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Filed Pursuant to Rule 497(e)
File Number 333-37856
GE Life & Annuity Separate Account III
Prospectus For The
Single Premium Variable Life Insurance Policy
Policy Form P1254 Single Life
Policy Form P1255 Joint Life
issued by:
GE Life and Annuity Assurance Company
6610 West Broad Street
Richmond, Virginia 23230
--------------------------------------------------------------------------------
This prospectus describes a single premium variable life insurance policy
offered by GE Life and Annuity Assurance Company ("we," "us," "our," or the
"Company"). The Policy provides life insurance protection.
We offer the Policy on either a single life or joint and last survivor basis.
If you purchase the Policy on a single life basis, we will pay a death benefit
upon the death of the Insured. If you purchase the Policy on a joint and last
survivor basis, we will pay a death benefit only on the death of the Last
Insured. If the Attained Age of the Insured under a single life Policy or the
Last Insured under a joint and last survivor Policy at death is less than 100,
the amount of the death benefit will equal the greater of the Specified Amount
or the Account Value multiplied by the applicable corridor percentage. If the
Attained Age of the Insured or Last Insured at death is 100 or more, the amount
of the death benefit will equal the Account Value multiplied by the applicable
corridor percentage. Partial Surrenders may lower your Specified Amount.
Your investment (premium payment) may accumulate Account Value on a variable or
fixed basis, or both. If you choose our variable option, we will invest your
premium payment in Subaccounts of Separate Account III. Each Subaccount invests
in shares of the Funds. We list the Funds, and their currently available
portfolios, below.
AIM Variable Insurance Funds:
AIM V.I. Capital Appreciation Fund, AIM V.I. Growth Fund, AIM V.I. Value
Fund
Alliance Variable Products Series Fund, Inc.:
Growth and Income Portfolio, Premier Growth Portfolio, Quasar Portfolio
Dreyfus:
Dreyfus Investment Portfolios-Emerging Markets Portfolio, The Dreyfus
Socially Responsible Growth Fund, Inc.
Federated Insurance Series:
Federated High Income Bond Fund II, Federated International Small Company
Fund II
Fidelity Variable Insurance Products Fund (VIP):
VIP Equity Income Portfolio, VIP Growth Portfolio
Fidelity Variable Insurance Products Fund II (VIP II):
VIP II Contrafund(R) Portfolio
Fidelity Variable Insurance Products Fund III (VIP III):
VIP III Growth & Income Portfolio, VIP III Mid Cap Portfolio
GE Investments Funds, Inc.:
Mid-Cap Value Equity Fund, Money Market Fund, Premier Growth Equity Fund,
S&P 500(R) Index Fund, Small-Cap Value Equity Fund, U.S. Equity Fund, Value
Equity Fund
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Janus Aspen Series:
Aggressive Growth Portfolio, Balanced Portfolio, Capital Appreciation
Portfolio, Global Life Sciences Portfolio, Global Technology Portfolio,
Growth Portfolio, International Growth Portfolio, Worldwide Growth Portfolio
MFS(R) Variable Insurance Trust:
MFS(R) Growth Series, MFS(R) Growth With Income Series, MFS(R) New Discovery
Series, MFS(R) Utilities Series
Oppenheimer Variable Account Funds:
Oppenheimer Global Securities Fund/VA, Oppenheimer Main Street Growth &
Income Fund/VA
PIMCO Variable Insurance Trust:
Foreign Bond Portfolio, High Yield Bond Portfolio, Long-Term U.S. Government
Bond Portfolio, Total Return Bond Portfolio
Rydex Variable Trust:
Rydex OTC Fund
Not all of these portfolios may be available in all states or in all
markets.
You bear the investment risk if you allocate your premium payments to Separate
Account III.
If you choose our fixed option, your premium payments will grow at the rate of
at least 4%. We take the investment risk of premium payments allocated to the
Guarantee Account.
Your Policy provides for a Surrender Value. Your Surrender Value will depend
upon your Account Value.
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.
In almost all cases, the Policies will be modified endowment contracts for
Federal income tax purposes. This means that a loan or other distribution from
the Policy during the life of the Insured under a single life Policy or the
lives of the Insureds under a joint and last survivor Policy will in almost all
cases be taxed as ordinary income to the extent of any earnings in the Policy,
and may be subject to an additional 10% Federal penalty tax, if taken before
the Owner attains age 59 1/2. Special tax and legal considerations apply if
this Policy is used in connection with a qualified plan or certain other
employment plans.
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 III 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 September 1, 2000
2
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Table of Contents
<TABLE>
<S> <C>
Definitions................................................................. 6
Policy Summary.............................................................. 8
Annual Expense Table........................................................ 12
Portfolio Annual Expenses.................................................. 13
Other Policies............................................................. 15
Risk Summary................................................................ 16
GE Life and Annuity Assurance Company....................................... 18
State Regulation........................................................... 18
Separate Account III........................................................ 19
Changes to Separate Account III............................................ 19
The Portfolios.............................................................. 21
Subaccounts................................................................ 21
Your Right to Vote Portfolio Shares........................................ 28
The Guarantee Account....................................................... 29
Charges And Deductions...................................................... 31
Charges Attributable to Premium Payments................................... 31
Mortality and Expense Risk Charge.......................................... 32
Administrative Expense Charge.............................................. 32
Cost of Insurance.......................................................... 32
Surrender Charge........................................................... 34
Partial Surrender Processing Fee........................................... 34
Transfer Charge............................................................ 34
Other Charges.............................................................. 35
Reduction of Charges for Group Sales....................................... 35
The Policy.................................................................. 36
Applying for a Policy...................................................... 36
Owner...................................................................... 36
Beneficiary................................................................ 36
Changing the Beneficiary................................................... 37
Canceling a Policy......................................................... 37
Premiums.................................................................... 38
General.................................................................... 38
Initial Premium............................................................ 38
Tax Free Exchanges (1035 Exchanges)........................................ 39
Additional Premium Payments................................................ 39
Allocating Premiums........................................................ 40
How Your Account Value Varies............................................... 41
Account Value.............................................................. 41
</TABLE>
3
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<TABLE>
<S> <C>
Surrender Value............................................................ 41
Subaccount Values.......................................................... 41
Unit Values................................................................ 41
Net Investment Factor...................................................... 41
Transfers................................................................... 43
General.................................................................... 43
Dollar-Cost Averaging...................................................... 43
Portfolio Rebalancing...................................................... 44
Transfers by Third Parties................................................. 45
Death Benefits.............................................................. 46
Amount of Death Benefit Payable............................................ 46
Accelerated Benefit Rider.................................................. 47
Changing the Specified Amount.............................................. 48
Surrenders and Partial Surrender............................................ 49
Surrenders................................................................. 49
Partial Surrender.......................................................... 49
Effect of Partial Surrenders on Account Value and Specified Amount......... 49
Loans....................................................................... 50
General.................................................................... 50
Preferred Policy Debt...................................................... 50
Interest Rate Charged...................................................... 51
Repayment of Policy Debt................................................... 51
Effect of Policy Loans..................................................... 51
Termination................................................................. 52
Premium to Prevent Termination............................................. 52
Your Policy will Remain in Effect During the Grace Period.................. 52
Reinstatement.............................................................. 52
Payments And Telephone Transactions......................................... 53
Requesting Payments........................................................ 53
Telephone Transactions..................................................... 53
Tax Considerations.......................................................... 54
Federal Tax Matters........................................................ 54
Introduction............................................................... 54
Tax Status of the Policy................................................... 54
Tax Treatment of Policies -- General....................................... 55
Tax Treatment of Modified Endowment Contracts.............................. 55
Tax Treatment of Policies That Are Not MECs................................ 56
Other Tax Rules Applicable to the Policies................................. 57
Income Tax Withholding..................................................... 59
Taxation Status of the Company............................................. 59
Changes in the Law and Other Considerations................................ 59
</TABLE>
4
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<TABLE>
<S> <C>
Other Policy Information.................................................... 60
Exchange Privilege......................................................... 60
Optional Payment Plans..................................................... 60
Dividends.................................................................. 61
Incontestability........................................................... 61
Suicide Exclusion.......................................................... 61
Misstatement of Age or Gender.............................................. 62
Written Notice............................................................. 62
Trustee.................................................................... 62
Other Changes.............................................................. 62
Reports.................................................................... 63
Change of Owner............................................................ 63
Using the Policy as Collateral............................................. 63
Reinsurance................................................................ 63
Legal Proceedings.......................................................... 63
Additional Information...................................................... 64
Sale of the Policies....................................................... 64
Legal Matters.............................................................. 64
Experts.................................................................... 64
Actuarial Matters.......................................................... 65
Financial Statements....................................................... 65
Executive Officers and Directors........................................... 66
Other Information.......................................................... 67
Hypothetical Illustrations.................................................. 68
</TABLE>
This Prospectus does not constitute an offering in any jurisdiction in which
such offering may not be lawfully made.
5
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Definitions
We have tried to make this Prospectus as understandable as possible. However,
in explaining how the Policy works, we have had to use certain terms that have
special meanings. We define these terms below.
Account Value -- The total amount under the Policy in each Subaccount,
Guarantee Account and the General Account.
Attained Age -- The 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 benefit
payable at the death of the Insured under a single life Policy or the death of
the Last Insured under a joint and last survivor Policy.
Fund -- Any open-end management investment company or unit investment trust in
which Separate Account III invests.
GE Life & Annuity -- GE Life and Annuity Assurance Company.
General Account -- Assets of GE Life & Annuity other than those allocated to
Separate Account III or any of our other separate accounts.
Guarantee Account -- Part of our General Account that provides a guaranteed
interest rate for a specified interest rate guarantee period. This account is
not part of and does not depend on the investment performance of Separate
Account III.
Home Office -- Our offices at 6610 West Broad Street, Richmond, Virginia 23230,
1-804-281-6000.
Insured -- The person upon whose life we issue a single life Policy.
Last Insured -- The last Insured to die under a joint and last survivor Policy.
Monthly Anniversary Day -- The same day in each month as the Policy Date.
Optional Payment Plan -- A plan under which any part of death benefit Proceeds
or Surrender Value Proceeds can be used to provide a series of periodic
payments to you or a Beneficiary.
Owner -- The Owner of the Policy. "You" or "your" refers to the Owner. You may
also name Contingent Owners.
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 of a month, the
Policy Date will be the 28th.
Policy Debt -- The amount of outstanding loans plus accrued interest.
Policy Month -- A one-month period beginning on a Monthly Anniversary Day and
ending on the day immediately preceding the next Monthly Anniversary Day.
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Proceeds -- The amount payable upon surrender of the Policy or the death of the
Insured under a single life Policy or the death of the Last Insured under a
joint and last survivor Policy. We will reduce your Proceeds by outstanding
Policy Debt and any due and unpaid monthly deductions to determine the death
benefit payable under the Policy.
Separate Account III -- GE Life & Annuity Separate Account III, the segregated
asset account of GE Life & Annuity to which you allocate premiums.
Specified Amount -- An amount we use in determining the insurance coverage on
an Insured's life under a single life Policy or the Insureds' lives under a
joint and last survivor Policy.
Subaccount -- A subdivision of Separate Account III, the assets of which invest
exclusively in a corresponding portfolio of a Fund. Not all Subaccounts may be
available in all states or markets.
Surrender Value -- The amount we pay you when you surrender the Policy. It is
equal to Account Value less Policy Debt and less any applicable surrender
charge.
Unit Value -- A unit of measure we use to calculate the Account Value for each
Subaccount.
Valuation Day -- For each Subaccount, each day on which the New York Stock
Exchange is open for regular trading except for days that the Subaccount's
corresponding Fund does not value its shares.
Valuation Period -- The period that starts at the close of regular trading on
the New York Stock Exchange on any Valuation Day and continues to the end of
the next Valuation Day.
7
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Policy Summary
PREMIUMS
. You select an initial premium payment which will be shown in your Policy's
data pages. The minimum initial premium payment is $25,000. See Premiums.
. You may make additional premium payments, within limits. See Premiums.
. Under certain circumstances, you may have to pay extra premiums to prevent
termination. See Premium to Prevent Termination.
ALLOCATION OF PREMIUMS
. You allocate your premiums among up to seven of the Subaccounts of Separate
Account III at any given time. You may also allocate premiums to the
Guarantee Account. Allocations to the Guarantee Account do not count as one
of the seven allocations we permit under the Policy. 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 any portion of your
initial premium designated for the Guarantee Account to the Guarantee Account
and any portion of your initial premium designated for the Subaccounts to the
Subaccounts you choose. See Allocating Premiums for rules and limits.
8
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. The Subaccounts invest in corresponding portfolios of the following Funds:
Portfolios
<TABLE>
<S> <C>
AIM Variable Insurance Funds Small-Cap Value Equity Fund
AIM V.I. Capital Appreciation Fund U.S. Equity Fund
AIM V.I. Growth Fund Value Equity Fund
AIM V.I. Value Fund
Janus Aspen Series
Alliance Variable Products Series Aggressive Growth Portfolio
Fund, Inc. Balanced Portfolio
Growth and Income Portfolio Capital Appreciation Portfolio
Premier Growth Portfolio Global Life Sciences Portfolio
Quasar Portfolio Global Technology Portfolio
Growth Portfolio
Dreyfus International Growth Portfolio
Dreyfus Investment Portfolios-Emerging Markets Worldwide Growth Portfolio
Portfolio
The Dreyfus Socially Responsible Growth MFS(R) Variable Insurance Trust Fund, Inc.
MFS(R) Growth Series
Federated Insurance Series MFS(R) Growth with Income Series
Federated High Income Bond Fund II MFS(R) New Discovery Series
Federated International Small Company Fund II MFS(R) Utilities Series
Fidelity Variable Insurance Products Fund (VIP) Oppenheimer Variable Account Funds
VIP Equity-Income Portfolio Oppenheimer Global Securities Fund/VA
VIP Growth Portfolio Oppenheimer Main Street Growth & Income Fund/VA
Fidelity Variable Insurance Products Fund II (VIP II) PIMCO Variable Insurance Trust
VIP II Contrafund Portfolio Forign Bond Portfolio
High Yield Bond Portfolio
Fidelity Variable Insurance Products Fund III Long-Term U.S. Government Bond Portfolio
(VIP III) Total Return Bond Portfolio
VIP III Growth & Income Portfolio
VIP III Mid Cap Portfolio Rydex Variable Trust
Rydex OTC Fund
GE Investments Funds, Inc.
Mid-Cap Value Equity Fund
Money Market Fund
Premier Growth Equity Fund
S&P 500(R) Index Fund
</TABLE>
Not all of these portfolios may be available in all states or in all markets.
DEDUCTIONS FROM ASSETS
. 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 1.55%.
. We make a monthly deduction from your Account Value for 1) the mortality and
expense risk charge at a current effective annual rate of .70% from assets in
the Subaccounts during the first ten Policy Years decreasing to a current
effective annual rate of .35% thereafter; 2) the administrative expense
charge at a current effective annual rate of .40% from your assets in the
Subaccounts and the Guarantee Account; 3) the cost of insurance; 4) the
premium tax charge (deducted monthly during the first ten years following
each premium payment at a rate equivalent to an annual rate of .20% of that
portion of the Policy's Account Value in Separate Account III attributable to
each premium payment); and 5) the
9
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distribution expense charge (deducted monthly during the first ten years
following each premium payment at a rate equivalent to an annual rate of .30%
of that portion of the Policy's Account Value in Separate Account III
attributable to each premium payment).
ACCOUNT VALUE
. Account Value equals the total amount in each Subaccount and the General
Account.
. Account Value serves as the starting point for calculating certain values
under a Policy, such as your Proceeds. Account Value varies from day to day
to reflect investment experience of the Subaccounts, 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 Subaccounts and the Guarantee
Account (subject to certain restrictions). We reserve the right to assess a
$10 transfer charge for 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. Your Policy will terminate if
the Surrender Value is too low to cover the monthly deduction (i.e., the
premium tax and distribution expense charges, if applicable, and the
mortality and expense risk charge, the administrative expense charge and the
cost of insurance charge) and the grace period expires without a sufficient
payment. 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.
. In each Policy Year after the first, you may make one partial surrender from
your Policy. The maximum amount you may withdraw is that amount equal to the
lesser of a) the Surrender Value less $1,000; and b) the available loan
amount (which is equal to 90% of the difference between Account Value and any
applicable surrender charges, minus any Policy Debt). A processing fee equal
to the lesser of $25 or 2% of the amount of the partial surrender will apply
to each partial surrender, but no surrender charge will apply. We will not
permit a partial surrender that would reduce Account Value below $25,000. See
Partial Surrender.
. While the Insured is alive under a single life Policy or the Last Insured is
alive under a joint and last survivor Policy, you can surrender your Policy
at any time for
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its Surrender Value (Account Value minus Policy Debt and minus any applicable
surrender charge). A surrender charge will apply within eight years of the
initial premium payment. See Surrenders and Surrender Charge.
. You may choose from a variety of payment options. See Requesting Payments.
DEATH BENEFITS
. We offer a death benefit. If the Attained Age of the Insured under a single
life Policy or the Attained Age of the Last Insured under a joint and last
survivor Policy at death is less than 100, the amount of the death benefit is
the greater of Specified Amount or the Account Value multiplied by the
applicable corridor percentage. If the Attained Age of the Insured under a
single life Policy or the Attained Age of the Last Insured under a joint and
last survivor Policy at death is 100 or more, the amount of the death benefit
is the Account Value multiplied by the applicable corridor percentage. See
Amount of Death Benefit Payable.
. We will pay a death benefit upon the death of a single Insured if you
purchase the Policy on a single life basis and upon the death of the Last
Insured if you purchase the Policy on a joint and last survivor basis.
. A death benefit is payable as a lump sum or under a variety of payment
options.
. You may change the Specified Amount. See Changing the Specified Amount for
rules and limits.
. During the grace period, your Policy will remain in effect subject to certain
provisions. See Your Policy Will Remain in Effect During the Grace Period.
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Annual Expense Table
EXPENSE TABLE
This table describes the various costs and expenses that you will pay (either
directly or indirectly) if you purchase the Policy. The table reflects expenses
of the Subaccounts of the Account, of the Guarantee Account and of the
portfolios. For more complete descriptions of the various costs and expenses
involved, See Charges and Deductions in this Prospectus, and the Fund
prospectuses.
<TABLE>
<CAPTION>
Owner Transaction Expenses:/1/
-------------------------------------------------------------------------------
<S> <C>
Maximum surrender charge (as a percentage of the initial
premium payment surrendered): 6%
We reduce the surrender charge percentage over time. In
general, the later you surrender, the lower the surrender
charge will be on the initial premium payment.
Transfer Charge (for each transfer after the first in a
calendar month) $10/2/
Partial Surrender Processing Fee lesser of $25 or 2%
of amount withdrawn
</TABLE>
<TABLE>
<CAPTION>
Expenses (as a percentage of Account Value Monthly Annual
in Separate Account III): Expense Expense
-----------------------------------------------------------------------------
<S> <C> <C>
Premium Tax Charge/3/ .0167% 0.20%
Distribution Expense Charge/3/ .0250% 0.30%
Maximum Mortality and Expense Risk Charge (decreasing to an
effective annual rate of 0.35% or an effective monthly rate
of .0292% after the tenth Policy year) .0583% 0.70%
<CAPTION>
Expenses (as a percentage of Account Value Monthly Annual
in Separate Account III and Guarantee Account) Expense Expense
-----------------------------------------------------------------------------
<S> <C> <C>
Administrative Expense Charge/4/ .0333% 0.40%
Cost of Insurance Charge/5/
Single Life .0542% 0.65%
Joint and Last Survivor .0292% 0.35%
</TABLE>
/1/We reserve the right to impose a maximum fee of $25 for the cost of
preparing an inforce illustration, although we do not currently do so.
/2/We reserve the right to impose a transfer charge of up to $10, although we
do not currently do so.
/3/Deducted monthly from Account Value attributable to each premium payment for
ten years following the premium payment.
/4/Subject to a minimum monthly deduction of $8.00.
/5/Subject to a maximum guaranteed cost of insurance charge as shown in your
policy. This charge depends on the insured's age, gender and applicable risk
class. See Charges and Deductions -- Cost of Insurance in this Prospectus.
We will not impose a cost of insurance once the Insured reaches Attained Age
100.
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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 Other Expenses
Fees (after (after Total
fee waivers 12b-1 Service reimbursement Annual
Portfolio as applicable) Fees* Fees** as applicable) Expenses
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM Variable Insurance Funds
AIM V.I. Capital Appreciation Fund.................... 0.62 -- 0.11 0.73
AIM V.I. Growth Fund.................................. 0.63 -- 0.10 0.73
AIM V.I. Value Fund................................... 0.61 -- 0.15 0.76
Alliance Variable Products Series Fund, Inc. /1/
Growth and Income Portfolio -- Class B Shares......... 0.63 0.25 -- 0.09 0.97
Premier Growth Portfolio -- Class B Shares............ 1.00 0.25 -- 0.04 1.29
Quasar Portfolio -- Class B Shares.................... 0.81 0.25 -- 0.14 1.20
Dreyfus
Dreyfus Investment Portfolio Emerging-Markets
Portfolio ........................................... 1.25 -- 0.25 1.50
The Dreyfus Socially Responsible Growth Fund, Inc..... 0.75 -- 0.04 0.79
Federated Insurance Series /2/
Federated High Income Bond Fund II -- Service Shares.. 0.60 0.10 0.19 0.89
Federated International Small Company Fund II......... 0.40 0.10 1.00 1.50
Fidelity Variable Insurance Products Fund (VIP) /3/
VIP Equity-Income Portfolio -- Service Class 2
Shares............................................... 0.48 0.25 -- 0.10 0.83
VIP Growth Portfolio -- Service Class 2 Shares........ 0.58 0.25 -- 0.10 0.93
Fidelity Variable Insurance Products Fund (VIP II) /4/
VIP II Contrafund Portfolio -- Service Class 2
Shares............................................... 0.58 0.25 -- 0.12 0.95
Fidelity Variable Insurance Products Fund (VIP III) /5/
VIP III Growth & Income Portfolio-- Service Class 2
Shares............................................... 0.48 0.25 -- 0.13 0.86
VIP III Mid Cap Portfolio -- Service Class 2 Shares... 0.57 0.25 -- 0.43 1.25
GE Investments Funds, Inc. /6/
Mid-Cap Value Equity Fund............................. 0.65 -- 0.06 0.71
Money Market Fund..................................... 0.24 -- 0.06 0.30
Premier Growth Equity Fund............................ 0.65 -- 0.03 0.68
S&P 500 Index Fund.................................... 0.35 -- 0.04 0.39
Small-Cap Value Equity Fund........................... 0.80 -- 0.13 0.93
U.S. Equity Fund...................................... 0.55 -- 0.06 0.61
Value Equity Fund..................................... 0.65 -- 0.13 0.78
Janus Aspen Series /7/
Aggressive Growth Portfolio -- Service Shares......... 0.65 0.25 -- 0.02 0.92
Balanced Portfolio -- Service Shares.................. 0.65 0.25 -- 0.02 0.92
Capital Appreciation Portfolio -- Service Shares..... 0.65 0.25 -- 0.04 0.94
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 -- Service Shares.................... 0.65 0.25 -- 0.02 0.92
International Growth Portfolio -- Service Shares...... 0.65 0.25 -- 0.11 1.01
Worldwide Growth Portfolio -- Service Shares.......... 0.65 0.25 -- 0.05 0.95
MFS(R) Variable Insurance Trust /8/
MFS(R) Growth Series -- Service Class Shares.......... 0.75 0.20 -- 0.16 1.11
MFS(R) Growth with Income Series-- Service Class
Shares............................................... 0.75 0.20 -- 0.13 1.08
</TABLE>
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<TABLE>
<CAPTION>
Management Other Expenses
Fees (after (after Total
fee waivers 12b-1 Service reimbursement Annual
Portfolio as applicable) Fees* Fees** as applicable) Expenses
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MFS(R) New Discovery
Series -- Service Class
Shares.................. 0.90 0.20 -- 0.17 1.27
MFS(R) Utilities Series
-- Service Class
Shares.................. 0.75 0.20 -- 0.16 1.11
Oppenheimer Variable
Account Funds
Oppenheimer Global
Securities Fund/VA --
Service Shares.......... 0.67 0.15 -- 0.02 0.84
Oppenheimer Main Street
Growth & Income Fund/VA
-- Service Shares....... 0.73 0.15 -- 0.05 0.93
PIMCO Variable Insurance
Trust /9/
Foreign Bond Portfolio --
Administrative Shares... 0.25 0.15 0.70 1.10
High Yield Bond Portfolio
-- Administrative
Shares.................. 0.25 0.15 0.35 0.75
Long-Term U.S. Government
Bond Portfolio --
Administrative Shares... 0.25 0.15 0.25 0.65
Total Return Bond
Portfolio --
Administrative Shares... 0.25 0.15 0.25 0.65
Rydex Variable Trust
Rydex OTC Fund........... 0.75 0.25 0.55 1.55
</TABLE>
* The 12b-1 fees deducted from the 12b-1 classes of these portfolios cover
certain distribution and shareholder support services provided by the
companies selling contracts investing in those portfolios. The portion of
the 12b-1 fees assesed against the Separate Account's assets related to the
portfolios will be remitted to Capital Brokerage Corporation, the principal
underwiter for the Contracts.
** The Service Share fees deducted from the service shares of these portfolios
cover certain administrative services provided by companies selling
contracts investing in those portfolios. The portion of the Service Share
fees assessed against the Separate Account's assets related to the
portfolios will be remitted to GE Life & Annuity.
/1/ Alliance Variable Products Series Fund, Inc. has voluntarily agreed to
reduce or limit certain other expenses. Absent these waivers total annual
expenses during 1999 would have been 1.44% for the Quasar Portfolio,
consisting of 1.00% management fees, .25% 12b-1 fee and .19% other
expenses.
/2/ Federated Insurance Series, Inc. has voluntarily agreed to reduce or limit
certain other expenses. Absent these waivers total annual expenses during
1999 would have been 1.04% for the High Income Bond Fund II, consisting of
.60% management fees, and 25% service fees, 19% other expenses; total
annual expenses during 1999 would have been 2.50% for International Small
Company Fund II, consisting of 1.25% management fee, 1.00% service fee and
.25% other expense.
/3/ The expenses of the portfolios of the Variable Insurance Products Fund
(VIP) - Service Class 2, are based on the estimated expenses that those
portfolios expect to incur in their initial fiscal year.
14
<PAGE>
/4/ The expenses of the portfolios of the Variable Insurance Products Fund II
(VIP II) - Service Class 2, are based on the estimated expenses that those
portfolios expect to incur in their initial fiscal year.
/5/ The expenses of the portfolios of the Variable Insurance Products Fund III
(VIP III) - Service Class 2, are based on the estimated expenses that those
portfolios expect to incur in their initial fiscal year.
/6/ GE Asset Management Incorporated currently serves as investment advisor to
GE Investments Funds, Inc. (except for GE Small-Cap Value Equity and Value
Equity Funds) and has agreed to waive a portion of the fee payable by the
Fund. Absent this fee waiver, the total annual expenses of the GE Money
Market Fund would have been .50%, consisting of .44% management fees and
.06% other expenses; GE Premier Growth Equity Fund would have been .72%
total annual expenses, consisting of .65% management fees and .07% other
expenses. Expenses for the Small-Cap Value Equity and the Value Equity
Funds are estimated due to the fund being in existence for less than 10
months.
/7/ Janus Aspen Series expenses (except for 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, and Balanced 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.
/8/ Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of MFS Variable Insurance Trust during 1999 would have been
total annual expenses of 1.66% for the Growth Series, consisting of .75%
management fees, .20% 12b-1 fee and .71% other expenses; total annual
expenses of 2.69% for the New Discovery Series, consisting of .90%
management fees, .20% 12b-1 fees and 1.59% other expenses.
/9/ Absent certain fee waivers or reimbursements, the total annual expenses of
the portfolios of the PIMCO Variable Insurance Trust during 1999 would have
been total annual expenses of 1.25% for the Foreign Bond Portfolio,
consisting of .25% management fees, .15% service fee and .85% other
expenses; total annual expenses of .71% for the Long-Term U.S. Government
Bond Portfolio, consisting of .25% management fees and .46% other expenses;
total annual expenses of .69% for Total Return Bond Portfolio, consisting
of .25% management fees and .44% other expenses.
PIMCO Foreign Bond Portfolio has contractually agreed to reduce total
annual portfolio operating expenses for the Administrative Class shares to
the extent they would exceed, due to the payment of organizational expenses
and Trustees' fee, 0.90% of average daily net assets. Under the Expense
Limitation Agreement, PIMCO may recoup these waivers and reimbursements in
future periods, not exceeding three years, provided total expenses,
including such recoupment, do not exceed the annual expense limit.
The expense information regarding the Funds was provided by those Funds. We
have not independently verified this information. We cannot guarantee that the
reimbursements and fee waivers provided by certain of the Funds will continue.
Other Policies
We offer other variable life insurance policies which also invest in the same
portfolios of the Funds. These policies may have different charges that could
affect the value of the Subaccounts and may offer different benefits more
suitable to your needs. To obtain more information about these policies,
contact your registered representative, or call (800) 352-9910.
15
<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. 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 Lapse
If the Surrender Value of your Policy is too low to pay the monthly deductions
when due, 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
Subaccounts 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 most cases, the Policy will be a Modified
Endowment Contract ("MEC"). If your Policy is a MEC, certain distributions made
during the Insured's lifetime under a single life Policy or the Insureds'
lifetimes under a joint and last survivor life Policy, such as loans and
withdrawals from, and collateral assignments of the Policy are includable in
gross income on an income-first basis. A 10% Federal penalty tax ordinarily
will be imposed on income distributed before you attain age 59 1/2. Policies
that are not MECs receive preferential tax treatment with respect to certain
distributions. See Tax Treatment of Modified Endowment Contracts. You should
consult a qualified tax advisor in all tax matters involving your Policy.
Limits on Partial Surrenders
You may make one partial surrender each Policy Year after the first Policy
Year.
You may withdraw an amount up to the amount equal to the lesser of a) the
Surrender Value less $1,000; and b) the available loan amount (which is equal
to 90% of the difference between Account Value and any applicable surrender
charges,
16
<PAGE>
minus any Policy Debt). We will assess a processing fee on the withdrawal. We
will not permit a partial surrender that would reduce Account Value below
$25,000.
Partial surrenders will reduce your Account Value and Specified Amount. 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 transfer the amount of the loan from the Subaccounts and/or the
Guarantee Account to the General Account and hold it 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 Subaccounts
and does not participate in the interest credited to the Guarantee Account. The
longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Subaccounts and the extent, if any,
of the difference in the interest rates credited to the Guarantee Account and
the General Account, the effect could be favorable or unfavorable.
A Policy loan also reduces the death benefit 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. If
Account Value becomes insufficient to cover charges when due, the Policy will
terminate without value after a grace period.
Comparison With Other Insurance Policies
The Policy is similar in many ways to universal life insurance. As with
universal life insurance:
. the Owner pays premium for insurance coverage on the Insured or Insureds;
. the Policy provides for the accumulation of Surrender Value that is payable
if the Owner surrenders the Policy during the Insured's or 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 Subaccounts. The amount and duration of life
insurance protection and of the Policy's Account Value will vary with the
investment performance of the Subaccounts you select.
The Surrender Value of your Policy may decrease if the investment performance
of the Subaccounts to which you allocate Account Value is sufficiently adverse.
If the Surrender Value becomes insufficient to cover charges when due, the
Policy will terminate without value after a grace period.
