ========= ======= ========= =========
Net asset value per
unit: Type I........... $ 51.75 34.92 39.95 24.98 13.82 29.06 32.74
========== ========= ========= ========= ======= ========= =========
Outstanding units: Type
II (note 2)............ 45,333 48,738 48,527 30,804 8,649 45,077 45,437
========== ========= ========= ========= ======= ========= =========
Net asset value per
unit: Type II.......... $ 51.75 34.92 39.95 24.98 13.82 29.06 32.74
========== ========= ========= ========= ======= ========= =========
</TABLE>
F-7
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
Goldman Sachs
Variable Insurance Salomon Brothers
Trust Variable 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>
Assets
Investment in Goldman Sachs Vari-
able Insurance Trust
at fair value (note 2):
Growth and Income Fund (1,957
shares; cost -- $21,040)....... $21,313 -- -- -- --
Mid Cap Value Fund (52,976
shares; cost -- $446,381)...... -- 446,055 -- -- --
Investment in Salomon Brothers
Variable Series Fund Inc.
at fair value (note 2):
Strategic Bond Fund (5,753
shares; cost -- $57,478)....... -- -- 55,570 -- --
Investors Fund (809 shares; cost
-- $9,604)..................... -- -- -- 9,889 --
Total Return Fund (110 shares;
cost -- $1,159)................ -- -- -- -- 1,122
Receivable from affiliate........ 1 12 -- -- --
Receivable for units sold........ -- 15,263 -- -- --
------- ------- ------ ----- -----
Total assets.................... 21,314 461,330 55,570 9,889 1,122
======= ======= ====== ===== =====
Liabilities
Accrued expenses payable to af-
filiate (note 3)................ 6 118 16 1 --
Payable for units withdrawn...... -- -- -- -- --
------- ------- ------ ----- -----
Total liabilities............... 6 118 16 1 --
------- ------- ------ ----- -----
Net assets attributable to vari-
able life policyholders......... $21,308 461,212 55,554 9,888 1,122
======= ======= ====== ===== =====
Outstanding units: Type I (note
2).............................. -- 47,242 -- 111 103
======= ======= ====== ===== =====
Net asset value per unit: Type
I............................... $ 9.30 8.45 10.22 13.48 10.69
======= ======= ====== ===== =====
Outstanding units: Type II (note
2).............................. 2,291 7,339 5,436 623 2
======= ======= ====== ===== =====
Net asset value per unit: Type
II.............................. $ 9.30 8.45 10.22 13.48 10.69
======= ======= ====== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
--------------------------------------------
Government
S&P 500 Index Fund Securities Fund
---------------------------- ---------------
Year ended December 31, Period ended
---------------------------- December 11,
1999 1998 1997 1997
---------- --------- ------- ---------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary dividends.... $ 60,042 43,701 40,894 --
Expenses -- Mortality and
expense risk charges --
Type I (note 3)................ 35,117 26,008 17,405 2,085
Expenses -- Mortality and
expense risk charges --
Type II (note 3)............... 13,313 1,383 -- --
---------- --------- ------- ------
Net investment income (expense).. 11,612 16,310 23,489 (2,085)
---------- --------- ------- ------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)........ 367,307 200,588 18,179 1,254
Unrealized appreciation (depre-
ciation) on investments........ 797,281 637,587 504,771 18,064
Capital gain distributions...... 82,915 154,941 48,005 --
---------- --------- ------- ------
Net realized and unrealized gain
(loss) on investments........... 1,247,503 993,116 570,955 19,318
---------- --------- ------- ------
Increase (decrease) in net assets
from operations................. $1,259,115 1,009,426 594,444 17,233
========== ========= ======= ======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
----------------------------------------------------
Money Market Fund Total Return Fund
-------------------------- ------------------------
Year ended December 31, Year ended December 31,
-------------------------- ------------------------
1999 1998 1997 1999 1998 1997
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary div-
idends................ 261,216 161,959 107,705 87,229 207,758 86,792
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 20,306 18,144 13,717 28,286 26,094 24,218
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 17,608 2,862 -- 1,377 212 --
------- ------- -------- ------- ------- -------
Net investment income
(expense).............. 223,302 140,953 93,988 57,566 181,452 62,574
------- ------- -------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 3 517 298,840 10,066 (62,109) (54,073)
Unrealized appreciation
(depreciation) on in-
vestments............. (3) (517) (300,439) 319,427 423,954 123,159
Capital gain distribu-
tions................. -- -- -- 102,400 -- 370,006
------- ------- -------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... -- -- (1,599) 431,893 361,845 439,092
------- ------- -------- ------- ------- -------
Increase (decrease) in
net assets from opera-
tions.................. 223,302 140,953 92,389 489,459 543,297 501,666
======= ======= ======== ======= ======= =======
</TABLE>
F-9
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
------------------------------------------------------
International Equity Real Estate
Fund Securities Fund
------------------------- ---------------------------
Year ended December 31, Year ended December 31,
------------------------- ---------------------------
1999 1998 1997 1999 1998 1997
-------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $ 669 5,942 685 23,112 13,488 7,238
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 792 638 399 2,004 1,772 814
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 531 10 -- 839 117 --
-------- ------- ------- -------- -------- -------
Net investment income
(expense).............. (654) 5,294 286 20,269 11,599 6,424
-------- ------- ------- -------- -------- -------
Net realized and
unrealized (loss) gain
on investments:
Net realized gain
(loss)................ 5,881 93 654 (14,908) (13,410) 2,800
Unrealized appreciation
(depreciation) on
investments........... 34,706 8,003 (5,290) (10,218) (64,135) (2,725)
Capital gain distribu-
tions................. 16,048 -- 7,881 1,216 12,450 13,442
-------- ------- ------- -------- -------- -------
Net realized and
unrealized (loss) gain
on investments......... 56,635 8,096 3,245 (23,910) (65,095) 13,517
-------- ------- ------- -------- -------- -------
Increase (decrease) in
net assets from
operations............. $ 55,981 13,390 3,531 (3,641) (53,496) 19,941
======== ======= ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
-----------------------------------------------------
Global Income Fund Value Equity Fund
-------------------------- --------------------------
Period from Period from
Year ended June 18, Year ended June 17,
December 31, 1997 to December 31, 1997 to
------------- December 31, ------------- December 31
1999 1998 1997 1999 1998 1997
------ ----- ------------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. 1,257 2,016 424 4,044 1,033 16
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 258 352 30 824 270 17
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 141 2 -- 1,482 256 --
------ ----- ---- ------ ------ ---
Net investment income
(expense).............. 858 1,662 394 1,738 507 (1)
------ ----- ---- ------ ------ ---
Net realized and
unrealized (loss) gain
on investments:
Net realized gain
(loss)................ (128) 3,656 35 14,236 (305) (9)
Unrealized appreciation
(depreciation) on
investments........... (4,715) 1,314 (329) 22,084 11,219 1
Capital gain distribu-
tions................. 95 84 37 -- 5,046 99
------ ----- ---- ------ ------ ---
Net realized and
unrealized (loss) gain
on investments......... (4,748) 5,054 (257) 36,320 15,960 (91)
------ ----- ---- ------ ------ ---
Increase (decrease) in
net assets from
operations............. (3,890) 6,716 137 38,058 16,467 90
====== ===== ==== ====== ====== ===
</TABLE>
F-10
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
----------------------------------------------------------------------
Premier Growth
Income Fund U.S. Equity Fund Equity Fund
----------------------------- ------------------------- --------------
Period from Period from Period from
Year ended December 12, Year June 10, June 9,
December 31, 1997 to Ended 1998 to 1999 to
---------------- December 31, December 31, December 31, December 31,
1999 1998 1997 1999 1998 1999
-------- ------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $ 21,400 20,775 992 1,122 269 124
Expenses -- Mortality
and expense risk
charges -- Type I
(note 3).............. 2,983 2,899 116 74 -- 103
Expenses -- Mortality
and expense risk
charges -- Type II
(note 3).............. 47 3 -- 825 47 116
-------- ------ ---- ------ ----- ------
Net investment income
(expense).............. 18,370 17,873 876 223 222 (95)
======== ====== ==== ====== ===== ======
Net realized and
unrealized (loss) gain
on investments:
Net realized gain
(loss)................ (78) 3,321 (838) 2,835 144 344
Unrealized appreciation
(depreciation) on
investments........... (28,051) 4,423 523 6,670 3,300 13,285
Capital gain
distributions......... 662 3,666 -- 10,093 600 4,011
-------- ------ ---- ------ ----- ------
Net realized and
unrealized (loss) gain
on investments......... (27,467) 11,410 (315) 19,598 4,044 17,640
-------- ------ ---- ------ ----- ------
Increase (decrease) in
net assets from
operations............. $ (9,097) 29,283 561 19,821 4,266 17,545
======== ====== ==== ====== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
--------------------------------------
Money Fund Bond Fund/VA
------------ -------------------------
Period ended Year ended December 31,
December 11, -------------------------
1997 1999 1998 1997
------------ -------- ------- -------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary dividends.......... $27 21,896 5,253 16,714
Expenses -- Mortality and expense risk
charges --
Type I (note 3)...................... 4 3,043 2,541 1,872
Expenses -- Mortality and expense risk
charges --
Type II (note 3)..................... -- 683 56 --
--- -------- ------- -------
Net investment income (expense)........ 23 18,170 2,656 14,842
=== ======== ======= =======
Net realized and unrealized gain on
investments:
Net realized gain (loss).............. -- (1,863) 2,899 276
Unrealized appreciation (depreciation)
on investments....................... -- (29,542) 11,167 5,965
Capital gain distributions............ -- 2,165 4,848 872
--- -------- ------- -------
Net realized and unrealized gain (loss)
on investments........................ -- (29,240) 18,914 7,113
--- -------- ------- -------
Increase (decrease) in net assets from
operations............................ $23 (11,070) 21,570 21,955
=== ======== ======= =======
</TABLE>
F-11
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
----------------------------------------------------------
Capital Appreciation Fund/VA Aggessive Growth Fund/VA
----------------------------------------------------------
Year ended December 31, Year ended December 31,
----------------------------------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- ------------------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. 11,323 18,421 94,465 -- 8,230 5,972
Expenses -- Mortality
and expense risk
charges -- Type I
(note 3).............. 24,680 18,337 13,535 30,929 23,326 19,370
Expenses -- Mortality
and expense risk
charges -- Type II
(note 3).............. 2,409 315 -- 1,422 306 --
---------- -------- -------- --------- ------- -------
Net investment income
(expense).............. (15,766) (231) 80,930 (32,351) (15,402) (13,398)
========== ======== ======== ========= ======= =======
Net realized and
unrealized gain on
investments:
Net realized gain
(loss)................ 205,534 89,327 112,639 393,176 93,644 264,595
Unrealized appreciation
(depreciation) on
investments........... 1,083,816 270,706 226,521 2,690,916 277,402 (89,502)
Capital gain
distributions......... 130,214 211,836 -- -- 83,215 113,459
---------- -------- -------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 1,419,564 571,869 339,160 3,084,092 454,261 288,552
---------- -------- -------- --------- ------- -------
Increase (decrease) in
net assets from
operations............. 1,403,798 571,638 420,090 3,051,741 438,859 275,154
========== ======== ======== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
---------------------------------------------------------
High Income Fund/VA Multiple Strategies Fund/VA
-------------------------- ------------------------------
Year ended December 31, Year ended December 31,
-------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
-------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $129,252 37,269 104,862 30,217 6,701 23,583
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 13,177 12,467 8,770 5,751 5,131 4,459
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 1,187 111 -- 766 150 --
-------- ------- ------- --------- --------- ---------
Net investment income
(expense).............. 114,888 24,691 96,092 23,700 1,420 19,124
======== ======= ======= ========= ========= =========
Net realized and
unrealized gain on
investments:
Net realized gain
(loss)................ (9,827) 3,380 11,476 12,030 10,586 26,553
Unrealized appreciation
(depreciation) on
investments........... (37,389) (81,675) 28,520 16,700 (5,312) 27,703
Capital gain
distributions......... -- 45,551 763 43,483 37,972 21,730
-------- ------- ------- --------- --------- ---------
Net realized and
unrealized gain (loss)
on investments......... (47,216) (32,744) 40,759 72,213 43,246 75,986
-------- ------- ------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. $ 67,672 (8,053) 136,851 95,913 44,666 95,110
======== ======= ======= ========= ========= =========
</TABLE>
F-12
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
---------------------------------------------------
Money Market High Income
Portfolio Portfolio Equity-Income Portfolio
------------ ------------ -------------------------
Period ended Period ended Year ended December 31,
December 11, December 11, -------------------------
1997 1997 1999 1998 1997
------------ ------------ -------- ------- -------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............... $31,897 14,963 100,754 77,691 57,767
Expenses -- Mortality and
expense risk charges--
Type I (note 3)......... 1,948 1,461 46,384 41,459 30,384
Expenses -- Mortality and
expense risk charges--
Type II (note 3)........ -- -- 2,894 544 --
------- ------- -------- ------- -------
Net investment income
(expense)................ 29,949 13,502 51,476 35,688 27,383
======= ======= ======== ======= =======
Net realized and
unrealized gain on
investments:
Net realized gain
(loss).................. -- 41,295 273,786 235,107 125,398
Unrealized appreciation
(depreciation) on
investments............. -- (23,320) (193,819) 97,581 539,549
Capital gain
distributions........... -- 1,849 224,259 275,448 282,036
------- ------- -------- ------- -------
Net realized and
unrealized gain (loss) on
investments.............. -- 19,824 304,226 608,136 946,983
------- ------- -------- ------- -------
Increase (decrease) in net
assets from operations... $29,949 33,326 355,702 643,824 974,366
======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund (continued)
-------------------------------------------------------
Growth Portfolio Overseas Portfolio
----------------------------- ------------------------
Year ended December 31, Year ended December 31,
----------------------------- ------------------------
1999 1998 1997 1999 1998 1997
--------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. 17,646 28,150 24,386 32,601 34,556 31,159
Expenses -- Mortality
and expense risk
charges --Type I (note
3).................... 56,960 42,146 30,276 16,186 13,985 12,638
Expenses -- Mortality
and expense risk
charges --Type II
(note 3).............. 3,167 138 -- 579 19 --
--------- --------- ------- ------- ------- -------
Net investment income
(expense).............. (42,481) (14,134) (5,890) 15,836 20,552 18,521
========= ========= ======= ======= ======= =======
Net realized and
unrealized gain on
investments:
Net realized gain
(loss)................ 453,879 728,950 193,439 112,501 98,578 95,087
Unrealized appreciation
(depreciation) on
investments........... 1,452,235 630,736 566,792 685,935 (8,287) (45,710)
Capital gain
distributions......... 864,641 675,592 111,094 53,190 103,670 124,634
--------- --------- ------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 2,770,755 2,035,278 871,325 851,626 193,961 174,011
--------- --------- ------- ------- ------- -------
Increase (decrease) in
net assets from
operations............. 2,728,274 2,021,144 865,435 867,462 214,513 192,532
========= ========= ======= ======= ======= =======
</TABLE>
F-13
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund II
--------------------------------------------------------------
Asset Manager Portfolio Contrafund Portfolio
------------------------------- ------------------------------
Year ended December 31 Year ended December 31
------------------------------- ------------------------------
1999 1998 1997 1999 1998 1997
-------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $153,442 131,901 121,212 18,437 14,737 9,110
Expenses -- Mortality
and expense risk
charges-- Type I (note
3).................... 33,559 30,607 26,984 23,952 17,652 11,153
Expenses -- Mortality
and expense risk
charges-- Type II
(note 3).............. 439 77 -- 6,221 668 --
-------- ------- ------- ------- ------- -------
Net investment income
(expense).............. 119,444 101,217 94,228 (11,736) (3,583) (2,043)
======== ======= ======= ======= ======= =======
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 64,747 58,132 68,861 354,876 228,313 198,947
Unrealized appreciation
(depreciation) on
investments........... 89,931 32,734 222,652 425,779 398,426 135,687
Capital gain
distributions......... 195,289 395,701 296,760 135,201 108,073 24,629
-------- ------- ------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 349,967 486,567 588,273 915,856 734,812 359,263
-------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from
operations............. $469,411 587,784 682,501 904,120 731,229 357,220
======== ======= ======= ======= ======= =======
<CAPTION>
Variable Insurance Products Fund III
--------------------------------------------------------------
Growth Opportunities
Growth & Income Portfolio Portfolio
------------------------------- ------------------------------
Period from Period from
Year ended May 30, Year ended May 30,
December 31, 1997 to December 31, 1997 to
----------------- December 31, ---------------- December 31,
1999 1998 1997 1999 1998 1997
-------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. 2,804 -- -- 3,049 808 --
Expenses -- Mortality
and expense risk
charges-- Type I (note
3).................... 2,165 1,159 45 1,866 1,170 148
Expenses -- Mortality
and expense risk
charges-- Type II
(note 3).............. 2,516 244 -- 866 53 --
-------- ------- ------- ------- ------- -------
Net investment income
(expense).............. (1,877) (1,403) (45) 317 (415) (148)
======== ======= ======= ======= ======= =======
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 28,022 2,566 1,642 10,345 3,612 472
Unrealized appreciation
(depreciation) on
investments........... 21,930 59,468 (1,102) (1,242) 35,308 3,433
Capital gain
distributions......... 5,692 337 -- 5,663 2,865 --
-------- ------- ------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 55,644 62,371 540 14,766 41,785 3,905
-------- ------- ------- ------- ------- -------
Increase (decrease) in
net assets from
operations............. 53,767 60,968 495 15,083 41,370 3,757
======== ======= ======= ======= ======= =======
</TABLE>
F-14
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Neuberger & Berman
Advisers Management Trust
-----------------------------
Balanced Bond Growth
Portfolio Portfolio Portfolio
--------- --------- ---------
Period ended December 11,
-----------------------------
1997 1997 1997
--------- --------- ---------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary dividends.................... $ 4,567 4,664 --
Expenses -- Mortality and expense risk charges
-- Type I (note 3)............................. 1,723 462 982
Expenses -- Mortality and expense risk charges
-- Type II (note 3)............................ -- -- --
------- ----- -------
Net investment income (expense).................. 2,844 4,202 (982)
======= ===== =======
Net realized and unrealized gain (loss) on in-
vestments:
Net realized gain (loss)........................ 36,568 (162) 37,624
Unrealized appreciation (depreciation) on in-
vestments...................................... (14,898) (48) (18,849)
Capital gain distributions...................... 11,743 -- 11,458
------- ----- -------
Net realized and unrealized gain (loss) on in-
vestments....................................... 33,413 (210) 30,233
------- ----- -------
Increase (decrease) in net assets from opera-
tions........................................... $36,257 3,992 29,251
======= ===== =======
</TABLE>
<TABLE>
<CAPTION>
Federated Insurance Series
------------------------------------------------------------------------------
American Leaders Fund High Income Bond Fund
II II Utility Fund II
-------------------------- ---------------------------------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
-------------------------- ---------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- ------- ------- -------- ------- --------------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $ 3,192 626 44 15,467 3,125 3,460 6,452 1,649 2,661
Expenses -- Mortality
and expense risk
charges -- Type I
(note 3).............. 1,774 1,082 113 1,149 938 656 1,634 1,345 860
Expenses -- Mortality
and expense risk
charges -- Type II
(note 3).............. 1,482 198 -- 583 41 -- 602 36 --
-------- ------- ------ -------- ------- ------ -------- ------- -------
Net investment income
(expense).............. (64) (654) (69) 13,735 2,146 2,804 4,216 268 1,801
======== ======= ====== ======== ======= ====== ======== ======= =======
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 8,624 (245) 598 (2,384) 1,890 836 3,277 5,077 1,782
Unrealized appreciation
(depreciation) on
investments........... (17,252) 22,437 3,025 (10,198) (3,246) 5,274 (16,132) 11,499 25,287
Capital gain
distributions......... 32,275 8,313 104 1,345 882 159 12,525 10,132 2,268
-------- ------- ------ -------- ------- ------ -------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 23,647 30,505 3,727 (11,237) (474) 6,269 (330) 26,708 29,337
-------- ------- ------ -------- ------- ------ -------- ------- -------
Increase (decrease) in
net assets from
operations............. $ 23,583 29,851 3,658 2,498 1,672 9,073 3,886 26,976 31,138
======== ======= ====== ======== ======= ====== ======== ======= =======
</TABLE>
F-15
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Alger American Fund
-----------------------------------------------------------
Small Capitalization Portfolio Growth Portfolio
--------------------------------- -------------------------
Year ended December 31, Year ended December 31,
--------------------------------- -------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $ -- -- -- 2,264 3,185 3,606
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 9,129 6,602 5,518 13,062 8,011 7,350
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 1,012 105 -- 4,272 105 --
---------- --------- --------- ------- ------- -------
Net investment income
(expense).............. (10,141) (6,707) (5,518) (15,070) (4,931) (3,744)
========== ========= ========= ======= ======= =======
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ (6,385) (65,245) 109,665 390,753 60,482 103,893
Unrealized appreciation
(depreciation) on
investments........... 405,230 102,269 (21,855) 99,476 293,124 100,012
Capital gain
distributions......... 183,620 119,910 23,157 224,152 156,070 6,410
---------- --------- --------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 582,465 156,934 110,967 714,381 509,676 210,315
---------- --------- --------- ------- ------- -------
Increase (decrease) in
net assets from
operations............. $ 572,324 150,227 105,449 699,311 504,745 206,571
========== ========= ========= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
PBHG Insurance Series Fund, Inc.
---------------------------------------------------------
PBHG Large Cap Growth
Portfolio PBGH Growth II Portfolio
---------------------------- ----------------------------
Period from Period from
Year ended May 30, Year ended May 30,
December 31, 1997 to December 31, 1997 to
-------------- December 31, -------------- December 31,
1999 1998 1997 1999 1998 1997
------ ------ ------------ ------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. -- -- -- -- -- --
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 606 310 63 569 177 43
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 209 17 -- 410 62 --
------ ------ --- ------- ----- ----
Net investment income
(expense).............. (815) (327) (63) (979) (239) (43)
====== ====== === ======= ===== ====
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 5,563 3,310 584 34,202 (197) 34
Unrealized appreciation
(depreciation) on
investments........... 71,826 13,650 92 81,393 8,666 (142)
Capital gain
distributions......... -- -- -- -- -- --
------ ------ --- ------- ----- ----
Net realized and
unrealized gain (loss)
on investments......... 77,389 16,960 676 115,595 8,469 (108)
------ ------ --- ------- ----- ----
Increase (decrease) in
net assets from
operations............. 76,574 16,633 613 114,616 8,230 (151)
====== ====== === ======= ===== ====
</TABLE>
F-16
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------------------------------------------
Aggressive Growth Worldwide Growth
Portfolio Growth Portfolio Portfolio
--------------------------- -------------------------- --------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
--------------------------- -------------------------- --------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---------- ------- ------- --------- ------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............. $ 65,274 -- -- 10,964 81,252 24,526 11,433 109,248 24,679
Expenses -- Mortality
and expense risk
charges -- Type I
(note 3).............. 24,955 13,231 10,376 25,172 16,385 11,319 38,848 27,847 16,118
Expenses -- Mortality
and expense risk
charges -- Type II
(note 3).............. 6,757 391 -- 5,821 257 -- 6,863 646 --
---------- ------- ------- --------- ------- ------- --------- ------- -------
Net investment income
(expense).............. 33,562 (13,622) (10,376) (20,029) 64,610 13,207 (34,278) 80,755 8,561
---------- ------- ------- --------- ------- ------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)................ 861,331 171,826 202,593 379,537 115,203 94,811 404,104 233,014 89,852
Unrealized appreciation
(depreciation) on
investments........... 3,141,869 488,613 (21,456) 1,328,882 576,941 155,268 3,266,899 623,292 251,916
Capital gain
distributions......... 111,141 -- -- 21,779 65,314 22,729 -- 43,815 11,139
---------- ------- ------- --------- ------- ------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... 4,114,341 660,439 181,137 1,730,198 757,458 272,808 3,671,003 900,121 352,907
---------- ------- ------- --------- ------- ------- --------- ------- -------
Increase (decrease) in
net assets
from operations........ $4,147,903 646,817 170,761 1,710,169 822,068 286,015 3,636,725 980,876 361,468
========== ======= ======= ========= ======= ======= ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
--------------------------------------------
Flexible Income
Balanced Portfolio Portfolio
----------------------- --------------------
Year ended
Year ended December 31, December 31,
----------------------- --------------------
1999 1998 1997 1999 1998 1997
-------- ------- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary dividends..... $ 43,936 36,704 11,688 12,568 4,328 3,475
Expenses -- Mortality and expense
risk charges -- Type I
(note 3)........................ 9,328 5,806 2,145 715 449 240
Expenses -- Mortality and expense
risk charges -- Type II (note
3).............................. 3,366 484 -- 511 10 --
-------- ------- ------ ------ ----- -----
Net investment income (expense)... 31,242 30,414 9,543 11,342 3,869 3,235
-------- ------- ------ ------ ----- -----
Net realized and unrealized gain
on investments:
Net realized gain (loss)......... 79,219 24,529 8,229 (1,786) 1,687 305
Unrealized appreciation (depreci-
ation) on investments........... 321,542 216,533 41,009 (8,109) (74) 72
Capital gain distributions....... -- 5,970 404 566 167 17
-------- ------- ------ ------ ----- -----
Net realized and unrealized gain
(loss) on investments............ 400,761 247,032 49,642 (9,329) 1,780 394
-------- ------- ------ ------ ----- -----
Increase (decrease) in net assets
from operations.................. $432,003 277,446 59,185 2,013 5,649 3,629
======== ======= ====== ====== ===== =====
</TABLE>
F-17
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
--------------------------------------------------------
International Growth Capital Appreciation
Portfolio Portfolio
------------------------- -----------------------------
Period from
Year ended May 21, 1997
Year ended December 31, December 31, to
------------------------- --------------- December 31,
1999 1998 1997 1999 1998 1997
-------- ------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary div-
idends................ 2,819 10,815 1,441 509 132 27
Expenses -- Mortality
and expense risk
charges --
Type I (note 3)....... 4,231 3,098 1,442 3,352 1,260 34
Expenses -- Mortality
and expense risk
charges --
Type II (note 3)...... 4,585 580 -- 4,381 91 --
-------- ------- ------- ------- ------ ---
Net investment income
(expense).............. (5,997) 7,137 (1) (7,224) (1,219) (7)
-------- ------- ------- ------- ------ ---
Net realized and
unrealized gain on in-
vestments:
Net realized gain
(loss)................ 54,154 40,482 5,037 82,791 28,363 106
Unrealized appreciation
(depreciation) on in-
vestments............. 923,354 16,463 16,037 513,292 45,429 697
Capital gain distribu-
tions................. -- 1,528 275 5,853 -- --
-------- ------- ------- ------- ------ ---
Net realized and
unrealized gain (loss)
on investments......... 977,508 58,473 21,349 601,936 73,792 803
-------- ------- ------- ------- ------ ---
Increase (decrease) in
net assets from opera-
tions.................. 971,511 65,610 21,348 594,712 72,573 796
======== ======= ======= ======= ====== ===
</TABLE>
<TABLE>
<CAPTION>
Goldman Sachs Variable Insurance Trust
---------------------------------------------------
Growth and Income Fund Mid Cap Value Fund
------------------------- -------------------------
Period from Period from
October 1, August 28,
Year ended 1998 to Year ended 1998 to
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............... $242 95 3,355 408
Expenses -- Mortality and
expense risk charges --
Type I (note 3)......... 3 2 293 --
Expenses -- Mortality and
expense risk charges --
Type II (note 3)........ 112 17 448 117
---- --- ------ -----
Net investment income
(expense)............. 127 76 2,614 291
---- --- ------ -----
Net realized and unrealized
gain (loss) on
investments:
Net realized gain
(loss).................. 585 120 87 3,047
Unrealized appreciation
(depreciation) on
investments............. (222) 496 (2,647) 2,320
Capital gain
distributions........... -- -- -- --
---- --- ------ -----
Net realized and
unrealized gain (loss)
on investments........ 363 616 (2,560) 5,367
---- --- ------ -----
Increase (decrease) in
net assets from opera-
tions................. $490 692 54 5,658
==== === ====== =====
</TABLE>
F-18
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Operations, Continued
<TABLE>
<CAPTION>
Salomon Brothers Variable Series Fund Inc.
---------------------------------------------------
Strategic Total
Bond Fund Investors Fund Return Fund
------------ ------------------------- ------------
Period from
December 8,
Year ended Year ended 1998 to Year ended
December 31, December 31, December 31, December 31,
1999 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
dividends............... $2,773 44 6 27
Expenses -- Mortality and
expense risk charges --
Type I (note 3)......... -- 14 1 4
Expenses -- Mortality and
expense risk charges --
Type II (note 3)........ 163 6 -- --
------ --- --- ---
Net investment income
(expense)............. 2,610 24 5 23
------ --- --- ---
Net realized and unrealized
gain (loss) on investments:
Net realized gain
(loss).................. 3 22 -- (1)
Unrealized appreciation
(depreciation) on
investments............. (1,908) 232 53 (37)
Capital gain distribu-
tions................... -- -- -- --
------ --- --- ---
Net realized and
unrealized gain (loss)
on investments........ (1,905) 254 53 (38)
------ --- --- ---
Increase (decrease) in
net assets from opera-
tions................. $ 705 278 58 (15)
====== === === ===
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
----------------------------------------------
Government
Securities
S&P 500 Index Fund Fund
-------------------------------- ------------
Year ended December 31, Period ended
-------------------------------- December 11,
1999 1998 1997 1997
---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net as-
sets
From operations:
Net investment income
(expense).................... $ 11,612 16,310 23,489 (2,085)
Net realized gain (loss)...... 367,307 200,588 18,179 1,254
Unrealized appreciation
(depreciation) on
investments.................. 797,281 637,587 504,771 18,064
Capital gain distributions.... 82,915 154,941 48,005 --
---------- --------- --------- --------
Increase (decrease) in net
assets from operations...... 1,259,115 1,009,426 594,444 17,233
---------- --------- --------- --------
From capital transactions:
Net premiums.................. 2,348,331 1,553,985 496,133 36,517
Loan interest................. (199) (667) (2,663) 290
Transfers (to) from the
general account of GE Life
and Annuity:
Death benefits................ (10,568) -- (146,232) --
Surrenders.................... (226,385) 2,166 (28,437) (15,385)
Loans......................... (147,819) (28,223) (12,720) (4,137)
Cost of insurance and
administrative expense
(note 3)..................... (761,285) (453,919) (235,713) (23,090)
Transfer gain (loss) and
transfer fees................ (1,620) (111,502) (793) (675)
Interfund transfers........... 702,040 (71,575) 954,081 (322,397)
---------- --------- --------- --------
Increase (decrease) in net
assets from capital
transactions................ 1,902,495 890,265 1,023,656 (328,877)
---------- --------- --------- --------
Increase (decrease) in net
assets........................ 3,161,610 1,899,691 1,618,100 (311,644)
Net assets at beginning of
year.......................... 5,307,680 3,407,989 1,789,889 311,644
---------- --------- --------- --------
Net assets at end of year...... $8,469,290 5,307,680 3,407,989 --
========== ========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
--------------------------------------------------------------------
Money Market Fund Total Return Fund
----------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
----------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ 223,302 140,953 93,988 57,566 181,452 62,574
Net realized gain
(loss)................ 3 517 298,840 10,066 (62,109) (54,073)
Unrealized appreciation
(depreciation) on
investments........... (3) (517) (300,439) 319,427 423,954 123,159
Capital gain
distributions......... -- -- -- 102,400 -- 370,006
----------- ---------- ---------- --------- --------- ---------
Increase (decrease) in
net assets from
operations........... 223,302 140,953 92,389 489,459 543,297 501,666
----------- ---------- ---------- --------- --------- ---------
From capital
transactions:
Net premiums........... 7,117,726 5,316,844 3,634,434 251,092 252,081 169,809
Loan interest.......... 132 2,567 (3,118) (279) (327) (299)
Transfers (to) from the
general account of GE
Life and Annuity
Death benefits........ -- (1,231) (15,944) (16,660) (21,333) (7,452)
Surrenders............. (143,091) (127,487) (10,646) (23,097) (16,053) (14,564)
Loans.................. (382,888) (92,788) (5,231) (24,984) (8,458) (3,824)
Cost of insurance and
administrative expense
(note 3).............. (488,436) (379,891) (284,457) (406,244) (385,697) (357,384)
Transfer gain (loss)
and transfer fees..... (7,217) (24,254) (233,325) (706) 26,522 39,224
Interfund transfers.... (5,024,217) (3,025,038) (3,317,791) (27,330) 84,003 (2,809)
----------- ---------- ---------- --------- --------- ---------
Increase (decrease) in
net assets from
capital
transactions......... 1,072,009 1,668,722 (236,078) (248,208) (69,262) (177,299)
----------- ---------- ---------- --------- --------- ---------
Increase (decrease) in
net assets............. 1,295,311 1,809,675 (143,689) 241,251 474,035 324,367
Net assets at beginning
of year................ 4,071,591 2,261,916 2,405,605 4,077,703 3,603,668 3,279,301
----------- ---------- ---------- --------- --------- ---------
Net assets at end of
year................... $ 5,366,902 4,071,591 2,261,916 4,318,954 4,077,703 3,603,668
=========== ========== ========== ========= ========= =========
</TABLE>
F-20
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
----------------------------------------------------------------------------------
International Equity Real Estate Securities
Fund Fund Global Income Fund
------------------------- ------------------------- ----------------------------
Period from
Year ended June 18,
Year ended December 31, Year ended December 31, December 31, 1997 to
------------------------- ------------------------- -------------- December 31,
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- ------- ------ ------- ------- ------- ------ ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ (654) 5,294 286 20,269 11,599 6,424 858 1,662 394
Net realized gain
(loss)................ 5,881 93 654 (14,908) (13,410) 2,800 (128) 3,656 35
Unrealized appreciation
(depreciation) on
investments........... 34,706 8,003 (5,290) (10,218) (64,135) (2,725) (4,715) 1,314 (329)
Capital gain
distributions......... 16,048 -- 7,881 1,216 12,450 13,442 95 84 37
-------- ------- ------ ------- ------- ------- ------ ------ -----
Increase (decrease) in
net assets from
operations........... 55,981 13,390 3,531 (3,641) (53,496) 19,941 (3,890) 6,716 137
From capital
transactions:
Net premiums........... 152,398 27,099 23,197 121,762 210,779 79,557 23,325 15,696 1,293
Loan interest.......... 14 1 4 47 (6) 2 -- -- --
Transfers (to) from the
general account of
GE Life and Annuity:
Death benefits........ (7,573) -- -- (11,787) -- -- -- -- --
Surrenders............ (86) (497) (904) (1,244) (3,842) (692) (1,142) -- --
Loans................. (24,626) (733) (289) (51,101) (660) (874) -- -- (243)
Cost of insurance and
administrative
expense (note 3)..... (40) (10,088) (5,480) (90) (49,575) (17,806) (5,884) (4,405) (373)
Transfer gain (loss)
and transfer fees.... -- 303 (1,837) -- (872) 300 66 128 (9)
Interfund transfers.... (27,880) 10,770 22,059 22,778 41,309 89,769 37,663 8,773 8,418
-------- ------- ------ ------- ------- ------- ------ ------ -----
Increase (decrease) in
assets from capital
transactions......... 92,207 26,855 36,750 80,365 197,133 150,256 54,028 20,192 9,086
-------- ------- ------ ------- ------- ------- ------ ------ -----
Increase (decrease) in
net assets............. 148,188 40,245 40,281 76,724 143,637 170,197 50,138 26,908 9,223
Net assets at beginning
of period.............. 115,749 75,504 35,223 344,046 200,409 30,212 36,131 9,223 --
-------- ------- ------ ------- ------- ------- ------ ------ -----
Net assets at end of
period................. $263,937 115,749 75,504 420,770 344,046 200,409 86,269 36,131 9,223
======== ======= ====== ======= ======= ======= ====== ====== =====
</TABLE>
F-21
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
--------------------------------------------------------------
Value Equity Fund Income Fund
------------------------------- ------------------------------
Period from Period from
Year ended June 17, Year ended December 12,
December 31, 1997 to December 31, 1997 to
----------------- December 31, ---------------- December 31,
1999 1998 1997 1999 1998 1997
-------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ 1,738 507 (1) 18,370 17,873 876
Net realized gain
(loss)................ 14,236 (305) (9) (78) 3,321 (838)
Unrealized appreciation
(depreciation) on
investments........... 22,084 11,219 1 (28,051) 4,423 523
Capital gain
distributions......... -- 5,046 99 662 3,666 --
-------- ------- ------ ------- ------- -------
Increase (decrease) in
net assets from
operations........... 38,058 16,467 90 (9,097) 29,283 561
From capital
transactions:
Net premiums........... 219,094 108,124 5,797 68,061 59,967 735
Loan interest.......... (57) 34 2 11 (75) 12
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... (10,051) -- -- -- -- --
Surrenders............. (4,932) (2,851) -- (3,866) (29,103) --
Loans.................. (20,880) (1,112) -- (2,087) (665) --
Cost of insurance and
administrative expense
(note 3).............. (40,864) (13,611) (1,002) (34,405) (32,512) (1,655)
Transfer gain (loss)
and transfer fees..... (8,769) (3,719) 35 (166) (444) (30)
Interfund transfers.... 167,398 95,455 8,637 (45,407) 29,042 378,428
-------- ------- ------ ------- ------- -------
Increase (decrease) in
net assets from
capital
transactions......... 300,939 182,320 13,469 (17,859) 26,210 377,490
-------- ------- ------ ------- ------- -------
Increase (decrease) in
net assets............. 338,997 198,787 13,559 (26,956) 55,493 378,051
Net assets at beginning
of period.............. 212,346 13,559 -- 433,544 378,051 --
-------- ------- ------ ------- ------- -------
Net assets at end of
period................. $551,343 212,346 13,559 406,588 433,544 378,051
======== ======= ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------
Premier
Growth Equity
U.S. Equity Fund Fund
------------------------- -------------
Period from Period from
June 10, June 9, 1999
Year ended 1998 to to
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)...... 223 222 (95)
Net realized gain (loss)............. 2,835 144 344
Unrealized appreciation
(depreciation) on investments....... 6,670 3,300 13,285
Capital gain distributions........... 10,093 600 4,011
------- ------ -------
Increase (decrease) in net assets
from operations.................... 19,821 4,266 17,545
From capital transactions:
Net premiums......................... 137,612 30,322 35,871
Loan interest........................ -- -- --
Transfers (to) from the general
account of GE Life and Annuity:
Death benefits....................... -- -- --
Surrenders........................... (462) (80) --
Loans................................ -- -- --
Cost of insurance and administrative
expense (note 3).................... (26,579) (2,198) (5,472)
Transfer gain (loss) and transfer
fees................................ (459) 172 1,248
Interfund transfers.................. 38,985 18,463 88,483
------- ------ -------
Increase (decrease) in net assets
from capital transactions.......... 149,097 46,679 120,130
------- ------ -------
Increase (decrease) in net assets..... 168,918 50,945 137,675
Net assets at beginning of period..... 50,945 -- --
------- ------ -------
Net assets at end of period........... 219,863 50,945 137,675
======= ====== =======
</TABLE>
F-22
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
--------------------------------------
Money Fund Bond Fund/VA
------------ -------------------------
Period ended Year ended December 31,
December 11, -------------------------
1997 1999 1998 1997
------------ ------- ------- -------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
From operations:
Net investment income (expense)...... $ 23 18,170 2,656 14,842
Net realized gain (loss)............. -- (1,863) 2,899 276
Unrealized appreciation
(depreciation) on investments....... -- (29,542) 11,167 5,965
Capital gain distributions........... -- 2,165 4,848 872
----- ------- ------- -------
Increase (decrease) in net assets
from operations.................... 23 (11,070) 21,570 21,955
From capital transactions:
Net premiums......................... 111 148,327 164,138 56,837
Loan interest........................ -- 18 (39) (13)
Transfers (to) from the general
account of GE Life and Annuity:
Death benefits....................... -- -- -- --
Surrenders........................... -- (13,864) (17,769) (17,569)
Loans................................ -- (838) (1,348) (2,018)