17
<PAGE>
GE Life and Annuity Assurance Company
We are a stock life insurance company operating under a charter granted by the
Commonwealth of Virginia on March 21, 1871. We 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 III 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 regulation of other states within
which we are licensed to operate.
18
<PAGE>
Separate Account III
We established GE Life & Annuity Separate Account III as a separate investment
account on February 10, 1987. Separate Account III currently has 41 Subaccounts
available under the Policy. Each Subaccount invests exclusively in shares
representing an interest in a separate corresponding portfolio of one of the 13
Funds described below.
The assets of Separate Account III belong to us. However, we may not charge the
assets in Separate Account III attributable to the Policies with liabilities
arising out of any other business which we may conduct. If Separate Account
III'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 III are credited
to or charged against Separate Account III without regard to the income, gains
or losses arising out of any other business we may conduct.
Separate Account III 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 III by the SEC.
CHANGES TO SEPARATE ACCOUNT III
Separate Account III may include other Subaccounts that are not available under
the Policy. We may substitute another Subaccount or insurance company separate
account under the Policy if, in our judgment, investment in a Subaccount should
no longer be possible or becomes inappropriate to the purposes of the Policies.
The new Subaccounts 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 or elimination may take place without prior 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;
. combine separate accounts, including Separate Account III;
. transfer assets of Separate Account III, which we determine to be associated
with the class of Policies to which this Policy belongs, to another separate
account;
19
<PAGE>
. add new Subaccounts to or remove Subaccounts from Separate Account III or
combine Subaccounts;
. make the Subaccounts available under other policies we issue;
. add new Funds or remove existing Funds;
. substitute new Funds for any existing Funds whose shares are no longer
available for investment;
. 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 III under the 1940 Act; and
. operate Separate Account III under the direction of a committee or in another
form.
20
<PAGE>
The Portfolios
You decide the Subaccounts to which you direct premiums. You may change your
premium allocation without penalty or charges. There is a separate Subaccount
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 a Subaccount to allocate your 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.
SUBACCOUNTS
We offer you a choice from among 41 Subaccounts, each of which invests in an
underlying portfolio of one of the Funds. You may invest in up to seven
Subaccounts at any one time. Allocations to the Guarantee Account do not count
as one of the seven allocations we permit under the Policy.
21
<PAGE>
AIM Variable Insurance Funds
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
--------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Capital The funds investment objective A I M Advisors,
Appreciation Fund is growth of capital. Invests Inc.
principally in common stocks,
with emphasis on medium and
small-sized growth companies.
This fund may invest up to 25%
of the value of the total
assets in foreign securities.
--------------------------------------------------------------------------------
AIM V.I. Growth Fund The funds investment objective A I M Advisors,
is to seek growth of capital. Inc.
Invests principally in
seasoned and better
capitalized companies
considered to have strong
earnings momentum. This fund
may invest up to 25% of the
value of the total assets in
foreign securities.
--------------------------------------------------------------------------------
AIM V.I. Value Fund Seeks to achieve long-term A I M Advisors,
growth of capital. Income is a Inc.
secondary objective. Invests
principally in equity
securities judged by the
investment advisor of the fund
to be undervalued. This fund
may invest up to 25% of the
value of the total assets in
foreign securities.
--------------------------------------------------------------------------------
ALLIANCE VARIABLE
PRODUCTS SERIES FUND
Growth and Income Seeks reasonable current Alliance Capital
Portfolio income and reasonable Management, L.P.
opportunity for appreciation
through investments primarily
in dividend-paying common
stocks of good quality. May
also invest in fixed-income
securities and convertible
securities.
--------------------------------------------------------------------------------
Premier Growth Portfolio Seeks long-term growth of Alliance Capital
capital by investing Management, L.P.
predominantly in the equity
securities of a limited number
of large, carefully selected,
high quality U.S. companies
judged likely to achieve
superior earnings growth.
--------------------------------------------------------------------------------
Quasar Portfolio Seeks growth of capital by Alliance Capital
pursuing aggressive investment Management, L.P.
policies. This fund invests
based upon the potential for
capital appreciation and only
incidentally for current
income. The investment
policies are aggressive.
--------------------------------------------------------------------------------
DREYFUS
Dreyfus Investment Seeks long-term capital growth The Dreyfus
Portfolios-Emerging by investing primarily in the Corporation
Markets Portfolio stocks of companies organized,
or with a majority of its
assets or business, in
emerging market countries.
--------------------------------------------------------------------------------
The Dreyfus Socially Seeks to provide capital The Dreyfus
Responsible Growth Fund, growth, with current income as Corporation
Inc. a secondary goal by investing
primarily in the common stock
of companies that in the
opinion of the Fund's
management, meet traditional
investment standards and
conduct their business in a
manner that contributes to the
enhancement of the quality of
life in America.
--------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
FEDERATED INSURANCE SERIES
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
---------------------------------------------------------------------------------
<S> <C> <C>
Federated High Income Seeks high current income by Federated
Bond Fund II investing primarily in a Investment
professionally managed, Management Company
diversified portfolio of fixed
income securities. Pursues
this objective by investing in
a diversified portfolio of
high-yield, lower-rated
corporate bonds (also known as
"junk bonds").
---------------------------------------------------------------------------------
Federated International Seeks to provide long-term Federated Global
Small Company Fund II growth of capital. Purses this Investment
objective by investing at Management Corp.
least 65% of its assets in
equity securities of foreign
companies that have a market
capitalization at the time of
purchase of $1.5 billion or
less.
---------------------------------------------------------------------------------
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND
(VIP)
Equity-Income Portfolio Seeks reasonable income and Fidelity Management
will consider the potential & Research Company
for capital appreciation. The (beginning January
fund also seeks a yield, which 1, 2001, FMR Co.,
exceeds the composite yield on 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.
---------------------------------------------------------------------------------
Growth Portfolio Seeks capital appreciation by Fidelity Management
investing primarily in common & Research Company
stocks of companies believed ("FMR Co., Inc.)
to have above-average growth (beginning January
potential. 1, 2001, FMR Co.,
Inc. will
subadvise.)
---------------------------------------------------------------------------------
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND
II (VIP II)
Contrafund Portfolio Seeks long-term capital Fidelity Management
appreciation by investing & Research Company
primarily in common stocks and (subadvised by
securities of companies whose Fidelity Management
value it believes to have not & Research (U.K.)
fully been recognized by the Inc., Fidelity
public. This fund invests in Management &
domestic and foreign issuers Research (Far East)
and also invests in "growth" Inc., and Fidelity
stocks or "value" stocks or Investments Japan
both. Limited; beginning
January 1, 2001,
FMR Co., Inc. will
subadvise.)
---------------------------------------------------------------------------------
FIDELITY VARIABLE
INSURANCE PRODUCTS FUND
III (VIP III)
Growth & Income Portfolio Seeks high total return Fidelity Management
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>
23
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
---------------------------------------------------------------------------------
<S> <C> <C>
Mid Cap Portfolio Seeks long-term growth of Fidelity Management
capital by investing primarily & Research Company
in common stocks and at least (subadvised by
65% of total assets in Fidelity Management
securities of companies with & Research (U.K.)
medium market capitalizations. 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,
Mid-Cap Value Equity Fund Objective of providing long- GE Asset Management
term growth of capital and Incorporated
future income by investing (Subadvised by NWQ
primarily in equity securities Investment
of companies that the Management Company)
portfolio management believes
at the time of purchase offers
above average growth
potential.
---------------------------------------------------------------------------------
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.
---------------------------------------------------------------------------------
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 Advisers)
Composite Stock Price Index
through investment in common
stocks comprising the Index.
---------------------------------------------------------------------------------
Small-Cap Value Equity Objective of providing long- GE Asset Management
Fund term growth of capital by Incorporated
investing primarily in equity (Subadvised by
securities of small cap Palisade Capital
undervalued U.S. companies Management, L.L.C.)
that have solid growth
prospects the portfolio
management believes are
undervalued by the market but
have solid growth.
---------------------------------------------------------------------------------
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.
---------------------------------------------------------------------------------
</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 Index Fund is not sponsored, endorsed, sold
or promoted by Standard & Poor's, and Standard and Poor's makes no
representation or warranty, express or implied, regarding the advisability
of investing in this Fund of the Policy.
24
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
--------------------------------------------------------------------------------
<S> <C> <C>
Value Equity Fund Objective of providing long- GE Asset Management
term growth of capital and Incorporated
future income. Pursues
investments in equity
securities of large
undervalued U.S. companies
that have solid growth
prospects.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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 Non-diversified portoflio Janus Capital
Portfolio pursuing long-term growth of Corporation
capital. Pursues this
objective by investing
primarily in common stocks of
companies of any size.
--------------------------------------------------------------------------------
Global Life Sciences Invests primarily in equity Janus Capital
Portfolio securities of U.S. and foreign Corporation
companies selected for their
growth potential. Normally
invests at least 65% of its
total assets in securities of
companies that the portfolio
manager believes have a life
science orientation.
--------------------------------------------------------------------------------
Global Technology Invests primarily in equity Janus Capital
Portfolio securities of U.S. and foreign Corporation
companies selected for their
growth potential. Under normal
circumstances, it invests at
least 65% of its total assets
in securities of 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.
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
---------------------------------------------------------------------------------
<S> <C> <C>
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.
---------------------------------------------------------------------------------
MFS(R) VARIABLE INSURANCE
TRUST
MFS(R) Growth Series Seeks to provide long-term Massachusetts
growth of capital and future Financial Services
income rather than current Company ("MFS")
income.
---------------------------------------------------------------------------------
MFS(R) Growth With Income Seeks to provide reasonable Massachusetts
Series current income and long-term Financial Services
growth of capital and income. Company ("MFS")
---------------------------------------------------------------------------------
MFS(R) New Discovery Seeks capital appreciation. Massachusetts
Series Pursues this objective by Financial Services
investing at least 65% of its Company ("MFS")
total assets in equity
securities of emerging growth
companies.
---------------------------------------------------------------------------------
MFS(R) Utilities Series Seeks capital growth and Massachusetts
current income. Purses this Financial Services
objective by investing at Company ("MFS")
least 65% of its total assets
in equity and debt securities
of domestic and foreign
companies in the utilities
industry.
---------------------------------------------------------------------------------
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
Global Securities Fund/VA Seeks long-term capital OppenheimerFunds,
appreciation by investing a Inc.
substantial portion of assets
in securities of foreign
issuers, "growth-type"
companies, cyclical industries
and special situations that
are considered to have
appreciation possibilities. It
invests mainly in common
stocks of U.S. and foreign
issuers.
---------------------------------------------------------------------------------
Main Street Growth & Seeks high total return, which OppenheimerFunds,
Income Fund/VA includes growth in the value Inc.
of its shares as well as
current income, from equity
and debt securities. The Fund
invests mainly in common
stocks of U.S. companies.
---------------------------------------------------------------------------------
PIMCO VARIABLE INSURANCE
TRUST
Foreign Bond Portfolio Non-diversified portfolio Pacific Investment
seeking to maximize total Management Company
return, consistent with
preservation of capital and
prudent investment management.
This fund primarily invests in
intermediate maturity hedged
foreign fixed income
securities.
---------------------------------------------------------------------------------
High Yield Bond Portfolio Seeks to maximize total Pacific Investment
return, consistent with Management Company
preservation of capital and
prudent investment management.
Primarily invests in higher
yielding fixed income
securities (also known as
"junk bonds").
---------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Adviser (and Sub-
Subaccount Investing In Investment Objective Adviser, as applicable)
---------------------------------------------------------------------------------
<S> <C> <C>
Long-Term U.S. Government Seeks to maximize total Pacific Investment
Bond Portfolio return, consistent with the Management Company
preservation of capital and
prudent investment management.
Primarily invests in long-term
maturity fixed income
securities.
---------------------------------------------------------------------------------
RYDEX VARIABLE TRUST
Total Return Bond Seeks to maximize total return Pacific Investment
Portfolio consistent with preservation Management Company
of capital and prudent
investment management.
Primarily invests in
intermediate maturity fixed
income securities.
---------------------------------------------------------------------------------
OTC Fund/2/ Non-diversified fund seeks to Rydex Global
provide investment results Advisors
that correspond to a benchmark
for over-the-counter
securities that invest
primarily in securities of
companies included in NASDAQ
100 Index(TM).
---------------------------------------------------------------------------------
</TABLE>
/2/ THE NASDAQ 100 Index(TM) is an unmanaged index that is a widely recognized
indicator of OTC Market performance.
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 Subaccounts of Separate Account III. 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.
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.
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<PAGE>
We have entered into agreements with either the investment adviser or
distributor of the Funds under which the advsior or distributor pays us a fee
ordinarily based upon a percentage of the average aggregate amount we have
invested on behalf of Account III and other separate accounts. These
percentages differ, and some investment advisers or distributors pay us a
greater percentage than other advisers or distributors. The amounts we receive
under these agreements may be significant. In addition, our affiliate, Capital
Brokerage Corporation, the principal underwriter for the Policies, will receive
12b-1 fees deducted from the assets of certain portfolios for providing
distribution and shareholder support services to these portfolios.
YOUR RIGHT TO VOTE PORTFOLIO SHARES
As required by law, we will vote the portfolio shares held in Separate Account
III at meetings of the shareholders of the Funds. The voting will be done
according to the instructions of Owners who have interests in any Subaccount
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 a Subaccount to the total number of votes
attributable to the Subaccount. In determining the number of votes, we will
recognize fractional shares.
We will vote portfolio shares of a class held in a Subaccount for which we
received no timely instructions in proportion to the voting instructions which
we received for all Policies participating in that Subaccount. We will apply
voting instructions to abstain on any item to be voted on a pro-rata basis to
reduce the number of votes eligible to be cast.
Whenever a Fund calls a shareholders meeting, each person having a voting
interest in a Subaccount will receive proxy material, reports and other
materials relating to the portfolio. Since each portfolio may engage in shared
funding, other persons or entities besides the Company may vote portfolio
shares. See Subaccounts.
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<PAGE>
The Guarantee Account
Due to certain exemptive and exclusionary provisions of the Federal securities
laws, we have not registered interests in the Guarantee Account under the
Securities Act of 1933 (the "1933 Act"), and we have not registered either the
Guarantee Account or our General Account as an investment company under the
1940 Act. Accordingly, neither the interests in the Guarantee Account, nor our
General Account are generally subject to regulation under the 1933 Act and the
1940 Act. Disclosures relating to the interests in the Guarantee Account, and
the General Account, however, may be subject to certain generally applicable
provisions of the Federal securities laws relating to the accuracy of
statements made in a registration statement.
You may allocate some or all of your premium payments and transfer some or all
of your Account Value to the Guarantee Account. We credit the portion of the
Account Value allocated to the Guarantee Account with interest (as described
below). Account Value in the Guarantee Account is subject to some, but not all,
of the charges we assess in connection with the Policy. See Charges and
Deductions.
Each time you allocate premium payments or transfer Account Value to the
Guarantee Account, we establish an interest rate guarantee period. For each
interest rate guarantee period, we guarantee an interest rate for a year. At
the end of an interest rate guarantee period, a new interest rate will become
effective, and a new interest rate guarantee period will commence with respect
to that portion of the Account Value in the Guarantee Account represented by
that particular allocation.
The initial interest rate guarantee period for any allocation will be one year.
Subsequent interest rate guarantee periods will each be one year. We determine
the interest rates in our sole discretion. The determination made will be
influenced by, but not necessarily correspond to, interest rates available on
fixed income investments which we may acquire with the amounts we receive as
premium payments or transfers of Account Value under the Policies. You will
have no direct or indirect interest in these investments. We also will consider
other factors in determining interest rates for a guarantee period including,
but not limited to, regulatory and tax requirements, sales commissions, and
administrative expenses borne by us, general economic trends, and competitive
factors. Amounts you allocate to the Guarantee Account will not share in the
investment performance of our General Account, or any portion thereof.
WE CANNOT PREDICT OR GUARANTEE THE LEVEL OF INTEREST RATES IN FUTURE GUARANTEE
PERIODS. HOWEVER, THE INTEREST RATES FOR ANY INTEREST GUARANTEE PERIOD WILL BE
AT LEAST THE GUARANTEED INTEREST RATE SHOWN IN YOUR POLICY.
We will notify Owners in writing at least 10 days prior to the expiration date
of any interest rate guarantee period about the then currently available
interest rate guarantee periods and the guaranteed interest rates applicable to
such interest rate
29
<PAGE>
guarantee periods. A new one year interest rate guarantee period will commence
automatically unless we receive written notice prior to the end of the 30 day
period following the expiration of the interest rate guarantee period ("30 day
window") of your election of a different interest rate guarantee period from
among those being offered by us at the time, or instructions to transfer all or
a portion of the remaining amount to one or more investment Subdivisions
subject to certain restrictions. (See Transfers Before the Maturity Date.)
During the 30 day window, the allocation will accrue interest at the new
interest rate guarantee period's interest rate.
We reserve the right to credit bonus interest on premium payments and Account
Value allocated to a Guarantee Account participating in the dollar-cost
averaging program. See Dollar-Cost Averaging.
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<PAGE>
Charges And Deductions
This section describes the charges and deductions we make under the Policy to
compensate 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 premium allocations, dollar-cost averaging,
asset allocation 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 and increases in Specified
Amount;
. 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 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.
CHARGES ATTRIBUTABLE TO PREMIUM PAYMENTS
For ten years after each premium payment, we deduct a monthly premium tax
charge equal to an annual rate of .20% (.0167% monthly) of the portion of the
Policy's Account Value in Separate Account III attributable to each premium
payment, and a monthly distribution expense charge equal to an annual rate of
.30% (.025% monthly) of that portion of the Policy's Account Value in Separate
Account III attributable to each premium payment. We deduct these charges
proportionately from your assets in each Subaccount. We do not deduct these
charges from Account Value in the Guarantee Account.
For purposes of calculating the premium tax charge and the distribution expense
charge, we attribute a portion of the Policy's Account Value in the Separate
Account to each premium payment at the time you make the premium payment. Your
initial
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<PAGE>
premium payment will represent 100 percent of Policy Account Value until you
make a new premium payment. At the time you make that new premium payment, we
will then determine the portion of the Policy's Account Value attributable to
both the initial premium payment and the new premium payment. The portion of
the Policy's Account Value attributable to the new premium payment will equal
the percentage of the Policy's Account Value that premium payment represents at
the time it is made with the remaining portion of the Policy's Account Value
attribtuable to the initial premium payment. If you had previously made more
than one premium payment, we would attribute the remaining Policy Account Value
to each of those premium payments on a proportional basis. We will redetermine
the portion of the Policy's Account Value attributable to premium payments you
have made only when you make new premium payments.
MORTALITY AND EXPENSE RISK CHARGE
We currently deduct a monthly mortality and expense risk charge. This
corresponds to an effective annual rate of 0.70% (.0583% monthly) of the
Account Value in each subaccount during the first ten Policy Years decreasing
to an effective annual rate of .35% (.0292% monthly) thereafter. This charge is
not deducted from your assets in the Guarantee Account. We will not increase
this charge for the duration of your Policy.
The mortality risk we assume is the risk that 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.
ADMINISTRATIVE EXPENSE CHARGE
We deduct a monthly administrative expense charge of .0333%. The effective
annual rate of this charge is .40% of the Account Value in each subaccount. We
also deduct an administrative expense charge monthly from the Account Value in
the Guarantee Account at an effective annual rate of .40%. The minimum monthly
deduction for the administrative expense charge is $8.00.
COST OF INSURANCE
We deduct a cost of insurance charge each month. The cost of insurance is a
significant charge under your Policy because it is the primary charge for the
death benefit we provide you. For a single life Policy, the current monthly
cost of insurance charge is .0542% of the Account Value in each Subaccount and
in the Guarantee Account. The effective annual rate of this charge is .65%. For
a joint and last survivor Policy, the current monthly cost of insurance charge
is .0292% of Account Value in each Subaccount and in the Guarantee Account. The
effective annual rate of this charge is .35%. The maximum charge will never be
more than the guaranteed monthly cost of insurance charge described below.
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<PAGE>
The maximum monthly cost of insurance charge equals (a) times (b) and then
divided by (c), where:
(a) is the maximum cost of insurance rate per $1,000 shown in your Policy based
on the Insured's or each Insured's Attained Age, gender and risk class;
(b) is an amount equal to the death benefit minus the Account Value; and
(c) is $1,000.
We guarantee that the cost of insurance rates will never exceed the maximum
rates shown in your Policy. The cost of insurance rates are based on the
Commissioners' 1980 Standard Ordinary Mortality Tables and vary based on age,
gender and applicable risk class. We currently place Insureds in the following
risk classes when we issue the Policy, based on our underwriting: a male or
female or unisex risk class where appropriate under applicable law (currently
including the State of Montana). The original risk class applies to the initial
Specified Amount. If an increase in Specified Amount is approved, a different
risk class may apply to the increase, based on the Insured's circumstances at
the time of the increase. The maximum cost of insurance rates are based on the
Insured's Attained Age. The guaranteed cost of insurance rates generally
increase as the Insured's Attained Age increases. Modifications to cost of
insurance rates are made for risk classes other than standard.
For a joint and last survivor Policy, we determine the maximum cost of
insurance rates 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. As such, the death of the first Insured to die will not
affect the cost of insurance scale for the second Insured.
Changes in the death benefit may affect the amount of the guaranteed cost of
insurance charge deductible under the Policy. Because the guaranteed cost of
insurance charge varies with the death benefit, an increase in specified amount
or the calculation of the death benefit based on the corridor percentage (See,
Death Benefit) may cause the guaranteed cost of insurance charge to increase.
We deduct the cost of insurance charge proportionately from your assets in the
Subaccounts and/or the Guarantee Account. The monthly deduction for cost of
insurance charges will end on the policy anniversary date on which the
Insured's Attained Age is 100.
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<PAGE>
SURRENDER CHARGE
If you fully surrender your Policy within seven years of the initial premium
payment, we will deduct a surrender charge. The total surrender charge will
equal a percentage of the initial premium payment you made under the Policy.
For purposes of this charge, we deem the initial premium payment to be made on
the first day of the first Policy Year; therefore, one year elapses on each
Policy Anniversary. We show the schedule of surrender charge percentage below:
<TABLE>
<CAPTION>
Policy Years
Since
Initial Premium Surrender Charge
Payment Percentage
-----------------------------------
<S> <C>
0 6%
1 5.5%
2 4.5%
3 3.5%
4 3%
5 2%
6 1%
7+ 0%
</TABLE>
For a joint and last survivor Policy, the surrender charge may be lower if
required by state non-forfeiture law.
We will deduct this surrender charge, along with any outstanding Policy Debt,
from your Account Value to determine the amount payable upon surrender.
We do not access a surrender charge on additional Premium Payments you make
under the Policy. We also 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 withdrawn and will be
deducted from the amount of the withdrawal. We will take the fee
proportionately from the Subaccounts and/or the Guarantee Account from which
you withdraw Account Value. We will not permit a partial surrender that would
reduce Account Value below $25,000.
TRANSFER CHARGE
We currently do not assess a charge for transfers. We reserve the right,
however, to assess a $10 transfer charge for each transfer after the first
transfer you make in any calendar month. We would take this charge from the
amount you transfer. For purposes of assessing such charge, we would consider
each transfer request one transfer, regardless of the number of Subaccounts
affected by the transfer. Multiple transfers within the same Valuation Period
would also be considered one transfer for this purpose.
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<PAGE>
OTHER CHARGES
If you request an inforce illustration of life insurance benefits under the
Policy, we reserve the right to charge a maximum fee of $25 for the cost of
preparing the illustration.
There are deductions from and expenses paid out of the assets of each portfolio
that are more fully described in each Fund's prospectus.
REDUCTION OF CHARGES FOR GROUP SALES
We may reduce charges and/or deductions for sales of the Policies to a trustee,
employer or similar entity representing a group or to members of the group
where such sales result in savings of sales or administrative expenses. We will
base these discounts on the following:
1. The size of the group. Generally, the sales expenses for each individual
owner for a larger group are less than for a smaller group because more
Policies can be implemented with fewer sales contacts and less
administrative cost.
2. The total amount of premium payments to be received from a group. Per Policy
sales and other expenses are generally proportionately less on larger
premium payments than on smaller ones.
3. The purpose for which the Policies are purchased. Certain types of plans are
more likely to be stable than others. Such stability reduces the number of
sales contacts and administrative and other services required, reduces sales
administration and results in fewer Policy terminations. As a result, our
sales and other expenses are reduced.
4. The nature of the group for which the Policies are 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 III.
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 must complete an application and you or your
registered representative must submit it to us at our Home Office. You also
must pay an initial premium of a sufficient amount. See Premiums. The minimum
initial premium is $25,000. 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 Premium.) Coverage
generally becomes effective as of the Policy Date.
Generally, we will issue a Policy covering an Insured up to Age 90 if evidence
of insurability satisfies our underwriting rules. Required evidence of
insurability may include, among other things, a medical examination of the
Insured. We may, in our sole discretion, issue a Policy covering an Insured
over Age 90. We may reject an application for any lawful reason.
If you do not pay the full premium with your application, the insurance will
become effective on the effective date. This date is the date that you pay your
full 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. 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 Insured's lifetime under a single life
Policy or the Insureds' lifetimes under a joint and last survivor Policy. If
you die before the Insured under a single life Policy or the Last Insured under
a joint and last survivor Policy and there is no contingent Owner, ownership
will pass to your estate.
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 death benefit 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 benefit
Proceeds in a lump sum to the primary Beneficiary(ies). If the primary
Beneficiary(ies) dies before the Insured under a single life Policy or the
Insureds under a joint and last survivor Policy, we will pay the death benefit
Proceeds to the contingent Beneficiary(ies). If there is no surviving
Beneficiary(ies) we will pay the death benefit Proceeds to you or your estate.
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<PAGE>
CHANGING THE BENEFICIARY
If you reserve the right, you may change the Beneficiary during the Insured's
life under a single life Policy or either Insured's life under a joint and last
survivor Policy. 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 registered representative who sold it. The free-look
period expires 10 days after you receive the Policy or within 45 days after you
sign the application, whichever is later. 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 an amount
equal to the sum of all premiums paid for the policy.
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<PAGE>
Premiums
GENERAL
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.
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. See Tax Considerations.
INITIAL PREMIUM
The initial premium is due on the Policy Date. Your initial premium will be
shown in your Policy's data pages. The minimum initial premium is $25,000.
The total premium must equal the guideline single premium for life insurance as
determined in the Internal Revenue Code for the Policy's initial Specified
Amount. The relationship between the guideline single premium and the Specified
Amount depends on the Age, gender (where applicable), and risk class of the
Insured. Generally, the same guideline single premium will purchase a higher
Specified Amount for a younger Insured than for an older Insured of the same
gender and risk class. Likewise, the same guideline single premium will
purchase a slightly higher Specified Amount for a female Insured than for a
male Insured of the same age and risk class. Representative Specified Amounts
for a $35,000 guideline single premium are set forth below:
Specified Amount for a $35,000 Guideline Single Premium
Single Premium Variable Life AGE-SIZE LIST
(Assumed Single Premium = $35000)
<TABLE>
<CAPTION>
Specified Amount
($)
-----------------
Age Male Female
---------------------
<S> <C> <C>
10 $632,214 $816,388
20 432,494 543,872
30 290,655 356,528
40 188,448 231,285
50 125,525 154,327
60 87,427 105,403
70 64,806 73,913
80 52,125 55,347
90 45,371 45,886
</TABLE>
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<PAGE>
JOINT OWNER Single Premium Variable Life AGE-SIZE LIST
(Assumed Single Premium = $35000)
<TABLE>
<CAPTION>
Male Female
---- ------ Specified
Age Age Amount ($)
<S> <C> <C>
----------------------
20 20 976,524
30 30 561,334
40 40 346,643
50 50 210,570
60 60 131,557
70 70 85,768
80 80 60,523
90 90 47,855
</TABLE>
TAX FREE EXCHANGES (1035 EXCHANGES)
We will accept as part of your initial premium money from one contract that
qualified for a tax-free exchange under Section 1035 of the Code. If you
contemplate such an exchange, you should consult a competent tax advisor to
learn the potential tax effects of such a transaction. We will accept 1035
exchanges even if there is an outstanding loan on the other policy, so long as
the outstanding loan is no more than 40% of the total 1035 exchange value. We
may allow a higher loan percentage. Replacing your existing coverage with this
Policy may not be to your advantage.
ADDITIONAL PREMIUM PAYMENTS
Although the Policy is a single premium policy, you may make additional premium
payments under certain circumstances, so long as there is no outstanding Policy
Debt. If there is Policy Debt outstanding, we will consider any payment (other
than an initial premium payment) we receive to be repayment of that debt.
Should any such payment exceed the amount of Policy Debt outstanding, we will
treat the amount in excess of Policy Debt as an additional premium payment. The
circumstances under which you can make additional premium payments are listed
below:
(1) Increases in Specified Amount -- After the first Policy Year, you may
request an increase in Specified Amount. (See Changing the Specified
Amount). If your request is approved, we will require you to make an
additional premium payment in order for the increase to become effective.
(2) In Order to Prevent Termination -- If the Surrender Value on a Monthly
Anniversary Day is insufficient to cover the monthly deduction due on that
Monthly Anniversary Day, then in order to prevent termination, you must
make a payment during the grace period sufficient to cover the monthly
deduction. We will mail you a notice stating the minimum payment you must
make to prevent termination. You may make an additional premium payment in
an amount greater than that required to prevent termination as long as the
total of all premium payments, immediately after the payment to prevent
termination, is less than the maximum premiums limitation shown in your
Policy's data pages.
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<PAGE>
(3) At Your Discretion -- You may make additional premium payments at your
discretion, so long as the amount of the payment is at least $1,000 and the
payment plus the total of all premiums previously paid does not exceed the
maximum premiums limitation shown in your Policy's data pages. The maximum
premiums limitation will be derived from the guideline premium test for
life insurance set forth in the Internal Revenue Code. If the initial
premium equals the maximum premiums limitation at issue, you normally will
not be able to make discretionary additional premium payments during the
early years of the Policy.
If you make a discretionary additional premium payment that causes the total
amount of premiums paid under the Policy to exceed the maximum premiums
limitation, we will accept only the portion of the premium which, together with
premiums previously paid, equals the maximum premiums limitation, and will
return the excess to you. Thereafter, we will not accept any discretionary
additional premium payments until allowed by the maximum premiums limitation.
REPAYMENT OF OUTSTANDING POLICY DEBT
If there is any outstanding Policy Debt on the date we receive a payment (other
than an initial premium payment), we will treat the payment first as a
repayment of outstanding Policy Debt.
ALLOCATING PREMIUMS
When you apply for a Policy, you specify the percentage of your premium we
allocate to each Subaccount and to the Guarantee Account. You may only direct
your premiums and Account Value to seven Subaccounts at any given time.
Allocations to the Guarantee Account do not count as one of the ten allocations
we permit under the Policy. 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 instructions. Premium
allocations must be in percentages totaling 100%, and each allocation
percentage must at least be 1.0% of the premium.
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 premium you pay into a non-interest bearing account.
Once we approve your application, receive all necessary forms (including any
subsequent amendments to the application), and receive the entire initial
premium, we will transfer your premium from the non-interest bearing account.
At that point, we will transfer any portion of the initial premium you
designated for the Subaccounts to the Subaccounts you choose in your
application. We will transfer any portion of the initial premium you designated
for the Guarantee Account to the Guarantee Account.