Cost of insurance and administrative
expense (note 3).................... (205) (63,471) (40,698) (23,294)
Transfer gain (loss) and transfer
fees................................ 15 211 188 (1,279)
Transfers (to) from the Guarantee
Account.............................. -- -- -- --
Interfund transfers................... (651) 108,262 51,994 (12,046)
----- ------- ------- -------
Increase (decrease) in net assets
from capital transactions.......... (730) 178,645 156,466 618
----- ------- ------- -------
Increase (decrease) in net assets..... (707) 167,575 178,036 22,573
Net assets at beginning of year....... 707 470,449 292,413 269,840
----- ------- ------- -------
Net assets at end of year............. $ -- 638,024 470,449 292,413
===== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
----------------------------------------------------------------
Aggressive Growth Fund/VA Capital Appreciation Fund/VA
------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. (32,351) (15,402) (13,398) (15,766) (231) 80,930
Net realized gain
(loss)................ 393,176 93,644 264,595 205,534 89,327 112,639
Unrealized appreciation
(depreciation) on
investments........... 2,690,916 277,402 (89,502) 1,083,816 270,706 226,521
Capital gain
distributions......... -- 83,215 113,459 130,214 211,836 --
--------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations........... 3,051,741 438,859 275,154 1,403,798 571,638 420,090
From capital
transactions:
Net premiums........... 706,892 826,696 794,773 823,296 687,713 460,957
Loan interest.......... (459) 171 305 (802) (398) (541)
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... (2,341) -- (313) (3,528) -- --
Surrenders............. (160,601) (139,804) (41,954) (104,939) (137,732) (69,141)
Loans.................. (187,114) (62,192) (38,517) (44,498) (10,897) (12,664)
Cost of insurance and
administrative expense
(note 3).............. (345,495) (336,566) (307,499) (302,052) (260,178) (176,831)
Transfer gain (loss)
and transfer fees..... (9,130) 2,879 13,531 (383) (93) (4,635)
Transfers (to) from the
Guarantee Account...... -- (257) -- -- -- --
Interfund transfers..... (235,950) (1,915) 61,532 (28,758) 100,907 180,805
--------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
capital
transactions......... (234,198) 289,012 481,858 338,336 379,322 377,950
--------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets............. 2,817,543 727,871 757,012 1,742,134 950,960 798,040
Net assets at beginning
of year................ 3,826,947 3,099,076 2,342,064 3,228,873 2,277,913 1,479,873
--------- --------- --------- --------- --------- ---------
Net assets at end of
year................... 6,644,490 3,826,947 3,099,076 4,971,007 3,228,873 2,277,913
========= ========= ========= ========= ========= =========
</TABLE>
F-23
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes In Net Assets, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds (continued)
-----------------------------------------------------------
Multiple Strategies
High Income Fund Fund
-------------------------------- -------------------------
Year ended December 31, Year ended December 31,
-------------------------------- -------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. $ 114,888 24,691 96,092 23,700 1,420 19,124
Net realized gain
(loss)................ (9,827) 3,380 11,476 12,030 10,586 26,553
Unrealized appreciation
(depreciation) on
investments........... (37,389) (81,675) 28,520 16,700 (5,312) 27,703
Capital gain
distributions......... -- 45,551 763 43,483 37,972 21,730
---------- --------- --------- ------- ------- -------
Increase (decrease) in
net assets from
operations........... 67,672 (8,053) 136,851 95,913 44,666 95,110
---------- --------- --------- ------- ------- -------
From capital
transactions:
Net premiums........... 445,041 464,843 359,877 193,685 235,155 132,071
Loan interest.......... 890 (313) (10) (5) (157) (129)
Transfers (to) from the
general account of
GE Life and Annuity:
Death benefits....... (215) (3,028) -- (253) -- --
Surrenders........... (82,275) (91,485) (19,540) (26,225) (8,552) (51,445)
Loans................ (44,238) (16,569) (25,149) (8,254) (9,879) (4,961)
Cost of insurance and
administrative
expense (note 3)... (170,939) (190,705) (162,386) (68,019) (68,755) (65,223)
Transfer gain (loss)
and transfer fees.... (1,499) 2,861 944 (182) (109) (84)
Transfers (to) from the
Guarantee Account..... (4) -- -- -- -- --
Interfund transfers.... 43,275 46,306 367,417 (53,287) (12,778) (13,534)
---------- --------- --------- ------- ------- -------
Increase (decrease) in
net assets from
capital
transactions......... 190,036 211,910 521,153 37,460 134,925 (3,305)
---------- --------- --------- ------- ------- -------
Increase (decrease) in
net assets............. 257,708 203,857 658,004 133,373 179,591 91,805
Net assets at beginning
of year................ 1,854,608 1,650,751 992,747 846,057 666,466 574,661
---------- --------- --------- ------- ------- -------
Net assets at end of
year................... $2,112,316 1,854,608 1,650,751 979,430 846,057 666,466
========== ========= ========= ======= ======= =======
</TABLE>
F-24
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
---------------------------------------------------------
Money High
Market Income
Portfolio Portfolio Equity-Income Portfolio
------------ ------------ -------------------------------
Period ended Period ended Year ended December 31,
December 11, December 11, -------------------------------
1997 1997 1999 1998 1997
------------ ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. $ 29,949 13,502 51,476 35,688 27,383
Net realized gain
(loss)................ -- 41,295 273,786 235,107 125,398
Unrealized appreciation
(depreciation) on
investments........... -- (23,320) (193,819) 97,581 539,549
Capital gain
distributions......... -- 1,849 224,259 275,448 282,036
--------- -------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 29,949 33,326 355,702 643,824 974,366
--------- -------- --------- --------- ---------
From capital
transactions:
Net premiums........... -- 208 1,437,479 1,528,326 1,111,418
Loan interest.......... (34) (41) 956 (659) 623
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... -- -- (26,021) (4,313) (276)
Surrenders............. (2) (2,471) (195,718) (292,782) (74,706)
Loans.................. (1,093) (1,664) (150,364) (48,745) (43,806)
Cost of insurance and
administrative expense
(note 3).............. (18,137) (16,918) (579,765) (625,045) (475,456)
Transfer gain (loss)
and transfer fees..... (15,912) 1,294 (4,942) 3,459 21,702
Interfund transfers.... (310,424) (226,946) (644,610) 111,431 662,909
--------- -------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (345,602) (246,538) (162,985) 671,672 1,202,408
--------- -------- --------- --------- ---------
Increase (decrease) in
net assets............. (315,653) (213,212) 192,717 1,315,496 2,176,774
Net assets at beginning
of year................ 315,653 213,212 6,713,088 5,397,592 3,220,818
--------- -------- --------- --------- ---------
Net assets at end of
year................... $ -- -- 6,905,805 6,713,088 5,397,592
========= ======== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund (continued)
------------------------------------------------------------------
Growth Portfolio Overseas Portfolio
--------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
--------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(expense)............. $ (42,481) (14,134) (5,890) 15,836 20,552 18,521
Net realized gain
(loss)................ 453,879 728,950 193,439 112,501 98,578 95,087
Unrealized appreciation
(depreciation) on
investments........... 1,452,235 630,736 566,792 685,935 (8,287) (45,710)
Capital gain
distributions......... 864,641 675,592 111,094 53,190 103,670 124,634
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 2,728,274 2,021,144 865,435 867,462 214,513 192,532
----------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums........... 1,388,701 1,067,020 1,063,353 364,398 357,948 366,213
Loan interest.......... (4,205) (3,767) (786) (189) (1,149) (656)
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... (14,970) (2,159) (12,511) (3,758) -- (264)
Surrenders............. (438,334) (303,094) (119,903) (92,920) (94,164) (78,977)
Loans.................. (133,503) (67,251) (102,452) (37,514) (10,363) (29,580)
Cost of insurance and
administrative expense
(note 3).............. (614,236) (550,302) (468,850) (164,565) (172,299) (181,619)
Transfer gain (loss)
and transfer fees..... (14,687) (32,108) (321) (2,197) 3,188 2,923
Interfund transfers.... (344,635) 735,023 127,136 (89,327) 7,063 (292,022)
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (175,869) 843,362 485,666 (26,072) 90,224 (213,982)
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets............. 2,552,405 2,864,506 1,351,101 841,390 304,737 (21,450)
Net assets at beginning
of year................ 7,826,253 4,961,747 3,610,646 2,043,917 1,739,180 1,760,630
----------- --------- --------- --------- --------- ---------
Net assets at end of
year................... $10,378,658 7,826,253 4,961,747 2,885,307 2,043,917 1,739,180
=========== ========= ========= ========= ========= =========
</TABLE>
F-25
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund II
-----------------------------------------------------------------
Asset Manager Portfolio Contrafund Portfolio
-------------------------------- -------------------------------
Year ended December 31, Year ended December 31,
-------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. $ 119,444 101,217 94,228 (11,736) (3,583) (2,043)
Net realized gain
(loss)................ 64,747 58,132 68,861 354,876 228,313 198,947
Unrealized appreciation
(depreciation) on
investments........... 89,931 32,734 222,652 425,779 398,426 135,687
Capital gain
distributions......... 195,289 395,701 296,760 135,201 108,073 24,629
---------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 469,411 587,784 682,501 904,120 731,229 357,220
---------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums........... 477,913 513,149 644,004 1,028,819 947,585 617,546
Loan interest.......... (525) (263) (381) (1,317) (583) (140)
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... (2,250) (4,354) -- -- (3,241) (5,439)
Surrenders............. (104,369) (197,464) (122,367) (127,334) (118,374) (90,538)
Loans.................. (33,108) (31,787) (29,206) (45,515) (45,386) (13,250)
Cost of insurance and
administrative expense
(note 3).............. (282,330) (311,542) (329,030) (391,276) (322,452) (207,378)
Transfer gain (loss)
and transfer fees..... (1,929) 689 12,971 (12,817) 26,399 17,537
Transfers (to) from the
Guarantee Account..... -- -- -- -- (102) --
Interfund transfers.... (188,976) (89,254) 430,161 179 403,462 292,298
---------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (135,574) (120,826) 606,152 450,739 887,308 610,636
---------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets............. 333,837 466,958 1,288,653 1,354,859 1,618,537 967,856
Net assets at beginning
of period.............. 4,636,363 4,169,405 2,880,752 3,631,860 2,013,323 1,045,467
---------- --------- --------- --------- --------- ---------
Net assets at end of
period................. $4,970,200 4,636,363 4,169,405 4,986,719 3,631,860 2,013,323
========== ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund III
---------------------------------------------------------------
Growth Opportunities
Growth & Income Portfolio Portfolio
-------------------------------- ------------------------------
Period from Period from
Year ended May 30, 1997 Year ended May 30, 1997
December 31, to December 31, to
------------------ December 31, ---------------- December 31,
1999 1998 1997 1999 1998 1997
--------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. $ (1,877) (1,403) (45) 317 (415) (148)
Net realized gain
(loss)................ 28,022 2,566 1,642 10,345 3,612 472
Unrealized appreciation
(depreciation) on
investments........... 21,930 59,468 (1,102) (1,242) 35,308 3,433
Capital gain
distributions......... 5,692 337 -- 5,663 2,865 --
--------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets from
operations............. 53,767 60,968 495 15,083 41,370 3,757
--------- ------- ------ ------- ------- ------
From capital
transactions:
Net premiums........... 444,542 202,919 5,448 160,164 71,954 6,899
Loan interest.......... 11 -- -- (114) (31) --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... -- -- -- -- -- --
Surrenders............. (12,518) (2,976) -- (1,860) (448) --
Loans.................. (1,076) 2,468 -- (479) (6,446) --
Cost of insurance and
administrative expense
(note 3).............. (107,292) (31,238) (1,504) (54,942) (24,940) (1,447)
Transfer gain (loss)
and transfer fees..... (9,848) 4,369 1,159 14 976 860
Interfund transfers.... 59,059 125,535 41,761 45,257 132,314 61,508
--------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets from capital
transactions........... 372,878 301,077 46,864 148,040 173,379 67,820
--------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets............. 426,645 362,045 47,359 163,123 214,749 71,577
Net assets at beginning
of period.............. 409,404 47,359 -- 286,326 71,577 --
--------- ------- ------ ------- ------- ------
Net assets at end of
period................. $ 836,049 409,404 47,359 449,449 286,326 71,577
========= ======= ====== ======= ======= ======
</TABLE>
F-26
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Neuberger & Berman Advisers Management Trust
---------------------------------------------------
Balanced Bond Growth
Portfolio Portfolio Portfolio
--------------- -------------- --------------
Period ended Period ended Period ended
December 11, December 11, December 11,
1997 1997 1997
--------------- -------------- --------------
<S> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)........... $ 2,844 4,202 (982)
Net realized gain
(loss).............. 36,568 (162) 37,624
Unrealized apprecia-
tion (depreciation)
on investments...... (14,898) (48) (18,849)
Capital gain distri-
butions............. 11,743 -- 11,458
--------------- ------------- --------------
Increase (de-
crease) in net
assets from op-
erations........ 36,257 3,992 29,251
--------------- ------------- --------------
From capital transac-
tions:
Net premiums......... 321 -- 578
Loan interest........ (32) -- (111)
Transfers (to) from
the general account
of GE Life and Annu-
ity:
Death benefits..... -- -- --
Surrenders......... (12,775) (61) (3,450)
Loans.............. (1,513) -- (1,168)
Cost of insurance
and administrative
expense (note 3).. (11,724) (1,655) (6,896)
Transfer gain
(loss) and trans-
fer fees.......... (153) (1,438) 2,241
Interfund transfers.. (254,395) (80,382) (154,994)
--------------- ------------- --------------
Increase (de-
crease) in net
assets from cap-
ital transac-
tions........... (280,271) (83,536) (163,800)
--------------- ------------- --------------
Increase (decrease) in
net assets............ (244,014) (79,544) (134,549)
Net assets at beginning
of year............... 244,014 79,544 134,549
--------------- ------------- --------------
Net assets at end of
year.................. $ -- -- --
=============== ============= ==============
</TABLE>
F-27
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Federated Insurance Series
---------------------------------------------------------------------------------
American Leaders Fund
II High Income Bond Fund II Utility Fund II
------------------------- --------------------------- -------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
------------------------- --------------------------- -------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
-------- ------- ------ -------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ (64) (654) (69) 13,735 2,146 2,804 4,216 268 1,801
Net realized gain
(loss)................ 8,624 (245) 598 (2,384) 1,890 836 3,277 5,077 1,782
Unrealized appreciation
(depreciation) on
investments........... (17,252) 22,437 3,025 (10,198) (3,246) 5,274 (16,132) 11,499 25,287
Capital gain
distributions......... 32,275 8,313 104 1,345 882 159 12,525 10,132 2,268
-------- ------- ------ -------- -------- ------- ------- ------- -------
Increase (decrease) in
net assets from opera-
tions.................. 23,583 29,851 3,658 2,498 1,672 9,073 3,886 26,976 31,138
-------- ------- ------ -------- -------- ------- ------- ------- -------
From capital
transactions:
Net premiums........... 253,145 161,541 26,104 127,454 76,550 41,464 89,180 81,174 43,641
Loan interest.......... 113 25 -- (48) 60 -- (68) 7 --
Transfers (to) from the
general account of
GE Life and Annuity:
Death benefits........ -- -- -- -- -- -- -- -- --
Surrenders............ (10,302) (6,132) -- (4,636) (3,973) -- (2,117) (2,124) --
Loans................. 37 (1,072) -- (105) (3,721) (3,068) (11,083) (315) --
Cost of insurance
(note 3)............. (60,062) (31,404) (3,533) (26,844) (21,339) (9,342) (27,107) (19,854) (10,455)
Transfer gain (loss)
and transfer fees.... (4,143) (1,069) 46 660 (94) 332 (1,353) (312) (196)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- -- -- -- --
Interfund transfers.... 79,528 120,045 17,684 58,046 16,748 20,749 80,135 (910) 11,808
-------- ------- ------ -------- -------- ------- ------- ------- -------
Increase (decrease) in
net assets from capital
transactions........... 258,316 241,934 40,301 154,527 64,231 50,135 127,587 57,666 44,798
-------- ------- ------ -------- -------- ------- ------- ------- -------
Increase (decrease) in
net assets............. 281,899 271,785 43,959 157,025 65,903 59,208 131,473 84,642 75,936
Net assets at beginning
of period.............. 318,014 46,229 2,270 160,709 94,806 35,598 247,918 163,276 87,340
-------- ------- ------ -------- -------- ------- ------- ------- -------
Net assets at end of
period................. $599,913 318,014 46,229 317,734 160,709 94,806 379,391 247,918 163,276
======== ======= ====== ======== ======== ======= ======= ======= =======
</TABLE>
F-28
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Alger American Fund
---------------------------------------------------------------
Small Capitalization
Portfolio Growth Portfolio
------------------------------ -------------------------------
Year ended December 31, Year ended December 31,
------------------------------ -------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ (10,141) (6,707) (5,518) (15,070) (4,931) (3,744)
Net realized gain
(loss)................ (6,385) (65,245) 109,665 390,753 60,482 103,893
Unrealized appreciation
(depreciation) on
investments........... 405,230 102,269 (21,855) 99,476 293,124 100,012
Capital gain
distributions......... 183,620 119,910 23,157 224,152 156,070 6,410
---------- --------- ------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 572,324 150,227 105,449 699,311 504,745 206,571
---------- --------- ------- --------- --------- ---------
From capital
transactions:
Net premiums........... 370,003 367,472 293,677 885,773 322,362 338,476
Loan interest.......... 92 94 1,571 49 79 578
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... -- (743) -- -- (828) --
Surrenders............. (45,840) (24,987) (3,177) (29,769) (132,389) (17,220)
Loans.................. (19,152) (29,830) (3,833) (10,722) 10,255 (5,609)
Cost of insurance (note
3).................... (124,312) (108,923) (88,074) (238,219) (130,212) (109,328)
Transfer gain (loss)
and transfer fees..... 1,435 8,000 22,932 (2,742) 6,290 (92,300)
Transfers (to) from the
Guarantee Account..... (4) -- -- (4) -- --
Interfund transfers.... 400,632 (11,610) 69,375 96,272 381,092 (862,640)
---------- --------- ------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... 582,854 199,473 292,471 700,638 456,649 (748,043)
---------- --------- ------- --------- --------- ---------
Increase (decrease) in
net assets............. 1,155,178 349,700 397,920 1,399,949 961,394 (541,472)
Net assets at beginning
of period.............. 1,169,395 819,695 421,775 1,826,506 865,112 1,406,584
---------- --------- ------- --------- --------- ---------
Net assets at end of
period................. $2,324,573 1,169,395 819,695 3,226,455 1,826,506 865,112
========== ========= ======= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
PBHG Insurance Series Fund, Inc.
------------------------------------------------------------
PBHG Large Cap
Growth Portfolio PBGH Growth II Portfolio
------------------------------ -----------------------------
Period from Period from
Year ended May 30, Year ended May 30,
December 31, 1997 to December 31, 1997 to
---------------- December 31, --------------- December 31,
1999 1998 1997 1999 1998 1997
-------- ------ ------------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............. $ (815) (327) (63) (979) (239) (43)
Net realized gain
(loss)................ 5,563 3,310 584 34,202 (197) 34
Unrealized appreciation
(depreciation) on
investments........... 71,826 13,650 92 81,393 8,666 (142)
Capital gain
distributions......... -- -- -- -- -- --
-------- ------ ------ ------- ------ ------
Increase (decrease) in
net assets from
operations............. 76,574 16,633 613 114,616 8,230 (151)
-------- ------ ------ ------- ------ ------
From capital
transactions:
Net premiums........... 50,946 38,098 4,425 57,283 19,247 10,354
Loan interest.......... (132) 15 -- -- -- --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits......... -- -- -- -- -- --
Surrenders............. (2,203) (949) (181) (6,046) (286) --
Loans.................. (336) (6,899) -- -- -- --
Cost of insurance (note
3).................... (20,936) (9,007) (1,384) (13,614) (8,107) (1,598)
Transfer gain (loss)
and transfer fees..... (882) (239) 401 (29) (1,497) (24)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- --
Interfund transfers.... 14,590 14,195 22,634 60,751 30,191 12,519
-------- ------ ------ ------- ------ ------
Increase (decrease) in
net assets from capital
transactions........... 41,047 35,214 25,895 98,345 39,548 21,251
-------- ------ ------ ------- ------ ------
Increase (decrease) in
net assets............. 117,621 51,847 26,508 212,961 47,778 21,100
Net assets at beginning
of period.............. 78,355 26,508 -- 68,878 21,100 --
-------- ------ ------ ------- ------ ------
Net assets at end of
period................. $195,976 78,355 26,508 281,839 68,878 21,100
======== ====== ====== ======= ====== ======
</TABLE>
F-29
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series
--------------------------------------------------------------------------------------------------
Aggressive Growth Portfolio Growth Portfolio Worldwide Growth Portfolio
-------------------------------- ------------------------------- -------------------------------
Year ended December 31, Year ended December 31, Year ended December 31,
-------------------------------- ------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
---------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets:
From operations:
Net investment income
(expense)............. $ 33,562 (13,622) (10,376) (20,029) 64,610 13,207 (34,278) 80,755 8,561
Net realized gain
(loss)................ 861,331 171,826 202,593 379,537 115,203 94,811 404,104 233,014 89,852
Unrealized appreciation
(depreciation) on
investments........... 3,141,869 488,613 (21,456) 1,328,882 576,941 155,268 3,266,899 623,292 251,916
Capital gain
distributions......... 111,141 -- -- 21,779 65,314 22,729 -- 43,815 11,139
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 4,147,903 646,817 170,761 1,710,169 822,068 286,015 3,636,725 980,876 361,468
---------- --------- --------- --------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums........... 1,082,138 624,199 525,446 1,295,975 731,597 531,252 1,535,217 1,375,973 822,511
Loan interest.......... (1,654) 113 (1,809) (37) 114 514 (1,750) (462) 740
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits........ (6,162) (826) -- (5,481) (857) -- (24,630) (1,493) --
Surrenders............ (129,518) (129,710) (39,796) (115,738) (112,392) (19,282) (104,073) (169,492) (35,503)
Loans................. (154,373) (41,049) (7,351) (48,269) (5,077) (17,285) (77,866) (55,021) (11,414)
Cost of insurance and
administrative ex-
pense (note 3)....... (385,151) (220,183) (186,650) (383,988) (247,297) (173,865) (598,888) (464,790) (279,525)
Transfer gain (loss)
and transfer fees.... 24,215 18,812 45,321 8,881 537 8,623 4,454 552 3,261
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- -- -- (100) --
Interfund transfers.... 1,428,558 (391,359) 436,211 1,134,259 208,382 231,416 163,874 355,363 795,994
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... 1,858,053 (140,003) 771,372 1,885,602 575,007 561,373 896,338 1,040,530 1,296,064
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets............. 6,005,956 506,814 942,133 3,595,771 1,397,075 847,388 4,533,063 2,021,406 1,657,532
Net assets at beginning
of period.............. 2,532,006 2,025,192 1,083,059 3,358,073 1,960,998 1,113,610 5,100,225 3,078,819 1,421,287
---------- --------- --------- --------- --------- --------- --------- --------- ---------
Net assets at end of
period................. $8,537,962 2,532,006 2,025,192 6,953,844 3,358,073 1,960,998 9,633,288 5,100,225 3,078,819
========== ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
F-30
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-------------------------------------------------------------------
Balanced Portfolio Flexible Income Portfolio
------------------------------ -----------------------------------
Year end December 31, Year end December 31,
------------------------------ -----------------------------------
1999 1998 1997 1999 1998 1997
---------- --------- ------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(expense)............. $ 31,242 30,414 9,543 11,342 3,869 3,235
Net realized gain
(loss)................ 79,219 24,529 8,229 (1,786) 1,687 305
Unrealized appreciation
(depreciation) on
investments........... 321,542 216,533 41,009 (8,109) (74) 72
Capital gain
distributions......... -- 5,970 404 566 167 17
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets from
operations............. 432,003 277,446 59,185 2,013 5,649 3,629
---------- --------- ------- --------- ------- -------
From capital
transactions:
Net premiums........... 542,890 389,374 73,161 47,950 44,607 40,176
Loan interest.......... (227) (51) 6 -- -- --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits........ -- -- -- -- (1,195) --
Surrenders............. (27,562) (8,613) (6,904) (4,556) (908) --
Loans.................. (6,685) (17,190) (577) -- -- --
Cost of insurance (note
3).................... (186,241) (100,651) (31,146) (21,676) (16,727) (10,448)
Transfer gain (loss)
and transfer fees..... (275) 3,680 305 134 (213) 271
Interfund transfers.... 274,258 143,125 369,258 79,252 (2,619) 28,139
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets from capital
transactions........... 596,158 409,674 404,103 101,104 22,945 58,138
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets............. 1,028,161 687,120 463,288 103,117 28,594 61,767
Net assets at beginning
of period.............. 1,319,184 632,064 168,776 99,244 70,650 8,883
---------- --------- ------- --------- ------- -------
Net assets at end of
period................. $2,347,345 1,319,184 632,064 202,361 99,244 70,650
========== ========= ======= ========= ======= =======
<CAPTION>
Janus Aspen Series (continued)
-------------------------------------------------------------------
International Growth
Portfolio Capital Appreciation Portfolio
------------------------------ -----------------------------------
Year ended Period from
Year end December 31, December 31, May 21, 1997
------------------------------ ------------------ to December 31,
1999 1998 1997 1999 1998 1997
---------- --------- ------- --------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets from
operations:
Net investment income
(expense)............. (5,997) 7,137 (1) (7,224) (1,219) (7)
Net realized gain
(loss)................ 54,154 40,482 5,037 82,791 28,363 106
Unrealized appreciation
(depreciation) on
investments........... 923,354 16,463 16,037 513,292 45,429 697
Capital gain
distributions......... -- 1,528 275 5,853 -- --
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets from
operations............. 971,511 65,610 21,348 594,712 72,573 796
---------- --------- ------- --------- ------- -------
From capital
transactions:
Net premiums........... 299,992 375,304 137,587 717,055 106,588 1,504
Loan interest.......... (36) 8 7 196 300 --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits........ -- (645) -- -- -- --
Surrenders............. (17,243) (19,180) (3,539) (7,847) (374) --
Loans.................. (24,736) (432) (462) (4,636) -- --
Cost of insurance (note
3).................... (113,927) (76,148) (30,132) (144,381) (25,927) (1,135)
Transfer gain (loss)
and transfer fees..... (177) 2,743 1,187 (9,482) (8,962) 4
Interfund transfers.... 354,820 168,918 140,874 837,693 79,406 7,451
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets from capital
transactions........... 498,693 450,568 245,522 1,388,598 151,031 7,824
---------- --------- ------- --------- ------- -------
Increase (decrease) in
net assets............. 1,470,204 516,178 266,870 1,983,310 223,604 8,620
Net assets at beginning
of period.............. 836,986 320,808 53,938 232,224 8,620 --
---------- --------- ------- --------- ------- -------
Net assets at end of
period................. 2,307,190 836,986 320,808 2,215,534 232,224 8,620
========== ========= ======= ========= ======= =======
</TABLE>
F-31
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Goldman Sachs Variable Insurance Trust
-------------------------------------------------
Growth and Income Fund Mid Cap Value Fund
------------------------ ------------------------
Period from Period from
October 1, August 28,
Year Ended 1998 to Year Ended 1998 to
December 31, December 31 December 31, December 31
1999 1998 1999 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (ex-
pense)................... $ 127 76 2,614 291
Net realized gain (loss).. 585 120 87 3,047
Unrealized appreciation
(depreciation) on invest-
ments.................... (222) 496 (2,647) 2,320
Capital gain distribu-
tions.................... -- -- -- --
------- ------ ------- ------
Increase (decrease) in
net assets from opera-
tions.................. 490 692 54 5,658
------- ------ ------- ------
From capital transactions:
Net premiums.............. 14,501 9,253 43,005 6,190
Loan interest............. -- -- -- --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits........... -- -- -- --
Surrenders............... (171) -- -- --
Loans.................... -- -- -- --
Cost of insurance (note
3)...................... (3,588) (294) (5,287) (1,091)
Transfer gain (loss) and
transfer fees........... (7) (2) 14 (3,036)
Interfund transfers....... (350) 784 330,218 85,487
------- ------ ------- ------
Increase (decrease) in
net assets from capital
transactions........... 10,385 9,741 367,950 87,550
------- ------ ------- ------
Increase (decrease) in net
assets.................... 10,875 10,433 368,004 93,208
Net assets at beginning of
period.................... 10,433 -- 93,208 --
------- ------ ------- ------
Net assets at end of peri-
od........................ $21,308 10,433 461,212 93,208
======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
Salomon Brothers Variable Series Fund Inc.
--------------------------------------------------
Strategic Total
Bond Fund Investors Fund Return Fund
------------ ------------------------ ------------
Period from
December 8,
Year Ended Year Ended 1998 to Year Ended
December 31, December 31, December 31 December 31,
1999 1999 1998 1999
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets from operations:
Net investment income (ex-
pense)................... 2,610 24 5 23
Net realized gain (loss).. 3 22 -- (1)
Unrealized appreciation
(depreciation) on invest-
ments.................... (1,908) 232 53 (37)
Capital gain distribu-
tions.................... -- -- -- --
------ ----- ----- -----
Increase (decrease) in
net assets from opera-
tions.................. 705 278 58 (15)
------ ----- ----- -----
From capital transactions:
Net premiums.............. 56,140 7,246 -- 344
Loan interest............. -- -- -- --
Transfers (to) from the
general account of GE
Life and Annuity:
Death benefits........... -- -- -- --
Surrenders............... -- -- -- --
Loans.................... -- -- -- --
Cost of insurance (note
3)...................... (2,890) (897) -- (216)
Transfer gain (loss) and
transfer fees........... (156) 36 -- 1
Interfund transfers....... 1,755 1,695 1,472 1,008
------ ----- ----- -----
Increase (decrease) in
net assets from capital
transactions........... 54,849 8,080 1,472 1,137
------ ----- ----- -----
Increase (decrease) in net
assets.................... 55,554 8,358 1,530 1,122
Net assets at beginning of
period.................... -- 1,530 -- --
------ ----- ----- -----
Net assets at end of peri-
od........................ 55,554 9,888 1,530 1,122
====== ===== ===== =====
</TABLE>
See accompanying notes to financial statements.
F-32
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements
December 31, 1999
(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), formerly The Life Insurance Company 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 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. General
Electric Capital Assurance Company and its parent, 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.
In June, 1999, a new investment subdivision, Premier Growth Equity Fund, 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. Between 1997 and
1999, the Oppenheimer Variable Account Capital Appreciation Fund changed its
name to the Oppenheimer Variable Account Aggressive Growth Fund/VA and the
Oppenheimer Variable Account Growth Fund changed its name to the Oppenheimer
Variable Account Capital Appreciation Fund/VA.
In October 1998, three new investment subdivisions were added to the Account
for both Type I and Type II policies. 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 Inc. All designated portfolios described
above are series type mutual funds.
In May 1998, three new investment subdivisions were added to the Account,
for both Type I and Type II policies. The U.S. Equity Fund invests solely in a
designated portfolio of the GE Investments Funds, Inc. The Mid Cap Equity and
Growth and Income Funds each invest solely in a designated portfolio of the
Goldman Sachs Variable Insurance Trust. 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-- Shares of Money Market Fund--
Variable Insurance Products Fund GE Investments Funds, Inc.
Shares of Money Fund-- Shares of Money Market Fund--
Oppenheimer Variable Account Funds GE Investments Funds, Inc.