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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 Subaccount,
the amount held in the Guarantee Account, and the Account Value held in the
General Account to secure Policy Debt. See Loans. We determine Account Value
first on your Policy Date (or on the date we receive your initial premium
payment, if later) and after that on each Valuation Day. Your Account Value
will vary to reflect the performance of the Subaccounts to which you have
allocated amounts and interest we credit to the Guarantee Account, and also
will vary to reflect Policy Debt, charges for the monthly deduction, 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 and any Policy Debt.
SUBACCOUNT VALUES
On any Valuation Day, the value of a Subaccount equals the number of Subaccount
units we credit to the Policy multiplied by the Unit Value for that day. When
you make allocations to a Subaccount, either by 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 Subaccount. We
determine the number of units by dividing the amount allocated, transferred or
repaid to the Subaccount by the Subaccount'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 Subaccount, you transfer an amount from the Subaccount, you
take a partial surrender from the Subaccount, or you surrender the Policy. (See
Deduction from Assets)
UNIT VALUES
We arbitrarily set the unit value for each Subaccount at $10 when we
established the Subaccount. After that, a Subaccount'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
a Subaccount's operations begin, by multiplying the net investment factor for
that Valuation Period by the Unit Value for the immediately preceding period.
NET INVESTMENT FACTOR
The net investment factor for a Valuation Period is (a) divided by (b), 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
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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 Subaccount at the end of the preceding
Valuation Period.
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Transfers
GENERAL
You may transfer all or a portion of your Account Value between and among the
Subaccounts of Separate Account III and the Guarantee Account subject to
certain conditions. Transfers among the Subaccounts of Separate Account III and
from a Subaccount to a Guarantee Account are made as of the end of the
Valuation Period that the transfer request is received at our Home Office.
Transfers to, from, or among the Subaccounts of Separate Account III may be
postponed under certain circumstances. See Requesting Payments.
Transfers from any particular allocation of a Guarantee Account to a Subaccount
are restricted. Unless you are participating in the dollar-cost averaging
program (see Dollar-Cost Averaging), you may make such transfers only during
the 30 day period beginning with the end of the preceding guarantee period
applicable to that particular allocation. We also may limit the amount which
may be transferred from the Guarantee Account to the Subaccounts, but we will
not limit it to less than 25% of the original allocation, plus any accrued
interest on that allocation remaining in the Guarantee Account. Further, we
restrict certain transfers from a Subaccount to the Guarantee Account. You may
not make any transfers from an Subaccount to the Guarantee Account during the
six month period following the transfer of any amount from the Guarantee
Account to any Subaccount.
We reserve the right to limit the number of transfers if it is necessary for
the Policy to continue to be treated as a life insurance policy by the Internal
Revenue Service. 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 a transfer will be made at an inopportune time. We
reserve the right to modify, restrict, suspend or eliminate the transfer
privileges, including telephone transfer privileges, at any time, for any
reason. In addition, we reserve the right to assess a $10 transfer charge,
although we do not currently do so. See Transfer Charge.
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 Subaccount investing in
the Money Market Fund of the GE Investments Funds (the "Money Market
Subaccount") and/or the 12 month dollar-cost averaging option under the
Guarantee Account to any combination of other Subaccounts (as long as the total
number of Subaccounts used does not exceed the maximum number allowed under the
Policy). The dollar-cost averaging method of investment is designed to reduce
the risk of making purchases only when the price of units is high, but you
should carefully consider your financial ability to continue the program over a
long enough period of time to purchase units when their value is low as well as
when it is high. Dollar-cost averaging does not assure a profit or protect
against a loss.
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You may participate in the dollar-cost averaging program by selecting the
program on your application, completing a dollar-cost averaging agreement, or
calling our Home Office. To use the dollar-cost averaging program, you must
transfer at least $100 from the Money Market Subaccount and/or the Guarantee
Account (if applicable) to any other Subaccount. If any transfer would leave
less than $100 in the Money Market Subaccount or the Guarantee Account, 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 Subaccount
or Guarantee Account 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. The dollar-cost averaging program will begin
on the 5th day of the month immediately following the allocation of your Net
Premiums to the Investment Subaccounts or Guarantee Account.
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 Subaccounts, the performance of each
Subaccount may cause your allocation to shift. You may instruct us in writing
to automatically rebalance (on a quarterly, semi-annual or annual basis) your
Account Value to return to the percentages specified in your allocation
instructions. The program does not include allocations to the Guarantee
Account. You may elect to participate in the portfolio rebalancing program at
any time by completing the portfolio rebalancing agreement. Your percentage
allocations must be in whole percentages and be at least 1.0%. 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.
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TRANSFER 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 Funds
underlying the Policies, and the managements of those Funds 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
As long as the Policy remains in force, we will process a claim for death
benefit Proceeds upon receipt at our Home Office of: (i) the Policy; (ii)
satisfactory proof that the Insured under a single life Policy or both Insureds
under a joint and last survivor Policy died while the Policy was in effect; and
(iii) proof of interest of the claimant. See Requesting Payments. We will pay
the death benefit to the Beneficiary. Under a joint and last survivor Policy,
no death benefit Proceeds are available at the death of the first Insured to
die.
AMOUNT OF DEATH BENEFIT PAYABLE
If the Attained Age of the Insured under a single life Policy or the Attained
Age of the Last Insured under a joint and last survivor Policy at death is less
than 100, the amount of death benefit payable equals:
. the greater of: 1) the Specified Amount; or 2) Account Value multiplied by
the applicable corridor percentage as determined using the table of
percentages shown below;
. minus any Policy Debt on that date; and
. minus the amount of any due and unpaid monthly deductions, if the date of
death occurred during a grace period.
If the Attained Age of the Insured under a single life Policy or the Attained
Age of the Last Insured under a joint and last survivor Policy at death is 100
or more, the amount of the death benefit payable equals:
. Account Value multiplied by applicable corridor percentage;
. minus any Policy Debt on that date; and
. minus the amount of any due and unpaid monthly deductions, if the date of
death occurred during a grace period.
Under certain circumstances, we may further adjust the amount of the death
benefit payable. See Incontestability and Misstatement of Age or Gender.
We determine the Specified Amount and Account Value on the date of the
Insured's death under a single life Policy or the date of death of the Last
Insured under a Joint and last survivor Policy. For a single life Policy, the
corridor percentage is 250% until attainment of Age 40 and declines after that
as the Insured's Attained Age increases. For a joint and last survivor Policy,
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>
Attained Corridor Attained Corridor Attained Corridor
Age Percentage Age Percentage 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 or older 101%
52 171% 66 119%
53 164% 67 118%
</TABLE>
Corridor percentages may vary by state.
ACCELERATED BENEFIT RIDER
Provided the Accelerated Benefit Rider is approved in your state, you may elect
an Accelerated Benefit if the Insured is terminally ill. The Accelerated
Benefit Rider provides you with access to a portion of the death benefit during
the Insured's lifetime, if the Insured is diagnosed with a terminal illness.
Joint and Last survivor policies will be eligible for acceleration only after
the death of the first Insured and the diagnosis of the terminal illness of the
surviving Insured.
For purposes of determining if an Accelerated Benefit is available, we define
terminal illness as a medical condition resulting from bodily injury or disease
that:
. has been diagnosed by a licensed physician;
. the diagnosis is supported by clinical, radiological, laboratory or other
evidence that is satisfactory to us; and
. a licensed physician certifies is expected to result in death within 12
months from the date of the certification.
Any request for payment of an Accelerated Benefit must be in a form
satisfactory to us, and any payment of an Accelerated Benefit requires
satisfactory proof of a terminal illness and is subject to our administrative
procedures as well as the conditions set forth in the Accelerated Benefit
Rider.
The Accelerated Benefit will equal (a) minus (b) minus (c) minus (d), where:
(a) is the Eligible Proceeds;
(b) is the discount for early payment of a Death Benefit. The discount will be
based on the annual interest rate charged for non-preferred policy loans;
(c) is the product of (1) the ratio of Eligible Proceeds to Total Proceeds, and
(2) any Policy Debt; and
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(d) is an administrative charge not to exceed $250.
Eligible proceeds is the lesser of (a) and (b), where:
(a) is 75% of the Total Proceeds; and
(b) is $250,000 for all the Insured's policies in force with us.
Total Proceeds includes the Policy's death benefit had the Insured's death
occurred on the date of the approval of the Accelerated Benefit claim and any
term insurance on the Insured, or in the case of joint and last survivor
policies the surviving Insured, added by rider. Any such rider must have at
least two years of the term remaining as measured from the date we received
proof of terminal illness.
The Accelerated Benefit will be paid in one lump sum.
On payment of an Accelerated Benefit, the Policy will continue with the
Specified Amount, Account Value, Policy Debt and any additional term insurance
eligible to be accelerated under this rider reduced by the ratio of Eligible
Proceeds to Total Proceeds. We will waive any surrender charge for the
resulting decrease in Specified Amount as well as the minimum Specified Amount
requirement under the Policy. Other rider benefits will continue without
reduction.
Changing the Specified Amount
After the first Policy year, you may increase the Specified Amount. To make a
change, you must send a written request and the Policy to our Home Office.
To apply for an increase, you must complete a supplemental application and
submit evidence of insurability satisfactory to us. When you request the
increase, the Insured under a single life Policy, or both Insureds under a
joint and last survivor Policy, must be of the same risk class as at the time
we issued the Policy. Any approved increase will become effective on the date
shown in the supplemental Policy data page.
For an increase in the Specified Amount to become effective, you must make an
additional premium payment. This payment will depend upon the amount of the
increase requested and the Attained Age, gender (where appropriate), and risk
class of the Insured under a single life Policy or the Insureds under a joint
and last survivor Policy. The minimum increase in Specified Amount that we will
allow is one which requires a $1,000 additional premium payment.
A partial surrender will reduce the Specified Amount in proportion to the
amount the partial surrender reduces the Account Value.
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 Insured dies
under a single life Policy or the Last Insured dies under a joint life and
survivor Policy. 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
within 7 Policy Years of the initial premium payment. A surrender may have
adverse tax consequences. (See Tax Considerations.)
PARTIAL SURRENDERS
After the first Policy Year, you may make one partial surrender each Policy
Year thereafter. The minimum partial surrender amount is $1,000. The maximum
partial surrender amount is the lesser of: a) the Surrender Value less $1,000;
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 not permit a partial surrender that would reduce Account Value below
$25,000.
We will deduct a processing fee from each partial surrender. See Partial
Surrender Processing Fee. No surrender charge will apply.
When you request a partial surrender, you can direct how we deduct the
withdrawal from your Account Value. If you provide no directions, we will
deduct the partial surrender first from the Subaccounts on a pro-rata basis, in
proportion to the Account Value in each Subaccount. We will deduct any
remaining amount from the Guarantee Account, starting with the amounts that
have been in the Guarantee Account for the longest period of time.
EFFECT OF PARTIAL SURRENDERS ON ACCOUNT VALUE AND SPECIFIED AMOUNT
A partial surrender will reduce the Account Value by the amount of the partial
surrender. A partial surrender will reduce the Specified Amount in proportion
to the amount the partial surrender reduces the Account Value.
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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; and
. less any outstanding Policy Debt.
The minimum Policy Loan is $1,000. You may request Policy loans by writing our
Home Office.
When you request a loan, we transfer an amount equal to the loan proceeds from
your Account Value in Separate Account III 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 Subaccount in which you
have invested. We will take any remaining collateral from your Account Value in
the Guarantee Account, starting with the amounts that have been in the
Guarantee Account for the longest period of time. We will credit interest at an
annual rate of at least 4% on that collateral. 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.
On each Policy Anniversary, we will transfer to Separate Account III and/or the
Guarantee Account interest credited to collateral for the loan. If you provide
no directions, we will allocate this amount among the Subaccounts and/or the
Guarantee Account in the same manner as Policy loans are allocated.
You may repay a loan in part or in full at any time during the Insured's life
under a single life Policy or either Insured's life under a joint and last
survivor Policy, 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 III and/or the Guarantee Account 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 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 2 and later, preferred policy debt will
be at least as large as the Account Value minus the total premiums paid.
We assess a preferred loan interest rate on preferred policy debt as described
below. We redetermine the amount of preferred policy debt each Policy Month. We
reserve the right to change this practice at our sole discretion.
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INTEREST RATE CHARGED
We will charge interest daily at an effective annual rate of 6% on any
outstanding non-preferred policy debt and at an effective annual rate of 4% on
preferred policy debt. Interest is due and payable at the end of each Policy
Year while a Policy loan is outstanding. If, on any Policy Anniversary, you
have not paid interest accrued since the last Policy Anniversary, we add the
amount of the interest to the loan and this becomes part of your outstanding
Policy Debt. We transfer the interest due from each Subaccount on a pro-rata
basis; then we will take the remaining interest due from amounts you allocated
to the Guarantee Account, starting with the amounts that have been in the
Guarantee Account for the longest period of time.
REPAYMENT OF POLICY DEBT
You may repay all or part of your Policy Debt at any time while the Insured is
living and the Policy is in force under a single life Policy and while either
Insured is living and the Policy is in force under a joint and last survivor
Policy. We will treat any payments by you (other than the initial premium)
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
additional premium payment. See Premiums.
When you repay a loan, we transfer an amount equal to the repayment from our
General Account to Separate Account III and/or the Guarantee Account 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 premium allocations.
You must send loan repayments to our Home Office. We will credit the repayments
as of the date we receive them.
EFFECT OF POLICY LOANS
A Policy loan affects the Policy, because we reduce the death benefit 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 benefit
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. We will credit interest at an annual rate of at least 4% on that
collateral. The amount held as collateral is not affected by Separate Account
III's investment performance or the interest we credit on the Guarantee
Account. Amounts transferred from Separate Account III 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 III.
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 adverse tax
consequences. 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. 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 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.
So long as there is outstanding Policy Debt, we will treat that portion of any
sufficient payment received during the grace period that is less than or equal
to the amount of the Policy Debt as a repayment of Policy Debt and not as an
additional premium payment. If we treat a payment as a repayment of outstanding
Policy Debt, we will transfer the amount of Account Value held in our General
Account (as security for that part of the Policy Debt being repaid) into
Separate Account III and/or the Guarantee Account, which increases the
Surrender Value of the Policy, thereby preventing termination.
YOUR POLICY WILL REMAIN IN EFFECT DURING THE GRACE PERIOD
If the Insured under a single life Policy, or the Last Insured under a joint
and last survivor Policy, should die during the grace period before you pay the
required premium, the death benefit will still be payable to the Beneficiary,
although we will reduce the amount of the death benefit Proceeds by the amount
of any due and unpaid monthly deductions and by any outstanding Policy Debt. 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 and submission of satisfactory
evidence of insurability. See your Policy for further information. On the date
of reinstatement, the Account Value less any outstanding Policy Debt will be
allocated to the Subaccounts of Separate Account III and/or the Guarantee
Account.
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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 your registered representatives. We will ordinarily pay any death
benefit 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 benefit Proceeds,
which we determine as of the date of the Insured's death, the amount we pay is
as of the date our Home Office receives all required documents. We may pay your
death benefit Proceeds in a lump sum or under an optional payment plan. See
Optional Payment Plans.
Any death benefit Proceeds that we pay in one lump sum will include interest
from the date of death 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 benefit Proceeds by any outstanding Policy Debt and
any due and unpaid monthly deductions.
We may delay making a payment or processing a transfer request if:
. the disposal or valuation of Separate Account III'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. Such payments may be deferred until the earlier
of (1) 15 days after the check is first credited to the Policy or (2) after the
check clears. We reserve the right to defer payments from the Guarantee Account
for up to six months. We will not defer payments if the law requires us to pay
earlier, or if the amount payable is to be used to pay premiums on policies
with us.
TELEPHONE TRANSACTIONS
You may make certain requests under the Policy by telephone provided you sent
us written authorization 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 insured are excluded from the gross
income of the beneficiary, and the Owner is not taxed on increases in the cash
value unless amounts are distributed while the Insured is 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, if the Policy is
issued on a joint and last survivor basis 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 III 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 III must be diversified. The IRS has issued
regulations that prescribe standards for determining whether the investments of
Separate Account III, including the assets of the Funds in which Separate
Account III invests, are "adequately diversified." If Separate Account III
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 III will be considered "adequately
diversified."
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Restrictions on the extent to which you can direct the investment of Account
Values. Federal income tax law limits your right to choose particular
investments for the Policy. The U.S. Treasury Department stated in 1986 that it
expected to issue guidance clarifying those limits, but it has not yet done so.
Thus, the nature of the limits is currently uncertain. As a result, your right
to allocate Account Values among the Funds may exceed those limits. If so, you
would be treated as the owner of a portion of the assets of Separate Account
III 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 III.
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 Insured is alive.
. The taxation of amounts distributed while the Insured is alive--and, in
particular, withdrawals and loans -- depends upon whether your Policy is a
"modified endowment contract." A withdrawal 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. The term "modified endowment contract,"
or "MEC," is defined below.
Tax Treatment of Modified Endowment Contracts
Definition of a "modified endowment contract:" 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.
In most cases, this Policy will constitute a MEC.
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Tax treatment of distributions, including loans, from MECs: If a Policy is
classified as a MEC, the following special rules apply:
. A withdrawal will be taxable to you to the extent that the Account Value
exceeds your "investment in the contract," as defined below.
. A full surrender and any maturity benefits paid will be taxable to the extent
the amount received plus Policy Debt exceeds your investment in the contract.
. 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 withdrawal.
. A penalty tax of 10% will be imposed on the amount of any full or withdrawal,
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 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).
You will be taxed on income from this Policy at ordinary income tax rates, not
at lower capital gains tax rates. Your "investment in the contract" generally
equals the total of the premiums paid for your Policy plus the amount of any
loan that was includible in your income, reduced by any amounts you previously
received from the Policy that you did not include in your income.
Special 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.
Tax Treatment of Policies That Are Not MECS
Partial withdrawals and full surrenders and maturity proceeds: If your Policy
is not a MEC, you will generally pay tax on the amount of a withdrawal only to
the extent it exceeds your investment in the contract.
Similarly, full surrenders and maturity proceeds are taxable to the extent the
amount received plus Policy Debt exceeds your investment in the contract.
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Loans: A loan received under a non-MEC 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 is attributable to Account Value in excess of premium payments
made. If your Policy terminates (by a full surrender or by a lapse) while the
Insured is 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.
Other Tax Rules Applicable to the Policies
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 Proceeds (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 Insured lives past age 100: If the Insured survives 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
benefit Proceeds and instead to tax you on the amount by which your Account
Value exceeds your "investment in the contract." Because we believe that the
Policy complies with the tax definition of life insurance and, in most states,
the Policy continues to have insurance risk beyond age 100, 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.
Accelerated Benefit Rider: Your Policy may contain an Accelerated Benefit
Rider, which provides you with access to a portion of the death benefit if the
Insured becomes terminally ill. The accelerated benefit payment is treated in
the same manner as death benefit Proceeds for tax purposes, meaning that it
generally will be excludable from gross income. But if the Insured under the
Policy is an officer, director, or employee of the Owner of the Policy, or is
financially interested in the trade or business of the Owner, the payment would
be taxable in part.
Loan interest: 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.
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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 an individual who is:
. a 20 percent owner of the entity, or
. an officer, director, or employee of the trade or business,
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.
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Other Considerations: The right to exchange the Policy for a permanent fixed
benefit policy (see "Exchange Privilege"), 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 exchange or
change.
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 III. 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 III, 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 III.
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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Other Policy Information
EXCHANGE PRIVILEGE
During the first 24 Policy Months, you may convert the Policy to a permanent
fixed benefit Policy. The amount of your new policy will be the Specified
Amount of this Policy on the date of the exchange. We will base premiums on the
same Age at issue and equivalent rating class of the Insured or Insureds, in
the case of a joint and last survivor Policy, as the existing Policy. The
conversion will be subject to an equitable adjustment in payments and Account
Value to reflect variances, if any, in the payments and Account Value under the
existing Policy and the new Policy. See your Policy for further information.
OPTIONAL PAYMENT PLANS
You may elect to have the death benefit Proceeds or the Surrender Value paid in
the lump sum or under one of the following five optional payment plans:
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, 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 a yearly
rate of 3%. We will pay the discounted amounts 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 we pay 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
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amount of the remaining payments for the 10 year period at a yearly rate of 3%.
We will pay the discounted amount in one sum to the survivor's estate unless
otherwise provided.
In selecting an optional payment plan: (1) the payee under a plan cannot be a
corporation, association or fiduciary; (2) the Proceeds applied under a plan
must be at least $10,000; and (3) the amount of each payment under a plan must
be at least $50.
You may select an optional payment plan in your application or by writing our
Home Office. We will transfer any amount left with us for payment under an
optional payment plan to our General Account. Payments under an optional
payment plan will not vary with the investment performance of Separate Account
III because they are forms of fixed-benefit annuities. Amounts allocated to an
optional payment plan will earn interest of at least 3.0% 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 your registered representative.
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 or as increased,
except for material misstatements contained in the application or a
supplemental application, after it has been in force for a minimum period,
generally for two years from the Policy Date or effective date of the increase.
SUICIDE EXCLUSION
If the Insured under a single life Policy commits suicide while sane or insane
within two years of the Policy Date, we will limit the death benefit Proceeds
we pay under the Policy to all premiums paid (other than those required for an
increase in Specified Amount), less outstanding Policy Debt and less amounts
paid upon partial surrender of the Policy.
If the Insured under a single life Policy 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, we will limit the death
benefit Proceeds with respect to the increase. The death benefit Proceeds thus
limited will equal the additional premium payment required for the increase.
If either Insured under a joint and last survivor Policy commits suicide while
sane or insane within two years of the Policy Date, we will limit the amount of
proceeds we pay under the Policy to all premiums paid (other than those
required for an increase in Specified Amount), less outstanding Policy Debt and
less amounts paid upon partial surrender of the Policy.
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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, we will limit the death benefit Proceeds with
respect to that increase. The death benefit Proceeds thus limited will equal
the additional premium payment required for the increase. The amount payable
will be treated as death benefit Proceeds and paid to the Beneficiary under the
same conditions as the initial Specified Amount.
If the Last Insured 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, we will limit the death benefit Proceeds with
respect to that increase. The death benefit Proceeds thus limited will equal
the additional premium payment required for the increase. The amount payable
will be treated as death benefit 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 Proceeds if you misstated an Insured's Age or
gender in your application.
WRITTEN NOTICE
You should send any written notice to us at our Home Office. The notice should
include the Policy number and the 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/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:
. to make the Policy, our operations, or the operation of Separate Account III
to 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 III, if allowed by
the Policy.
Only an authorized officer of GE Life & Annuity has the right to change the
Policy. No registered representative has the authority to change the Policy or
waive any of its terms. An officer of GE Life & Annuity must sign all
endorsements, amendments, or riders to be valid.
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REPORTS
We maintain records and accounts of all transactions involving the Policy,
Separate Account III 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:
. Specified Amount;
. the Account Value in each Subaccount and the Guarantee Account;
. the Surrender Value;
. Policy Debt; and
. 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 Separate Account III to which you have allocated Account Value, as
required by the 1940 Act. In addition, when you pay premiums, or if you take
out a Policy loan, make transfers or make partial surrenders, you will receive
a written confirmation of these transactions.
CHANGE OF OWNER
You may change the Owner of the Policy by sending a written request on a form
satisfactory to us to our Home Office while the 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.
USING THE POLICY AS COLLATERAL
You can assign the Policy as collateral security. You must notify us in writing
if you assign the Policy. Any payments we made before the assignment will not
be affected. We are not responsible for the validity of an assignment. An
assignment may affect your rights and the rights of the Beneficiary.
REINSURANCE
We intend to reinsure a portion of the risks assumed under the Policies.
LEGAL PROCEEDINGS
GE Life & Annuity, like all other companies, is involved in lawsuits, including
class action lawsuits. In some class action and other lawsuits involving
insurance companies, substantial damages have been sought and/or material
settlement payments have been made. Although the outcome of any litigation
cannot be predicted with certainty, GE Life & Annuity believes that at the
present time there are no pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on it or Separate Account III.
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Additional Information
Sale of The Policies
Capital Brokerage Corporation (doing business in Indiana, Minnesota, New
Mexico, and Texas as GE Capital Brokerage Corporation) ("Capital Brokerage") is
the distributor and principal underwriter of the Policies. Capital Brokerage, a
Washington corporation and an affiliate of ours, is located at 6630 W. Broad
St., Richmond, Virginia 23230.
Properly licensed registered representatives of independent and affiliated
broker-dealers will sell the Policies. These broker-dealers have selling
agreements with Capital Brokerage and have been licensed by state insurance
departments to represent us. One of these affiliated broker-dealers is Terra
Securities Corporation.
Properly licensed registered representatives of Capital Brokerage will also
sell the Policies. Capital Brokerage is registered with the SEC under the
Securities Exchange Act of 1934 as a broker-dealer and is a member of the
National Association of Securities Dealers, Inc. ("NASD"). We will offer the
Policies in all states where we are licensed to do business.
We pay sales commissions and other expenses associated with the promotion and
sales of the Policies to broker/dealers. Broker/dealers may receive aggregate
commissions of up to 8.5% of your initial premium payment.
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 expenses-paid trips, expense-paid educational seminars and
merchandise.
Capital Brokerage will receive 12b-1 fees from return portfolios 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 Donita King Senior Vice President, General Counsel and
Secretary 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 & Annuity Separate Account III, 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
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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 audited
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 and subsidiary included in this prospectus from the financial
statements of Separate Account III. 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 and subsidiary as affecting the investment performance of the assets
held in Separate Account III.
The Separate Account III financial statements included in this Prospectus
profile have several Subaccounts that are not available to this Policy. The new
Subaccounts in Separate Account III that are available to this Policy did not
begin operation before the date of this Prospectus.
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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 Financial Assurance since 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.
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 Director, GE Life & Annuity, since 5/96; Director of
GNA since April, 1994; Senior Vice President, Business
Development and Chief Actuary of GNA since May, 1993.
Thomas M. Stinson Director and Senior Vice President, Senior Vice
President GE Life and Annuity Assurance Company, since
4/00. President; Personal Financial Services GE Life
and Annuity Assurance Company; General Manager Home
Depot Credit 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.
Elliot A. Rosenthal Director and Senior Vice President of GE Life and
Annuity Assurance Company since June, 2000; Senior
Vice President and Senior Investment Officer of the GE
Financial Assurance Institutional Stable Value Group
since 1982.
Timothy C. Stonesifer Senior Vice President and Chief Financial Officer of
GE Life and Annuity Assurance Company since July,
2000; Chief Financial Officer of GE Financial
Assurance, 2/98 to 7/2000; Auditor and Financial
Analyst, General Electric Corporation, 7/89-2/98.
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 is GE Financial Assurance, 6604
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 III, 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
The following tables illustrate how the death benefits, Account Values and
Surrender Values of a Policy change with the investment experience of Separate
Account III and with changes in the cost of insurance charges. The tables
illustrate the Policy values that would result based upon the hypothetical
investment rates of return if premiums are paid as indicated, if all premiums
are allocated to Separate Account III, and if no Policy loans, partial
surrenders or transfer requests have been made. The tables are also based on
the assumption that the Policyowner has not requested an increase in the
Specified Amount of the Policy.
The tables illustrate both a single life and joint and last survivor Policy
issued to a male insured, age 60, with a total planned premium of $70,000
(single life); and a male insured, age 60, and a female insured, age 60, with a
total planned premium of $70,000, (joint life). The second column of each
illustration shows the accumulated value of the premiums paid at the stated
interest rate. The remaining columns illustrate the death benefit, Account
Value and Surrender Value of a Policy over the designated period under varying
assumptions of investment rates of return and cost of insurance charges. Death
benefits, cash and surrender values also take into account charges deducted
from premium payments. (See Charges and Deductions.)
The guaranteed cost of insurance charges allowable under the Policy (shown in
the illustrations as "guaranteed") are based upon the 1980 Commissioners'
Standard Ordinary Mortality Table, adjusted for any substandard rating class.
These guaranteed charges are used to determine the maximum monthly deduction
for cost of insurance. GE Life & Annuity currently deducts lower cost of
insurance charges (shown in the illustrations as "current") and anticipates
deducting these charges for the foreseeable future.
The current cost of insurance charge is equal to .0542% of the Policy's Account
Value in each Subaccount and the Guarantee Account on the Monthly Anniversary
Day. This is equivalent to an annual rate of .65% of the Policy's Account Value
in Separate Account III and the Guarantee Account.
The illustration columns using the guaranteed cost of insurance charges will
show the minimum values that would be available under the Policy's terms based
on the assumed investment rates of return of 0%, 6% or 12%. The death benefits,
Account Values and Surrender Values would be different from those shown if the
gross annual investment rates of return averaged 0%, 6% or 12%, over a period
of years, but fluctuated above and below those averages for individual Policy
years.
The illustration columns using the cost of insurance charges currently deducted
by GE Life & Annuity assume those current cost of insurance charges are
continued for the entire period indicated. Although GE Life & Annuity currently
makes deductions for cost of insurance based upon the current charges, and
anticipates continuing such practice for the foreseeable future, THERE IS NO
GUARANTEE THAT SUCH CHARGES
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WILL BE CONTINUED. At the discretion of GE Life & Annuity, the charges could be
increased or decreased, based upon its estimate of expected mortality. Thus,
the values in the illustrations using current cost of insurance charges
indicate values that would be available, assuming the stated investment rates
of return, if the current cost of insurance charges are continued. THOSE
COLUMNS DO NOT ILLUSTRATE VALUES THAT WOULD BE GUARANTEED IF THE HYPOTHETICAL
INVESTMENT RATES OF RETURN WERE EARNED.
The illustrations reflect an average annual charge of 0.94% of the average
daily net assets of the portfolios for investment management fees, 12b-1 fees
and other operating expenses. Assumed charges for fees and other expenses, as
an annual percentage of the average daily net assets of the Funds, are based on
the actual fees and expenses incurred by the funds in 1999, or on estimates as
described below. Actual fees and expenses charged to a policy will depend on
the Subaccounts chosen by the Policyowner. After deduction of these amounts,
the illustrated gross annual investment rates of return of 0%, 6% and 12%
correspond to approximate net annual rates of -.94%, 5.06% and 11.06%,
respectively.
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. If these agreements terminate, the values shown on the following page
would less.
All of the information used to determine average fees and expenses for the
illustrations was provided by the Funds. In some cases, estimates were
substituted by the Funds for the actual fees and expenses. GE Life & Annuity
does not represent that such estimates are true and complete, and has not
independently verified these figures.
The illustrations also take into account the monthly charges by GE Life &
Annuity for the premium tax charge, distribution expense charge, mortality and
expense risk charge, administrative expense charge and cost of insurance.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against Separate Account III, since GE Life & Annuity is
not currently making such charges. However, such charges may be made in the
future and, in that event, the gross annual investment rate of return would
have to exceed 0%, 6% or 12% by an amount sufficient to cover the tax charges
in order to produce the death benefits and Account Values illustrated. (See
Federal Tax Matters.)
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The tables also do not reflect any reduction in sales charges available to
certain groups (See Reduction in Charges for Group Sales); if the reduced
charges were illustrated they would show increased Account Values.
Upon request, GE Life & Annuity will provide a personalized illustration based
upon the age, gender, and risk class of the proposed Insured under a single
life Policy or the proposed Insureds under a joint and last survivor Policy and
the proposed premium payments.