Shares of Government Securities Fund-- Shares of Income Fund--
GE Investments Funds, Inc. GE Investments Funds, Inc.
Shares of Bond Portfolio-- Shares of Income Fund--
Neuberger & Berman Advisers GE Investments Funds, Inc.
Management Trust
Shares of High Income Portfolio-- Shares of High Income Fund--
Variable Insurance Products Fund Oppenheimer Variable Account Funds
Shares of Growth Portfolio-- Shares of Growth Portfolio Fund--
Neuberger & Berman Advisers Variable Insurance Products Fund
Management Trust
Shares of Balanced Portfolio-- Shares of Balanced Portfolio--
Neuberger & Berman Advisers Janus Aspen Series
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.
F-33
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(1) Description of Entity -- Continued
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,
Inc. All designated portfolios described above are series type mutual funds.
(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 forms P1096 and P1251. Type II units are sold under policy forms
P1250 and P1250CR. 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, 1999, were:
<TABLE>
<CAPTION>
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
- -------------- ----------- -----------
<S> <C> <C>
GE Investments Funds, Inc.:
S&P 500 Index Fund..................................... $ 4,504,973 2,494,953
Money Market Fund...................................... 19,300,686 17,973,359
Total Return Fund...................................... 523,100 615,821
International Equity Fund.............................. 180,310 72,033
Real Estate Securities Fund............................ 233,133 131,421
Global Income Fund..................................... 62,526 7,622
Value Equity Fund...................................... 472,016 176,880
Income Fund............................................ 93,657 92,634
U.S. Equity Fund....................................... 199,953 42,925
Premier Growth Equity Fund............................. 132,370 9,777
Oppenheimer Variable Account Funds:
Bond Fund/VA........................................... 349,782 135,527
Aggressive Growth Fund/VA.............................. 1,154,536 1,423,060
Capital Appreciation Fund/VA........................... 1,305,704 853,999
High Income Fund/VA.................................... 732,517 430,839
Multiple Strategies Fund/VA............................ 291,073 187,313
Variable Insurance Products Fund:
Equity-Income Portfolio................................ 2,239,159 2,132,558
Growth Portfolio....................................... 3,929,095 3,280,460
Overseas Portfolio..................................... 1,033,140 990,130
</TABLE>
F-34
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(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 II:
Asset Manager Portfolio................................. $ 898,985 719,244
Contrafund Portfolio.................................... 3,135,642 2,552,430
Variable Insurance Products Fund III:
Growth & Income Portfolio............................... 795,911 407,761
Growth Opportunities Portfolio.......................... 290,906 136,963
Federated Insurance Series:
Utility Fund II......................................... 233,059 81,786
High Income Bond Fund II................................ 256,863 87,275
American Leaders Fund II................................ 489,923 199,306
The Alger American Fund:
Small Capitalization Portfolio.......................... 1,397,424 655,869
Growth Portfolio........................................ 4,123,473 3,220,895
PBHG Insurance Series Fund, Inc.:
PBHG Large Cap Growth Portfolio......................... 76,815 35,807
PBHG Growth II Portfolio................................ 424,714 326,296
Janus Aspen Series:
Aggressive Growth Portfolio............................. 6,035,690 4,030,878
Growth Portfolio........................................ 3,402,613 1,522,923
Worldwide Growth Portfolio.............................. 2,420,154 1,561,606
Balanced Portfolio...................................... 1,087,912 437,464
Flexible Income Portfolio............................... 258,190 144,205
International Growth Portfolio.......................... 997,760 502,820
Capital Appreciation Portfolio.......................... 4,260,893 2,877,168
Goldman Sachs Variable Insurance Trust:
Growth and Income Fund.................................. 19,505 8,996
Mid Cap Value Fund...................................... 407,729 52,361
Salomon Brothers Variable Series Fund Inc.:
Strategic Bond Fund..................................... 60,675 3,200
Investors Fund.......................................... 9,062 952
Total Return Fund....................................... 1,379 219
</TABLE>
F-35
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(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, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
----------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Fund Fund Fund Fund Fund Fund
------- ---------- -------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at
December 31, 1996...... 56,039 16,683 154,701 125,692 3,036 1,918
------ ------- -------- ------- ------ ------
Net premiums........... 12,804 1,856 229,013 6,095 1,752 4,672
Loan interest.......... (69) 15 (196) (11) -- --
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... (3,774) -- (1,005) (267) -- --
Surrenders........... (734) (782) (671) (523) (68) (41)
Loans................ (328) (210) (330) (137) (22) (51)
Cost of insurance and
administrative ex-
penses.............. (6,083) (1,174) (17,924) (12,827) (414) (1,046)
Interfund transfers.... 24,623 (16,388) (224,564) (101) 1,666 5,271
------ ------- -------- ------- ------ ------
Net increase (decrease)
in units from capital
transactions........... 26,439 (16,683) (15,677) (7,771) 2,914 8,805
------ ------- -------- ------- ------ ------
Units outstanding at
December 31, 1997...... 82,478 -- 139,024 117,921 5,950 10,723
------ ------- -------- ------- ------ ------
Net premiums........... 9,623 -- 112,037 5,873 1,468 8,323
Loan interest.......... (7) -- 153 (10) -- --
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- (73) (662) -- --
Surrenders........... 23 -- (7,598) (498) (35) (201)
Loans................ (301) -- (5,530) (263) (51) (37)
Cost of insurance and
administrative ex-
penses.............. (4,258) -- (16,515) (11,632) (660) (2,557)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- --
Interfund transfers.... (1,774) -- (103,800) (210) 740 1,263
------ ------- -------- ------- ------ ------
Net increase (decrease)
in units from capital
transactions........... 3,306 -- (21,326) (7,402) 1,462 6,791
------ ------- -------- ------- ------ ------
Units outstanding at
December 31, 1998...... 85,784 -- 117,698 110,519 7,412 17,514
------ ------- -------- ------- ------ ------
Net premiums........... 15,661 -- 37,026 4,245 1,433 5,331
Loan interest.......... (1) -- 9 (8) 1 3
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... (222) -- -- (44) -- --
Surrenders........... (4,503) -- (9,425) (622) (449) (488)
Loans................ (2,322) -- (9,247) (673) (5) (81)
Cost of insurance and
administrative ex-
penses.............. (8,750) -- (12,766) (9,984) (510) (2,392)
Transfers (to) from the
Guarantee Account..... -- -- -- -- --
Interfund transfers.... (346) -- 7,179 (1,367) (1,909) (912)
------ ------- -------- ------- ------ ------
Net increase (decrease)
in units from capital
transactions........... (483) -- 12,776 (8,453) (1,439) 1,461
------ ------- -------- ------- ------ ------
Units outstanding at
December 31, 1999...... 85,301 -- 130,474 102,066 5,973 18,975
====== ======= ======== ======= ====== ======
</TABLE>
F-36
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
-------------------------------------------------
Global Value Premier
Income Equity Income U.S. Equity Growth Equity
Fund Fund Fund Fund Fund
------ ------ ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at December
31, 1996...................... -- -- -- -- --
----- ----- ------ ----- -----
Net premiums.................. 128 444 74 -- --
Loan interest................. -- -- 1 -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits............... -- -- -- -- --
Surrenders................... -- -- -- -- --
Loans........................ (24) -- -- -- --
Cost of insurance and
administrative expenses..... (37) (77) (166) -- --
Interfund transfers........... 829 661 37,858 -- --
----- ----- ------ ----- -----
Net increase (decrease) in
units from capital
transactions.................. 896 1,028 37,767 -- --
----- ----- ------ ----- -----
Units outstanding at December
31, 1997...................... 896 1,028 37,767 -- --
----- ----- ------ ----- -----
Net premiums.................. 1,593 2,656 5,943 30 --
Loan interest................. -- 3 (7) -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits............... -- -- -- -- --
Surrenders................... -- (211) (2,891) -- --
Loans........................ -- (84) (66) -- --
Cost of insurance and
administrative expenses..... (464) (648) (3,205) (22) --
Transfers (to) from the
Guarantee Account............ -- -- -- -- --
Interfund transfers........... 985 2,342 2,659 10 --
----- ----- ------ ----- -----
Net increase (decrease) in
units from capital
transactions.................. 2,114 4,058 2,433 18 --
----- ----- ------ ----- -----
Units outstanding at December
31, 1998...................... 3,010 5,086 40,200 18 --
----- ----- ------ ----- -----
Net premiums.................. 1,215 1,407 4,423 302 275
Loan interest................. -- 4 1 -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits............... -- -- -- -- --
Surrenders................... (107) (301) (373) -- --
Loans........................ -- (18) (201) -- --
Cost of insurance and
administrative expenses..... (259) (775) (2,961) (113) (69)
Transfers (to) from the
Guarantee Account............ -- -- -- -- --
Interfund transfers........... (3) 3,672 (4,367) 1,727 5,227
----- ----- ------ ----- -----
Net increase (decrease) in
units from capital
transactions.................. 846 3,989 (3,478) 1,916 5,433
----- ----- ------ ----- -----
Units outstanding at December
31, 1999...................... 3,856 9,075 36,722 1,934 5,433
===== ===== ====== ===== =====
</TABLE>
F-37
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
----------------------------------------------------------
Aggressive Capital High Multiple
Money Bond Growth Appreciation Income Strategies
Fund Fund/VA Fund/VA Fund/VA Fund/VA Fund/VA
----- ------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at
December 31, 1996...... 45 13,055 63,799 44,162 32,190 22,651
--- ------ ------- ------ ------ ------
Net premiums........... 6 (539) 20,919 11,890 10,966 3,690
Loan interest.......... -- -- 8 (14) -- (4)
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- (8) -- -- --
Surrenders........... -- 167 (1,104) (1,783) (595) (1,437)
Loans................ -- 19 (1,014) (327) (766) (139)
Cost of insurance and
administrative ex-
penses.............. (12) 221 (8,094) (4,561) (4,949) (1,822)
Interfund transfers.... (39) 114 1,620 4,663 11,197 (378)
--- ------ ------- ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... (45) (18) 12,327 9,868 15,853 (90)
--- ------ ------- ------ ------ ------
Units outstanding at
December 31, 1997...... -- 13,037 76,126 54,030 48,043 22,561
--- ------ ------- ------ ------ ------
Net premiums........... -- 4,915 23,331 12,058 11,931 5,523
Loan interest.......... -- (2) 5 (8) (9) (5)
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- -- -- (88) --
Surrenders........... -- (776) (4,257) (2,931) (2,666) (277)
Loans................ -- (59) (1,894) (232) (483) (320)
Cost of insurance and
administrative ex-
penses.............. -- (1,448) (10,077) (5,205) (5,457) (2,167)
Transfers (to) from the
Guarantee Account..... -- -- (8) -- -- --
Interfund transfers.... -- 1,572 (2,098) 1,707 1,100 (457)
--- ------ ------- ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... -- 4,202 5,002 5,389 4,328 2,297
--- ------ ------- ------ ------ ------
Units outstanding at
December 31, 1998...... -- 17,239 81,128 59,419 52,371 24,858
--- ------ ------- ------ ------ ------
Net premiums........... -- 3,765 10,658 940 8,672 3,427
Loan interest.......... -- 1 (8) (2) 25 --
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- (41) (7) (6) (8)
Surrenders........... -- (592) (2,676) (202) (2,276) (788)
Loans................ -- (36) (3,253) (79) (1,224) (248)
Cost of insurance and
administrative ex-
penses.............. -- (1,479) (5,482) (453) (4,185) (1,754)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- --
Interfund transfers.... -- 109 (4,525) (198) (1,264) (1,536)
--- ------ ------- ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... -- 1,768 (5,327) (1) (258) (907)
--- ------ ------- ------ ------ ------
Units outstanding at
December 31, 1999...... -- 19,007 75,801 59,418 52,113 23,951
=== ====== ======= ====== ====== ======
</TABLE>
F-38
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<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 I Units:
Units outstanding at December
31, 1996.................... 20,234 8,361 101,828 103,102 81,098
------- ------ ------- ------- -------
Net premiums................ -- 6 30,443 27,236 14,830
Loan interest............... (2) (1) 17 (20) (27)
Transfers (to) from the
general account of GE Life
& Annuity:
Death benefits............. -- -- (8) (320) (11)
Surrenders................. -- (83) (2,046) (3,071) (3,198)
Loans...................... (67) (56) (1,200) (2,624) (1,198)
Cost of insurance and
administrative expenses... (1,113) (571) (13,023) (12,010) (7,354)
Interfund transfers......... (19,052) (7,656) 18,157 3,258 (11,825)
------- ------ ------- ------- -------
Net increase (decrease) in
units from capital
transactions................ (20,234) (8,361) 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 GE Life
& Annuity:
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
------- ------ ------- ------- -------
Net premiums................ -- -- 25,811 13,506 8,226
Loan interest............... -- -- 22 (68) (6)
Transfers (to) from the
general account of GE Life
& Annuity:
Death benefits............. -- -- (157) (243) (112)
Surrenders................. -- -- (4,410) (7,080) (2,762)
Loans...................... -- -- (3,312) (2,060) (1,115)
Cost of insurance and
administrative expenses... -- -- (11,683) (8,374) (4,317)
Transfers (to) from the
Guarantee Account.......... -- -- -- -- --
Interfund transfers......... -- -- (15,909) (10,368) (3,401)
------- ------ ------- ------- -------
Net increase (decrease) in
units from capital
transactions................ -- -- (9,638) (14,687) (3,487)
------- ------ ------- ------- -------
Units outstanding at December
31, 1999.................... -- -- 134,499 115,121 71,868
======= ====== ======= ======= =======
</TABLE>
F-39
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III
-------------------- -----------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Type I Units:
Units outstanding at December 31,
1996............................. 135,501 62,082 -- --
------- ------- ------ ------
Net premiums..................... 30,613 36,387 454 598
Loan interest.................... (18) (8) -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits.................. -- (320) -- --
Surrenders...................... (5,817) (5,335) -- --
Loans........................... (1,388) (781) -- --
Cost of insurance and
administrative expenses........ (15,641) (12,219) (125) (125)
Interfund transfers.............. 20,449 17,222 3,484 5,332
------- ------- ------ ------
Net increase (decrease) in units
from capital transactions........ 28,198 34,946 3,813 5,805
------- ------- ------ ------
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 GE Life & Annuity:
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
------- ------- ------ ------
Net premiums..................... 14,013 20,627 3,421 2,186
Loan interest.................... (17) (46) 1 (6)
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits.................. (75) -- -- --
Surrenders...................... (3,495) (4,709) (652) (100)
Loans........................... (1,110) (1,173) (32) --
Cost of insurance and
administrative expenses........ (9,169) (10,938) (1,730) (1,384)
Transfers (to) from the Guarantee
Account......................... -- -- -- --
Interfund transfers.............. (6,414) (14,178) (2,229) (1,296)
------- ------- ------ ------
Net increase (decrease) in units
from capital transactions........ (6,267) (10,417) (1,221) (600)
------- ------- ------ ------
Units outstanding at December 31,
1999............................. 151,835 109,523 15,603 15,681
======= ======= ====== ======
</TABLE>
F-40
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Neuberger & Berman
Advisers Management Trust Federated Insurance Series
----------------------------- ----------------------------
American
Balanced Bond Growth Leaders High Income Utility
Portfolio Portfolio Portfolio Fund II Fund II Fund II
--------- --------- --------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at
December 31, 1996...... 14,270 6,358 8,592 205 2,627 6,422
------- ------ ------ ------ ------ ------
Net premiums........... 17 -- 30 1,922 2,964 3,027
Loan interest.......... (2) -- (6) -- -- --
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- -- -- -- --
Surrenders........... (651) (5) (179) -- -- --
Loans................ (77) -- (60) -- (219) --
Cost of insurance and
administrative ex-
penses.............. (597) (128) (357) (260) (668) (725)
Interfund transfers.... (12,960) (6,225) (8,020) 1,302 1,484 819
------- ------ ------ ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... (14,270) (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
GE Life & Annuity:
Death benefits....... -- -- -- -- -- --
Surrenders........... -- -- -- (394) (254) (121)
Loans................ -- -- -- (69) (238) (18)
Cost of insurance and
administrative ex-
penses.............. -- -- -- (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
------- ------ ------ ------ ------ ------
Net premiums........... -- -- -- 5,066 2,703 1,671
Loan interest.......... -- -- -- 7 (3) (1)
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- -- -- -- --
Surrenders........... -- -- -- (637) (296) (111)
Loans................ -- -- -- 3 (7) --
Cost of insurance and
administrative ex-
penses.............. -- -- -- (1,849) (891) (930)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- --
Interfund transfers.... -- -- -- 637 1,142 (83)
------- ------ ------ ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... -- -- -- 3,227 2,648 546
------- ------ ------ ------ ------ ------
Units outstanding at
December 31, 1999...... -- -- -- 16,635 11,900 12,001
======= ====== ====== ====== ====== ======
</TABLE>
F-41
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
PBHG Insurance
Alger American Fund Series Fund, Inc.