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Single Life
Variable Life Insurance
<TABLE>
<S> <C> <C>
Male Issue Age 60 Initial Specified Amount $174,853
Rating 100% (Standard) Initial Premium $70,000
Level Death Benefit Total Planned Premium (1) $70,000
</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 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 73,500 62,343 66,543 174,853 66,453 70,653 174,853 70,564 74,764 174,853
2 77,175 59,106 62,956 174,853 67,330 71,180 174,853 76,052 79,902 174,853
3 81,034 56,057 59,207 174,853 68,408 71,558 174,853 82,304 85,454 174,853
4 85,085 52,808 55,258 174,853 69,303 71,753 174,853 89,016 91,466 174,853
5 89,340 48,968 51,068 174,853 69,634 71,734 174,853 95,898 97,998 174,853
6 93,807 45,194 46,594 174,853 70,066 71,466 174,853 103,723 105,123 174,853
7 98,497 41,094 41,794 174,853 70,216 70,916 174,853 112,238 112,938 174,853
8 103,422 36,619 36,619 174,853 70,044 70,044 174,853 121,560 121,560 174,853
9 108,593 31,015 31,015 174,853 68,804 68,804 174,853 131,132 131,132 174,853
10 114,023 24,911 24,911 174,853 67,138 67,138 174,853 141,825 141,825 174,853
15 145,525 * * * 49,711 49,711 174,853 219,111 219,111 234,449
20 185,731 * * * * * * 341,279 341,279 358,343
25 237,045 * * * * * * 525,896 525,896 552,190
30 302,536 * * * * * * 796,650 796,650 836,482
35 386,121 * * * * * * 1,217,923 1,217,923 1,230,102
-----------------------------------------------------------------------------------------------------
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume a single premium of $70,000 with no
additional premiums. Values would 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 -.94%, 5.06%, and 11.06%. 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>
Single Life
Variable Life Insurance
<TABLE>
<S> <C> <C>
Male Issue Age 60 Initial Specified Amount $174,853
Rating 100% (Standard) Initial Premium $70,000
Level Death Benefit Total Planned Premium (1) $70,000
</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 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 73,500 63,598 67,798 174,853 67,704 71,904 174,853 71,811 76,011 174,853
2 77,175 61,815 65,665 174,853 70,010 73,860 174,853 78,688 82,538 174,853
3 81,034 60,449 63,599 174,853 72,720 75,870 174,853 86,475 89,625 174,853
4 85,085 59,148 61,598 174,853 75,484 77,934 174,853 94,871 97,321 174,853
5 89,340 57,560 59,660 174,853 77,954 80,054 174,853 103,577 105,677 174,853
6 93,807 56,383 57,783 174,853 80,831 82,231 174,853 113,352 114,752 174,853
7 98,497 55,266 55,966 174,853 83,768 84,468 174,853 123,905 124,605 174,853
8 103,422 54,205 54,205 174,853 86,766 86,766 174,853 135,305 135,305 174,853
9 108,593 52,500 52,500 174,853 89,127 89,127 174,853 146,923 146,923 174,853
10 114,023 50,848 50,848 174,853 91,551 91,551 174,853 159,627 159,627 185,168
15 145,525 44,102 44,102 174,853 106,547 106,547 174,853 247,001 247,001 264,291
20 185,731 38,251 38,251 174,853 124,000 124,000 174,853 384,719 384,719 403,955
25 237,045 33,176 33,176 174,853 144,311 144,311 174,853 593,174 593,174 622,833
30 302,536 28,774 28,774 174,853 167,950 167,950 176,347 911,302 911,302 956,867
35 386,121 24,957 24,957 174,853 196,493 196,493 198,458 1,407,447 1,407,447 1,421,521
-----------------------------------------------------------------------------------------------------
</TABLE>
(1) The values illustrated assume a single premium of $70,000 with no
additional premiums. Values would 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 -.94%, 5.06%, and 11.06%. 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>
Joint and Survivor
Variable Life Insurance
<TABLE>
<S> <C> <C>
Male Issue Age 60 Rating 100% (Standard) Initial Specified Amount $263,113
Female Issue Age 60 Rating 100% (Standard) Initial Premium $70,000
Level Death Benefit Total Planned Premium (1) $70,000
</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 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 73,500 64,012 68,212 263,113 68,145 72,345 263,113 72,277 76,477 263,113
2 77,175 62,552 66,402 263,113 70,852 74,702 263,113 79,641 83,491 263,113
3 81,034 61,404 64,554 263,113 73,911 77,061 263,113 87,933 91,083 263,113
4 85,085 60,198 62,648 263,113 76,953 79,403 263,113 96,846 99,296 263,113
5 89,340 58,559 60,659 263,113 79,608 81,708 263,113 106,077 108,177 263,113
6 93,807 57,158 58,558 263,113 82,551 83,951 263,113 116,379 117,779 263,113
7 98,497 55,613 56,313 263,113 85,407 86,107 263,113 127,466 128,166 263,113
8 103,422 53,892 53,892 263,113 88,148 88,148 263,113 139,412 139,412 263,113
9 108,593 51,259 51,259 263,113 90,047 90,047 263,113 151,609 151,609 263,113
10 114,023 48,373 48,373 263,113 91,768 91,768 263,113 164,863 164,863 263,113
15 145,525 27,941 27,941 263,113 97,346 97,346 263,113 256,982 256,982 274,970
20 185,731 * * * 83,883 83,883 263,113 404,477 404,477 424,701
25 237,045 * * * 13,135 13,135 263,113 630,505 630,505 662,031
30 302,536 * * * * * * 965,670 965,670 1,013,954
35 386,121 * * * * * * 1,483,207 1,483,207 1,498,039
-----------------------------------------------------------------------------------------------------
</TABLE>
* Premium in addition to the planned premium is required to keep the policy in
effect.
(1) The values illustrated assume a single premium of $70,000 with no
additional premiums. Values would 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 -.94%, 5.06%, and 11.06%. 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>
Joint and Survivor
Variable Life Insurance
<TABLE>
<S> <C> <C>
Male Issue Age 60 Rating 100% (Standard) Initial Specified Amount $263,113
Female Issue Age 60 Rating 100% (Standard) Initial Premium $70,000
Level Death Benefit Total Planned Premium (1) $70,000
</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 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 73,500 64,012 68,212 263,113 68,145 72,345 263,113 72,277 76,477 263,113
2 77,175 62,552 66,402 263,113 70,852 74,702 263,113 79,641 83,491 263,113
3 81,034 61,404 64,554 263,113 73,911 77,061 263,113 87,933 91,083 263,113
4 85,085 60,261 62,711 263,113 76,953 79,403 263,113 96,846 99,296 263,113
5 89,340 58,821 60,921 263,113 79,709 81,809 263,113 106,077 108,177 263,113
6 93,807 57,782 59,182 263,113 82,887 84,287 263,113 116,419 117,819 263,113
7 98,497 56,793 57,493 263,113 86,141 86,841 263,113 127,621 128,321 263,113
8 103,422 55,852 55,852 263,113 89,471 89,471 263,113 139,759 139,759 263,113
9 108,593 54,258 54,258 263,113 92,182 92,182 263,113 152,217 152,217 263,113
10 114,023 52,709 52,709 263,113 94,975 94,975 263,113 165,785 165,785 263,113
15 145,525 46,408 46,408 263,113 112,205 112,205 263,113 259,264 259,264 277,413
20 185,731 40,860 40,860 263,113 132,560 132,560 263,113 408,069 408,069 428,473
25 237,045 35,975 35,975 263,113 156,609 156,609 263,113 637,279 637,279 669,143
30 302,536 31,675 31,675 263,113 185,020 185,020 263,113 993,880 993,880 1,043,574
35 386,121 27,888 27,888 263,113 218,586 218,586 263,113 1,551,998 1,551,998 1,567,518
-----------------------------------------------------------------------------------------------------
</TABLE>
(1) The values illustrated assume a single premium of $70,000 with no
additional premiums. Values would 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 -.94%, 5.06%, and 11.06%. 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>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Financial Statements
For the six months ended June 30, 2000
(Unaudited)
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Table of Contents
For the six months ended June 30, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements (Unaudited):
Statements of Assets and Liabilities..................................... F-1
Statements of Operations................................................. F-8
Statements of Changes in Net Assets...................................... F-14
Notes to Financial Statements (Unaudited).................................. F-26
</TABLE>
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
----------------------------------------------------------
S&P 500 Total Real Estate
Index Money Return International Securities
Fund Market Fund Fund Equity Fund Fund
---------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Investment in GE
Investments Funds,
Inc.,
at fair value (note 2):
S&P 500 Index Fund
(284,329 shares;
cost -- $7,007,861).. $7,941,321 -- -- -- --
Money Market Fund
(13,679,548 shares;
cost --
$13,679,548)........ -- 13,679,548 -- -- --
Total Return Fund
(106,574 shares;
cost -- $1,528,974).. -- -- 1,743,555 -- --
International Equity
Fund (29,799 shares;
cost -- $422,979).... -- -- -- 441,028 --
Real Estate Securities
Fund (48,018 shares;
cost -- $690,829).... -- -- -- -- 606,941
Receivable from
affiliate.............. -- -- 258 -- --
Receivable for units
sold................... -- 2,215,612 250 -- --
---------- ---------- --------- ------- -------
Total assets........... 7,941,321 15,895,160 1,744,063 441,028 606,941
---------- ---------- --------- ------- -------
Liabilities
Accrued expenses payable
to affiliate (note 3).. 6,046 631,749 500 24,956 5,325
Payable for units
withdrawn.............. 181 -- -- -- --
---------- ---------- --------- ------- -------
Total liabilities...... 6,227 631,749 500 24,956 5,325
---------- ---------- --------- ------- -------
Net assets attributable
to variable life
policyholders.......... $7,935,094 15,263,411 1,743,563 416,072 601,616
========== ========== ========= ======= =======
Outstanding units....... 155,896 920,037 50,774 21,991 35,389
========== ========== ========= ======= =======
Net asset value per
unit................... $ 50.90 16.59 34.34 18.92 17.00
========== ========== ========= ======= =======
</TABLE>
F-1
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
----------------------------------------------------
Global Mid-Cap U.S. Premier
Income Value Equity Income Equity Growth Equity
Fund Fund Fund Fund Fund
------- ------------ --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Investment in GE
Investments Funds, Inc.,
at fair value (note 2):
Global Income Fund
(2,681 shares; cost --
$25,075)............. $25,420 -- -- -- --
Mid-Cap Value Equity
Fund (47,588 shares;
cost -- $721,627)..... -- 719,060 -- -- --
Income Fund (103,512
shares; cost of
$1,248,714)........... -- -- 1,231,791 -- --
U.S. Equity Fund (3,332
shares; cost
$123,109)............. -- -- -- 126,574 --
Premier Growth Equity
Fund (5,995 shares;
cost $477,113)........ -- -- -- -- 528,610
Receivable from
affiliate............... 1,048 -- -- -- 57
------- ------- --------- ------- -------
Total assets............ 26,468 719,060 1,231,791 126,574 528,667
------- ------- --------- ------- -------
Liabilities
Accrued expenses payable
to affiliate (note 3)... 8 1,148 975 1,306 151
Payable for units
withdrawn............... -- -- -- 670 --
------- ------- --------- ------- -------
Total liabilities....... 8 1,148 975 1,976 151
------- ------- --------- ------- -------
Net assets attributable
to variable life
policyholders........... $26,460 717,912 1,230,816 124,598 528,516
======= ======= ========= ======= =======
Outstanding units........ 2,574 47,138 115,461 9,936 45,483
======= ======= ========= ======= =======
Net asset value per
unit.................... $ 10.28 15.23 10.66 12.54 11.62
======= ======= ========= ======= =======
</TABLE>
F-2
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-------------------------------------------------------
Aggressive Capital High Multiple
Bond Growth Appreciation Income Strategies
Fund/VA Fund/VA Fund/VA Fund/VA Fund/VA
---------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Investment in
Oppenheimer Variable
Account Funds, at fair
value (note 2):
Bond Fund/VA (123,699
shares; cost --
$1,432,216)......... $1,337,181 -- -- -- --
Aggressive Growth
Fund/VA (116,544
shares; cost --
$6,532,736)......... -- 11,262,767 -- -- --
Capital Appreciation
Fund/VA (103,963
shares; cost --
$4,885,814)......... -- -- 5,316,654 -- --
High Income Fund/VA
(413,314 shares;
cost -- $4,406,121).. -- -- -- 3,955,415 --
Multiple Strategies
Fund/VA (194,922
shares; cost --
$3,187,130)......... -- -- -- -- 3,233,757
Receivable from
affiliate.............. 369 973 -- 1,033 --
Receivable for units
sold................... 376 -- 106 221 471
---------- ---------- --------- --------- ---------
Total assets........... 1,337,926 11,263,740 5,316,760 3,956,669 3,234,228
---------- ---------- --------- --------- ---------
Liabilities
Accrued expenses payable
to affiliate (note 3).. 384 3,224 12,303 1,134 1,070
Payable for units
withdrawn.............. -- 925 -- -- --
---------- ---------- --------- --------- ---------
Total liabilities...... 384 4,149 12,303 1,134 1,070
---------- ---------- --------- --------- ---------
Net assets attributable
to variable life
policyholders.......... $1,337,542 11,259,591 5,304,457 3,955,535 3,233,158
========== ========== ========= ========= =========
Outstanding units....... 58,690 139,940 93,570 121,934 100,659
========== ========== ========= ========= =========
Net asset value per
unit................... $ 22.79 80.46 56.69 32.44 32.12
========== ========== ========= ========= =========
</TABLE>
F-3
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance Variable Insurance
Products Fund Products Fund II Products Fund III
-------------------------------- -------------------- -----------------------
Growth
Equity- Asset & Growth
Income Growth Overseas Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ---------- --------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in Variable
Insurance Products
Fund, at fair value
(note 2):
Equity-Income
Portfolio (562,340
shares; cost --
$12,640,853)........ $12,883,204 -- -- -- -- -- --
Growth Portfolio
(310,111 shares;
cost --
$13,927,742)........ -- 15,983,101 -- -- -- -- --
Overseas Portfolio
(186,561 shares;
cost -- $4,375,887).. -- -- 4,376,723 -- -- -- --
Investment in Variable
Insurance Products Fund
II, at fair value
(note 2):
Asset Manager
Portfolio (479,209
shares; cost --
$7,461,238)......... -- -- -- 7,926,121 -- -- --
Contrafund Portfolio
(415,626 shares;
cost -- $9,518,116).. -- -- -- -- 10,428,062 -- --
Investment in Variable
Insurance Products Fund
III, at fair value
(note 2):
Growth & Income
Portfolio (71,507
shares; cost --
$1,170,974).......... -- -- -- -- -- 1,106,925 --
Growth Opportunities
Portfolio (31,782
shares; cost --
$657,442)........... -- -- -- -- -- -- 655,017
Receivable from
affiliate.............. 2,193 -- -- -- -- -- --
Receivable for units
sold................... 55 -- -- 471 490 -- --
----------- ---------- --------- --------- ---------- --------- -------
Total assets........... 12,885,452 15,983,101 4,376,723 7,926,592 10,428,552 1,106,925 655,017
----------- ---------- --------- --------- ---------- --------- -------
Liabilities
Accrued expenses payable
to affiliate (note 3).. 3,700 11,129 39,513 23,727 7,378 1,129 1,081
Payable for units
withdrawn.............. -- 78,271 178 -- -- -- --
----------- ---------- --------- --------- ---------- --------- -------
Total liabilities...... 3,700 89,400 39,691 23,727 7,378 1,129 1,081
----------- ---------- --------- --------- ---------- --------- -------
Net assets attributable
to variable life
policyholders.......... $12,881,752 15,893,701 4,337,032 7,902,865 10,421,174 1,105,796 653,936
=========== ========== ========= ========= ========== ========= =======
Outstanding units....... 351,672 243,060 156,628 265,464 331,357 66,775 43,918
=========== ========== ========= ========= ========== ========= =======
Net asset value per
unit................... $ 36.63 65.39 27.69 29.77 31.45 16.56 14.89
=========== ========== ========= ========= ========== ========= =======
</TABLE>
F-4
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
PBHG Insurance
Federated Insurance Series Alger American Fund Series Fund, Inc.
---------------------------- ------------------------ -------------------
PBHG
American High Income Small Large Cap PBHG
Leaders Bond Utility Capitalization Growth Growth Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
-------- ----------- ------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in Federated
Insurance Series, at
fair value (note 2):
American Leaders Fund
II (39,097 shares;
cost -- $769,495)... $750,263 -- -- -- -- -- --
High Income Bond Fund
II (77,322 shares;
cost -- $739,329)... -- 705,178 -- -- -- -- --
Utility Fund II
(31,923 shares;
cost -- $429,322)... -- -- 430,647 -- -- -- --
Investment in Alger
American Fund, at fair
value (note 2):
Small Capitalization
Portfolio (89,739
shares; cost --
$3,668,522)........ -- -- -- 2,894,964 -- -- --
Growth Portfolio
(100,868 shares;
cost --
$5,411,364)........ -- -- -- -- 5,789,840 -- --
Investment in PBHG
Insurance Series Fund,
Inc., at fair value
(note 2):
PBHG Large Cap Growth
Portfolio (23,060
shares; cost --
$571,067).......... -- -- -- -- -- 693,635 --
PBHG Growth II
Portfolio
(99,015 shares;
cost --
$2,657,861)........ -- -- -- -- -- -- 2,740,743
Receivable from
affiliate............. -- 68 -- -- 467 -- --
Receivable for units
sold.................. 55 -- 808 -- -- -- --
-------- ------- ------- --------- --------- ------- ---------
Total assets.......... 750,318 705,246 431,455 2,894,964 5,790,307 693,635 2,740,743
-------- ------- ------- --------- --------- ------- ---------
Liabilities
Accrued expenses
payable to affiliate
(note 3).............. 934 234 1,000 1,687 1,659 32,586 3,289
Payable for units
withdrawn............. -- -- -- -- 76,797 -- 2,087,321
-------- ------- ------- --------- --------- ------- ---------
Total liabilities..... 934 234 1,000 1,687 78,456 32,586 2,090,610
-------- ------- ------- --------- --------- ------- ---------
Net assets attributable
to variable life
policyholders......... $749,384 705,012 430,455 2,893,277 5,711,851 661,049 650,133
======== ======= ======= ========= ========= ======= =========
Outstanding units...... 44,633 46,969 23,130 170,193 215,298 22,905 24,478
======== ======= ======= ========= ========= ======= =========
Net asset value per
unit.................. $ 16.79 15.01 18.61 17.00 26.53 28.86 26.56
======== ======= ======= ========= ========= ======= =========
</TABLE>
F-5
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------------------------------------------------------------
Global
Aggressive Worldwide Flexible International Capital Life Global
Growth Growth Growth Balanced Income Growth Appreciation Sciences Technology
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
---------- ---------- ---------- --------- --------- ------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in
Janus Aspen
Series, at fair
value (note 2):
Aggressive
Growth
Portfolio
(151,162
shares; cost --
$8,426,739).... $8,434,848 -- -- -- -- -- -- -- --
Growth Portfolio
(327,542 shares;
cost --
$8,416,608).... -- 10,772,853 -- -- -- -- -- -- --
Worldwide Growth
Portfolio
(394,264
shares; cost --
$15,252,448)... -- -- 18,936,501 -- -- -- -- -- --
Balanced
Portfolio
(281,961 shares;
cost --
$5,883,947).... -- -- -- 7,421,222 -- -- -- -- --
Flexible Income
Portfolio
(21,164 shares;
cost --
$247,035)...... -- -- -- -- 238,091 -- -- -- --
International
Growth
Portfolio
(102,476 shares;
cost --
$4,027,303).... -- -- -- -- -- 4,067,260 -- -- --
Capital
Appreciation
Portfolio
(100,339 shares;
cost --
$2,822,714).... -- -- -- -- -- -- 3,183,743 -- --
Global Life
Sciences
Portfolio
(7,030 shares;
costs --
$56,970)....... -- -- -- -- -- -- -- 60,596 --
Global
Technology
Portfolio
(3,631 shares;
cost --
$35,495)....... -- -- -- -- -- -- -- -- 35,660
Receivable from
affiliate........ -- 1,760 5,501 929 -- -- -- -- --
Receivable for
units sold....... -- 806 3,170 -- -- -- -- -- --
---------- ---------- ---------- --------- ------- --------- --------- ------ ------
Total assets..... 8,434,848 10,775,419 18,945,172 7,422,151 238,091 4,067,260 3,183,743 60,596 35,660
---------- ---------- ---------- --------- ------- --------- --------- ------ ------
Liabilities
Accrued expenses
payable to
affiliate (note
3)............... 13,683 2,981 5,331 2,019 625 1,570 3,963 17 10
Payable for units
withdrawn........ 2,293 -- -- 651 -- -- 761 -- --
---------- ---------- ---------- --------- ------- --------- --------- ------ ------
Total
liabilities..... 15,976 2,981 5,331 2,670 625 1,570 4,724 17 10
---------- ---------- ---------- --------- ------- --------- --------- ------ ------
Net assets
attributable to
variable life
policyholders.... $8,418,872 10,772,438 18,939,841 7,419,481 237,466 4,065,690 3,179,019 60,579 35,650
========== ========== ========== ========= ======= ========= ========= ====== ======
Outstanding
units............ 166,942 316,093 484,147 304,576 17,525 139,907 103,450 5,683 3,488
========== ========== ========== ========= ======= ========= ========= ====== ======
Net asset value
per unit......... $ 50.43 34.08 39.12 24.36 13.55 29.06 30.73 10.66 10.22
========== ========== ========== ========= ======= ========= ========= ====== ======
</TABLE>
F-6
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Goldman Sachs Salomon Brothers
Variable Variable Series
Insurance Trust Funds Inc.
--------------- ----------------
Growth
and Mid Cap Total
Income Value Investors Return
Fund Fund Fund Fund
------- ------- --------- ------
<S> <C> <C> <C> <C>
Assets
Investment in Goldman Sachs Variable
Insurance Trust, at fair value (note 2):
Growth and Income Fund (3,963 shares;
cost -- $44,565).......................... $43,477 -- -- --
Mid Cap Value Fund (31,081 shares; cost --
$245,732)................................ -- 271,963 -- --
Investment in Salomon Brothers Variable
Series Funds Inc., at fair value (note 2):
Investors Fund (11,749 shares; cost --
$156,620)................................ -- -- 156,849 --
Total Return Fund (836 shares; cost --
$9,010).................................. -- -- -- 8,822
Receivable from affiliate.................... 7 -- -- 1
------- ------- ------- -----
Total assets................................ 43,484 271,963 156,849 8,823
------- ------- ------- -----
Liabilities
Accrued expenses payable to affiliate (note
3).......................................... 12 157 35 3
Payable for units withdrawn.................. -- 743 -- --
------- ------- ------- -----
Total liabilities........................... 12 900 35 3
------- ------- ------- -----
Net assets attributable to variable life
policyholders............................... $43,472 271,063 156,814 8,820
======= ======= ======= =====
Outstanding units............................ 4,715 31,373 10,807 811
======= ======= ======= =====
Net asset value per unit..................... $ 9.22 8.64 14.51 10.88
======= ======= ======= =====
</TABLE>
See accompanying notes to unaudited financial statements.
F-7
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
--------------------------------
Money Total
S&P 500 Index Market Return
Fund Fund Fund
------------- ---------- -------
Six months ended June 30, 2000
--------------------------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends............... $ -- 412,925 --
Expenses -- Mortality and expense risk
charges and administrative expenses
(note 3).................................. 52,889 88,280 11,488
--------- ------- -------
Net investment income (expense).............. (52,889) 324,645 (11,488)
--------- ------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... 181,722 -- 12,484
Unrealized appreciation (depreciation)..... (242,929) -- 40,688
Capital gain distributions................. -- -- --
--------- ------- -------
Net realized and unrealized gain (loss) on
investments................................. (61,207) -- 53,172
--------- ------- -------
Increase (decrease) in net assets from
operations.................................. $(114,096) 324,645 41,684
========= ======= =======
<CAPTION>
GE Investments Funds, Inc.
(continued)
--------------------------------
Real
Estate Global
International Securities Income
Equity Fund Fund Fund
------------- ---------- -------
Six months ended June 30, 2000
--------------------------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends............... $ -- -- --
Expenses -- Mortality and expense risk
charges and
administrative expenses (note 3).......... 3,107 3,977 506
--------- ------- -------
Net investment income (expense).............. (3,107) (3,977) (506)
--------- ------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... 36,422 (36,933) (12,622)
Unrealized appreciation (depreciation)..... (28,996) 123,444 930
Capital gain distributions................. -- -- --
--------- ------- -------
Net realized and unrealized gain (loss) on
investments................................. 7,426 86,511 (11,692)
--------- ------- -------
Increase (decrease) in net assets from
operations.................................. $ 4,319 82,534 (12,198)
========= ======= =======
</TABLE>
F-8
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(continued)
---------------------------------
Mid-Cap Premier
Value U.S. Growth
Equity Income Equity Equity
Fund Fund Fund Fund
-------- ------- ------ -------
Six months ended June 30, 2000
---------------------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends............... $ -- -- -- --
Expenses -- Mortality and expense risk
charges and administrative expenses (note
3)........................................ 4,869 8,414 872 3,399
-------- ------- ---- ------
Net investment income (expense).............. (4,869) (8,414) (872) (3,399)
-------- ------- ---- ------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... 4,871 (18,122) 988 4,948
Unrealized appreciation (depreciation)..... (31,344) 59,328 (55) (3,249)
Capital gain distributions................. -- -- -- --
-------- ------- ---- ------
Net realized and unrealized gain (loss) on
investments................................. (26,473) 41,206 933 1,699
-------- ------- ---- ------
Increase (decrease) in net assets from
operations.................................. $(31,342) 32,792 61 (1,700)
======== ======= ==== ======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-------------------------------------------------------
Aggressive Capital High Multiple
Bond Growth Appreciation Income Strategies
Fund/VA Fund/VA Fund/VA Fund/VA Fund/VA
-------- ---------- ------------ -------- ----------
Six months ended June 30, 2000
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $108,521 -- 6,341 414,296 145,756
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 9,591 70,333 35,041 27,491 21,296
-------- --------- -------- -------- --------
Net investment income
(expense).............. 98,930 (70,333) (28,700) 386,805 124,460
-------- --------- -------- -------- --------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... (53,962) 648,214 804,899 (42,282) 4,777
Unrealized
appreciation
(depreciation)....... (31,732) 902,131 (673,984) (398,786) (153,516)
Capital gain
distributions........ -- 389,633 338,409 -- 211,696
-------- --------- -------- -------- --------
Net realized and
unrealized gain (loss)
on investments......... (85,694) 1,939,978 469,324 (441,068) 62,957
-------- --------- -------- -------- --------
Increase (decrease) in
net assets from
operations............. $ 13,236 1,869,645 440,625 (54,263) 187,417
======== ========= ======== ======== ========
</TABLE>
F-9
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
(Unaudited)
<TABLE>
<CAPTION>
Variable Insurance Products Fund
------------------------------------
Equity-Income Growth Overseas
Portfolio Portfolio Portfolio
------------- ---------- ----------
Six months ended June 30, 2000
------------------------------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends........... $ 248,784 16,715 65,884
Expenses -- Mortality and expense risk
charges and administrative expenses
(note 3).............................. 89,136 103,893 31,837
----------- ---------- ----------
Net investment income (expense).......... 159,648 (87,178) 34,047
----------- ---------- ----------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss)............... (48,152) 401,629 385,641
Unrealized appreciation
(depreciation)........................ (1,653,726) (1,321,104) (1,117,777)
Capital gain distributions............. 937,281 1,663,182 414,893
----------- ---------- ----------
Net realized and unrealized gain (loss)
on investments.......................... (764,597) 743,707 (317,243)
----------- ---------- ----------
Increase (decrease) in net assets from
operations.............................. $ (604,949) 656,529 (283,195)
=========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III
----------------------- ------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
----------- ---------- --------- -------------
Six months ended Six months ended
June 30, 2000 June 30, 2000
----------------------- ------------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends.................. $ 274,793 39,966 15,017 10,736
Expenses -- Mortality and
expense risk charges and
administrative expenses
(note 3)................... 55,487 73,295 7,884 4,807
----------- ---------- -------- -------
Net investment income
(expense).................... 219,306 (33,329) 7,133 5,929
----------- ---------- -------- -------
Net realized and unrealized
gain (loss) on investments:
Net realized gain (loss).... 223,226 295,657 (39,106) (3,503)
Unrealized appreciation
(depreciation)............. (1,221,801) (1,987,830) (118,781) (98,718)
Capital gain distributions.. 647,393 1,450,776 98,008 54,448
----------- ---------- -------- -------
Net realized and unrealized
gain (loss) on investments... (351,182) (241,397) (59,879) (47,773)
----------- ---------- -------- -------
Increase (decrease) in net
assets from operations....... $ (131,876) (274,725) (52,746) (41,844)
=========== ========== ======== =======
</TABLE>
F-10
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
(Unaudited)
<TABLE>
<CAPTION>
Federated Insurance Series
-----------------------------
American High Income
Leaders Bond Utility
Fund II Fund II Fund II
-------- ----------- -------
Six months ended
June 30, 2000
-----------------------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends.................. $ 7,773 83,925 12,337
Expenses -- Mortality and expense risk charges
and administrative expenses (note 3)......... 5,230 6,701 2,787
-------- -------- -------
Net investment income (expense)................. 2,543 77,224 9,550
-------- -------- -------
Net realized and unrealized gain on investments:
Net realized gain (loss)...................... 2,260 (77,307) 4,693
Unrealized appreciation (depreciation)........ (68,814) (29,235) (32,723)
Capital gain distributions.................... 23,521 -- 8,200
-------- -------- -------
Net realized and unrealized gain (loss) on
investments.................................... (43,033) (106,542) (19,830)
-------- -------- -------
Increase (decrease) in net assets from
operations..................................... $(40,489) (29,318) (10,280)
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
PBHG Insurance
Alger American Fund Series Fund, Inc.
------------------------ -------------------
PBHG
Small Large Cap PBHG
Capitalization Growth Growth Growth II
Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- ---------
Six months ended Six months ended
June 30, 2000 June 30, 2000
------------------------ -------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends.... $ -- -- -- --
Expenses -- Mortality and
expense risk charges and
administrative expenses (note
3)............................. 19,589 37,453 2,888 5,397
----------- -------- ------ -------
Net investment income (expense)... (19,589) (37,453) (2,888) (5,397)
----------- -------- ------ -------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)........ 400,885 108,693 34,052 192,166
Unrealized appreciation
(depreciation)................. (1,435,058) (656,576) 11,383 1,153
Capital gain distributions...... 1,020,453 732,190 -- --
----------- -------- ------ -------
Net realized and unrealized gain
(loss) on investments............ (13,720) 184,307 45,435 193,319
----------- -------- ------ -------
Increase (decrease) in net assets
from operations.................. $ (33,309) 146,854 42,547 187,922
=========== ======== ====== =======
</TABLE>
F-11
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
(Unaudited)
<TABLE>
<CAPTION>
Janus Aspen Series
---------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Portfolio Portfolio Portfolio Portfolio
----------- --------- ---------- ---------
Six months ended June 30, 2000
---------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends.... $ -- -- -- --
Expenses -- Mortality and
expense risk charges and
administrative expenses (note
3)............................. 72,178 68,774 130,260 48,868
----------- -------- ---------- --------
Net investment income (expense)... (72,178) (68,774) (130,260) (48,868)
----------- -------- ---------- --------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)........ 2,726,250 636,607 3,969,731 143,574
Unrealized appreciation
(depreciation)................. (3,466,076) (906,904) (3,809,510) (557,003)
Capital gain distributions...... 809,741 415,299 271,412 470,225
----------- -------- ---------- --------
Net realized and unrealized gain
(loss) on investments............ 69,915 145,002 431,633 56,796
----------- -------- ---------- --------
Increase (decrease) in net assets
from operations.................. $ (2,263) 76,228 301,373 7,928
=========== ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
--------------------------------------------------------------------
Flexible International Capital Global Life Global
Income Growth Appreciation Sciences Technology
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ------------ --------------- ---------------
Period from Period from
June 1, 2000 to June 6, 2000 to
Six months ended June 30, 2000 June 30, 2000 June 30, 2000
------------------------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $ -- -- -- -- --
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 1,788 29,884 23,740 58 24
------- ---------- -------- ----- ---
Net investment income
(expense).............. (1,788) (29,884) (23,740) (58) (24)
------- ---------- -------- ----- ---
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... (5,949) 1,588,305 379,076 1 --
Unrealized
appreciation
(depreciation)....... 2,569 (1,469,842) (532,711) 3,626 166
Capital gain
distributions........ 6,385 10,273 11,285 -- --
------- ---------- -------- ----- ---
Net realized and
unrealized gain (loss)
on investments......... 3,005 128,736 (142,350) 3,627 166
------- ---------- -------- ----- ---
Increase (decrease) in
net assets from
operations............. $ 1,217 98,852 (166,090) 3,569 142
======= ========== ======== ===== ===
</TABLE>
F-12
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
(Unaudited)
<TABLE>
<CAPTION>
Goldman Sachs
Variable Insurance
Trust Fund Salomon Brothers Variable Series Funds Inc.
------------------ ---------------------------------------------
Growth and Mid Cap
Income Value Strategic Total Return
Fund Fund Bond Fund Investors Fund Fund
---------- ------- ------------- ----------------- -------------
Six months Period from Six months
Six months ended ended March 31, 2000 to ended
June 30, 2000 June 30, 2000 June 30, 2000 June 30, 2000
------------------ ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $ -- -- -- -- --
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 424 1,720 485 55 50
------- ------- ------- --- ---
Net investment income
(expense).............. (424) (1,720) (485) (55) (50)
------- ------- ------- --- ---
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... (1,555) (47,679) 5,604 1 (6)
Unrealized
appreciation
(depreciation)....... 1,704 53,143 (10,939) 229 236
Capital gain
distributions........ -- -- -- -- --
------- ------- ------- --- ---
Net realized and
unrealized gain (loss)
on investments......... 149 5,464 (5,335) 230 230
------- ------- ------- --- ---
Increase (decrease) in
net assets from
operations............. $ (275) 3,744 (5,820) 175 180
======= ======= ======= === ===
</TABLE>
See accompanying notes to unaudited financial statements.
F-13
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------
Money Total
S&P 500 Market Return
Index Fund Fund Fund
---------- ---------- ---------
Six months ended June 30, 2000
---------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)........... $ (52,889) 324,645 (11,488)
Net realized gain (loss).................. 181,722 -- 12,484
Unrealized appreciation (depreciation) on
investments.............................. (242,929) -- 40,688
Capital gain distributions................ -- -- --
---------- ---------- ---------
Increase (decrease) in net assets from
operations................................. (114,096) 324,645 41,684
---------- ---------- ---------
From capital transactions:
Net premiums.............................. 10,143 2,203,887 1,250
Loan interest............................. (934) 32,589 (240)
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits.......................... (95,421) -- --
Surrenders.............................. (132,996) (2,470,638) (87,095)
Loans................................... (4,052) (774,164) (3,031)
Cost of insurance and administrative
expense (note 3)....................... (39,556) (81,383) (8,152)
Transfer gain (loss) and transfer fees.. (1,852) (1,820,915) 336
Transfers (to) from the Guarantee Account
(note 1)................................. (14,838) (131,309) 500
Interfund transfers....................... (45,351) 2,549,977 35,592
---------- ---------- ---------
Increase (decrease) in net assets from
capital transactions....................... (324,857) (491,956) (60,840)
---------- ---------- ---------
Increase (decrease) in net assets......... (438,953) (167,311) (19,156)
Net assets at beginning of year............. 8,374,047 15,430,722 1,762,719
---------- ---------- ---------
Net assets at end of period................. $7,935,094 15,263,411 1,743,563
========== ========== =========
</TABLE>
F-14
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
------------------------------------------
Real Mid-Cap
Estate Global Value
International Securities Income Equity
Equity Fund Fund Fund Fund
------------- ---------- -------- -------
Six months ended June 30, 2000
------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense).. $ (3,107) (3,977) (506) (4,869)
Net realized gain (loss)......... 36,422 (36,933) (12,622) 4,871
Unrealized appreciation
(depreciation) on investments... (28,996) 123,444 930 (31,344)
Capital gain distributions....... -- -- -- --
-------- ------- -------- -------
Increase (decrease) in net assets
from operations................... 4,319 82,534 (12,198) (31,342)
-------- ------- -------- -------
From capital transactions:
Net premiums..................... -- 5,000 -- 4,254
Loan interest.................... -- (439) 892 (900)
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits................. -- -- -- --
Surrenders..................... -- -- -- --
Loans.......................... (100) (2,894) -- --
Cost of insurance and
administrative expense (note
3)............................ (1,986) (3,054) (152) (3,678)
Transfer gain (loss) and transfer
fees............................ (10,247) (474) 464,789 (7,335)
Transfers (to) from the Guarantee
Account (note 1)................ -- -- -- --
Interfund transfers.............. 14,260 (93,544) (454,714) 1,567
-------- ------- -------- -------
Increase (decrease) in net assets
from capital transactions......... 1,927 (95,405) 10,815 (6,092)
-------- ------- -------- -------
Increase (decrease) in net
assets.......................... 6,246 (12,871) (1,383) (37,434)
Net assets at beginning of year.... 409,826 614,487 27,843 755,346
-------- ------- -------- -------
Net assets at end of period........ $416,072 601,616 26,460 717,912
======== ======= ======== =======
</TABLE>
F-15
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(continued)
----------------------------------
U.S. Premier
Income Equity Growth Equity
Fund Fund Fund
---------- ------- -------------
Six months ended June 30, 2000
----------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)........... $ (8,414) (872) (3,399)
Net realized gain (loss).................. (18,122) 988 4,948
Unrealized appreciation (depreciation) on
investments.............................. 59,328 (55) (3,249)
Capital gain distributions................ -- -- --
---------- ------- -------
Increase (decrease) in net assets from
operations................................. 32,792 61 (1,700)
---------- ------- -------
From capital transactions:
Net premiums.............................. -- 1,273 --
Loan interest............................. (668) -- --
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits.......................... -- -- --
Surrenders.............................. (51,628) -- --
Loans................................... (10,684) -- --
Cost of insurance and administrative
expense (note 3)....................... (6,434) (640) (2,724)
Transfer gain (loss) and transfer fees.. (25) 241 89
Transfers (to) from the Guarantee Account
(note 1)................................. -- 3,580 3,961
Interfund transfers....................... (56,887) (8,772) 67,090
---------- ------- -------
Increase (decrease) in net assets from
capital transactions....................... (126,326) (4,318) 68,416
---------- ------- -------
Increase (decrease) in net assets......... (93,534) (4,257) 66,716
Net assets at beginning of year............. 1,324,350 128,855 461,800
---------- ------- -------
Net assets at end of period................. $1,230,816 124,598 528,516
========== ======= =======
</TABLE>
F-16
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
------------------------------------
Aggressive Capital
Bond Growth Appreciation
Fund/VA Fund/VA Fund/VA
---------- ---------- ------------
Six months ended June 30, 2000
------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)......... $ 98,930 (70,333) (28,700)
Net realized gain....................... (53,962) 648,214 804,899
Unrealized appreciation (depreciation)
on investments......................... (31,732) 902,131 (673,984)
Capital gain distributions.............. -- 389,633 338,409
---------- ---------- ---------
Increase (decrease) in net assets from
operations............................... 13,236 1,869,645 440,625
---------- ---------- ---------
From capital transactions:
Net premiums............................ -- 25,098 20,472
Loan interest........................... 1,324 (2,788) (1,155)
Transfers (to) from the general account
of GE Life & Annuity:
Death benefits........................ -- -- --
Surrenders............................ (13,237) (250,252) (66,466)
Loans................................. (14,340) (48,820) (571,432)
Cost of insurance and administrative
expense (note 3)..................... (7,116) (48,494) (23,232)
Transfer gain (loss) and transfer
fees................................. 446,347 6,198 24,116
Transfers from the Guarantee Account
(note 1)............................... 1,405 6,212 46,140
Interfund transfers..................... (698,505) 564,191 517,174
---------- ---------- ---------
Increase (decrease) in net assets from
capital transactions..................... (284,122) 251,345 (54,384)
---------- ---------- ---------
Increase (decrease) in net assets....... (270,886) 2,120,990 386,241
Net assets at beginning of year........... 1,608,428 9,138,601 4,918,216
---------- ---------- ---------
Net assets at end of period............... $1,337,542 11,259,591 5,304,457
========== ========== =========
</TABLE>
F-17
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Oppenheimer Variable
Accounts Fund
(continued)
----------------------
High Multiple
Income Strategies
Fund/VA Fund/VA
---------- ----------
Six months ended
June 30, 2000
----------------------
<S> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)....................... $ 386,805 124,460
Net realized gain (loss).............................. (42,282) 4,777
Unrealized appreciation (depreciation) on
investments.......................................... (398,786) (153,516)
Capital gain distributions............................ -- 211,696
---------- ---------
Increase (decrease) in net assets from operations....... (54,263) 187,417
---------- ---------
From capital transactions:
Net premiums.......................................... -- --
Loan interest......................................... 1,818 9,156
Transfers (to) from the general account of GE Life &
Annuity:
Death benefits...................................... -- --
Surrenders.......................................... (105,238) (52,029)
Loans............................................... (21,941) (7,277)
Cost of insurance and administrative expense (note
3)................................................. (19,986) (15,131)
Transfer gain (loss) and transfer fees.............. 432,765 361
Transfers (to) from the Guarantee Account (note 1).... 4,023 943
Interfund transfers................................... (800,830) (7,737)
---------- ---------
Increase (decrease) in net assets from capital
transactions........................................... (509,389) (71,714)
---------- ---------
Increase (decrease) in net assets..................... (563,652) 115,703
Net assets at beginning of year......................... 4,519,187 3,117,455
---------- ---------
Net assets at end of period............................. $3,955,535 3,233,158
========== =========
</TABLE>
F-18
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, continued
(Unaudited)
<TABLE>
<CAPTION>
Variable Insurance Products Fund
------------------------------------
Equity-Income Growth Overseas
Portfolio Portfolio Portfolio
------------- ---------- ----------
Six months ended June 30, 2000
------------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)........ $ 159,648 (87,178) 34,047
Net realized gain (loss)............... (48,152) 401,629 385,641
Unrealized appreciation (depreciation)
on investments........................ (1,653,726) (1,321,104) (1,117,777)
Capital gain distributions............. 937,281 1,663,182 414,893
----------- ---------- ----------
Increase (decrease) in net assets from
operations.............................. (604,949) 656,529 (283,195)
----------- ---------- ----------
From capital transactions:
Net premiums........................... 1,230 9,495 2,530
Loan interest.......................... (7,786) (18,435) (2,838)
Transfers (to) from the general account
of GE Life & Annuity:
Death benefits....................... (139,146) (135,401) --
Surrenders........................... (365,593) (539,015) (73,493)
Loans................................ (14,620) (83,320) (611,272)
Cost of insurance and administrative
expense............................. (58,950) (70,080) (21,850)
Transfer gain (loss) and transfer
fees................................ 29,338 (408) 51,884
Transfers from the Guarantee Account
(note 1).............................. 6,715 53,849 443
Interfund transfers.................... (1,133,707) 246,303 547,850
----------- ---------- ----------
Increase (decrease) in net assets from
capital transactions.................... (1,682,519) (537,012) (106,746)
----------- ---------- ----------
Increase (decrease) in net assets...... (2,287,468) 119,517 (389,941)
Net assets at beginning of year.......... 15,169,220 15,774,184 4,726,973
----------- ---------- ----------
Net assets at end of period.............. $12,881,752 15,893,701 4,337,032
=========== ========== ==========
</TABLE>
F-19
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Variable Insurance Variable Insurance
Products Fund II Products Fund III
----------------------- ------------------------
Asset Growth & Growth
Manager Contrafund Income Opportunities
Portfolio Portfolio Portfolio Portfolio
----------- ---------- --------- -------------
Six months ended Six months ended
June 30, 2000 June 30, 2000
----------------------- ------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment income
(expense)................. $ 219,306 (33,329) 7,133 5,929
Net realized gain (loss)... 223,226 295,657 (39,106) (3,503)
Unrealized appreciation
(depreciation) on
investments............... (1,221,801) (1,987,830) (118,781) (98,718)
Capital gain
distributions............. 647,393 1,450,776 98,008 54,448
----------- ---------- --------- --------
Increase (decrease) in net
assets from operations...... (131,876) (274,725) (52,746) (41,844)
----------- ---------- --------- --------
From capital transactions:
Net premiums............... -- 25,797 -- --
Loan interest.............. (6,194) (4,747) 782 (41)
Transfers (to) from the
general account of GE Life
& Annuity:
Death benefits........... -- (123,201) -- --
Surrenders............... (349,608) (128,306) (14,475) (39,679)
Loans.................... (8,961) (124,208) (28,635) (38,083)
Cost of insurance and
administrative expense
(note 3)................ (39,956) (49,711) (5,426) (3,232)
Transfer gain (loss) and
transfer fees........... 2,733 (8,151) 1,884 (4,114)
Transfers (to) from
Guarantee Account (note
1)........................ 1,808 2,315 (10,233) --
Interfund transfers........ (1,092,403) (661,170) (299,971) (126,157)
----------- ---------- --------- --------
Increase (decrease) in net
assets from capital
transactions................ (1,492,581) (1,071,382) (356,074) (211,306)
----------- ---------- --------- --------
Increase (decrease) in net
assets.................... (1,624,457) (1,346,107) (408,820) (253,150)
Net assets at beginning of
year........................ 9,527,322 11,767,281 1,514,616 907,086
----------- ---------- --------- --------
Net assets at end of period.. $ 7,902,865 10,421,174 1,105,796 653,936
=========== ========== ========= ========
</TABLE>
F-20
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Federated Insurance Series
------------------------------
American High Income
Leaders Bond Utility
Fund II Fund II Fund II
--------- ----------- -------
Six months ended
June 30, 2000
------------------------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense).............. $ 2,543 77,224 9,550
Net realized gain (loss)..................... 2,260 (77,307) 4,693
Unrealized appreciation (depreciation) on
investments................................. (68,814) (29,235) (32,723)
Capital gain distributions................... 23,521 -- 8,200
--------- --------- -------
Increase (decrease) in net assets from
operations.................................... (40,489) (29,318) (10,280)
--------- --------- -------
From capital transactions:
Net premiums................................. 4,082 3,600 --
Loan interest................................ (4) (973) (209)
Transfers (to) from the general account of GE
Life & Annuity:
Death benefits............................. -- -- --
Surrenders................................. (6,843) (3,957) (9,261)
Loans...................................... (1,277) (12,274) (1,826)
Cost of insurance and administrative
expense (note 3).......................... (3,885) (5,217) (1,965)
Transfer gain (loss) and transfer fees..... (803) 435,646 37,448
Transfers (to) from the Guarantee Account
(note 1).................................... (14,910) -- 2,400
Interfund transfers.......................... (111,971) (698,651) 760
--------- --------- -------
Increase (decrease) in net assets from capital
transactions.................................. (135,611) (281,826) 27,347
--------- --------- -------
Increase (decrease) in net assets............ (176,100) (311,144) 17,067
Net assets at beginning of year................ 925,484 1,016,156 413,388
--------- --------- -------
Net assets at end of period.................... $ 749,384 705,012 430,455
========= ========= =======
</TABLE>
F-21
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
PBHG Insurance
Alger American Fund Series Fund, Inc.
------------------------ -------------------
PBHG
Small Large Cap PBHG
Capitalization Growth Growth Growth II
Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- ---------
Six months ended Six months ended
June 30, 2000 June 30, 2000
------------------------ -------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment income
(expense).................... $ (19,589) (37,453) (2,888) (5,397)
Net realized gain (loss)...... 400,885 108,693 34,052 192,166
Unrealized appreciation
(depreciation) on
investments.................. (1,435,058) (656,576) 11,383 1,153
Capital gain distributions.... 1,020,453 732,190 -- --
----------- --------- ------- --------
Increase (decrease) in net
assets from operations......... (33,309) 146,854 42,547 187,922
----------- --------- ------- --------
From capital transactions:
Net premiums.................. 26,092 10,678 250 4,082
Loan interest................. (432) (2,154) (104) (86)
Transfers (to) from the
general account of
GE Life & Annuity:
Death benefits.............. -- -- -- --
Surrenders.................. (46,275) (62,092) (17,527) --
Loans....................... (489) (5,123) (464) (15,906)
Cost of insurance and
administrative expense
(note 3)................... (13,891) (26,299) (2,128) (2,238)
Transfer gain (loss) and
transfer fees.............. 37,626 30,315 (971) (552,401)
Transfers (to) from the
Guarantee Account (note 1)... 44,693 747 -- 41,500
Interfund transfers........... 60,136 95,013 351,484 658,177
----------- --------- ------- --------
Increase (decrease) in net
assets from capital
transactions................... 107,460 41,085 330,540 133,128
----------- --------- ------- --------
Increase (decrease) in net
assets....................... 74,151 187,939 373,087 321,050
Net assets at beginning of
year........................... 2,819,126 5,523,912 287,962 329,083
----------- --------- ------- --------
Net assets at end of period..... $ 2,893,277 5,711,851 661,049 650,133
=========== ========= ======= ========
</TABLE>
F-22
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------
Aggressive Worldwide
Growth Growth Growth Balanced
Portfolio Portfolio Portfolio Portfolio
----------- ---------- ---------- ---------
Six months ended June 30, 2000
----------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment income
(expense)................... $ (72,178) (68,774) (130,260) (48,868)
Net realized gain (loss)..... 2,726,250 636,607 3,969,731 143,574
Unrealized appreciation
(depreciation) on
investments................. (3,466,076) (906,904) (3,809,510) (557,003)
Capital gain distributions... 809,741 415,299 271,412 470,225
----------- ---------- ---------- ---------
Increase (decrease) in net
assets from operations........ (2,263) 76,228 301,373 7,928
----------- ---------- ---------- ---------
From capital transactions:
Net premiums................. 20,040 36,989 50,800 25,452
Loan interest................ 13,094 (4,592) (254) (12,843)
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits............. -- -- -- --
Surrenders................. (161,852) (120,530) (190,237) --
Loans...................... (164,529) (77,969) (592,187) (36,470)
Cost of insurance and
administrative expense
(note 3).................. (46,568) (47,713) (85,913) (31,309)
Transfer gain (loss) and
transfer fees............. 238,892 26,813 87,975 48,025
Transfers (to) from the
Guarantee Account (note 1).. 74,738 51,050 35,692 (6,095)
Interfund transfers.......... (2,102,805) 936,245 948,244 487,222
----------- ---------- ---------- ---------
Increase (decrease) in net
assets from capital
transactions.................. (2,128,990) 800,293 254,120 473,982
----------- ---------- ---------- ---------
Increase (decrease) in net
assets...................... (2,131,253) 876,521 555,493 481,910
Net assets at beginning of
year.......................... 10,550,125 9,895,917 18,384,348 6,937,571
----------- ---------- ---------- ---------
Net assets at end of period.... $ 8,418,872 10,772,438 18,939,841 7,419,481
=========== ========== ========== =========
</TABLE>
F-23
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
---------------------------------------------------------------------
Flexible International Capital Global Life Global
Income Growth Appreciation Sciences Technology
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------- ------------ --------------- ---------------
Period from Period from
June 1, 2000 to June 6, 2000 to
Six months ended June 30, 2000 June 30, 2000 June 30, 2000
------------------------------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ (1,788) (29,884) (23,740) (58) (24)
Net realized gain
(loss)............... (5,949) 1,588,305 379,076 1 --
Unrealized
appreciation
(depreciation) on
investments.......... 2,569 (1,469,842) (532,711) 3,626 166
Capital gain
distributions........ 6,385 10,273 11,285 -- --
--------- ---------- --------- ------ ------
Increase (decrease) in
net assets from
operations............. 1,217 98,852 (166,090) 3,569 142
--------- ---------- --------- ------ ------
From capital
transactions:
Net premiums.......... -- 7,965 39,137 -- --
Loan interest......... 469 (1,891) (1,680) -- --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- --
Surrenders.......... (41,001) (349,380) (53,039) -- --
Loans............... 9,718 (570,600) (28,091) -- --
Cost of insurance
and administrative
expense (note 3)... (1,285) (20,635) (16,549) (6) (26)
Transfer gain (loss)
and transfer fees.. (9) 116,665 417 -- --
Transfers (to) from
the Guarantee Account
(note 1)............. 1 -- 24,901 -- --
Interfund transfers... (93,062) 967,584 (267,511) 57,016 35,534
--------- ---------- --------- ------ ------
Increase (decrease) in
net assets from capital
transactions........... (125,169) 149,708 (302,415) 57,010 35,508
--------- ---------- --------- ------ ------
Increase (decrease) in
net assets........... (123,952) 248,560 (468,505) 60,579 35,650
Net assets at beginning
of year................ 361,418 3,817,130 3,647,524 -- --
--------- ---------- --------- ------ ------
Net assets at end of
period................. $ 237,466 4,065,690 3,179,019 60,579 35,650
========= ========== ========= ====== ======
</TABLE>
F-24
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
(Unaudited)
<TABLE>
<CAPTION>
Goldman Sachs
Variable Insurance
Trust Salomon Brothers Variable Series Funds Inc.
------------------ ---------------------------------------------
Growth and Mid Cap
Income Value Strategic Total Return
Fund Fund Bond Fund Investors Fund Fund
---------- ------- ------------- ----------------- -------------
Six months Period from Six months
Six months ended ended March 31, 2000 to ended
June 30, 2000 June 30, 2000 June 30, 2000 June 30, 2000
------------------ ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ (424) (1,720) (485) (55) (50)
Net realized gain
(loss)............... (1,555) (47,679) 5,604 1 (6)
Unrealized
appreciation
(depreciation) on
investments.......... 1,704 53,143 (10,939) 229 236
Capital gain
distributions........ -- -- -- -- --
-------- ------- -------- ------- -----
Increase (decrease) in
net assets from
operations............. (275) 3,744 (5,820) 175 180
-------- ------- -------- ------- -----
From capital
transactions:
Net premiums.......... -- 2,000 -- -- --
Loan interest......... -- -- 892 -- --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- --
Surrenders.......... -- -- -- -- --
Loans............... -- -- -- -- --
Cost of insurance
and administrative
expense (note 3)... (281) (1,338) (135) (18) (68)
Transfer gain (loss)
and transfer fees.. 416 (2,405) 449,397 (1) 33
Transfers from the
Guarantee Account
(note 1)............. -- -- -- -- --
Interfund transfers... (24,957) 25,160 (546,782) 156,658 2,250
-------- ------- -------- ------- -----
Increase (decrease) in
net assets from capital
transactions........... (24,822) 23,417 (96,628) 156,639 2,215
-------- ------- -------- ------- -----
Increase (decrease) in
net assets........... (25,097) 27,161 (102,448) 156,814 2,395
Net assets at beginning
of year................ 68,569 243,902 102,448 -- 6,425
-------- ------- -------- ------- -----
Net assets at end of
period................. $ 43,472 271,063 -- 156,814 8,820
======== ======= ======== ======= =====
</TABLE>
See accompanying notes to financial statements.
F-25
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements
June 30, 2000
(Unaudited)
(1)Description of Entity
GE Life & Annuity Separate Account III (the Account) is a separate
investment account established in 1986 by GE Life and Annuity Assurance
Company (GE Life & Annuity) under the laws of the Commonwealth of Virginia.
The Account operates as a unit investment trust under the Investment Company
Act of 1940. The Account is used to fund certain benefits for variable life
insurance policies issued by GE Life & Annuity. GE Life & Annuity 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 Corporation (GE Capital). GE Capital, a diversified financial services
company, is a wholly-owned subsidiary of General Electric Company (GE), a New
York corporation.
During the second quarter of 2000, two new investment subdivisions were
added to the Account. The Global Life Sciences Portfolio and the Global
Technology Portfolio each invests solely in a designated portfolio of the
Janus Aspen Series. All designated portfolios described above are series type
mutual funds.
For policies issued after May 1, 1995, some policyowners may transfer cash
values between the Account's portfolios and the Guarantee Account that is part
of the general account of GE Life & Annuity. Amounts transferred to the
Guarantee Account earn interest at the interest rate effective at the time of
such transfer and remain in effect for one year, after which a new rate may be
declared.
(2)Summary of Significant Accounting Policies
(a) Unit Classes
There is one unit class included in the Account. Units are sold under policy
form P1097. Effective on or after September 15, 2000, Type II units will be
sold under policy forms P1254 and P1255.
(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 period.
The aggregate cost of the investments acquired and the aggregate proceeds of
investments sold, for the six months or lesser period ended June 30, 2000
were:
<TABLE>
<CAPTION>
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
-------------- ----------- -----------
<S> <C> <C>
GE Investment Funds, Inc.:
S&P 500 Index Fund.................................... $ 1,418,842 1,771,025
Money Market Fund..................................... 86,220,993 88,520,604
Total Return Fund..................................... 53,124 126,339
International Equity Fund............................. 2,989,641 2,990,464
Real Estate Securities Fund........................... 31,988 130,870
Global Income Fund.................................... 1,542,190 1,532,064
Mid-Cap Value Equity Fund............................. 575,933 587,226
Income Fund........................................... 248,476 383,678
U.S. Equity Fund...................................... 32,772 37,338
Premier Growth Equity Fund............................ 109,004 44,135
</TABLE>
F-26
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(2)Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Cost of Proceeds
Shares from
Fund/Portfolio Acquired Shares Sold
-------------- ----------- -----------
<S> <C> <C>
Oppenheimer Variable Account Funds:
Bond Fund/VA.......................................... $ 1,622,844 1,809,473
Aggressive Growth Fund/VA............................. 2,066,576 1,497,779
Capital Appreciation Fund/VA.......................... 6,137,140 5,882,523
High Income Fund/VA................................... 3,353,965 3,525,675
Multiple Strategies Fund/VA........................... 446,610 183,567
Variable Insurance Products Fund:
Equity-Income Portfolio............................... 4,575,675 5,167,202
Growth Portfolio...................................... 3,863,856 2,751,794
Overseas Portfolio.................................... 11,727,388 11,388,912
Variable Insurance Products Fund II:
Asset Manager Portfolio............................... 1,291,736 2,027,115
Contrafund Portfolio.................................. 3,276,615 2,911,971
Variable Insurance Products Fund III:
Growth & Income Portfolio............................. 408,076 659,631
Growth Opportunties Portfolio......................... 97,063 248,399
Federated Insurance Series:
American Leaders Fund II.............................. 88,661 198,671
High Income Bond Fund II.............................. 3,888,816 4,094,305
Utility Fund II....................................... 189,339 145,205
Alger American Fund:
Small Capitalization Portfolio........................ 4,929,425 3,821,921
Growth Portfolio...................................... 1,502,576 691,731
PBHG Insurance Series Fund, Inc.
PBHG Large Cap Growth Portfolio....................... 566,751 234,174
PBHG Growth II Portfolio.............................. 13,225,055 11,009,053
Janus Aspen Series:
Aggressive Growth Portfolio........................... 21,834,306 23,227,401
Growth Portfolio...................................... 3,277,562 2,134,879
Worldwide Growth Portfolio............................ 13,080,652 12,695,367
Balanced Portfolio.................................... 1,503,600 503,189
Flexible Income Portfolio............................. 117,281 238,001
International Growth Portfolio........................ 11,146,350 11,017,687
Capital Appreciation Portfolio........................ 1,714,867 2,030,472
Global Life Sciences Portfolio........................ 57,016 47
Global Technology Portfolio........................... 35,534 39
Goldman Sachs Variable Insurance Trust:
Growth and Income Fund................................ 31,673 56,950
Mid Cap Value Fund.................................... 1,532,402 1,510,015
Salomon Brothers Variable Series Funds Inc.:
Strategic Bond Fund................................... 1,425,836 1,523,006
Investors Fund........................................ 156,658 39
Total Return Fund..................................... 2,283 119
</TABLE>
F-27
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(2)Summary of Significant Accounting Policies -- Continued
(c) Capital Transactions
The increase (decrease) in outstanding units from capital transactions for
six months or lesser period ended June 30, 2000 is as follows:
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------------------------
S&P 500 Money Total Real Estate
Index Market Return International Securities
Fund Fund Fund Equity Fund Fund
------- ------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999......... 162,477 951,339 52,618 22,022 41,745
------- ------- ------ ------ ------
From capital transactions:
Net premiums............. 207 (51,910) 37 -- 334
Loan Interest............ (19) (768) (7) -- (29)
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits......... (1,944) -- -- -- --
Surrenders............. (2,710) 58,193 (2,625) -- --
Loans.................. (83) 18,235 (91) -- (194)
Cost of insurance and
administrative
expenses.............. (806) 1,917 (246) 5 (204)
Transfers (to) from the
Guarantee Account....... (302) 3,093 15 -- --
Interfund transfers...... (924) (60,062) 1,073 (36) (6,263)
------- ------- ------ ------ ------
Net increase (decrease) in
units from capital
transactions.............. (6,581) (31,302) (1,844) (31) (6,356)
------- ------- ------ ------ ------
Units outstanding at June
30, 2000.................. 155,896 920,037 50,774 21,991 35,389
======= ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------------------
Global Mid-Cap U.S. Premier
Income Value Equity Income Equity Growth Equity
Fund Fund Fund Fund Fund
------ ------------ ------- ------ -------------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999.......... 2,659 47,150 127,587 10,235 39,302
----- ------ ------- ------ ------
From capital transactions:
Net premiums.............. -- (42) 1 83 --
Loan Interest............. -- 9 (64) -- --
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits.......... -- -- -- -- --
Surrenders.............. -- -- (4,957) -- --
Loans................... -- -- (1,026) -- --
Cost of insurance and
administrative
expenses............... -- 36 (618) (42) (246)
Transfers (to) from the
Guarantee Account........ -- -- -- 235 358
Interfund transfers....... (85) (15) (5,462) (575) 6,069
----- ------ ------- ------ ------
Net increase (decrease) in
units from capital
transactions............... (85) (12) (12,126) (299) 6,181
----- ------ ------- ------ ------
Units outstanding at June
30, 2000................... 2,574 47,138 115,461 9,936 45,483
===== ====== ======= ====== ======
</TABLE>
F-28
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(2)Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
----------------------------------------------------
Aggressive Capital High Multiple
Bond Growth Appreciation Income Strategies
Fund/VA Fund/VA Fund/VA Fund/VA Fund/VA
------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999........ 71,486 136,764 94,309 137,529 102,886
------- ------- ------ ------- -------
From capital transactions:
Net premiums............ -- 325 194 -- 1
Loan Interest........... 23 (36) (11) 30 283
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits........ -- -- -- -- --
Surrenders............ (232) (3,242) (626) (1,742) (1,608)
Loans................. (251) (632) (5,380) (363) (225)
Cost of insurance and
administrative
expenses............. (125) (628) (219) (331) (468)
Transfers (to) from the
Guarantee Account...... 25 80 434 67 29
Interfund transfers..... (12,236) 7,309 4,869 (13,256) (239)
------- ------- ------ ------- -------
Net increase (decrease) in
units from capital
transactions............. (12,796) 3,176 (739) (15,595) (2,227)
------- ------- ------ ------- -------
Units outstanding at June
30, 2000................. 58,690 139,940 93,570 121,934 100,659
======= ======= ====== ======= =======
</TABLE>
<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
---------- ---------- ---------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999...... 400,455 251,944 161,000 315,788 366,925 88,834 58,334
---------- ---------- ---------- ------- ------- ------- -------
From capital
transactions:
Net premiums.......... 35 156 70 -- 863 1 1
Loan Interest......... (222) (305) (78) (208) (159) 48 (3)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... (3,965) (2,242) -- -- (4,121) -- --
Surrenders.......... (10,418) (8,924) (2,026) (11,766) (4,292) (892) (2,761)
Loans............... (417) (1,379) (16,847) (302) (4,155) (1,765) (2,650)
Cost of insurance
and administrative
expenses........... (1,680) (1,160) (602) (1,345) (1,663) (334) (225)
Transfers (to) from
the Guarantee
Account.............. 191 892 12 61 77 (631) --
Interfund transfers... (32,307) 4,078 15,099 (36,764) (22,118) (18,486) (8,778)
---------- ---------- ---------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... (48,783) (8,884) (4,372) (50,324) (35,568) (22,059) (14,416)
---------- ---------- ---------- ------- ------- ------- -------
Units outstanding at
June 30, 2000.......... 351,672 243,060 156,628 265,464 331,357 66,775 43,918
========== ========== ========== ======= ======= ======= =======
</TABLE>
F-29
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(2)Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
PBHG Insurance
Federated Insurance Series Alger American Fund Series Fund, Inc.