------------------------ -------------------
Small Large Cap
Capitalization Growth Growth Growth II
Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Type I Units:
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 GE Life & Annuity:
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 GE Life & Annuity:
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
------- ------- ----- ------
Net premiums..................... 14,158 18,292 1,496 4,760
Loan interest.................... 6 3 (9) --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits................. -- -- -- --
Surrenders..................... (2,787) (1,514) (133) (1,121)
Loans.......................... (1,178) (537) (21) --
Cost of insurance and
administrative expenses....... (6,036) (7,299) (563) (1,461)
Transfers (to) from the Guarantee
Account......................... -- -- -- --
Interfund transfers.............. 20,595 (15,368) 221 (137)
------- ------- ----- ------
Net increase (decrease) in units
from capital transactions........ 24,758 (6,423) 991 2,041
------- ------- ----- ------
Units outstanding at December 31,
1999............................. 113,855 79,133 5,461 4,820
======= ======= ===== ======
</TABLE>
F-42
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Janus Aspen Series
------------------------------------------------------------------------------
Aggressive Flexible International Capital
Growth Growth World Wide Balanced Income Growth Appreciation
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- ---------- --------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at
December 31, 1996...... 69,875 74,890 90,240 13,755 780 4,602 --
------- ------- ------- ------ ------ ------ ------
Net premiums........... 33,956 31,979 45,089 5,204 3,339 10,507 131
Loan interest.......... (117) 31 41 -- -- 1 --
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... -- -- -- -- -- -- --
Surrenders........... (2,572) (1,161) (1,946) (491) -- (270) --
Loans................ (475) (1,040) (626) (41) -- (35) --
Cost of insurance and
administrative
expenses............ (12,062) (10,466) (15,323) (2,215) (868) (2,301) (99)
Interfund transfers.... 28,188 13,930 43,635 26,265 2,338 10,760 652
------- ------- ------- ------ ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... 46,918 33,273 70,870 28,722 4,809 18,662 684
------- ------- ------- ------ ------ ------ ------
Units outstanding at
December 31, 1997...... 116,793 108,163 161,110 42,477 5,589 23,264 684
------- ------- ------- ------ ------ ------ ------
Net premiums........... 24,642 27,838 47,797 12,861 2,801 8,858 4,038
Loan interest.......... 6 6 (21) (3) -- -- 22
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... (43) (45) (68) -- (84) (39) --
Surrenders........... (6,780) (5,890) (7,737) (520) (64) (1,149) (27)
Loans................ (2,146) (267) (2,519) (1,038) -- (26) --
Cost of insurance and
administrative
expenses............ (10,966) (12,198) (20,085) (5,313) (1,139) (3,657) (1,554)
Transfers (to) from the
Guarantee Account..... -- -- (5) -- -- -- --
Interfund transfers.... (23,977) 9,558 11,118 5,127 (291) 3,504 5,052
------- ------- ------- ------ ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... (19,264) 19,002 28,480 11,114 1,223 7,491 7,531
------- ------- ------- ------ ------ ------ ------
Units outstanding at
December 31, 1998...... 97,529 127,165 189,590 53,591 6,812 30,755 8,215
------- ------- ------- ------ ------ ------ ------
Net premiums........... 12,369 16,689 38,292 6,407 251 6,335 2,077
Loan interest.......... (46) (1) (76) (10) -- 5 7
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits....... (171) (161) (222) -- -- -- --
Surrenders........... (3,586) (3,363) (5,000) (955) (326) (867) (284)
Loans................ (4,215) (1,314) (2,004) (105) -- (31) (98)
Cost of insurance and
administrative
expenses............ (7,317) (7,290) (21,189) (4,660) (952) (3,152) (1,822)
Transfers (to) from the
Guarantee Account..... -- -- -- -- -- -- --
Interfund transfers.... 25,088 18,674 (6,785) 8,897 208 1,272 14,138
------- ------- ------- ------ ------ ------ ------
Net increase (decrease)
in units from capital
transactions........... 22,122 23,234 3,016 9,574 (819) 3,562 14,018
------- ------- ------- ------ ------ ------ ------
Units outstanding at
December 31, 1999...... 119,651 150,399 192,606 63,165 5,993 34,317 22,233
======= ======= ======= ====== ====== ====== ======
</TABLE>
F-43
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies - Continued
<TABLE>
<CAPTION>
Goldman Sachs Variable Salomon Brothers
Insurance Trust Variable Series Fund Inc.
---------------------- -------------------------------
Growth and Mid Cap Strategic Investors Total
Income Fund Value Fund Bond Fund Fund Return Fund
----------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Type I Units:
Units outstanding at De-
cember 31, 1996........ -- -- -- -- --
--- ------ --- --- ---
Net premiums........... -- -- -- -- --
Loan interest.......... -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits........ -- -- -- -- --
Surrenders............ -- -- -- -- --
Loans................. -- -- -- -- --
Cost of insurance and
administrative ex-
penses............... -- -- -- -- --
Interfund transfers.... -- -- -- -- --
--- ------ --- --- ---
Net increase
(decrease) in units
from capital
transactions........ -- -- -- -- --
--- ------ --- --- ---
Units outstanding at De-
cember 31, 1997........ -- -- -- -- --
--- ------ --- --- ---
Net premiums........... -- -- -- -- --
Loan interest.......... -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits........ -- -- -- -- --
Surrenders............ -- -- -- -- --
Loans................. -- -- -- -- --
Cost of insurance and
administrative ex-
penses............... (13) -- -- -- --
Transfers (to) from the
Guarantee Account..... -- -- -- -- --
Interfund transfers.... 94 -- -- 126 --
--- ------ --- --- ---
Net increase
(decrease) in units
from capital
transactions........ 81 -- -- 126 --
--- ------ --- --- ---
Units outstanding at De-
cember 31, 1998........ 81 -- -- 126 --
--- ------ --- --- ---
Net premiums........... -- 2,906 -- -- 25
Loan interest.......... -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits........ -- -- -- -- --
Surrenders............ -- -- -- -- --
Loans................. -- -- -- -- --
Cost of insurance and
administrative ex-
penses............... (8) (160) -- (15) (16)
Transfers (to) from the
Guarantee Account..... -- -- -- -- --
Interfund transfers.... (73) 44,496 -- -- 94
--- ------ --- --- ---
Net increase
(decrease) in units
from capital
transactions........ (81) 47,242 -- (15) 103
--- ------ --- --- ---
Units outstanding at De-
cember 31, 1999........ -- 47,242 -- 111 103
=== ====== === === ===
</TABLE>
F-44
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies - Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------------------------------------
S&P 500 Government Money Total International Real Estate
Index Securities Market Return Equity Securities
Fund Fund Fund Fund Fund Fund
------- ---------- -------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at
December 31, 1997...... -- -- -- -- -- --
------ --- -------- ----- ------ -----
Net premiums........... 14,211 -- 203,673 1,858 444 4,046
Loan interest.......... -- -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits......... -- -- -- -- -- --
Surrenders............. -- -- -- -- -- (16)
Loans.................. -- -- -- -- -- --
Cost of insurance and
administrative
expenses.............. (1,193) -- (6,092) (323) (44) (252)
Interfund transfers.... 2,066 -- (76,055) 2,682 9 1,224
------ --- -------- ----- ------ -----
Net increase in units
from capital
transactions........... 15,084 -- 121,526 4,217 409 5,002
------ --- -------- ----- ------ -----
Units outstanding at
December 31, 1998...... 15,084 -- 121,526 4,217 409 5,002
------ --- -------- ----- ------ -----
Net premiums........... 28,289 -- 373,827 2,488 8,139 2,648
Loan interest.......... (3) -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits......... -- -- -- (400) -- --
Surrenders............. (219) -- (61) -- -- (285)
Loans.................. (661) -- (13,879) -- -- --
Cost of insurance and
administrative
expenses.............. (6,092) -- (16,872) (941) (1,016) (956)
Interfund transfers.... 12,671 -- (292,484) 625 277 2,408
------ --- -------- ----- ------ -----
Net increase in units
from capital
transactions........... 33,985 -- 50,531 1,772 7,400 3,815
------ --- -------- ----- ------ -----
Units outstanding at
December 31, 1999...... 49,069 -- 172,057 5,989 7,809 8,817
====== === ======== ===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
-------------------------------------------------
Global Value Premier
Income Equity Income U.S. Equity Growth Equity
Fund Fund Fund Fund Fund
------ ------ ------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December
31, 1997...................... -- -- -- -- --
----- ------ ----- ------ -----
Net premiums.................. 134 5,572 14 3,071 --
Loan interest................. -- -- -- -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits................ -- -- -- -- --
Surrenders.................... -- (6) -- (8) --
Loans......................... -- -- -- -- --
Cost of insurance and
administrative expenses...... (24) (386) (24) (203) --
Interfund transfers........... -- 4,923 214 1,879 --
----- ------ ----- ------ -----
Net increase in units from
capital transactions.......... 110 10,103 204 4,739 --
----- ------ ----- ------ -----
Units outstanding at December
31, 1998...................... 110 10,103 204 4,739 --
----- ------ ----- ------ -----
Net premiums.................. 953 11,785 2,123 11,266 3,298
Loan interest................. -- (8) -- -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits................ -- (604) -- -- --
Surrenders.................... -- -- -- (39) --
Loans......................... -- (1,237) -- -- --
Cost of insurance and
administrative expenses...... (287) (1,693) (353) (2,119) (475)
Interfund transfers........... 3,476 6,445 (10) 1,503 3,411
----- ------ ----- ------ -----
Net increase in units from
capital transactions.......... 4,142 14,688 1,760 10,611 6,234
----- ------ ----- ------ -----
Units outstanding at December
31, 1999...................... 4,252 24,791 1,964 15,350 6,234
===== ====== ===== ====== =====
</TABLE>
F-45
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies - Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
------------------------------------------------------
Aggressive Capital High Multiple
Bond Growth Appreciation 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 GE
Life & Annuity:
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
------ ----- ------ ------ -----
Net premiums........... 2,591 1,518 5,822 3,721 2,421
Loan interest.......... -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits......... -- -- -- -- --
Surrenders............. (1) (109) (3) -- --
Loans.................. -- (2) (61) -- --
Cost of insurance and
administrative
expenses.............. (1,241) (489) (1,163) (557) (294)
Interfund transfers.... 4,538 391 1,282 2,515 (67)
------ ----- ------ ------ -----
Net increase in units
from capital
transactions........ 5,887 1,309 5,877 5,679 2,060
------ ----- ------ ------ -----
Units outstanding at
December 31, 1999...... 8,423 4,437 8,659 7,489 4,250
====== ===== ====== ====== =====
<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 GE
Life & Annuity:
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
------ ----- ------ ------ -----
Net premiums........... -- -- 6,469 8,198 3,033
Loan interest.......... -- -- -- -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits......... -- -- (413) -- --
Surrenders............. -- -- (27) (28) --
Loans.................. -- -- (93) (96) --
Cost of insurance and
administrative
expenses.............. -- -- (1,395) (1,444) (669)
Interfund transfers.... -- -- 1,232 4,342 868
------ ----- ------ ------ -----
Net increase in units
from capital
transactions........ -- -- 5,773 10,972 3,232
------ ----- ------ ------ -----
Units outstanding at
December 31, 1999...... -- -- 12,153 12,742 3,803
====== ===== ====== ====== =====
</TABLE>
F-46
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III
-------------------- -----------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
--------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31,
1997.............................. -- -- -- --
----- ------ ------ ------
Net premiums...................... 1,321 11,842 6,034 2,476
Loan interest..................... -- -- -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits.................... -- -- -- --
Surrenders........................ -- (35) -- (31)
Loans............................. -- (123) 201 --
Cost of insurance and
administrative expenses.......... (67) (904) (599) (208)
Interfund transfers............... 24 4,847 3,160 245
----- ------ ------ ------
Net increase in units from
capital transactions........... 1,278 15,627 8,796 2,482
----- ------ ------ ------
Units outstanding at December 31,
1998.............................. 1,278 15,627 8,796 2,482
----- ------ ------ ------
Net premiums...................... 1,964 16,460 22,463 7,729
Loan interest..................... -- (3) -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits.................... -- -- -- --
Surrenders........................ -- (33) (32) --
Loans............................. 1 (487) (29) (31)
Cost of insurance and
administrative expenses.......... (280) (3,385) (4,444) (1,892)
Interfund transfers............... 85 13,182 5,886 4,477
----- ------ ------ ------
Net increase in units from
capital transactions........... 1,770 25,734 23,844 10,283
----- ------ ------ ------
Units outstanding at December 31,
1999.............................. 3,048 41,361 32,640 12,765
===== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Federated Insurance
Series Alger American Fund
------------------------ -------------------------
American High Small
Leaders Income Utility Capitalization Growth
Fund II Fund II Fund II Portfolio Portfolio
-------- ------- ------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December
31, 1997.................... -- -- -- -- --
------ ----- ----- ------ ------
Net premiums................ 3,993 1,042 1,404 2,957 2,770
Loan interest............... -- -- -- -- --
Transfers (to) from the
general account of GE Life
& Annuity:
Death benefits.............. -- -- -- -- --
Surrenders.................. -- -- -- -- --
Loans....................... -- -- -- -- --
Cost of insurance and
administrative expenses.... (282) (90) (89) (317) (366)
Interfund transfers......... 1,544 85 35 3,104 3,686
------ ----- ----- ------ ------
Net increase in units from
capital transactions..... 5,255 1,037 1,350 5,744 6,090
------ ----- ----- ------ ------
Units outstanding at December
31, 1998.................... 5,255 1,037 1,350 5,744 6,090
------ ----- ----- ------ ------
Net premiums................ 9,243 5,365 2,927 9,990 24,310
Loan interest............... -- -- (3) -- --
Transfers (to) from the
general account of GE Life
& Annuity:
Death benefits.............. -- -- -- -- --
Surrenders.................. (1) -- -- (36) (72)
Loans....................... (1) -- (566) -- (32)
Cost of insurance and
administrative expenses.... (1,629) (812) (478) (1,870) (4,566)
Interfund transfers......... 3,735 2,531 4,176 4,696 17,028
------ ----- ----- ------ ------
Net increase in units from
capital transactions..... 11,347 7,084 6,056 12,780 36,668
------ ----- ----- ------ ------
Units outstanding at December
31, 1999.................... 16,602 8,121 7,406 18,524 42,758
====== ===== ===== ====== ======
</TABLE>
F-47
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
PBHG Insurance
Janus Aspen Series Series Fund, Inc.
------------------------------------------------------------------------------ --------------------
Aggressive Flexible International Capital PBHG Large PBHG
Growth Growth World Wide Balanced Income Growth Appreciation Cap Growth Growth II
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- ---------- --------- --------- ------------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <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 15,053 3,233 812 367
Loan interest...... -- -- -- -- -- -- -- -- --
Transfers (to) from
the general
account of GE Life
& Annuity:
Death benefits.... -- -- -- -- -- -- -- -- --
Surrenders........ -- (23) (22) -- -- -- -- (20) (8)
Loans............. -- -- -- -- -- -- -- -- --
Cost of insurance
and
administrative
expenses......... (594) (753) (1,180) (735) (44) (999) (279) (127) (74)
Interfund
transfers......... 3,849 1,299 5,095 3,376 111 7,307 595 -- 2,930
------ ------ ------ ------ ----- ------ ------ ----- -----
Net increase in
units from capital
transactions....... 11,987 10,349 18,923 12,867 432 21,361 3,549 665 3,215
------ ------ ------ ------ ----- ------ ------ ----- -----
Units outstanding at
December 31, 1998.. 11,987 10,349 18,923 12,867 432 21,361 3,549 665 3,215
------ ------ ------ ------ ----- ------ ------ ----- -----
Net premiums....... 20,475 25,736 27,011 18,588 3,248 9,638 27,320 1,792 1,601
Loan interest...... -- -- (8) (1) -- (7) -- -- --
Transfers (to) from
the general
account of GE Life
& Annuity:
Death benefits.... -- -- (717) -- -- -- -- -- --
Surrenders........ -- (48) (92) (326) -- -- (1) (13) --
Loans............. (70) (127) (1,325) (203) -- (1,336) (80) (1) --
Cost of insurance
and
administrative
expenses......... (3,896) (4,807) (6,014) (3,963) (612) (2,838) (3,898) (786) (290)
Interfund
transfers......... 16,837 17,635 10,749 3,842 5,581 18,259 18,547 709 3,114
------ ------ ------ ------ ----- ------ ------ ----- -----
Net increase in
units from capital
transactions....... 33,346 38,389 29,604 17,937 8,217 23,716 41,888 1,701 4,425
------ ------ ------ ------ ----- ------ ------ ----- -----
Units outstanding at
December 31, 1999.. 45,333 48,738 48,527 30,804 8,649 45,077 45,437 2,366 7,640
====== ====== ====== ====== ===== ====== ====== ===== =====
</TABLE>
F-48
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Goldman Sachs
Variable Insurance Salomon Brothers Variable
Trust Series Fund, Inc.
------------------ --------------------------
Growth Mid Cap Strategic Total
and Income Value Bond Investors Return
Fund Fund Fund Fund Fund
---------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Type II Units:
Units outstanding at December 31,
1997............................ -- -- -- -- --
----- ------ ----- --- ---
Net premiums.................... 1,115 742 -- -- --
Loan interest................... -- -- -- -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits................. -- -- -- -- --
Surrenders..................... -- -- -- -- --
Loans.......................... -- -- -- -- --
Cost of insurance and adminis-
trative expenses.............. (23) (131) -- -- --
Interfund transfers............. -- 10,240 -- -- --
----- ------ ----- --- ---
Net increase (decrease) in units
from capital transactions....... 1,092 10,851 -- -- --
----- ------ ----- --- ---
Units outstanding at December 31,
1998............................ 1,092 10,851 -- -- --
----- ------ ----- --- ---
Net premiums.................... 1,560 2,252 5,549 548 6
Loan interest................... -- -- -- -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits................. -- -- -- -- --
Surrenders..................... (18) -- -- -- --
Loans.......................... -- -- -- -- --
Cost of insurance and adminis-
trative expenses.............. (378) (478) (286) (53) (4)
Interfund transfers............. 35 (5,286) 173 128 --
----- ------ ----- --- ---
Net increase (decrease) in units
from capital transactions....... 1,199 (3,512) 5,436 623 2
----- ------ ----- --- ---
Units outstanding at December 31,
1999............................ 2,291 7,339 5,436 623 2
===== ====== ===== === ===
</TABLE>
F-49
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT II
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
(d) Federal Income Taxes
The Account is not taxed separately because the operations of the Account
are part of the total operations of 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.
If a policy is surrendered or lapses during the first nine years for Type I
policies or 15 years for Type II policies, 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.
GE Investments Funds, Inc. (the Fund) is an openend 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, .65% for the Value Equity and Premier Growth Equity Funds, 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 GE Life & Annuity are also officers and
directors of Capital Brokerage Corporation.
F-50
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
GE Life and Annuity Assurance Company:
We have audited the accompanying consolidated balance sheets of GE Life and
Annuity Assurance Company and subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of income, shareholders' interest, and
cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion of 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 GE Life
and Annuity Assurance Company and subsidiary as of December 31, 1999 and 1998,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
As discussed in note 15 to the consolidated financial statements, the
Company changed its method of accounting for insurance-related assessments in
1999.