---------------------------- ------------------------ --------------------
American High Small PBHG Large PBHG
Leaders Income Bond Utility Capitalization Growth Cap Growth Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
-------- ----------- ------- -------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999...... 52,435 65,984 21,792 164,765 214,105 11,687 14,784
------ ------- ------ ------- ------- ------ ------
From capital
transactions:
Net premiums.......... 236 95 -- 2,029 1,183 9 58
Loan Interest......... -- (26) 28 (34) (239) (4) (1)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- -- -- --
Surrenders.......... (396) (105) 1,227 (3,597) (6,878) (593) --
Loans............... (74) (325) 242 (38) (567) (16) (225)
Cost of insurance
and administrative
expenses........... (225) (138) 260 (1,080) (2,913) (72) (32)
Transfers (to) from
the Guarantee
Account.............. (863) -- (318) 3,474 83 -- 587
Interfund transfers... (6,480) (18,516) (101) 4,674 10,524 11,894 9,307
------ ------- ------ ------- ------- ------ ------
Net increase (decrease)
in units from capital
transactions........... (7,802) (19,015) 1,338 5,428 1,193 11,218 9,694
------ ------- ------ ------- ------- ------ ------
Units outstanding at
June 30, 2000.......... 44,633 46,969 23,130 170,193 215,298 22,905 24,478
====== ======= ====== ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series
--------------------------------------------------
Aggressive Worldwide Flexible
Growth Growth Growth Balanced Income
Portfolio Portfolio Portfolio Portfolio Portfolio
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1999.......... 211,129 293,473 476,525 284,911 26,831
------- ------- ------- ------- ------
From capital transactions:
Net premiums.............. 373 1,081 2,331 1,175 --
Loan Interest............. 244 (134) (12) (593) 35
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits.......... -- -- -- -- --
Surrenders.............. (3,020) (3,525) (8,727) -- (3,049)
Loans................... (3,070) (2,280) (27,167) (1,684) 723
Cost of insurance and
administrative
expenses............... (869) (1,395) (3,941) (1,445) (96)
Transfers (to) from the
Guarantee Account........ 1,395 1,493 1,637 (281) --
Interfund transfers....... (39,240) 27,380 43,501 22,493 (6,919)
------- ------- ------- ------- ------
Net increase (decrease) in
units from capital
transactions............... (44,187) 22,620 7,622 19,665 (9,306)
------- ------- ------- ------- ------
Units outstanding at June
30, 2000................... 166,942 316,093 484,147 304,576 17,525
======= ======= ======= ======= ======
</TABLE>
F-30
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(2)Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-----------------------------------------------
Global
International Capital Life Global
Growth Appreciation Sciences Technology
Portfolio Portfolio Portfolio Portfolio
------------- ------------ --------- ----------
<S> <C> <C> <C> <C>
Units outstanding at December
31, 1999...................... 134,264 113,207 -- --
------- ------- ----- -----
From capital transactions:
Net premiums................. 1,360 1,261 -- --
Loan Interest................ (323) (54) -- --
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits............. -- -- -- --
Surrenders................. (59,666) (1,709) -- --
Loans...................... (97,445) (905) -- --
Cost of insurance and
administrative expenses... (3,524) (533) (1) (3)
Transfers (to) from the
Guarantee Account........... -- 802 -- --
Interfund transfers.......... 165,241 (8,619) 5,684 3,491
------- ------- ----- -----
Net increase (decrease) in
units from capital
transactions.................. 5,643 (9,757) 5,683 3,488
------- ------- ----- -----
Units outstanding at June 30,
2000.......................... 139,907 103,450 5,683 3,488
======= ======= ===== =====
</TABLE>
<TABLE>
<CAPTION>
Goldman Sachs
Variable Insurance Salomon Brothers Variable
Trust Series Funds Inc.
------------------ --------------------------
Growth and Mid Cap Total
Income Value Strategic Investors Return
Fund Fund Bond Fund Fund Fund
---------- ------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Units outstanding at December 31,
1999............................ 7,445 29,140 10,103 -- 606
------ ------ ------- ------ ---
From capital transactions:
Net premiums................... -- 173 -- -- --
Loan Interest.................. -- -- 17 -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits............... -- -- -- -- --
Surrenders................... -- -- -- -- --
Loans........................ -- -- -- -- --
Cost of insurance and
administrative expenses..... (30) (116) (3) (1) (6)
Transfers (to) from the
Guarantee Account............. -- -- -- -- --
Interfund transfers............ (2,700) 2,176 (10,117) 10,808 211
------ ------ ------- ------ ---
Net increase (decrease) in units
from capital transactions....... (2,730) 2,233 (10,103) 10,807 205
------ ------ ------- ------ ---
Units outstanding at June 30,
2000............................ 4,715 31,373 -- 10,807 811
====== ====== ======= ====== ===
</TABLE>
F-31
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
June 30, 2000
(Unaudited)
(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
The premiums transferred from GE Life & Annuity to the Account represent
gross premiums recorded by GE Life & Annuity on its variable life insurance
policies. During the first ten years following a premium payment, a charge is
deducted monthly at an effective annual rate of .50% of the premium payment
from the policy cash value to cover distribution expenses and premiums taxes.
If a policy is surrendered or lapses during the first nine years, a charge is
made by GE Life & Annuity to cover the expenses of issuing the policy. Subject
to certain limitations, the charge generally equals 6% of the premium
withdrawn in the first four years, and this charge decreases 1% per year for
every year thereafter. 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. In addition, GE Life & Annuity charges the
Account for the mortality and expense (M&E) risk that GE Life & Annuity
assumes. This M&E charge is deducted daily and equals the effective annual
rate of .90% of the net assets of the Account. GE Life & Annuity also charges
the Account for certain administrative charges which are deducted daily and
equal the effective annual rate of .40% of the net assets of the Account.
GE Investments Funds, Inc. (the Fund) is an open-end diversified management
investment company.
Capital Brokerage Corporation, an affiliate of GE Life & Annuity, is a
Washington Corporation registered with the Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Capital Brokerage Corporation serves
as principal underwriter for variable life insurance policies and variable
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, and Total Return Funds, 1.00% for the International
Equity Fund, .85% for the Real Estate Securities Fund, .60% for the Global
Income Fund, .55% for the U.S. Equity Fund, and .65% for the Value Equity and
Premier Growth Equity Funds. Prior to May 1, 1997, Aon Advisors, Inc. served
as investment advisor to the Fund and was subject to the same compensation
arrangement as GE Investment Management Incorporated.
Certain officers and directors of GE Life & Annuity are also officers and
directors of Capital Brokerage Corporation.
F-32
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
FINANCIAL STATEMENTS
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
Policyholders
GE Life & Annuity Separate Account III
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 III (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, Aggressive Growth/VA, Capital Appreciation/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 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 III 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 III
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
---------------------------------------------------------
S&P 500 Money Total Real Estate
Index Market Return International Securities
Fund Fund Fund Equity Fund Fund
---------- ---------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Assets
Investment in GE Invest-
ments Funds, Inc.,
at fair value (note 2):
S&P 500 Index Fund
(297,321 shares;
cost --
$7,178,322)........ $8,354,713 -- -- -- --
Money Market Fund
(15,979,159 shares;
cost --
$15,979,159)........ -- 15,979,159 -- -- --
Total Return Fund
(111,198 shares;
cost -- $1,589,705).. -- -- 1,763,598 -- --
International Equity
Fund (30,022 shares;
cost -- $387,380).... -- -- -- 434,424 --
Real Estate Securities
Fund (56,974 shares;
cost -- $826,644).... -- -- -- -- 619,311
Receivable from affili-
ate.................... -- -- 5 -- --
Receivable for units
sold................... 28,428 67,844 -- -- --
---------- ---------- --------- ------- -------
Total assets........... 8,383,141 16,047,003 1,763,603 434,424 619,311
---------- ---------- --------- ------- -------
Liabilities
Accrued expenses payable
to affiliate (note 3).. 9,094 616,281 884 24,598 4,824
Payable for units with-
drawn.................. -- -- -- -- --
---------- ---------- --------- ------- -------
Total liabilities...... 9,094 616,281 884 24,598 4,824
---------- ---------- --------- ------- -------
Net assets attributable
to variable life
policyholders.......... $8,374,047 15,430,722 1,762,719 409,826 614,487
========== ========== ========= ======= =======
Outstanding units....... 162,477 951,339 52,618 22,022 41,745
========== ========== ========= ======= =======
Net asset value per
unit................... $ 51.54 16.22 33.50 18.61 14.72
========== ========== ========= ======= =======
</TABLE>
F-2
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
-----------------------------------------------
Global Value U.S. Premier
Income Equity Income Equity Growth Equity
Fund Fund Fund Fund Fund
------- ------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investment in GE Investments
Funds, Inc., at fair value
(note 2):
Global Income Fund (2,814
shares; cost -- $27,571).... 26,986 -- -- -- --
Value Equity Fund (47,931
shares;
cost -- $728,049)........... -- 756,828 -- -- --
Income Fund (115,186 shares;
cost of $1,402,038)......... -- -- 1,325,786 -- --
U.S. Equity Fund (3,436
shares; cost $126,687)...... -- -- -- 130,206 --
Premier Growth Equity Fund
(5,212 shares;
cost $407,296).............. -- -- -- -- 462,041
Receivable from affiliate...... 869 -- -- -- --
Receivable for units sold...... -- -- -- -- --
------- ------- --------- ------- -------
Total assets.................. 27,855 756,828 1,325,786 130,206 462,041
------- ------- --------- ------- -------
Liabilities
Accrued expenses payable to af-
filiate (note 3).............. 12 1,482 1,436 1,351 241
Payable for units withdrawn.... -- -- -- -- --
------- ------- --------- ------- -------
Total liabilities............. 12 1,482 1,436 1,351 241
------- ------- --------- ------- -------
Net assets attributable to
variable life policyholders... $27,843 755,346 1,324,350 128,855 461,800
======= ======= ========= ======= =======
Outstanding units.............. 2,659 47,150 127,587 10,235 39,302
======= ======= ========= ======= =======
Net asset value per unit....... $ 10.47 16.02 10.38 12.59 11.75
======= ======= ========= ======= =======
</TABLE>
F-3
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, continued
December 31, 1999
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-------------------------------------------------------
Aggressive Capital High Multiple
Bond Growth Appreciation Income Strategies
Fund/VA Fund/VA Fund/VA Fund/VA Fund/VA
---------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Assets
Investment in Oppen-
heimer Variable Ac-
count Funds,
at fair value (note
2):
Bond Fund/VA (139,174
shares;
cost --
$1,672,807)........ $1,609,507 -- -- -- --
Aggressive Growth
Fund/VA (111,088
shares;
cost --
$5,315,725)........ -- 9,143,625 -- -- --
Capital Appreciation
Fund/VA (98,939
shares;
cost --
$3,826,298)........ -- -- 4,931,122 -- --
High Income Fund/VA
(426,138 shares;
cost --
$4,620,113)........ -- -- -- 4,568,195 --
Multiple Strategies
Fund/VA (178,663
shares;
cost --
$2,919,310)........ -- -- -- -- 3,119,454
Receivable from
affiliate............. -- -- -- 167 --
Receivable for units
sold.................. -- -- -- -- --
---------- --------- --------- --------- ---------
Total assets.......... 1,609,507 9,143,625 4,931,122 4,568,362 3,119,454
---------- --------- --------- --------- ---------
Liabilities
Accrued expenses
payable to affiliate
(note 3).............. 1,079 5,024 12,906 2,299 1,999
Payable for units
withdrawn............. -- -- -- 46,876 --
---------- --------- --------- --------- ---------
Total liabilities..... 1,079 5,024 12,906 49,175 1,999
---------- --------- --------- --------- ---------
Net assets attributable
to variable life
policyholders......... $1,608,428 9,138,601 4,918,216 4,519,187 3,117,455
========== ========= ========= ========= =========
Outstanding units...... 71,486 136,764 94,309 137,529 102,886
========== ========= ========= ========= =========
Net asset value per
unit.................. $ 22.50 66.82 52.15 32.86 30.30
========== ========= ========= ========= =========
</TABLE>
F-4
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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
----------- ---------- --------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in Variable
Insurance
Products Fund,
at fair value
(note 2):
Equity-Income Portfolio
(590,300 shares;
cost -- $13,280,532)... $15,716,608 -- -- -- -- -- --
Growth Portfolio
(287,466 shares;
cost -- $12,414,051)... -- 15,790,513 -- -- -- -- --
Overseas Portfolio
(173,848 shares;
cost -- $3,651,770).... -- -- 4,770,384 -- -- -- --
Investment in Variable
Insurance
Products
Fund II, at
fair value
(note 2):
Asset Manager Portfolio
(517,412 shares;
cost -- $7,973,391).... -- -- -- 9,660,076 -- -- --
Contrafund Portfolio
(403,279 shares;
cost -- $8,857,815).... -- -- -- -- 11,755,590 -- --
Investment in Variable
Insurance
Products Fund
III,
at fair value
(note 2):
Growth & Income
Portfolio (87,651
shares;
cost -- $1,461,635)..... -- -- -- -- -- 1,516,368 --
Growth Opportunities
Portfolio (39,247
shares;
cost -- $812,281)...... -- -- -- -- -- -- 908,574
Receivable from affiliate... 230 -- -- -- 23,428 -- --
----------- ---------- --------- --------- ---------- --------- -------
Total assets............. 15,716,838 15,790,513 4,770,384 9,660,076 11,779,018 1,516,368 908,574
----------- ---------- --------- --------- ---------- --------- -------
Liabilities
Accrued expenses payable to
affiliate (note 3)......... 7,618 16,329 43,411 27,664 11,737 1,752 1,488
Payable for units
withdrawn.................. -- -- -- 105,090 -- -- --
----------- ---------- --------- --------- ---------- --------- -------
Total liabilities........ 7,618 16,329 43,411 132,754 11,737 1,752 1,488
----------- ---------- --------- --------- ---------- --------- -------
Net assets attributable to
variable
life policyholders......... $15,169,220 15,774,184 4,726,973 9,527,322 11,767,281 1,514,616 907,086
=========== ========== ========= ========= ========== ========= =======
Outstanding units........... 400,455 251,944 161,000 315,788 366,925 88,834 58,334
=========== ========== ========= ========= ========== ========= =======
Net asset value per unit.... $ 37.88 62.61 29.36 30.17 32.07 17.05 15.55
=========== ========== ========= ========= ========== ========= =======
</TABLE>
F-5
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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 Income Small Large Cap PBHG
Leaders Bond Utility Capitalization Growth Growth Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
--------- ----------- ------- -------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Investment in Federated
Insurance Series, at
fair value (note 2):
American Leaders Fund
II (44,516 shares;
cost -- $877,245)... $ 926,827 -- -- -- -- -- --
High Income Bond Fund
II (99,337 shares;
cost -- $1,022,125)
.................... -- 1,017,207 -- -- -- -- --
Utility Fund II
(28,888 shares; cost
-- $380,495)........ -- -- 414,542 -- -- -- --
Investment in Alger
American Fund, at fair
value (note 2):
Small Capitalization
Portfolio (51,163
shares;
cost --
$2,160,133)........ -- -- -- 2,821,633 -- -- --
Growth Portfolio
(85,848 shares;
cost --
$4,491,826)........ -- -- -- -- 5,526,879 -- --
Investment in PBHG
Insurance Series Fund,
Inc. at fair value
(note 2):
PBHG Large Cap Growth
Portfolio (12,373
shares;
cost -- $204,438)... -- -- -- -- -- 315,623 --
PBHG Growth II
Portfolio (14,378
shares;
cost -- $249,693)... -- -- -- -- -- -- 331,421
Receivable for units
sold.................. -- -- -- -- -- -- --
--------- --------- ------- --------- --------- ------- -------
Total assets.......... 926,827 1,017,207 414,542 2,821,633 5,526,879 315,623 331,421
--------- --------- ------- --------- --------- ------- -------
Liabilities
Accrued expenses
payable to affiliate
(note 3).............. 1,343 1,051 1,154 2,507 2,967 27,661 2,338
Payable for units
withdrawn............. -- -- -- -- -- -- --
--------- --------- ------- --------- --------- ------- -------
Total liabilities..... 1,343 1,051 1,154 2,507 2,967 27,661 2,338
--------- --------- ------- --------- --------- ------- -------
Net assets attributable
to variable life
policyholders......... $ 925,484 1,016,156 413,388 2,819,126 5,523,912 287,962 329,083
========= ========= ======= ========= ========= ======= =======
Outstanding units...... 52,435 65,984 21,792 164,765 214,105 11,687 14,784
========= ========= ======= ========= ========= ======= =======
Net asset value per
unit.................. $ 17.65 15.40 18.97 17.11 25.80 24.64 22.26
========= ========= ======= ========= ========= ======= =======
</TABLE>
F-6
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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
Portfolio (177,044
shares; cost --
$7,093,584).......... $10,567,769 -- -- -- -- -- --
Growth Portfolio
(294,219 shares;
cost -- $6,637,318).. -- 9,900,467 -- -- -- -- --
Worldwide Growth
Portfolio (385,152
shares; cost --
$10,897,432)......... -- -- 18,390,996 -- -- -- --
Balanced Portfolio
(244,779 shares;
cost -- $4,739,962).. -- -- -- 6,834,240 -- -- --
Flexible Income
Portfolio (31,715
shares; cost --
$373,704)........... -- -- -- -- 362,191 -- --
International Growth
Portfolio (98,788
shares; cost --
$2,310,335).......... -- -- -- -- -- 3,820,134 --
Capital Appreciation
Portfolio (110,129
shares; cost --
$2,759,243).......... -- -- -- -- -- -- 3,652,983
Receivable from
affiliate.............. -- 370 2,629 -- -- -- --
Receivable for units
sold................... -- -- -- 106,766 -- -- --
----------- --------- ---------- --------- ------- --------- ---------
Total assets........... 10,567,769 9,900,837 18,393,625 6,941,006 362,191 3,820,134 3,652,983
----------- --------- ---------- --------- ------- --------- ---------
Liabilities
Accrued expenses payable
to affiliate (note 3).. 17,644 4,920 9,277 3,435 773 3,004 5,459
Payable for units
withdrawn.............. -- -- -- -- -- -- --
----------- --------- ---------- --------- ------- --------- ---------
Total liabilities...... 17,644 4,920 9,277 3,435 773 3,004 5,459
----------- --------- ---------- --------- ------- --------- ---------
Net assets attributable
to variable life
policyholders.......... $10,550,125 9,895,917 18,384,348 6,937,571 361,418 3,817,130 3,647,524
=========== ========= ========== ========= ======= ========= =========
Outstanding units....... 211,129 293,473 476,525 284,911 26,831 134,264 113,207
=========== ========= ========== ========= ======= ========= =========
Net asset value per
unit................... $ 49.97 33.72 38.58 24.35 13.47 28.43 32.22
=========== ========= ========== ========= ======= ========= =========
</TABLE>
F-7
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Assets and Liabilities, Continued
December 31, 1999
<TABLE>
<CAPTION>
Goldman Sachs
Variable Salomon Brothers
Insurance Variable
Trust Series Fund Inc.
---------------- ----------------
Growth
and Mid Cap Strategic Total
Income Value Bond Return
Fund Fund Fund Fund
-------- ------- --------- ------
<S> <C> <C> <C> <C>
Assets
Investment in Goldman Sachs Variable
Insurance Trust, at fair value (note 2):
Growth and Income Fund (6,300 shares;
cost -- $71,397)......................... $ 68,606 -- -- --
Mid Cap Value Fund (28,992 shares; cost --
$271,024)............................... -- 244,112 -- --
Investment in Salomon Brothers Variable
Series Fund Inc., at fair value (note 2):
Strategic Bond Fund (10,611 shares;
cost -- $106,829)........................ -- -- 102,505 --
Total Return Fund (628 shares; cost --
$6,852)................................. -- 6,428
Receivable from affiliate................... -- -- -- --
Receivable for units sold................... -- -- -- --
-------- ------- ------- -----
Total assets............................... 68,606 244,112 102,505 6,428
-------- ------- ------- -----
Liabilities
Accrued expenses payable to affiliate (note
3)......................................... 37 210 57 3
Payable for units withdrawn................. -- -- -- --
-------- ------- ------- -----
Total liabilities.......................... 37 210 57 3
-------- ------- ------- -----
Net assets attributable to variable life
policyholders.............................. $ 68,569 243,902 102,448 6,425
======== ======= ======= =====
Outstanding units........................... 7,445 29,140 10,103 606
======== ======= ======= =====
Net asset value per unit.................... $ 9.21 8.37 10.14 10.61
======== ======= ======= =====
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
------------------------------ ------------
Year ended December 31, Period ended
------------------------------ December 11,
1999 1998 1997 1997
---------- --------- ------- ------------
<S> <C> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends..... $ 57,860 50,925 38,392 --
Expenses -- Mortality and expense
risk charges and administrative
expenses (note 3)............... 97,457 62,371 30,270 9,821
---------- --------- ------- -------
Net investment income (expense).... (39,597) (11,446) 8,122 (9,821)
---------- --------- ------- -------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss)......... 547,538 398,018 125,533 2,596
Unrealized appreciation
(depreciation).................. 714,039 497,472 337,547 46,607
Capital gain distributions....... 79,903 180,554 45,068 --
---------- --------- ------- -------
Net realized and unrealized gain
(loss) on investments............. 1,341,480 1,076,044 508,148 49,203
---------- --------- ------- -------
Increase (decrease) in net assets
from operations................... $1,301,883 1,064,598 516,270 39,382
========== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------------------
Money Market Total Return
Fund 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............... $666,017 667,640 524,091 36,096 91,033 43,451
Expenses -- Mortality and
expense risk charges and
administrative expenses
(note 3)................ 173,939 165,220 134,484 24,550 22,215 20,274
-------- ------- -------- ------- ------- -------
Net investment income
(expense)................. 492,078 502,420 389,607 11,546 68,818 23,177
-------- ------- -------- ------- ------- -------
Net realized and unrealized
gain (loss) on
investments:
Net realized gain
(loss).................. -- (2,104) (256,503) 34,289 4,509 1,710
Unrealized appreciation
(depreciation).......... -- 2,104 287,655 110,595 183,805 26,729
Capital gain
distributions........... -- -- -- 42,374 -- 185,237
-------- ------- -------- ------- ------- -------
Net realized and unrealized
gain (loss) on
investments............... -- -- 31,152 187,258 188,314 213,676
-------- ------- -------- ------- ------- -------
Increase (decrease) in net
assets from operations.... $492,078 502,420 420,759 198,804 257,132 236,853
======== ======= ======== ======= ======= =======
</TABLE>
F-9
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
------------------------------------------------------
International Real Estate
Equity Fund Securities Fund
-------------------------- --------------------------
Year ended December 31, Year ended December 31,
-------------------------- --------------------------
1999 1998 1997 1999 1998 1997
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $ 1,099 16,301 6,900 34,118 28,292 38,975
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 4,573 4,237 11,206 9,016 11,845 10,398
-------- ------- -------- ------- -------- -------
Net investment income
(expense).............. (3,474) 12,064 (4,306) 25,102 16,447 28,577
-------- ------- -------- ------- -------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 166 1,173 146,386 (51,641) (76,333) 142,744
Unrealized
appreciation
(depreciation)....... 72,780 5,854 (6,150) 15,871 (155,043) (97,672)
Capital gain
distributions........ 26,382 -- 79,345 1,796 26,116 72,382
-------- ------- -------- ------- -------- -------
Net realized and
unrealized gain (loss)
on investments......... 99,328 7,027 219,581 (33,974) (205,260) 117,454
-------- ------- -------- ------- -------- -------
Increase (decrease) in
net assets from
operations............. $95,854 19,091 215,275 (8,872) (188,813) 146,031
======== ======= ======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
(continued)
---------------------------------
Global
Income Fund
---------------------------------
Period from
Year ended September 15,
December 31, 1997 to
------------------- December 31,
1999 1998 1997
--------- -------- -------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends............... $ 376 1,547 629
Expenses -- Mortality and expense risk
charges and administrative expenses (note
3)........................................ 10,893 292 19
--------- ------- -----
Net investment income (expense).............. (10,517) 1,255 610
--------- ------- -----
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... (174,205) 11
Unrealized appreciation (depreciation)..... (1,207) 1,291 (669)
Capital gain distributions................. 28 64 55
--------- ------- -----
Net realized and unrealized gain (loss) on
investments................................. (175,384) 1,366 (614)
--------- ------- -----
Increase (decrease) in net assets from
operations.................................. $(185,901) 2,621 (4)
========= ======= =====
</TABLE>
F-10
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, 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>
Investment income:
Income -- Ordinary
Dividends............ $ 6,020 2,603 368 69,103 69,756 3,329
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 9,700 7,471 710 18,770 18,068 733
------- ------ ----- ------- ------ ------
Net investment income
(expense).............. (3,680) (4,868) (342) 50,333 51,688 2,596
------- ------ ----- ------- ------ ------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 68,899 1,355 208 (784) 9,720 (2,508)
Unrealized
appreciation
(depreciation)....... 24,230 2,571 1,977 (90,951) 13,245 1,454
Capital gain
distributions........ -- 12,708 2,263 2,137 12,310 --
------- ------ ----- ------- ------ ------
Net realized and
unrealized gain (loss)
on investments......... 93,129 16,634 4,448 (89,598) 35,275 (1,054)
------- ------ ----- ------- ------ ------
Increase (decrease) in
net assets from
operations............. $89,449 11,766 4,106 (39,265) 86,963 1,542
======= ====== ===== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------
Premier
Growth Equity
U.S. Equity Fund Fund
------------------------- -------------
Period from Period from
May 5, 1998 June 11, 1999
Year ended to to
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends......... $ 687 90 425
Expenses -- Mortality and expense
risk charges and administrative
expenses (note 3)................... 702 39 1,970
------ ---- ------
Net investment income (expense)........ (15) 51 (1,545)
------ ---- ------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss)............. 520 89 139
Unrealized appreciation
(depreciation)...................... 3,276 243 54,745
Capital gain distributions........... 6,179 199 13,746
------ ---- ------
Net realized and unrealized gain (loss)
on investments........................ 9,975 531 68,630
------ ---- ------
Increase (decrease) in net assets from
operations............................ $9,960 582 67,085
====== ==== ======
</TABLE>
F-11
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
-----------------------------------------------------------------
Money
Fund Bond Fund/VA Aggressive Growth Fund/VA
-------- -------------------------- -----------------------------
Period
ended
December
11, Year Ended December 31, Year ended December 31,
-------- -------------------------- -----------------------------
1997 1999 1998 1997 1999 1998 1997
-------- -------- ------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $ 7,779 96,549 30,639 123,712 -- 16,972 13,590
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 1,958 30,625 44,412 21,914 89,368 92,177 80,784
------- -------- ------- ------- --------- --------- -------
Net investment income
(expense)............ 5,821 65,924 13,773 101,798 (89,368) (75,205) (67,194)
------- -------- ------- ------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss) .............. -- (61,516) 140,916 11,410 1,178,701 1,139,675 362,326
Unrealized
appreciation
(depreciation)....... -- (84,560) (22,639) 14,947 3,216,453 (392,601) 69,894
Capital gain distribu-
tions................ -- 9,549 28,282 4,923 -- 171,601 258,219
------- -------- ------- ------- --------- --------- -------
Net realized and
unrealized gain
(loss) on
investments.......... -- (136,527) 146,559 31,280 4,395,154 918,675 690,439
------- -------- ------- ------- --------- --------- -------
Increase (decrease) in
net assets from
operations........... $ 5,821 (70,603) 132,786 133,078 4,305,786 843,470 623,245
======= ======== ======= ======= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Oppenheimer Variable Account Funds
------------------------------------------------------------------------------------
Capital Appreciation Multiple Strategies
Fund/VA High Income Fund/VA Fund/VA
----------------------------- --------------------------- -------------------------
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.... $ 15,085 30,546 137,266 348,986 120,682 392,523 109,789 29,411 108,613
Expenses -- Mortality and
expense risk charges and
administrative expenses
(note 3)....................... 62,566 56,132 39,859 71,383 83,415 56,210 42,535 42,195 36,789
---------- -------- ------- -------- -------- ------- ------- -------- -------
Net investment income ex-
pense)......................... (47,481) (25,586) 97,407 277,603 37,267 336,313 67,254 (12,784) 71,824
---------- -------- ------- -------- -------- ------- ------- -------- -------
Net realized and unrealized gain
(loss) on investments:
Net realized gain (loss) ....... 900,975 779,763 211,799 (31,032) (157,587) 180,406 20,609 353,554 34,009
Unrealized appreciation
(depreciation)................. 646,214 (197,508) 311,259 (77,143) 402 (53,341) 68,454 (372,624) 206,122
Capital gain distributions...... 173,473 351,282 -- -- 147,500 2,806 157,988 166,660 95,618
---------- -------- ------- -------- -------- ------- ------- -------- -------
Net realized and unrealized gain
(loss) on investments.......... 1,720,662 933,537 523,058 (108,175) (9,685) 129,871 247,051 147,590 335,749
---------- -------- ------- -------- -------- ------- ------- -------- -------
Increase (decrease) in net as-
sets from operations........... $1,673,181 907,951 620,465 169,428 27,582 466,184 314,305 134,806 407,573
========== ======== ======= ======== ======== ======= ======= ======== =======
</TABLE>
F-12
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund
--------------------------------------------------------
Money Market High Income Equity-Income
Portfolio Portfolio 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............ $ 91,625 94,018 241,170 221,548 218,168
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 10,228 15,435 220,388 217,902 186,346
-------- ------- -------- --------- ---------
Net investment income
(expense).............. 81,397 78,583 20,782 3,646 31,822
-------- ------- -------- --------- ---------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... -- 185,532 949,231 1,283,354 1,197,816
Unrealized
appreciation
(depreciation)....... -- (92,552) (762,258) (494,927) 1,016,128
Capital gain
distributions........ -- 11,620 536,798 785,489 1,065,171
-------- ------- -------- --------- ---------
Net realized and
unrealized gain (loss)
on investments......... -- 104,600 723,771 1,573,916 3,279,115
-------- ------- -------- --------- ---------
Increase (decrease) in
net assets from
operations............. $ 81,397 183,183 744,553 1,577,562 3,310,937
======== ======= ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Products Fund (continued)
--------------------------------------------------------------
Growth Overseas
Portfolio 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............ $ 30,736 56,532 56,737 59,843 87,981 101,260
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 187,151 156,899 121,040 58,174 62,196 73,250
---------- --------- --------- --------- -------- --------
Net investment income
(expense).............. (156,415) (100,367) (64,303) 1,669 25,785 28,010
---------- --------- --------- --------- -------- --------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 1,288,523 1,619,202 1,766,746 694,024 (178,639) 801,884
Unrealized
appreciation
(depreciation)....... 1,712,349 667,154 (282,336) 859,657 349,052 (489,713)
Capital gain
distributions........ 1,506,084 1,356,757 258,471 97,639 263,943 405,040
---------- --------- --------- --------- -------- --------
Net realized and
unrealized gain (loss)
on investments......... 4,506,956 3,643,113 1,742,881 1,651,320 434,356 717,211
---------- --------- --------- --------- -------- --------
Increase (decrease) in
net assets from
operations............. $4,350,541 3,542,746 1,678,578 1,652,989 460,141 745,221
========== ========= ========= ========= ======== ========
</TABLE>
F-13
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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............ $338,815 304,810 291,804 49,344 54,962 40,502
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 133,280 131,037 120,291 137,209 110,295 81,691
-------- --------- --------- --------- --------- ---------
Net investment income
(expense).............. 205,535 173,773 171,513 (87,865) (55,333) (41,189)
-------- --------- --------- --------- --------- ---------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 259,916 252,067 187,349 971,552 1,254,204 268,831
Unrealized
appreciation
(depreciation)....... (9,876) (67,659) 534,401 885,621 648,485 823,917
Capital gain
distributions........ 431,219 914,428 714,417 361,853 403,057 109,504
-------- --------- --------- --------- --------- ---------
Net realized and
unrealized gain (loss)
on investments......... 681,259 1,098,836 1,436,167 2,219,026 2,305,746 1,202,252
-------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. $886,794 1,272,609 1,607,680 2,131,161 2,250,413 1,161,063
======== ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Variable Insurance Product Fund III
--------------------------------------------------------------
Growth Opportunities
Growth & Income Portfolio Portfolio
------------------------------- ------------------------------
Period from Period from
Year ended May 16, Year ended May 16,
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............ $ 6,549 -- -- 6,596 4,014 --
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 22,680 10,395 1,712 9,994 5,891 1,910
-------- ------- ------ ------- ------- ------
Net investment income
(expense).............. (16,131) (10,395) (1,712) (3,398) (1,877) (1,910)
-------- ------- ------ ------- ------- ------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 160,560 100,071 6,219 32,368 15,522 876
Unrealized
appreciation
(depreciation)....... (48,360) 91,779 11,314 (18,063) 75,120 39,235
Capital gain
distributions........ 13,296 1,681 -- 12,249 14,232 --
-------- ------- ------ ------- ------- ------
Net realized and
unrealized gain (loss)
on investments......... 125,496 193,531 17,533 26,554 104,874 40,111
-------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets from
operations............. $109,365 183,136 15,821 23,156 102,997 38,201
======== ======= ====== ======= ======= ======
</TABLE>
F-14
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
Federated Insurance Series
--------------------------------------------------
American Leaders High Income Bond Fund
Fund II II
------------------------ ------------------------
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................ $ 9,786 2,959 909 84,197 48,396 42,534
Expenses -- Mortality and
expense risk charges and
administrative expenses
(note 3)................. 14,056 11,035 3,437 17,569 17,967 10,943
-------- ------ ------ ------- ------- ------
Net investment income
(expense).................. (4,270) (8,076) (2,528) 66,628 30,429 31,591
-------- ------ ------ ------- ------- ------
Net realized and unrealized
gain on investments:
Net realized gain (loss).. 19,046 (4,077) 11,788 (82,162) 85,989 5,827
Unrealized appreciation
(depreciation)........... (65,306) 58,884 53,148 543 (90,012) 55,167
Capital gain
distributions............ 98,945 39,312 571 7,321 13,650 2,683
-------- ------ ------ ------- ------- ------
Net realized and unrealized
gain (loss) on
investments................ 52,685 94,119 65,507 (74,298) 9,627 63,677
-------- ------ ------ ------- ------- ------
Increase (decrease) in net
assets from operations..... $ 48,415 86,043 62,979 (7,670) 40,056 95,268
======== ====== ====== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
Federated Insurance
Series (continued)
------------------------
Utility Fund II
------------------------
Year ended
December 31,
------------------------
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends........................ $ 13,222 4,053 6,464
Expenses -- Mortality and expense risk charges and
administrative expenses (note 3)................... 6,330 6,146 3,837
-------- ------ ------
Net investment income (expense)....................... 6,892 (2,093) 2,627
-------- ------ ------
Net realized and unrealized gain on investments:
Net realized gain (loss)............................ 10,756 25,956 11,484
Unrealized appreciation (depreciation).............. (42,270) 8,478 50,092
Capital gain distributions.......................... 25,666 24,895 5,733
-------- ------ ------
Net realized and unrealized gain (loss) on
investments.......................................... (5,848) 59,329 67,309
-------- ------ ------
Increase (decrease) in net assets from operations..... $ 1,044 57,236 69,936
======== ====== ======
</TABLE>
F-15
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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............ $ -- -- -- 4,197 7,214 5,656
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 28,322 21,533 18,711 57,600 31,716 21,426
-------- -------- ------- --------- --------- -------
Net investment income
(expense).............. (28,322) (21,533) (18,711) (53,403) (24,502) (15,770)
-------- -------- ------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 263,133 (361,335) 155,266 367,836 342,335 121,886
Unrealized
appreciation
(depreciation)....... 286,111 411,856 (23,084) 477,546 332,102 195,886
Capital gain
distributions........ 250,852 207,517 42,941 415,458 353,476 10,056
-------- -------- ------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments......... 800,096 258,038 175,123 1,260,840 1,027,913 327,828
-------- -------- ------- --------- --------- -------
Increase (decrease) in
net assets from
operations............. $771,774 236,505 156,412 1,207,437 1,003,411 312,058
======== ======== ======= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
PBHG Insurance Series Fund, Inc.
------------------------------------------------------------
PBHG Large Cap Growth
Portfolio PBHG Growth II Portfolio
------------------------------ -----------------------------
Period from Period from
Year ended July 22, Year ended May 22, 1997
December 31, 1997 to December 31, 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 and
administrative
expenses (note 3).... 1,948 1,340 205 3,631 1,328 540
-------- ------ ----- ------- ------ -----
Net investment income
(expense).............. (1,948) (1,340) (205) (3,631) (1,328) (540)
-------- ------ ----- ------- ------ -----
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 29,261 12,396 (1) 127,082 36,908 1,296
Unrealized
appreciation
(depreciation)....... 99,164 11,365 656 66,595 15,978 (846)
Capital gain
distributions........ -- -- -- -- -- --
-------- ------ ----- ------- ------ -----
Net realized and
unrealized gain (loss)
on investments......... 128,425 23,761 655 193,677 52,886 450
-------- ------ ----- ------- ------ -----
Increase (decrease) in
net assets from
operations............. $126,477 22,421 450 190,046 51,558 (90)
======== ====== ===== ======= ====== =====
</TABLE>
F-16
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, 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>
Investment income:
Income -- Ordinary Dividends.......... $ 34,494 36,455 --
Expenses -- Mortality and expense risk
charges and administrative expenses
(note 3)............................. 24,999 6,443 9,747
--------- ------- -------
Net investment income (expense)......... 9,495 30,012 (9,747)
--------- ------- -------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss).............. 315,380 (3,318) 150,610
Unrealized appreciation
(depreciation)....................... (146,827) (1,629) (55,310)
Capital gain distributions............ 88,699 -- 64,488
--------- ------- -------
Net realized and unrealized gain (loss)
on investments......................... 257,252 (4,947) 159,788
--------- ------- -------
Increase (decrease) in net assets from
operations............................. $ 266,747 25,065 150,041
========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series
----------------------------------------------------------
Aggressive Growth
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............ $ 41,689 -- -- 17,258 186,177 58,424
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 66,736 31,583 28,915 99,371 67,687 49,779
---------- ------- ------- --------- --------- -------
Net investment income
(expense).............. (25,047) (31,583) (28,915) (82,113) 118,490 8,645
---------- ------- ------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 1,877,887 678,326 192,226 732,403 870,857 243,734
Unrealized
appreciation
(depreciation)....... 3,056,764 307,545 99,444 2,126,069 434,354 376,858
Capital gain
distributions........ 70,984 -- -- 38,444 150,149 54,303
---------- ------- ------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments......... 5,005,635 985,871 291,670 2,896,916 1,455,360 674,895
---------- ------- ------- --------- --------- -------
Increase (decrease) in
net assets from
operations............. $4,980,588 954,288 262,755 2,814,803 1,573,850 683,540
========== ======= ======= ========= ========= =======
</TABLE>
F-17
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
------------------------------------------------------------
Worldwide Growth Portfolio Balanced 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............ $ 22,883 283,470 77,270 134,118 156,510 52,809
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 173,236 132,642 91,422 77,430 53,807 15,089
---------- --------- --------- --------- --------- -------
Net investment income
(expense).............. (150,353) 150,828 (14,152) 56,688 102,703 37,720
---------- --------- --------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 1,684,622 1,535,984 457,649 397,981 75,042 16,368
Unrealized
appreciation
(depreciation)....... 5,709,994 417,036 666,571 859,559 1,021,865 172,861
Capital gain
distributions........ -- 114,875 36,750 -- 26,713 1,466
---------- --------- --------- --------- --------- -------
Net realized and
unrealized gain (loss)
on investments......... 7,394,616 2,067,895 1,160,970 1,257,540 1,123,620 190,695
---------- --------- --------- --------- --------- -------
Increase (decrease) in
net assets from
operations............. $7,244,263 2,218,723 1,146,818 1,314,228 1,226,323 228,415
========== ========= ========= ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-----------------------------------------------------
International Growth
Flexible Income Portfolio 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............ $ 23,898 22,361 11,966 5,822 54,292 11,016
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 5,169 4,450 2,246 34,028 31,407 19,234
--------- ------- ------- --------- ------- -------
Net investment income
(expense).............. 18,729 17,911 9,720 (28,206) 22,885 (8,218)
--------- ------- ------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 2,310 2,524 3,107 452,801 171,620 145,208
Unrealized
appreciation
(depreciation)....... (20,012) 3,399 4,489 1,288,333 158,124 45,943
Capital gain
distributions........ 1,152 1,021 76 -- 7,791 2,276
--------- ------- ------- --------- ------- -------
Net realized and
unrealized gain (loss)
on investments......... (16,550) 6,944 7,672 1,741,134 337,535 193,427
--------- ------- ------- --------- ------- -------
Increase (decrease) in
net assets from
operations............. $ 2,179 24,855 17,392 1,712,928 360,420 185,209
========= ======= ======= ========= ======= =======
</TABLE>
F-18
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Operations, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
---------------------------------
Capital Appreciation Portfolio
---------------------------------
Period from
Year ended May 22,
December 31, 1997 to
------------------- December 31,
1999 1998 1997
---------- ------- ------------
<S> <C> <C> <C>
Investment income:
Income -- Ordinary Dividends............... $ 935 555 37
Expenses -- Mortality and expense risk
charges and administrative expenses (note
3)........................................ 32,166 6,271 112
---------- ------- -------
Net investment income (expense).............. (31,231) (5,716) (75)
---------- ------- -------
Net realized and unrealized gain (loss) on
investments:
Net realized gain (loss)................... 435,959 225,641 (7,519)
Unrealized appreciation (depreciation)..... 837,570 56,754 (582)
Capital gain distributions................. 10,754 -- --
---------- ------- -------
Net realized and unrealized gain (loss) on
investments................................. 1,284,283 282,395 (8,101)
---------- ------- -------
Increase (decrease) in net assets from
operations.................................. $1,253,052 276,679 (8,176)
========== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Goldman Sachs Salomon Brothers
Variable Insurance Trust Variable Series Funds Inc.
--------------------------------------------------- -------------------------------
Growth and Income Mid Cap Value Strategic Bond Total Return
Fund Fund Fund Fund
------------------------- ------------------------- --------------- ---------------
Period from Period from
October 6, June 25, Period from Period from
Year ended 1998 to Year ended 1998 to March 19, 1999 July 14, 1999
December 31, December 31, December 31, December 31, to December 31, to December 31,
1999 1998 1999 1998 1999 1999
------------ ------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Income -- Ordinary
Dividends............ $ 766 48 1,901 662 5,114 154
Expenses -- Mortality
and expense risk
charges and
administrative
expenses (note 3).... 648 11 4,901 237 6,264 39
------- ---- ------- ---- ------- -----
Net investment income
(expense).............. 118 37 (3,000) 425 (1,150) 115
------- ---- ------- ---- ------- -----
Net realized and
unrealized gain (loss)
on investments:
Net realized gain
(loss)............... 573 58 84,871 (16) (14,814) (8)
Unrealized
appreciation
(depreciation)....... (2,840) 49 (27,108) 196 (4,324) (424)
Capital gain
distributions........ -- -- -- -- -- --
------- ---- ------- ---- ------- -----
Net realized and
unrealized gain (loss)
on investments......... (2,267) 107 57,763 180 (19,138) (432)
------- ---- ------- ---- ------- -----
Increase (decrease) in
net assets from
operations............. $(2,149) 144 54,763 605 (20,288) (317)
======= ==== ======= ==== ======= =====
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
----------------------------------------------
S&P 500 Government
Index Securities
Fund Fund
-------------------------------- ------------
Year ended December 31, Period ended
-------------------------------- December 11,
1999 1998 1997 1997
---------- --------- --------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net
assets
From operations:
Net investment income
(expense).................... $ (39,597) (11,446) 8,122 (9,821)
Net realized gain (loss)...... 547,538 398,018 125,533 2,596
Unrealized appreciation
(depreciation) on
investments.................. 714,039 497,472 337,547 46,607
Capital gain distributions.... 79,903 180,554 45,068 --
---------- --------- --------- --------
Increase (decrease) in net
assets from operations......... 1,301,883 1,064,598 516,270 39,382
---------- --------- --------- --------
From capital transactions:
Net premiums.................. 209,250 364,101 29,621 13,143
Loan interest................. (3,621) (1,758) (472) (455)
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits.............. -- (26,898) (1,802) --
Surrenders.................. (571,204) (122,586) (50,594) (262,974)
Loans....................... (14,382) (8,955) (10,019) (23,924)
Cost of insurance and
administrative expense
(note 3)................... (76,602) (54,690) (24,852) (8,334)
Transfer gain (loss) and
transfer fees.............. (2,154) 190,048 (2,909) (3,207)
Transfers (to) from the
Guarantee Account (note 1)... 1,200 156,285 33,241 288
Interfund transfers........... 1,450,154 1,318,239 1,154,053 (529,174)
---------- --------- --------- --------
Increase (decrease) in net
assets from capital
transactions................... 992,641 1,813,786 1,126,267 (814,637)
---------- --------- --------- --------
Increase (decrease) in net
assets....................... 2,294,524 2,878,384 1,642,537 (775,255)
Net assets at beginning of
year........................... 6,079,523 3,201,139 1,558,602 775,255
---------- --------- --------- --------
Net assets at end of year....... $8,374,047 6,079,523 3,201,139 --
========== ========= ========= ========
</TABLE>
F-20
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------------------------------------
Money Market Total Return
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)............ $ 492,078 502,420 389,607 11,546 68,818 23,177
Net realized gain
(loss)............... -- (2,104) (256,503) 34,289 4,509 1,710
Unrealized
appreciation
(depreciation) on
investments.......... -- 2,104 287,655 110,595 183,805 26,729
Capital gain
distributions........ -- -- -- 42,374 -- 185,237
----------- ---------- ----------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 492,078 502,420 420,759 198,804 257,132 236,853
----------- ---------- ----------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 7,275,148 10,323,239 14,800,378 9,104 13,446 37,415
Loan interest......... 33,105 15,680 25,356 (740) (107) 77
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- (9,663) -- -- -- (122,969)
Surrenders.......... (4,064,746) (492,391) (81,503) (134,715) (163,264) (9,555)
Loans............... (733,748) (1,044,167) (259,694) (5,353) (33,631) (31,550)
Cost of insurance
and administrative
expense (note 3)... (151,555) (149,692) (124,687) (18,760) (17,774) (16,232)
Transfer gain (loss)
and transfer fees.... (55,274) 3,729 (135,353) 1,266 643 (3,467)
Transfers (to) from
the Guarantee Account
(note 1)............. -- (57,398) (32,069) 500 10,426 45,496
Interfund transfers... 1,796,890 (9,507,257) (13,250,370) (74,939) 52,057 134,091
----------- ---------- ----------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... 4,099,820 (917,920) 942,058 (223,637) (138,204) 33,306
----------- ---------- ----------- --------- --------- ---------
Increase (decrease) in
net assets........... 4,591,898 (415,500) 1,362,817 (24,833) 118,928 270,159
Net assets at beginning
of year................ 10,838,824 11,254,324 9,891,507 1,787,552 1,668,624 1,398,465
----------- ---------- ----------- --------- --------- ---------
Net assets at end of
year................... $15,430,722 10,838,824 11,254,324 1,762,719 1,787,552 1,668,624
=========== ========== =========== ========= ========= =========
</TABLE>
F-21
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
-----------------------------------------------------------
International Real Estate
Equity Fund Securities 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)............ $ (3,474) 12,064 (4,306) 25,102 16,447 28,577
Net realized gain
(loss)............... 166 1,173 146,386 (51,641) (76,333) 142,744
Unrealized
appreciation
(depreciation) on
investments.......... 72,780 5,854 (6,150) 15,871 (155,043) (97,672)
Capital gain
distributions........ 26,382 -- 79,345 1,796 26,116 72,382
--------- ------- -------- ------- --------- ---------
Increase (decrease) in
net assets from
operations............. 95,854 19,091 215,275 (8,872) (188,813) 146,031
--------- ------- -------- ------- --------- ---------
From capital
transactions:
Net premiums.......... -- 1,056 1,056 9,200 41,531 62,904
Loan interest......... (6) (50) (12) (1,009) (188) --
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... -- -- -- (35,918) (2,915) --
Loans............... -- 3,954 1,860 (4,066) (15,423) (16,740)
Cost of insurance
and administrative
expense (note 3)... (3,710) (3,955) (9,446) (8,475) (11,347) (9,178)
Transfer gain (loss)
and transfer fees.. (5,641) 26,258 (16,723) 2,893 1,201 (5,456)
Transfers (to) from
the Guarantee Account
(note 1)............. -- 25,276 -- 7 35,000 3,269
Interfund transfers... 23,090 (28,632) (727,513) (46,114) (222,532) 661,463
--------- ------- -------- ------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... 13,733 23,907 (750,778) (83,482) (174,673) 696,262
--------- ------- -------- ------- --------- ---------
Increase (decrease) in
net assets........... 109,587 42,998 (535,503) (92,354) (363,486) 842,293
Net assets at beginning
of year................ 300,239 257,241 792,744 706,841 1,070,327 228,034
--------- ------- -------- ------- --------- ---------
Net assets at end of
year................... $ 409,826 300,239 257,241 614,487 706,841 1,070,327
========= ======= ======== ======= ========= =========
</TABLE>
F-22
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
---------------------------------------------------------------
Global Income Value Equity
Fund Fund
-------------------------------- ------------------------------
Period from Period from
Year ended September 15, 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>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ (10,517) 1,255 610 (3,680) (4,868) (342)
Net realized gain
(loss)............... (174,205) 11 -- 68,899 1,355 208
Unrealized
appreciation
(depreciation) on
investments.......... (1,207) 1,291 (669) 24,230 2,571 1,977
Capital gain
distributions........ 28 64 55 -- 12,708 2,263
--------- ------ ------ ------- ------- -------
Increase (decrease) in
net assets from
operations............. (185,901) 2,621 (4) 89,449 11,766 4,106
--------- ------ ------ ------- ------- -------
From capital
transactions:
Net premiums.......... 3,403 -- -- 3,802 19,404 4,596
Loan interest......... 227 -- -- (1,028) (1,009) --
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... -- -- -- -- -- --
Loans............... 15,465 -- -- (6,939) (1,441) --
Cost of insurance
and administrative
expense (note 3)... (4,487) (264) (18) (8,194) (5,910) (615)
Transfer gain (loss)
and transfer fees.. 329 (3) -- (1,865) (39,597) 360
Transfers (to) from
the Guarantee Account
(note 1)............. -- -- -- 29,405 -- --
Interfund transfers... 170,322 12,432 13,721 118,008 297,789 243,259
--------- ------ ------ ------- ------- -------
Increase (decrease) in
net assets from capital
transactions........... 185,259 12,165 13,703 133,189 269,236 247,600
--------- ------ ------ ------- ------- -------
Increase (decrease) in
net assets........... (642) 14,786 13,699 222,638 281,002 251,706
Net assets at beginning
of year................ 28,485 13,699 -- 532,708 251,706 --
--------- ------ ------ ------- ------- -------
Net assets at end of
year................... $ 27,843 28,485 13,699 755,346 532,708 251,706
========= ====== ====== ======= ======= =======
</TABLE>
F-23
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
--------------------------------------------------------------------------------
Premier
Growth Equity
Income Fund U.S. Equity Fund Fund
----------------------------------- ---------------------------- ---------------
Period from
Year ended December 12, Period from Period from
December 31, 1997 to Year ended May 5, 1998 June 11, 1999
--------------------- December 31, December 31, to December 31, to December 31,
1999 1998 1997 1999 1998 1999
---------- --------- ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ 50,333 51,688 2,596 (15) 51 (1,545)
Net realized gain
(loss)............... (784) 9,720 (2,508) 520 89 139
Unrealized
appreciation
(depreciation) on
investments.......... (90,951) 13,245 1,454 3,276 243 54,745
Capital gain
distributions........ 2,137 12,310 -- 6,179 199 13,746
---------- --------- --------- ------- ------ -------
Increase (decrease) in
net assets from
operations............. (39,265) 86,963 1,542 9,960 582 67,085
---------- --------- --------- ------- ------ -------
From capital
transactions:
Net premiums.......... 16,162 -- -- -- -- --
Loan interest......... (4,763) (3,764) -- -- -- --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... (87,362) (2,594) -- -- -- --
Loans............... (4,459) (21,862) (2,396) -- -- (300)
Cost of insurance
and administrative
expense (note 3)... (15,183) (15,101) (742) (540) (30) (2,033)
Transfer gain (loss)
and
transfer fees...... (139) (703) (202) (188) (108) 3,988
Transfers (to) from
the Guarantee Account
(note 1)............. 20,109 7,872 -- -- -- --
Interfund transfers... (27,799) 196,041 1,221,995 109,461 9,718 393,060
---------- --------- --------- ------- ------ -------
Increase (decrease) in
net assets from capital
transactions........... (103,434) 159,889 1,218,655 108,733 9,580 394,715
---------- --------- --------- ------- ------ -------
Increase (decrease) in
net assets........... (142,699) 246,852 1,220,197 118,693 10,162 461,800
Net assets at beginning
of year................ 1,467,049 1,220,197 -- 10,162 -- --
---------- --------- --------- ------- ------ -------
Net assets at end of
year................... $1,324,350 1,467,049 1,220,197 128,855 10,162 461,800
========== ========= ========= ======= ====== =======
</TABLE>
F-24
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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).................... $ 5,821 65,924 (13,773) 101,798
Net realized gain (loss)...... -- (61,516) 140,916 11,410
Unrealized appreciation
(depreciation) on
investments.................. -- (84,560) (22,639) 14,947
Capital gain distributions.... -- 9,549 28,282 4,923
--------- --------- ---------- ---------
Increase (decrease) in net
assets from operations......... 5,821 (70,603) 132,786 133,078
--------- --------- ---------- ---------
From capital transactions:
Net premiums.................. -- 21,642 63,953 12,401
Loan interest................. -- 3,160 1,867 224
Transfers (to) from the
general account of GE Life &
Annuity:
Death benefits.............. -- -- -- --
Surrenders.................. -- (35,960) (80,793) --
Loans....................... -- (30,925) (717) (20,518)
Cost of insurance and
administrative expense
(note 3)................... (1,618) (21,619) (29,054) (17,321)
Transfer gain (loss) and
transfer fees.............. 26 23,758 (48,553) 4,175
Transfers (to) from the
Guarantee Account (note 1)... -- 6,580 8,443 10,164
Interfund transfers........... (160,456) (761,210) (1,102,223) 1,749,977
--------- --------- ---------- ---------
Increase (decrease) in net
assets from capital
transactions................... (162,048) (794,574) (1,187,077) 1,739,102
--------- --------- ---------- ---------
Increase (decrease) in net
assets....................... (156,227) (865,177) (1,054,291) 1,872,180
Net assets at beginning of
year........................... 156,227 2,473,605 3,527,896 1,655,716
--------- --------- ---------- ---------
Net assets at end of year....... $ -- 1,608,428 2,473,605 3,527,896
========= ========= ========== =========
</TABLE>
F-25
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<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)............ $ (89,368) (75,205) (67,194) (47,481) (25,586) 97,407
Net realized gain
(loss)............... 1,178,701 1,139,675 362,326 900,975 779,763 211,799
Unrealized
appreciation
(depreciation) on
investments.......... 3,216,453 (392,601) 69,894 646,214 (197,508) 311,259
Capital gain
distributions........ -- 171,601 258,219 173,473 351,282 --
----------- ---------- --------- ---------- --------- ---------
Increase (decrease) in
net assets from
operations............. 4,305,786 843,470 623,245 1,673,181 907,951 620,465
----------- ---------- --------- ---------- --------- ---------
From capital
transactions:
Net premiums.......... 54,210 106,960 160,331 34,750 130,707 136,857
Loan interest......... (5,149) 7,156 (478) (2,980) (2,818) (1,570)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... (22,618) -- -- -- -- --
Surrenders.......... (421,155) (235,363) (5,632) (638,691) (143,689) --
Loans............... (124,739) (644,066) (76,259) (159,747) (119,579) (52,908)
Cost of insurance
and administrative
expense (note 3)... (68,853) (81,387) (69,581) (44,705) (46,695) (33,074)
Transfer gain (loss)
and transfer fees.. (53,960) (865,659) (10,950) (247,728) 130,682 5,703
Transfers from the
Guarantee Account
(note 1)............. 8,140 7,563 86,490 7 58,430 67,111
Interfund transfers... (1,031,745) 515,285 786,921 (2,684,688) 2,177,306 1,239,168
----------- ---------- --------- ---------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (1,665,869) (1,189,511) 870,842 (3,743,782) 2,184,344 1,361,287
----------- ---------- --------- ---------- --------- ---------
Increase (decrease) in
net assets........... 2,639,917 (346,041) 1,494,087 (2,070,601) 3,092,295 1,981,752
Net assets at beginning
of year................ 6,498,684 6,844,725 5,350,638 6,988,817 3,896,522 1,914,770
----------- ---------- --------- ---------- --------- ---------
Net assets at end of
year................... $ 9,138,601 6,498,684 6,844,725 4,918,216 6,988,817 3,896,522
=========== ========== ========= ========== ========= =========
</TABLE>
F-26
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<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>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ 277,603 37,267 336,313 67,254 (12,784) 71,824
Net realized gain
(loss)............... (31,032) (157,587) 180,406 20,609 353,554 34,009
Unrealized
appreciation
(depreciation) on
investments.......... (77,143) 402 (53,341) 68,454 (372,624) 206,122
Capital gain
distributions........ -- 147,500 2,806 157,988 166,660 95,618
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 169,428 27,582 466,184 314,305 134,806 407,573
----------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 6,954 11,471 94,743 37,781 1,000 12,358
Loan interest......... (2,114) (1,733) (628) (208) (877) (722)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- (45,936) -- -- (18,545) (2,000)
Surrenders.......... (96,824) (576,832) (9,092) (189,005) (140,865) --
Loans............... (118,625) (34,516) (29,617) (10,720) (50,344) 8,746
Cost of insurance
and administrative
expense (note 3)... (52,357) (62,108) (45,518) (31,574) (31,968) (29,942)
Transfer gain (loss)
and transfer fees.. 9,892 (53,899) 32,059 1,885 6,332 356
Transfers from the
Guarantee Account
(note 1)............. 443 28,238 -- 943 29,334 23,966
Interfund transfers... (1,558,865) 191,267 2,226,116 (254,274) 108,424 447,254
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (1,811,496) (544,048) 2,268,063 (445,172) (97,509) 460,016
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets........... (1,642,068) (516,466) 2,734,247 (130,867) 37,297 867,589
Net assets at beginning
of year................ 6,161,255 6,677,721 3,943,474 3,248,322 3,211,025 2,343,436
----------- --------- --------- --------- --------- ---------
Net assets at end of
year................... $ 4,519,187 6,161,255 6,677,721 3,117,455 3,248,322 3,211,025
=========== ========= ========= ========= ========= =========
</TABLE>
F-27
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, 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>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ 81,397 78,583 20,782 3,646 31,822
Net realized gain
(loss)............... -- 185,532 949,231 1,283,354 1,197,816
Unrealized
appreciation
(depreciation) on
investments.......... -- (92,552) (762,258) (494,927) 1,016,128
Capital gain
distributions........ -- 11,620 536,798 785,489 1,065,171
----------- ---------- ---------- ---------- ----------
Increase (decrease) in
net assets from
operations............. 81,397 183,183 744,553 1,577,562 3,310,937
----------- ---------- ---------- ---------- ----------
From capital
transactions:
Net premiums.......... -- -- 30,709 146,903 215,369
Loan interest......... (8,013) 6 (12,986) (10,898) (5,772)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- (61,020) (18,249)
Surrenders.......... (11,729) (163,901) (531,791) (222,133) (71,914)
Loans............... (17,933) (6,459) (229,126) (402,392) (121,271)
Cost of insurance
and administrative
expense............ (8,075) (11,738) (153,739) (167,638) (151,529)
Transfer gain (loss)
and transfer fees.. (66,375) (44,309) 7,118 15,304 58,911
Transfers from the
Guarantee Account
(note 1)............. -- -- (128,390) 122,727 112,723
Interfund transfers... (1,079,728) (1,280,202) (1,383,061) (202,161) 311,215
----------- ---------- ---------- ---------- ----------
Increase (decrease) in
net assets from capital
transactions........... (1,191,853) (1,506,603) (2,401,266) (781,308) 329,483
----------- ---------- ---------- ---------- ----------
Increase (decrease) in
net assets........... (1,110,456) (1,323,420) (1,656,713) 796,254 3,640,420
Net assets at beginning
of year................ 1,110,456 1,323,420 16,825,933 16,029,679 12,389,259
----------- ---------- ---------- ---------- ----------
Net assets at end of
year................... $ -- -- 15,169,220 16,825,933 16,029,679
=========== ========== ========== ========== ==========
</TABLE>
F-28
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<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)............ $ (156,415) (100,367) (64,303) 1,669 25,785 28,010
Net realized gain
(loss)............... 1,288,523 1,619,202 1,766,746 694,024 (178,639) 801,884
Unrealized
appreciation
(depreciation) on
investments.......... 1,712,349 667,154 (282,336) 859,657 349,052 (489,713)
Capital gain
distributions........ 1,506,084 1,356,757 258,471 97,639 263,943 405,040
----------- ---------- ---------- ---------- --------- ----------
Increase (decrease) in
net assets from
operations............. 4,350,541 3,542,746 1,678,578 1,652,989 460,141 745,221
----------- ---------- ---------- ---------- --------- ----------
From capital
transactions:
Net premiums.......... 161,347 50,433 78,875 18,135 19,010 12,810
Loan interest......... (16,324) (17,111) (3,060) (2,376) (1,529) (2,436)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- (24,255) (1,634) (21,324) (30,475) --
Surrenders.......... (1,385,411) (572,105) (28,946) (191,090) (214,745) (26,126)
Loans............... (164,276) (532,091) (153,343) (107,707) (93,248) (140,934)
Cost of insurance
and administrative
expense............ (133,989) (123,718) (99,653) (40,060) (47,188) (59,162)
Transfer gain (loss)
and transfer fees.. (48,212) 177,115 26,694 (29,352) 66,028 (12,801)
Transfers from the
Guarantee Account
(note 1)............. 5,600 100,312 44,630 443 (8,627) 61,472
Interfund transfers... (452,607) 463,637 44,400 (1,559,209) 294,585 (1,392,016)
----------- ---------- ---------- ---------- --------- ----------
Increase (decrease) in
net assets from capital
transactions........... (2,033,872) (477,783) (92,037) (1,932,540) (16,189) (1,559,193)
----------- ---------- ---------- ---------- --------- ----------
Increase (decrease) in
net assets........... 2,316,669 3,064,963 1,586,541 (279,551) 443,952 (813,972)
Net assets at beginning
of year................ 13,457,515 10,392,552 8,806,011 5,006,524 4,562,572 5,376,544
----------- ---------- ---------- ---------- --------- ----------
Net assets at end of
year................... $15,774,184 13,457,515 10,392,552 4,726,973 5,006,524 4,562,572
=========== ========== ========== ========== ========= ==========
</TABLE>
F-29
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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)............ $ 205,535 173,773 171,513 (87,865) (55,333) (41,189)
Net realized gain
(loss)............... 259,916 252,067 187,349 971,552 1,254,204 268,831
Unrealized
appreciation
(depreciation) on
investments.......... (9,876) (67,659) 534,401 885,621 648,485 823,917
Capital gain
distributions........ 431,219 914,428 714,417 361,853 403,057 109,504
----------- ---------- --------- ---------- ---------- ---------
Increase (decrease) in
net assets from
operations............. 886,794 1,272,609 1,607,680 2,131,161 2,250,413 1,161,063
----------- ---------- --------- ---------- ---------- ---------
From capital
transactions:
Net premiums.......... 2,300 2,300 98,687 71,587 177,753 171,916
Loan interest......... (8,302) (7,000) (4,946) (8,628) (6,910) (3,288)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- (41,112) (149,074) (23,810) (24,991) (1,797)
Surrenders.......... (786,658) (325,417) (8,956) (549,804) (22,516) (9,456)
Loans............... (58,273) (241,371) (97,092) (153,985) (85,784) (118,554)
Cost of insurance
and administrative
expense (note 3)... (98,577) (101,341) (98,131) (102,249) (94,295) (72,675)
Transfer gain (loss)
and transfer fees.. (47,936) (13,045) 397 (21,586) 59,824 34,177
Transfers (to) from
Guarantee Account
(note 1)............. 38,441 69,851 33,707 6,587 84,180 150,028
Interfund transfers... (748,397) 156,323 (59,803) (759,216) 989,747 1,827,255
----------- ---------- --------- ---------- ---------- ---------
Increase (decrease) in
net assets from capital
transactions........... (1,707,402) (500,812) (285,211) (1,541,104) 1,077,008 1,977,606