/s/ KPMG LLP
Richmond, Virginia
January 21, 2000
F-52
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Assets
Investments:
Fixed maturities available-for-sale, at fair value....... $ 8,033.7 $ 7,022.8
Equity securities available-for-sale, at fair value:
Common stocks........................................... 9.2 6.1
Preferred stocks, non-redeemable........................ 23.9 48.3
Investment in subsidiary................................. 2.6 2.6
Mortgage loans, net of valuation allowance of $23.3 and
$20.9 at December 31, 1999 and 1998, respectively....... 810.5 745.8
Policy loans............................................. 58.5 204.4
Real estate owned........................................ 2.5 2.5
Other invested assets.................................... 141.5 130.8
--------- ---------
Total investments....................................... 9,082.4 8,163.3
--------- ---------
Cash...................................................... 21.2 11.1
Accrued investment income................................. 190.2 141.5
Deferred acquisition costs................................ 482.5 282.8
Intangible assets......................................... 472.8 458.3
Reinsurance recoverable................................... 72.4 68.9
Deferred income tax asset................................. 120.3 42.1
Other assets.............................................. 269.7 64.2
Separate account assets................................... 9,245.8 5,528.7
--------- ---------
Total Assets............................................ $19,957.3 $14,760.9
========= =========
Liabilities and Shareholders' Interest
Liabilities:
Future annuity and contract benefits..................... $ 9,063.0 $ 7,538.1
Liability for policy and contract claims................. 110.7 154.2
Other policyholder liabilities........................... 138.8 118.9
Accounts payable and accrued expenses.................... 193.3 127.2
Separate account liabilities............................. 9,245.8 5,528.7
--------- ---------
Total liabilities....................................... 18,751.6 13,467.1
--------- ---------
Shareholders' interest:
Net unrealized investment gains (losses)................. (134.2) 57.8
--------- ---------
Accumulated non-owner changes in equity.................. (134.2) 57.8
Preferred stock, Series A ($1,000 par value, $1,000 re-
demption and liquidation value, 200,000 shares autho-
rized, 120,000 shares issued and outstanding)........... 120.0 120.0
Common stock ($1,000 par value, 50,000 authorized, 25,651
shares issued and outstanding in 1999; 7,010 issued and
outstanding, 18,641 declared but not issued in 1998).... 25.6 25.6
Additional paid-in capital............................... 1,050.7 1,050.1
Retained earnings........................................ 143.6 40.3
--------- ---------
Total shareholders' interest............................ 1,205.7 1,293.8
--------- ---------
Total Liabilities and Shareholders' Interest............ $19,957.3 $14,760.9
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-53
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Net investment income............................. $ 638.2 $ 574.7 $ 562.7
Net realized investment gains..................... 12.0 29.6 19.0
Premiums.......................................... 123.9 123.1 171.8
Cost of insurance................................. 129.0 128.5 127.2
Variable product fees............................. 90.2 60.8 44.4
Other income...................................... 24.6 22.3 23.7
-------- ------- -------
Total revenues................................... 1,017.9 939.0 948.8
-------- ------- -------
Benefits and expenses:
Interest credited................................. 440.8 378.4 373.7
Benefits and other changes in policy reserves..... 214.7 178.4 217.2
Commissions....................................... 192.1 112.8 139.1
General expenses.................................. 124.7 111.0 92.2
Amortization of intangibles, net.................. 58.3 64.8 69.7
Change in deferred acquisition costs, net......... (179.1) (74.7) (112.6)
Interest expense.................................. 1.9 2.2 --
-------- ------- -------
Total benefits and expenses...................... 853.4 772.9 779.3
-------- ------- -------
Income before income taxes and cumulative effect
of accounting change............................ 164.5 166.1 169.5
Provision for income taxes......................... 56.6 60.3 62.1
-------- ------- -------
Income before cumulative effect of accounting
change.......................................... 107.9 105.8 107.4
-------- ------- -------
Cumulative effect of accounting change, net of
tax............................................... 5.0 -- --
-------- ------- -------
Net Income....................................... $ 112.9 $ 105.8 $ 107.4
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-54
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INTEREST
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Common Stock
Preferred Declared Accumulated
Stock Common Stock but not Issued Additional Non-owner Total
-------------- ------------- --------------- Paid-In Changes Retained Shareholders'
Shares Amount Shares Amount Shares Amount Capital in Equity Earnings Interest
------- ------ ------ ------ ------- ------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1996................... -- -- 7,010 7.0 -- -- 1,060.6 25.8 85.7 1,179.1
Changes other than
transactions with
shareholders:
Net income............. -- -- -- -- -- -- -- -- 107.4 107.4
Net unrealized gains on
investment securities
(a)................... -- -- -- -- -- -- -- 61.9 -- 61.9
-------
Total changes other
than transactions with
shareholders.......... 169.3
Adjustment to reflect
purchase method........ -- -- -- -- -- -- (2.2) -- -- (2.2)
------- ----- ------ ---- ------- ----- ------- ------ ------ -------
Balances at December 31,
1997................... -- -- 7,010 7.0 -- -- 1,058.4 87.7 193.1 1,346.2
Changes other than
transactions with
shareholders:
Net income............. -- -- -- -- -- -- -- -- 105.8 105.8
Net unrealized losses
on investment securi-
ties (a).............. -- -- -- -- -- -- -- (29.9) -- (29.9)
-------
Total changes other
than transactions with
shareholders.......... 75.9
Cash dividend declared
and paid............... -- -- -- -- -- -- -- -- (120.0) (120.0)
Preferred stock divi-
dend................... 120,000 120.0 -- -- -- -- -- -- (120.0) --
Common stock dividend
declared but not is-
sued................... -- -- -- -- 18,641 18.6 -- -- (18.6) --
Adjustment to reflect
purchase method........ -- -- -- -- -- -- (8.3) -- -- (8.3)
------- ----- ------ ---- ------- ----- ------- ------ ------ -------
Balances at December 31,
1998................... 120,000 120.0 7,010 7.0 18,641 18.6 1,050.1 57.8 40.3 1,293.8
Changes other than
transactions with
shareholders:
Net income............. -- -- -- -- -- -- -- -- 112.9 112.9
Net unrealized losses
on investment securi-
ties (a).............. -- -- -- -- -- -- -- (192.0) -- (192.0)
-------
Total changes other
than transactions with
shareholders.......... (79.1)
Cash dividend declared
and paid............... -- -- -- -- -- -- -- -- (9.6) (9.6)
Common stock issued..... -- -- 18,641 18.6 (18,641) (18.6) -- -- -- --
Adjustment to reflect
purchase method........ -- -- -- -- -- -- 0.6 -- -- 0.6
------- ----- ------ ---- ------- ----- ------- ------ ------ -------
Balances at December 31,
1999................... 120,000 120.0 25,651 25.6 -- -- 1,050.7 (134.2) 143.6 1,205.7
======= ===== ====== ==== ======= ===== ======= ====== ====== =======
</TABLE>
- -------
(a) Presented net of deferred taxes of $72.2, $(31.1) and $(47.2) in 1999,
1998, and 1997, respectively.
See accompanying notes to consolidated financial statements.
F-55
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 112.9 $ 105.8 $ 107.4
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Cost of insurance and surrender fees........ (169.5) (171.6) (170.7)
Increase in future policy benefits.......... 565.5 440.6 461.2
Net realized investment gains............... (12.0) (29.6) (19.0)
Amortization of investment premiums and dis-
counts..................................... (1.3) (1.3) 4.7
Amortization of intangibles................. 58.3 64.8 69.7
Deferred income tax expense (benefit)....... 25.0 29.5 (9.6)
Change in certain assets and liabilities:
Decrease (increase) in:
Accrued investment income................. (48.6) 1.5 (5.7)
Deferred acquisition costs................ (179.1) (74.7) (112.6)
Other assets, net......................... (200.1) (30.3) (14.3)
Increase (decrease) in:
Policy and contract claims................ (43.4) 18.0 36.4
Other policyholder liabilities............ 20.0 2.5 (0.4)
Accounts payable and accrued expenses..... 73.8 19.6 (113.3)
--------- --------- ---------
Total adjustments........................ 88.6 269.0 126.4
--------- --------- ---------
Net cash provided by operating activi-
ties.................................... 201.5 374.8 233.8
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales and maturities of invest-
ment securities and other invested assets... 1,702.2 2,238.0 992.3
Principal collected on mortgage loans........ 103.3 138.3 91.8
Proceeds collected from securitization....... 145.1 -- --
Purchase of investment securities and other
invested assets............................. (3,086.2) (2,685.4) (1,232.6)
Mortgage loans originations and increase in
policy loans................................ (170.4) (212.3) (121.5)
--------- --------- ---------
Net cash used in investing activities.... (1,306.0) (521.4) (270.0)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of investment con-
tracts...................................... 4,717.6 2,280.0 1,961.9
Redemption and benefit payments on investment
contracts................................... (3,593.4) (2,016.2) (1,973.4)
Cash dividend to shareholders................ (9.6) (120.0) --
--------- --------- ---------
Net cash provided by (used in) financing
activities.............................. 1,114.6 143.8 (11.5)
--------- --------- ---------
Net increase (decrease) in cash and
equivalents............................. 10.1 (2.8) (47.7)
Cash and cash equivalents at beginning of
year......................................... 11.1 13.9 61.6
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 21.2 $ 11.1 $ 13.9
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-56
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The accompanying consolidated financial statements include the historical
operations and accounts of GE Life and Annuity Assurance Company and its
subsidiary, Assigned Settlements Inc. (collectively the "Company" or
"GELAAC"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Effective January 1, 1999, an affiliated company, The Harvest Life Insurance
Company ("Harvest") merged into The Life Insurance Company of Virginia ("LOV")
with the merged Company renamed GE Life and Annuity Assurance Company
("GELAAC"). Harvest's former parent, Federal Home Life Insurance Company
("FHLIC"), received common stock of GELAAC in exchange for its interest in
Harvest. FHLIC is an indirect wholly-owned subsidiary of GE Financial
Assurance Holdings, Inc. ("GEFAHI"). As the merged entities were under common
control, the transaction has been accounted for similar to a pooling of
interests. Accordingly, the GELAAC consolidated financial statements have been
restated for the years ended December 31, 1998 and 1997 as if Harvest had been
a part of LOV as of January 1, 1997.
The majority of GELAAC's outstanding common stock is owned by General Electric
Capital Assurance Company ("GECA"). GECA is a wholly-owned subsidiary of
GEFAHI, which is an indirect wholly-owned subsidiary of General Electric
Capital Corporation ("GECC"). GECC is an indirect wholly-owned subsidiary of
General Electric Company.
(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.
(c) Products
The Company's product offerings are divided along two major segments of
consumer needs: (i) Wealth Accumulation and Transfer and (ii) Lifestyle
Protection and Enhancement.
The Company's principal product lines under the Wealth Accumulation and
Transfer segment are (i) annuities (deferred and immediate; either fixed or
variable); (ii) life insurance (universal, ordinary and group), (iii)
guaranteed investment contracts ("GICs") including funding agreements and (iv)
mutual funds. Wealth Accumulation and Transfer products are used by customers
as vehicles for accumulating wealth, often on a tax-deferred basis,
transferring wealth to beneficiaries, or providing a means to replace the
insured's income in the event of premature death. The Company's distribution
of Wealth Accumulation and Transfer products is accomplished through two
distribution methods: (i) intermediaries and (ii) career or dedicated sales
forces.
The Company's principal product lines under the Lifestyle Protection and
Enhancement segment are (i) long-term care insurance and (ii) supplemental
accident and health insurance. Lifestyle Protection and Enhancement products
are used by customers as vehicles to protect their income and assets from the
adverse economic impacts of significant health care costs or other
unanticipated events that cause temporary or permanent loss of earnings
capabilities (including the ability to repay certain indebtedness). The
Company's distribution of Lifestyle Protection and Enhancement products is
accomplished through two distribution methods: (i) intermediaries and (ii)
career or dedicated sales forces.
Approximately 17%, 20% and 27% of premium and annuity consideration collected,
in 1999, 1998, and 1997, respectively, came from customers residing in the
South Atlantic region of the United States, and approximately 17%, 27% and 13%
of premium and annuity consideration collected, in 1999, 1998, and 1997,
respectively, came from customers residing in the Mid-Atlantic region of the
United States.
F-57
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(1) Summary of Significant Accounting Policies -- Continued
Although the Company markets its products through numerous distributors,
approximately 28%, 20% and 19% of the Company's sales in 1999, 1998, and 1997,
respectively, have been through two specific national stockbrokerage firms
(part of the Wealth Accumulation and Transfer segment.) 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) 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.
(e) Investments
The Company has designated its fixed maturities (bonds, notes, mortgage-backed
securities, asset-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 and, accordingly, have no effect on net income, but are shown as a
separate component of accumulated non-owner changes in equity in the
consolidated statements of shareholders' interest. 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. In
general, the Company ceases to accrue investment income when interest or
dividend payments are 90 days in arrears.
Investment income on mortgage-backed and asset-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.
F-58
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(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.
(f) 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
investment 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.
(g) 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.
(h) Federal Income Taxes
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.
(i) 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.
(j) 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.
F-59
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(1) Summary of Significant Accounting Policies -- Continued
(k) 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.
(l) 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, 1999, approximately $44.3 of the Company's other invested
assets related to its capital investments in the separate accounts.
(m) 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 for the years ended December
31, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Fixed maturities..................................... $560.1 $489.8 $477.2
Equity securities.................................... -- 4.9 7.3
Mortgage loans....................................... 66.9 64.2 61.0
Policy loans......................................... 14.0 14.4 13.7
Other investments.................................... 2.5 6.7 9.0
------ ------ ------
Gross investment income.............................. 643.5 580.0 568.2
Investment expenses.................................. (5.3) (5.3) (5.5)
------ ------ ------
Net investment income................................ $638.2 $574.7 $562.7
====== ====== ======
</TABLE>
F-60
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(2) Investments -- Continued
For the years ended December 31, sales proceeds and gross realized investment
gains and losses from the sales of investment securities available-for-sale
were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ -------- ------
<S> <C> <C> <C>
Sales proceeds..................................... $590.3 $1,330.0 $483.6
====== ======== ======
Gross realized investment:
Gains............................................. 28.6 43.8 24.5
Losses............................................ (16.6) (14.2) (5.5)
------ -------- ------
Net realized investment gains...................... $ 12.0 $ 29.6 $ 19.0
====== ======== ======
</TABLE>
The additional proceeds from the investments presented in the consolidated
statements of cash flows result from principal collected on mortgage-backed
securities, asset-backed securities, maturities, calls and sinking fund
payments.
Net unrealized gains and losses on investment securities and other invested
assets 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 and other invested assets reflected as a separate component of
shareholders' interest as of December 31, are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Net unrealized gains/(losses) on available-for-sale
investment securities and other invested assets be-
fore adjustments:
Fixed maturities.................................... $(245.0) $138.2 $192.2
Equity securities................................... (0.4) 5.5 14.6
Other invested assets............................... (4.1) 2.3 6.4
------- ------ ------
Subtotal........................................... (249.5) 146.0 213.2
------- ------ ------
Adjustments to the present value of future profits
and deferred acquisition costs 43.1 (57.1) (78.3)
Deferred income taxes................................ 72.2 (31.1) (47.2)
------- ------ ------
Net unrealized gains/(losses)...................... $(134.2) $ 57.8 $ 87.7
======= ====== ======
</TABLE>
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
1999 cost gains losses value
- ---- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Fixed maturities:
U.S. government and agency........... $ 9.8 $ 0.1 $ (0.2) $ 9.7
State and municipal.................. 1.5 -- -- 1.5
Non-U.S. government.................. 3.0 -- (0.2) 2.8
U.S. corporate....................... 4,936.3 21.4 (227.6) 4,730.1
Non-U.S. corporate................... 624.6 8.1 (17.8) 614.9
Mortgage-backed...................... 1,696.5 16.9 (27.4) 1,686.0
Asset-backed......................... 1,007.0 1.5 (19.8) 988.7
-------- ----- ------- --------
Total fixed maturities............. 8,278.7 48.0 (293.0) 8,033.7
Common stocks and non-redeemable
preferred stocks.................... 33.5 1.3 (1.7) 33.1
-------- ----- ------- --------
Total available-for-sale securities.. $8,312.2 $49.3 $(294.7) $8,066.8
======== ===== ======= ========
</TABLE>
F-61
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(2) Investments -- Continued
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
1998 cost gains losses value
- ---- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Fixed maturites:
U.S. government and agency........... $ 66.3 $ 2.2 $ (0.1) $ 68.4
State and municipal.................. 1.6 0.4 -- 2.0
Non-U.S. government.................. 3.0 -- (0.4) 2.6
U.S. corporate....................... 4,223.8 142.2 (54.6) 4,311.4
Non-U.S. corporate................... 314.3 6.4 (9.0) 311.7
Mortgage-backed...................... 1,665.0 58 (9) 1,714.0
Asset-backed......................... 610.6 7.8 (5.7) 612.7
-------- ------ ------ --------
Total fixed maturities............. 6,884.6 217.0 (78.8) 7,022.8
Common stocks and non-redeemable
preferred stocks.................... 48.9 5.8 (0.3) 54.4
-------- ------ ------ --------
Total available-for-sale securities.. $6,933.5 $222.8 $(79.1) $7,077.2
======== ====== ====== ========
</TABLE>
The scheduled maturity distribution of the fixed maturity portfolio at
December 31, 1999 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>
Amortized Fair
Cost Value
--------- --------
<S> <C> <C>
Due in one year or less.................................. $ 332.4 $ 329.7
Due one year through five years.......................... 2,222.5 2,170.0
Due five years through ten years......................... 1,663.2 1,565.5
Due after ten years...................................... 1,357.1 1,293.8
-------- --------
Subtotals.............................................. 5,575.2 5,359.0
Mortgage-backed securities............................... 1,696.5 1,686.0
Asset-backed securities.................................. 1,007.0 988.7
-------- --------
Totals................................................. $8,278.7 $8,033.7
======== ========
</TABLE>
As required by law, the Company has investments on deposit with governmental
authorities and banks for the protection of policyholders of $5.9 and $10.8 as
of December 31, 1999 and 1998, respectively.
As of December 31, 1999, approximately 26.1% and 16.1% 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, 1999 the Company did not hold any fixed maturity securities
which exceeded 10% of shareholders' interest.
F-62
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(2) Investments -- Continued
The credit quality of the fixed maturity portfolio at December 31, follows.
The categories are based on the higher of the ratings published by Standard &
Poors or Moody's.
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
Fair Fair
value Percent value Percent
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Agencies and treasuries.................... $ 284.7 3.5% $ 536.0 7.6%
AAA/Aaa.................................... 2,080.7 25.9 1,696.1 24.2
AA/Aa...................................... 461.7 5.7 415.2 5.9
A/A........................................ 1,807.5 22.5 1,388.8 19.8
BBB/Baa.................................... 2,078.2 25.9 1,980.8 28.2
BB/Ba...................................... 368.2 4.6 401.5 5.7
B/B........................................ 191.6 2.4 188.5 2.7
CCC/Ca..................................... 0.7 0.0 -- --
CC/Ca...................................... 0.1 0.0 -- --
Not rated.................................. 760.3 9.5 415.9 5.9
-------- ----- -------- -----
Totals..................................... $8,033.7 100.0% $7,022.8 100.0%
======== ===== ======== =====
</TABLE>
Bonds with ratings ranging from AAA/Aaa to BBB-/Baa are generally regarded as
investment grade securities. Some agencies and treasuries (that is, those
securities issued by the United States government or an agency thereof) are
not rated, but all are considered to be investment grade securities. Finally,
some securities, such as private placements, have not been assigned a rating
by any rating service and are therefore categorized as "not rated." This has
neither positive nor negative implications regarding the value of the
security.
At December 31, 1999 and 1998, there were fixed maturities in default with a
fair value of $1.0 and $4.5, respectively.
(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, 1999:
<TABLE>
<CAPTION>
Mortgage Real Estate
-------- -----------
<S> <C> <C>
South Atlantic.......................................... 30.0% 100.0%
Pacific................................................. 26.0 --
East North Central...................................... 15.0 --
West South Central...................................... 10.0 --
Mountain................................................ 5.0 --
Other................................................... 14.0 --
----- -----
Totals.................................................. 100.0% 100.0%
===== =====
</TABLE>
F-63
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(2) Investments -- Continued
Type distribution as of December 31, 1999:
<TABLE>
<CAPTION>
Mortgage Real Estate
-------- -----------
<S> <C> <C>
Office Building......................................... 22.0% --%
Retail.................................................. 30.0 100.0
Industrial.............................................. 23.0 --
Apartments.............................................. 15.0 --
Other................................................... 10.0 --
----- -----
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 principles, the Company has two types of "impaired" loans as of
December 31, 1999 and 1998: 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 of income recognition ($12.5 and
$11.3, respectively). There was no allowance for losses on these loans as of
December 31, 1999 or 1998. Average investment in impaired loans during 1999,
1998 and 1997 was $15.0, $20.0 and $23.0 and interest income earned on these
loans while they were considered impaired was $2.6, $1.8 and $2.0 for the
years ended 1999, 1998 and 1997, respectively.
The following table shows the activity in the allowance for losses during the
years ended December 31:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Balance on January 1...................................... $20.9 $17.7 $21.0
Provision charged to operations........................... 1.6 1.5 1.4
Amounts written off, net of recoveries.................... 0.8 1.7 (4.7)
----- ----- -----
Balance at December 31.................................... $23.3 $20.9 $17.7
===== ===== =====
</TABLE>
The allowance for losses on mortgage loans at December 31, 1999 and 1998
represented 2.8% and 2.7% of gross mortgage loans, respectively.
The Company had $4.5 and $5.6 of non-income producing mortgage loan
investments as of December 31, 1999 and 1998 respectively.
(3) Deferred Acquisition Costs
Activity impacting deferred policy acquisition costs for the years ended
December 31, was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Unamortized balance -- at January 1................ $296.1 $221.4 $108.8
Costs deferred..................................... 218.9 107.0 130.6
Amortization, net.................................. (39.8) (32.3) (18.0)
------ ------ ------
Unamortized balance -- at December 31.............. 475.2 296.1 221.4
Cumulative effect of net unrealized investment
(gains) losses.................................... 7.3 (13.3) (14.8)
------ ------ ------
Balance at December 31............................. $482.5 $282.8 $206.6
====== ====== ======
</TABLE>
F-64
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(4) Intangibles
(a) Present Value of Future Profits
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 investment and 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.
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>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Unamortized balance -- at January 1................ $367.0 $426.9 $487.9
Interest accreted at 7.19%, 6.25% and 6.75% for
1999, 1998, and 1997, respectively................ 21.9 24.0 28.4
Amortization....................................... (74.1) (83.9) (89.4)
------ ------ ------
Unamortized balance -- at December 31.............. 314.8 367.0 426.9
Cumulative effect of net unrealized investment
(gains) losses.................................... 35.8 (43.8) (63.5)
------ ------ ------
Balance at December 31............................. $350.6 $323.2 $363.4
====== ====== ======
</TABLE>
The estimated percentage of the December 31, 1999 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>
2000................................... 14.7%
2001................................... 12.4
2002................................... 10.2
2003................................... 8.5
2004................................... 7.2
</TABLE>
(b) Goodwill
Goodwill represents the excess of purchase price over the fair value of the
assets acquired, less the fair value of the liabilities assumed which has been
pushed-down to the consolidated financial statements by the Company's parent.
Adjustments to the purchase price related to pre-acquisition contingencies are
recorded as adjustments to goodwill in the period in which they are resolved.
At December 31, 1999 and 1998, total unamortized goodwill was $121.4 and
$134.2, respectively, which is shown net of accumulated amortization and
adjustments of $36.1 and $50.9 for the years ended December 31, 1999 and 1998,
respectively. Goodwill amortization was $6.0, $4.9, and $8.7 for the years
ending December 31, 1999, 1998 and 1997, respectively. Adjustments to goodwill
totaled ($6.8), ($27.6) and ($1.9) for the years ending December 31, 1999,
1998 and 1997, respectively.
(5) Reinsurance and Claim Reserves
GELAAC is involved in both the cession and assumption of reinsurance with
other companies. Although these reinsurance agreements contractually obligate
the reinsurers to reimburse the Company, they do not discharge the
F-65
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(5) Reinsurance and Claim Reserves -- Continued
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 the 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>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Direct............................................... $348.0 $427.5 $412.7
Assumed.............................................. 17.9 19.2 20.7
Ceded................................................ (113.0) (195.1) (134.4)
------ ------ ------
Net premiums earned.................................. $252.9 $251.6 $299.0
------ ------ ------
Percentage of amount assumed to net.................. 7% 8% 7%
====== ====== ======
</TABLE>
Due to the nature of the Company's insurance contracts, premiums earned
approximate premiums written. The above premium amounts include cost of
insurance charges on universal life policies.
During 1998 and 1997, a significant portion of GELAAC's ceded premiums related
to group life and health premiums. During 1998 and 1997, GELAAC was the
primary carrier for the State of Virginia employees group life and health
plan. By statute, GELAAC had to reinsure these risks with other Virginia
domiciled companies who wished to participate.
Incurred losses and loss adjustment expenses are net of reinsurance of $68.2,
$112.4 and $85.6 for the years ended December 31, 1999, 1998 and 1997,
respectively.
(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.
F-66
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(6) Future Annuity and Contract Benefits -- Continued
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 1999 1998
------------------ ---------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
Investment Contracts.... N/A N/A N/A $6,891.1 $5,416.2
Limited-payment
Contracts.............. None (a) 4.0-9.3% 16.3 14.4
Traditional life
insurance contracts.... Company Experience (b) 7.1% 380.8 381.5
Universal life-type
contracts.............. N/A N/A N/A 1,730.2 1,684.7
Accident & Health....... Company Experience (c) 3.5-7.5% 44.6 41.3
-------- --------
Total future annuity and
contract benefits...... $9,063.0 $7,538.1
======== ========
</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
GELAAC 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. As such the Company is not at risk for income taxes nor
entitled to recoveries related to post-acquisition periods.
The total provision for income taxes at December 31, consisted of the
following components:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Current federal income tax provision ..................... $29.3 $29.2 $69.1
Deferred federal income tax provision (benefit)........... 24.9 28.7 (9.5)
----- ----- -----
Subtotal-federal provision.............................. 54.2 57.9 59.6
Current state income tax provision ....................... 2.3 1.6 2.6
Deferred state income tax provision (benefit)............. 0.1 0.8 (0.1)
----- ----- -----
Subtotal-state provision................................ 2.4 2.4 2.5
----- ----- -----
Total income tax provision.............................. $56.6 $60.3 $62.1
===== ===== =====
</TABLE>
The reconciliation of the federal statutory rate to the effective income tax
rate at December 31, is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal income tax rate..................... 35.0% 35.0% 35.0%
State income tax........................................... 0.5 0.5 0.5
Non-deductible goodwill amortization....................... 1.2 1.0 1.7
Dividends received deduction............................... (1.1) (0.2) --
Other, net................................................. (1.2) -- (0.5)
---- ---- ----
Effective rate........................................... 34.4% 36.3% 36.7%
==== ==== ====
</TABLE>
F-67
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(7) Income Taxes -- Continued
The components of the net deferred income tax asset at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Assets:
Insurance reserve amounts.................................... $149.0 $159.5
Investments.................................................. 10.7 --
Net unrealized investment losses on investment securities.... 72.2 --
Other........................................................ 22.2 7.7
------ ------
Total deferred tax assets................................... 254.1 167.2
------ ------
Liabilities:
Net unrealized investment gains on investment securities..... -- 31.1
Investments.................................................. -- 15.9
Present value of future profits.............................. 59.6 67.1
Deferred acquisition costs................................... 74.2 11.0
------ ------
Total deferred tax liabilities.............................. 133.8 125.1
------ ------
Net deferred income tax asset............................... $120.3 $ 42.1
====== ======
</TABLE>
Based on an analysis of the Company's tax position, management believes it
is more likely than not that the results of future operations and
implementation of tax planning strategies will generate sufficient taxable
income enabling the Company to realize remaining deferred tax assets.
Accordingly, no valuation allowance for deferred tax assets is deemed
necessary.
The Company paid $41.8, $25.6 and $70.6, for federal and state income taxes
for the years ended December 31, 1999, 1998 and 1997, respectively.
(8) Related Party Transactions
GELAAC pays investment advisory fees and other fees to affiliates. Amounts
incurred for these items aggregated $14.8, $11.5 and $11.9 for the years ended
December 31, 1999, 1998 and 1997, respectively. GELAAC charges affiliates for
certain services and for the use of facilities and equipment which aggregated
$45.1, $19.1 and $4.6, for the years ended December 31, 1999, 1998 and 1997,
respectively.
GELAAC pays interest on outstanding amounts under a credit funding
agreement with GNA Corporation, the parent company of GECA. Interest expense
under this agreement was $1.9 and $2.2 with no outstanding borrowings at
December 31, 1999 and $64.3 outstanding at December 31, 1998.
During 1998, GELAAC 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
GELAAC 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, 1999 and 1998,
totaled $30.8 and $75.9, 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.
F-68
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(9) Commitments and Contingencies -- Continued
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 $.1, $3.1, and $4.6 to various
state guaranty associations during 1999, 1998 and 1997, respectively. At
December 31, 1999 and 1998, accounts payable and accrued expenses include $4.1
and $17.8, respectively, related to estimated future payments.
(c) Litigation
The Company and its subsidiary are defendants in various cases of litigation
considered to be in the normal course of business. The Company believes that
the outcome of such litigation will not have a material effect on its
financial position or results of operations.
(10) Fair Value of Financial Instruments
The Company has no derivative financial instruments as of December 31, 1999
and 1998 other than mortgage loan commitments of $53.0 and $83.8 and interest
rate floors of $13.9 and $17.2, respectively. The notional value of the
interest rate floors at December 31, 1999 and 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 matter 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, 1999 and 1998.
At December 31, the carrying amounts and fair value of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
Carrying Fair Carrying Fair
amount value amount value
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Mortgage loans.......................... $ 810.5 $ 819.4 $ 745.8 $ 828.3
Investment type insurance contracts..... 6,891.1 6,849.8 5,416.2 5,441.8
Interest rate floors.................... 13.9 1.2 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.
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.
F-69
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(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 2000 is $54.2.
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 received 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 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.
At December 31, statutory net income and statutory capital and surplus is
summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Statutory net income................................... $ 70.8 $ 70.1 $ 80.9
Statutory capital and surplus.......................... $542.5 $577.5 $600.0
</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, 1999 and 1998,
the Company exceeded the minimum required RBC levels.
(13) Operating Segment Information
The Company conducts its operations through two business segments: (1) Wealth
Accumulation and Transfer, comprised of products intended to increase the
policyholder's wealth, transfer wealth to beneficiaries or provide a means for
replacing the income of the insured in the event of premature death, and (2)
Lifestyle Protection and Enhancement, comprised of products intended to
protect accumulated wealth and income from the financial drain of unforeseen
events. See Note (1)(c) for further discussion of the Company's principal
product lines within these two segments.
F-70
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(13) Operating Segment Information -- Continued
The following is a summary of industry segment activity for 1999, 1998 and
1997:
<TABLE>
<CAPTION>
Wealth Lifestyle
Accumulation & Protection
1999 -- Segment Data Transfer & Enhancement Consolidated
- -------------------- -------------- ------------- ------------
<S> <C> <C> <C>
Net investment income................ $ 634.2 $ 4.0 $ 638.2
Net realized investment gains........ 12.0 -- 12.0
Premiums............................. 67.8 56.1 123.9
Other revenues....................... 243.6 0.2 243.8
--------- ------ ---------
Total revenues..................... 957.6 60.3 1,017.9
--------- ------ ---------
Interest credited, benefits, and
other changes in policy reserves.... 617.0 38.5 655.5
Commissions.......................... 179.7 12.4 192.1
Amortization of intangibles.......... 56.2 2.1 58.3
Other operating costs and expenses... (55.1) 2.6 (52.5)
--------- ------ ---------
Total benefits and expenses........ 797.8 55.6 853.4
--------- ------ ---------
Income before income taxes and
cumulative effect of accounting
change............................ $ 159.8 $ 4.7 $ 164.5
========= ====== =========
Total Assets......................... $19,774.2 $183.1 $19,957.3
========= ====== =========
<CAPTION>
Wealth Lifestyle
Accumulation & Protection
1998 -- Segment Data Transfer & Enhancement Consolidated
- -------------------- -------------- ------------- ------------
<S> <C> <C> <C>
Net investment income................ $ 569.4 $ 5.3 $ 574.7
Net realized investment gains........ 29.6 -- 29.6
Premiums............................. 101.4 21.7 123.1
Other revenues....................... 211.1 0.5 211.6
--------- ------ ---------
Total revenues..................... 911.5 27.5 939.0
--------- ------ ---------
Interest credited, benefits, and
other changes in policy reserves.... 560.7 (3.9) 556.8
Commissions.......................... 106.2 6.6 112.8
Amortization of intangibles.......... 55.1 9.7 64.8
Other operating costs and expenses... 26.0 12.5 38.5
--------- ------ ---------
Total benefits and expenses........ 748.0 24.9 772.9
--------- ------ ---------
Income before income taxes and
cumulative effect of accounting
change............................ $ 163.5 $ 2.6 $ 166.1
========= ====== =========
Total Assets......................... $14,661.1 $ 99.8 $14,760.9
========= ====== =========
<CAPTION>
Wealth Lifestyle
Accumulation & Protection
1997 -- Segment Data Transfer & Enhancement Consolidated
- -------------------- -------------- ------------- ------------
<S> <C> <C> <C>
Net investment income................ $ 555.7 $ 7.0 $ 562.7
Net realized investment gains........ 19.0 -- 19.0
Premiums............................. 105.6 66.2 171.8
Other revenues....................... 195.1 0.2 195.3
--------- ------ ---------
Total revenues..................... 875.4 73.4 948.8
--------- ------ ---------
Interest credited, benefits, and
other changes in policy reserves.... 548.4 42.5 590.9
Commissions.......................... 125.2 13.9 139.1
Amortization of intangibles.......... 66.6 3.1 69.7
Other operating costs and expenses... (24.5) 4.1 (20.4)
--------- ------ ---------
Total benefits and expenses........ 715.7 63.6 779.3
--------- ------ ---------
Income before income taxes and
cumulative effect of accounting
change............................ $ 159.7 $ 9.8 $ 169.5
========= ====== =========
Total Assets......................... $12,699.0 $ 47.9 $12,746.9
========= ====== =========
</TABLE>
F-71
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
December 31, 1999, 1998 and 1997
(Dollar amounts in millions, except per share amounts)
(14) Accounting Pronouncements Not Yet Adopted
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities (Statement No. 133), effective for GELAAC
on January 1, 2001 (as amended by Statement of Financial Accounting Standards
No. 137, Deferral of the Effective Date of Statement No. 133.) Upon adoption,
all derivative instruments (including certain derivative instruments embedded
in other contracts) will be recognized in the balance sheets at fair value,
and changes in such fair values must be recognized immediately in earnings
unless specific hedging criteria are met. Changes in the values of derivatives
meeting these hedging criteria will ultimately offset related earnings effects
of the hedged items; effects of qualifying changes in fair value are to be
recorded in equity pending recognition in earnings. Certain significant
refinements and interpretations of Statement 133 are being deliberated by the
FASB, and the effects on accounting for GELAAC financial instruments will
depend to some degree on the results of such deliberations. Management has not
determined the total probable effects of adopting Statement 133, and does not
believe that an estimate of such effects would be meaningful at this time.
(15) Cumulative Effect of Accounting Change
The American Institute of Certified Public Accountants has issued Statement of
Position ("SOP") No. 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 No. 97-3 and has reported
the favorable impact of this adoption as a cumulative effect of a change in
accounting principle resulting in an increase to net income of $5 (net of
income taxes of $2.8).
F-72