----------- ---------- --------- ---------- ---------- ---------
Increase (decrease) in
net assets........... (820,608) 771,797 1,322,469 590,057 3,327,421 3,138,669
Net assets at beginning
of year................ 10,347,930 9,576,133 8,253,664 11,177,224 7,849,803 4,711,134
----------- ---------- --------- ---------- ---------- ---------
Net assets at end of
year................... $ 9,527,322 10,347,930 9,576,133 11,767,281 11,177,224 7,849,803
=========== ========== ========= ========== ========== =========
</TABLE>
F-30
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Variable Insurance Products Fund III
------------------------------------------------------------------
Growth Opportunities
Growth & Income Portfolio Portfolio
----------------------------------- ------------------------------
Period from Period from
Year ended May 16, 1997 Year ended May 16, 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)............ $ (16,131) (10,395) (1,712) (3,398) (1,877) (1,910)
Net realized gain
(loss)............... 160,560 100,071 6,219 32,368 15,522 876
Unrealized
appreciation
(depreciation) on
investments.......... (48,360) 91,779 11,314 (18,063) 75,120 39,235
Capital gain
distributions........ 13,296 1,681 -- 12,249 14,232 --
---------- --------- ------- ------- ------- -------
Increase (decrease) in
net assets from
operations............. 109,365 183,136 15,821 23,156 102,997 38,201
---------- --------- ------- ------- ------- -------
From capital
transactions:
Net premiums.......... 11,807 23,295 12,486 589 39,535 18,354
Loan interest......... (19) (393) -- (95) (134) --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... (33,425) -- -- (17,405) -- --
Loans............... (9,320) (3,183) -- (979) -- --
Cost of insurance
and administrative
expense (note 3)... (15,670) (7,686) (1,616) (8,389) (5,140) (1,627)
Transfer gain (loss)
and transfer fees.. 43,657 28,249 10,283 (7) 1,640 (20)
Transfers (to) from
Guarantee Account
(note 1)............. 10,278 13,857 -- -- 8,711 2,963
Interfund transfers... 392,746 357,477 373,471 265,913 145,247 293,576
---------- --------- ------- ------- ------- -------
Increase (decrease) in
net assets from capital
transactions........... 400,054 411,616 394,624 239,627 189,859 313,246
---------- --------- ------- ------- ------- -------
Increase (decrease) in
net assets........... 509,419 594,752 410,445 262,783 292,856 351,447
Net assets at beginning
of year................ 1,005,197 410,445 -- 644,303 351,447 --
---------- --------- ------- ------- ------- -------
Net assets at end of
year................... $1,514,616 1,005,197 410,445 907,086 644,303 351,447
========== ========= ======= ======= ======= =======
</TABLE>
F-31
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Federated Insurance Series
----------------------------------------------------------------
American High Income
Leaders Fund II Bond Fund II
------------------------------ --------------------------------
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)............ $ (4,270) (8,076) (2,528) 66,628 30,429 31,591
Net realized gain
(loss)............... 19,046 (4,077) 11,788 (82,162) 85,989 5,827
Unrealized
appreciation
(depreciation) on
investments.......... (65,306) 58,884 53,148 543 (90,012) 55,167
Capital gain
distributions........ 98,945 39,312 571 7,321 13,650 2,683
---------- --------- ------- --------- ---------- ---------
Increase (decrease) in
net assets from
operations............. 48,415 86,043 62,979 (7,670) 40,056 95,268
---------- --------- ------- --------- ---------- ---------
From capital
transactions:
Net premiums.......... 57,574 96,517 92,480 17,397 28,358 43,594
Loan interest......... (79) (225) (3) (244) (409) (1,353)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... -- -- -- (28,048) -- --
Loans............... (6,155) (12,883) 205 (73,906) (14,686) (11,473)
Cost of insurance
and administrative
expense (note 3)... (12,640) (11,161) (3,145) (13,418) (14,411) (8,961)
Transfer gain (loss)
and transfer fees.. 1,294 2,778 1,084 (13,811) 706 (359)
Transfers (to) from
the Guarantee Account
(note 1)............. 9,174 16,071 5,323 -- 6,031 5,441
Interfund transfers... (210,684) 343,685 341,074 6,333 (1,149,736) 1,432,858
---------- --------- ------- --------- ---------- ---------
Increase (decrease) in
net assets from capital
transactions........... (161,516) 434,782 437,018 (105,697) (1,144,147) 1,459,747
---------- --------- ------- --------- ---------- ---------
Increase (decrease) in
net assets........... (113,101) 520,825 499,997 (113,367) (1,104,091) 1,555,015
Net assets at beginning
of year................ 1,038,585 517,760 17,763 1,129,523 2,233,614 678,599
---------- --------- ------- --------- ---------- ---------
Net assets at end of
year................... $ 925,484 1,038,585 517,760 1,016,156 1,129,523 2,233,614
========== ========= ======= ========= ========== =========
</TABLE>
F-32
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Federated
Insurance Series
(continued)
---------------------------
Utility Fund II
---------------------------
Year ended December 31,
---------------------------
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)................. $ 6,892 (2,093) 2,627
Net realized gain (loss)........................ 10,756 25,956 11,484
Unrealized appreciation (depreciation) on
investments.................................... (42,270) 8,478 50,092
Capital gain distributions...................... 25,666 24,895 5,733
--------- ------- -------
Increase (decrease) in net assets from
operations....................................... 1,044 57,236 69,936
--------- ------- -------
From capital transactions:
Net premiums.................................... -- 21,133 --
Loan interest................................... (581) (807) (55)
Transfers (to) from the general account of GE
Life & Annuity:
Death benefits................................ -- -- --
Surrenders.................................... (14,150) -- --
Loans......................................... (27,345) (18,860) (34,631)
Cost of insurance and administrative expense
(note 3)..................................... (5,113) (5,595) (3,486)
Transfer gain (loss) and transfer fees........ 76 690 2,314
Transfers (to) from the Guarantee Account
(note 1)....................................... -- -- 10,521
Interfund transfers............................. (67,113) 79,433 107,029
--------- ------- -------
Increase (decrease) in net assets from capital
transactions..................................... (114,226) 75,994 81,692
--------- ------- -------
Increase (decrease) in net assets............... (113,182) 133,230 151,628
Net assets at beginning of year................... 526,570 393,340 241,712
--------- ------- -------
Net assets at end of year......................... $ 413,388 526,570 393,340
========= ======= =======
</TABLE>
F-33
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Alger American Fund
------------------------------------------------------------------
Growth
Small Capitalization Portfolio 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)............ $ (28,322) (21,533) (18,711) (53,403) (24,502) (15,770)
Net realized gain
(loss)............... 263,133 (361,335) 155,266 367,836 342,335 121,886
Unrealized
appreciation
(depreciation) on
investments.......... 286,111 411,856 (23,084) 477,546 332,102 195,886
Capital gain
distributions........ 250,852 207,517 42,941 415,458 353,476 10,056
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 771,774 236,505 156,412 1,207,437 1,003,411 312,058
----------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 47,061 53,010 88,579 61,208 49,615 23,449
Loan interest......... (4,390) (394) 2 (2,317) (929) (449)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- (13,545) -- (26,523) (19,533) --
Surrenders.......... -- (70,773) (1,243) (286,712) (43,795) (4,963)
Loans............... 3,449 22,480 (51,090) (87,064) (69,736) (60,475)
Cost of insurance
and administrative
expense (note 3)... (25,363) (19,635) (17,890) (46,522) (27,911) (20,884)
Transfer gain (loss)
and transfer fees.. 46,137 68,756 (6,935) (7,321) 30,431 (16,706)
Transfers (to) from
the Guarantee Account
(note 1)............. 11,769 23,461 72,126 500 35,331 25,127
Interfund transfers... (1,053,597) 1,262,264 148,081 1,365,674 631,892 147,496
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (974,934) 1,325,624 231,630 970,923 585,365 92,595
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets........... (203,160) 1,562,129 388,042 2,178,360 1,588,776 404,653
Net assets at beginning
of year................ 3,022,286 1,460,157 1,072,115 3,345,552 1,756,776 1,352,123
----------- --------- --------- --------- --------- ---------
Net assets at end of
year................... $ 2,819,126 3,022,286 1,460,157 5,523,912 3,345,552 1,756,776
=========== ========= ========= ========= ========= =========
</TABLE>
F-34
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------
PBHG
Large Cap Growth PBHG
Portfolio Growth II Portfolio
------------------------------- ------------------------------
Period from Period from
Year ended July 22, Year ended May 22,
December 31, 1997 to December 31, 1997 to
----------------- December 31, ---------------- December 31,
1999 1998 1997 1999 1997 1997
-------- ------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in
net assets
From operations:
Net investment income
(expense)............ $ (1,948) (1,340) (205) (3,631) (1,328) (540)
Net realized gain
(loss)............... 29,261 12,396 (1) 127,082 36,908 1,296
Unrealized
appreciation
(depreciation) on
investments.......... 99,164 11,365 656 66,595 15,978 (846)
Capital gain
distributions........ -- -- -- -- -- --
-------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets from
operations............. 126,477 22,421 450 190,046 51,558 (90)
-------- ------- ------ ------- ------- ------
From capital
transactions:
Net premiums.......... 6,138 -- -- 2,000 3,717 4,615
Loan interest......... 26 -- -- (191) (58) --
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... -- (3,629) -- -- -- --
Loans............... (678) (817) -- (10,000) -- --
Cost of insurance
and administrative
expense (note 3)... (1,747) (2,407) (134) (4,856) (1,168) (460)
Transfer gain (loss)
and transfer fees.. (6,275) (2,844) 53 (19,026) (36,339) 1,309
Transfers (to) from
the Guarantee Account
(note 1)............. -- -- 3,269 -- 25,929 2,518
Interfund transfers... 128,326 (8,883) 28,216 33,117 2,248 84,214
-------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets from capital
transactions........... 125,790 (18,580) 31,404 1,044 (5,671) 92,196
-------- ------- ------ ------- ------- ------
Increase (decrease) in
net assets........... 252,267 3,841 31,854 191,090 45,887 92,106
Net assets at beginning
of year................ 35,695 31,854 -- 137,993 92,106 --
-------- ------- ------ ------- ------- ------
Net assets at end of
year................... $287,962 35,695 31,854 329,083 137,993 92,106
======== ======= ====== ======= ======= ======
</TABLE>
F-35
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series
------------------------------------------------------------------
Aggressive Growth 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)............ $ (25,047) (31,583) (28,915) (82,113) 118,490 8,645
Net realized gain
(loss)............... 1,877,887 678,326 192,226 732,403 870,857 243,734
Unrealized
appreciation
(depreciation) on
investments.......... 3,056,764 307,545 99,444 2,126,069 434,354 376,858
Capital gain
distributions........ 70,984 -- -- 38,444 150,149 54,303
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 4,980,588 954,288 262,755 2,814,803 1,573,850 683,540
----------- --------- --------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 29,506 42,148 60,192 83,311 64,698 100,831
Loan interest......... (3,772) (1,997) (77) (8,033) (5,496) (600)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- (23,434) -- --
Surrenders.......... (147,936) (9,219) (318) (332,087) (103,135) (11,331)
Loans............... (100,897) (24,856) (68,184) (113,712) (159,214) (101,750)
Cost of insurance
and administrative
expense (note 3)... (51,847) (25,282) (24,702) (72,587) (55,256) (43,347)
Transfer gain (loss)
and transfer fees.. 78,299 (164,381) 43,699 9,023 16,223 594
Transfers (to) from
the Guarantee Account
(note 1)............. -- 8,345 34,546 3,568 18,355 84,063
Interfund transfers... 2,991,895 (793,229) 503,885 1,275,017 305,817 1,105,318
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... 2,795,248 (968,471) 549,041 821,066 81,992 1,133,778
----------- --------- --------- --------- --------- ---------
Increase (decrease) in
net assets........... 7,775,836 (14,183) 811,796 3,635,869 1,655,842 1,817,318
Net assets at beginning
of year................ 2,774,289 2,788,472 1,976,676 6,260,048 4,604,206 2,786,888
----------- --------- --------- --------- --------- ---------
Net assets at end of
year................... $10,550,125 2,774,289 2,788,472 9,895,917 6,260,048 4,604,206
=========== ========= ========= ========= ========= =========
</TABLE>
F-36
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
-------------------------------------------------------------------
Worldwide Growth Portfolio Balanced 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)............ $ (150,353) 150,828 (14,152) 56,688 102,703 37,720
Net realized gain
(loss)............... 1,684,622 1,535,984 457,649 397,981 75,042 16,368
Unrealized
appreciation
(depreciation) on
investments.......... 5,709,994 417,036 666,571 859,559 1,021,865 172,861
Capital gain
distributions........ -- 114,875 36,750 -- 26,713 1,466
----------- ---------- --------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 7,244,263 2,218,723 1,146,818 1,314,228 1,226,323 228,415
----------- ---------- --------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 181,280 276,172 334,686 39,986 20,390 32,001
Loan interest......... (5,533) (3,134) (933) (7,355) (4,091) (48)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... (23,423) (68,985) (1,737) (24,021) (18,660) --
Surrenders.......... (306,760) (104,833) (5,393) (382,801) (5,329) (2,416)
Loans............... (86,961) (97,145) (74,934) (339,651) (78,415) 26,990
Cost of insurance
and administrative
expense (note 3)... (127,864) (110,038) (79,593) (55,893) (43,371) (13,436)
Transfer gain (loss)
and transfer fees.. 3,589 12,636 14,879 (6,027) 989 606
Transfers (to) from
the Guarantee Account
(note 1)............. 35,983 (12,929) 109,443 14,501 46,495 41,217
Interfund transfers... 269,462 863,455 1,831,317 1,299,658 395,097 2,601,676
----------- ---------- --------- --------- --------- ---------
Increase (decrease) in
net assets from capital
transactions........... (60,227) 755,199 2,127,735 538,397 313,105 2,686,590
----------- ---------- --------- --------- --------- ---------
Increase (decrease) in
net assets........... 7,184,036 2,973,922 3,274,553 1,852,625 1,539,428 2,915,005
Net assets at beginning
of year................ 11,200,312 8,226,390 4,951,837 5,084,946 3,545,518 630,513
----------- ---------- --------- --------- --------- ---------
Net assets at end of
year................... $18,384,348 11,200,312 8,226,390 6,937,571 5,084,946 3,545,518
=========== ========== ========= ========= ========= =========
</TABLE>
F-37
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
------------------------------------------------------------
Flexible International
Income Growth
Portfolio 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)............ $ 18,729 17,911 9,720 (28,206) 22,885 (8,218)
Net realized gain
(loss)............... 2,310 2,524 3,107 452,801 171,620 145,208
Unrealized
appreciation
(depreciation) on
investments.......... (20,012) 3,399 4,489 1,288,333 158,124 45,943
Capital gain
distributions........ 1,152 1,021 76 -- 7,791 2,276
--------- ------- ------- --------- --------- ---------
Increase (decrease) in
net assets from
operations............. 2,179 24,855 17,392 1,712,928 360,420 185,209
--------- ------- ------- --------- --------- ---------
From capital
transactions:
Net premiums.......... 9,934 5,245 21,946 18,930 36,145 60,001
Loan interest......... (42) (324) (28) 1,974 (617) (1,662)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- (11,677) --
Surrenders.......... -- (52,087) -- (13,011) (60,448) --
Loans............... 2,596 21,183 (30,720) (7,155) 4,516 (10,000)
Cost of insurance
and administrative
expense (note 3)... (4,230) (3,675) (1,977) (25,425) (24,306) (16,021)
Transfer gain (loss)
and transfer fees.. 225 (208) (429) (1,336) 59,856 12,507
Transfers (to) from
the Guarantee Account
(note 1)............. -- 85 3,243 -- 77,727 122,804
Interfund transfers... (85,330) 269,008 3,106 (913,181) 813,972 1,044,932
--------- ------- ------- --------- --------- ---------
Increase (decrease) in
net assets from
capital transactions... (76,847) 239,227 (4,859) (939,204) 895,168 1,212,561
--------- ------- ------- --------- --------- ---------
Increase (decrease) in
net assets........... (74,668) 264,082 12,533 773,724 1,255,588 1,397,770
Net assets at beginning
of year................ 436,086 172,004 159,471 3,043,406 1,787,818 390,048
--------- ------- ------- --------- --------- ---------
Net assets at end of
year................... $ 361,418 436,086 172,004 3,817,130 3,043,406 1,787,818
========= ======= ======= ========= ========= =========
</TABLE>
F-38
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Janus Aspen Series (continued)
---------------------------------------
Capital
Appreciation
Portfolio
---------------------------------------
Period from
Year ended December 31, May 22,
-------------------------- December 31,
1999 1998 1997
------------- ----------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense)...... $ (31,231) (5,716) (75)
Net realized gain (loss)............. 435,959 225,641 (7,519)
Unrealized appreciation
(depreciation) on investments....... 837,570 56,754 (582)
Capital gain distributions........... 10,754 -- --
------------- ---------- ------
Increase (decrease) in net assets from
operations............................ 1,253,052 276,679 (8,176)
------------- ---------- ------
From capital transactions:
Net premiums......................... 73,275 12,000 --
Loan interest........................ (1,142) -- --
Transfers (to) from the general
account of GE Life & Annuity:
Death benefits..................... -- -- --
Surrenders......................... (41,706) -- --
Loans.............................. (7,970) (37,337) --
Cost of insurance and
administrative expense (note 3)... (28,392) (8,261) (181)
Transfer gain (loss) and transfer
fees.............................. 119,454 (4,436) (24)
Transfers (to) from the Guarantee
Account (note 1).................... -- -- --
Interfund transfers.................. 1,353,094 677,289 20,306
------------- ---------- ------
Increase (decrease) in net assets from
capital transactions.................. 1,466,613 639,255 20,101
------------- ---------- ------
Increase (decrease) in net assets.... 2,719,665 915,934 11,925
Net assets at beginning of year........ 927,859 11,925 --
------------- ---------- ------
Net assets at end of year.............. $ 3,647,524 927,859 11,925
============= ========== ======
</TABLE>
F-39
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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)............... $ 9,495 30,012 (9,747)
Net realized gain
(loss).................. 315,380 (3,318) 150,610
Unrealized appreciation
(depreciation) on
investments............. (146,827) (1,629) (55,310)
Capital gain
distributions........... 88,699 -- 64,488
---------------- ------------- -------------
Increase (decrease) in net
assets from operations.... 266,747 25,065 150,041
---------------- ------------- -------------
From capital transactions:
Net premiums.............. -- -- --
Loan interest............. (669) (2,301) (894)
Transfers (to) from the
general account of GE
Life & Annuity:
Death benefits........... -- -- --
Surrenders............... (19,398) -- --
Loans.................... (4,103) 53,065 (7,618)
Cost of insurance and
administrative expense
(note 3)................ (19,558) (5,054) (7,810)
Transfer gain (loss) and
transfer fees........... 669 (38,185) (1,185)
Interfund transfers....... (2,096,250) (670,024) (881,910)
---------------- ------------- -------------
Increase (decrease) in net
assets from capital trans-
actions................... (2,139,309) (662,499) (899,417)
---------------- ------------- -------------
Increase (decrease) in net
assets.................... (1,872,562) (637,434) (749,376)
Net assets at beginning of
year...................... 1,872,562 637,434 749,376
---------------- ------------- -------------
Net assets at end of year.. $ -- -- --
================ ============= =============
</TABLE>
F-40
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Statements of Changes in Net Assets, Continued
<TABLE>
<CAPTION>
Salomon Brothers
Goldman Sachs Variable Insurance Trust Variable Series Funds Inc.
--------------------------------------------------- ---------------------------------
Strategic Bond Total Return
Growth and Income Fund Mid Cap Value Fund Fund Fund
------------------------- ------------------------- ---------------- ----------------
Period from Period from
October 6, June 25, Period from Period from
Year ended 1998 to Year ended 1998 to March 19, 1999 July 14, 1999
December 31, December 31, December 31, December 31, to December 31, to December 31,
1999 1998 1999 1998 1999 1999
------------ ------------ ------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets
From operations:
Net investment income (expense).... $ 118 37 (3,000) 425 (1,150) 115
Net realized gain (loss)........... 573 58 84,871 (16) (14,814) (8)
Unrealized appreciation
(depreciation) on investments..... (2,840) 49 (27,108) 196 (4,324) (424)
Capital gain distributions......... -- -- -- -- -- --
------- ----- ------- ------ ------- -----
Increase (decrease) in net assets
from operations..................... (2,149) 144 54,763 605 (20,288) (317)
------- ----- ------- ------ ------- -----
From capital transactions:
Net premiums....................... 1,250 -- 7,450 -- -- --
Loan interest...................... (86) -- 945 -- 227 --
Transfers (to) from the general
account of
GE Life & Annuity:
Death benefits
Surrenders....................... -- -- -- -- -- --
Loans............................ -- -- -- -- -- --
Cost of insurance and
administrative expense.......... -- -- -- -- 11,465 (134)
(note 3)....................... (497) (10) (2,968) (279) (2,472) (65)
Transfer gain (loss) and transfer
fees............................ (19) 63 35,817 116 (471) 1
Transfers (to) from the Guarantee
Account (note 1).................. -- -- 23,524 -- -- --
Interfund transfers................ 64,781 5,092 44,102 79,827 113,987 6,940
------- ----- ------- ------ ------- -----
Increase (decrease) in net assets
from capital transactions........... 65,429 5,145 108,870 79,664 122,736 6,742
------- ----- ------- ------ ------- -----
Increase (decrease) in net assets.. 63,280 5,289 163,633 80,269 102,448 6,425
Net assets at beginning of year...... 5,289 -- 80,269 -- -- --
------- ----- ------- ------ ------- -----
Net assets at end of year............ $68,569 5,289 243,902 80,269 102,448 6,425
======= ===== ======= ====== ======= =====
</TABLE>
F-41
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements
December 31, 1999
(1)Description of Entity
GE Life & Annuity Separate Account III, formerly Life of Virginia Separate
Account III, (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 variable
life insurance policies issued by GE Life & Annuity. GE Life & Annuity 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 Corporation (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 was added to the Account. The
Premier Growth Equity Fund, which invests solely in a designated portfolio of
the GE Investment Funds, Inc., was added to the Account. The fund 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. The Investors Fund, Strategic Bond Fund, and the Total Return Fund
each invest solely in a designated portfolio of the Salomon Brothers Variable
Series Fund. All designated portfolios described above are series type mutual
funds. There were no amounts issued in the Investors Fund during 1998 or 1999.
In May 1998, three new investment subdivisions were added to the Account.
The U.S. Equity Fund invests solely in a designated portfolio of the GE
Investments Funds, Inc. The Growth and Income, and Mid Cap Value (formerly Mid
Cap Equity) Funds each invest solely in a designated portfolio of the Goldman
Sachs Variable Insurance Trust Fund. All designated portfolios described above
are series type mutual funds.
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 Management GE Investments Funds, Inc.
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--
Neuberger & Berman Advisers Management Variable Insurance Products Fund
Trust
Shares of Balanced Portfolio-- Shares of Balanced Portfolio--
Neuberger & Berman Advisers Management Janus Aspen Series
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-42
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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.
For policies issued after May 1, 1995, some policyowners may transfer cash
values between the Account's portfolios and the Guarantee Account that is part
of the general account of GE Life & Annuity. Amounts transferred to the
Guarantee Account earn interest at the interest rate effective at the time of
such transfer and remain in effect for one year, after which a new rate may be
declared.
(2)Summary of Significant Accounting Policies
(a) 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................................. $ 8,074,508 7,214,880
Money Market Fund.................................. 142,550,663 137,813,632
Total Return Fund.................................. 252,045 423,194
International Equity Fund.......................... 95,821 53,745
Real Estate Securities Fund........................ 129,373 186,650
Global Income Fund................................. 8,053,103 7,879,226
Value Equity Fund.................................. 2,236,005 2,105,030
Income Fund........................................ 217,788 270,438
U.S. Equity Fund................................... 125,476 10,321
Premier Growth Equity Fund......................... 411,273 4,116
Oppenheimer Variable Account Funds:
Bond Fund/VA....................................... 4,664,510 5,368,442
Aggressive Growth Fund/VA.......................... 10,318,765 12,079,719
Capital Appreciation Fund/VA....................... 13,344,120 14,752,551
High Income Fund/VA................................ 5,801,753 9,370,017
Multiple Strategies Fund/VA........................ 409,651 632,184
</TABLE>
F-43
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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:
Equity-Income Portfolio............................. $ 4,915,891 6,821,877
Growth Portfolio.................................... 22,585,871 23,276,357
Overseas Portfolio.................................. 7,307,789 9,133,870
Variable Insurance Products Fund II:
Asset Manager Portfolio............................. 1,254,832 2,225,955
Contrafund Portfolio................................ 4,543,326 5,813,319
Variable Insurance Products Fund III:
Growth & Income Portfolio........................... 5,056,011 4,659,241
Growth Opportunities Portfolio...................... 517,132 269,032
Federated Insurance Series:
American Leaders Fund II............................ 369,678 437,325
High Income Bond Fund II............................ 4,343,137 4,376,296
Utility Fund II..................................... 64,465 146,678
Alger American Fund:
Small Capitalization Portfolio...................... 6,407,968 7,157,866
Growth Portfolio.................................... 4,227,645 2,891,282
PBHG Insurance Series Fund, Inc.:
PBHG Large Cap Growth Portfolio..................... 285,430 150,633
PBHG Growth II Portfolio............................ 7,159,550 7,161,161
Janus Aspen Series:
Aggressive Growth Portfolio......................... 43,175,696 40,322,321
Growth Portfolio.................................... 4,678,348 3,905,156
Worldwide Growth Portfolio.......................... 7,097,136 7,336,085
Balanced Portfolio.................................. 2,045,928 1,567,384
Flexible Income Portfolio........................... 303,173 360,565
International Growth Portfolio...................... 5,200,086 6,170,402
Capital Appreciation Portfolio...................... 36,142,487 34,686,023
Goldman Sachs Variable Insurance Trust:
Growth and Income Fund.............................. 93,553 27,975
Mid Cap Value Fund.................................. 3,431,804 3,325,911
Salomon Brothers Variable Series Fund Inc.:
Strategic Bond Fund................................. 5,645,594 5,523,951
Total Return Fund................................... 7,094 234
</TABLE>
F-44
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
(b) Capital Transactions
The increase (decrease) of 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.
--------------------------------------------------------------
Real
S&P 500 Government Money Total International Estate
Index Securities Market Return Equity Securities
Fund Fund Fund Fund Fund Fund
------- ---------- -------- ------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding at De-
cember 31, 1996........ 58,616 43,554 683,115 62,796 69,054 14,627
------- ------- -------- ------ ------- -------
From capital transac-
tions:
Net premiums.......... 918 705 888,521 1,582 69 3,906
Loan interest......... (15) (24) 1,522 3 (1) --
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... (56) -- -- (5,200) -- --
Surrenders.......... (1,568) (14,115) (4,893) (404) -- --
Loans............... (310) (1,284) (15,590) (1,334) 123 (1,039)
Cost of insurance
and administrative
expenses........... (770) (447) (7,485) (686) (623) (570)
Transfers (to) from
the Guarantee Ac-
count................ 1,030 15 (1,925) 1,924 -- 203
Interfund transfers... 35,756 (28,404) (795,469) 5,670 (48,010) 41,075
------- ------- -------- ------ ------- -------
Net increase (decrease)
in units from capital
transactions........... 34,985 (43,554) 64,681 1,555 (48,442) 43,575
------- ------- -------- ------ ------- -------
Units outstanding at De-
cember 31, 1997........ 93,601 -- 747,796 64,351 20,612 58,202
------- ------- -------- ------ ------- -------
From capital transac-
tions:
Net premiums.......... 10,503 -- 318,502 457 (63) 2,573
Loan interest......... (51) -- 939 (4) 3 (12)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... (776) -- (579) -- -- --
Surrenders.......... (3,536) -- (29,501) (5,534) -- (181)
Loans............... (258) -- (62,560) (1,140) (230) (955)
Cost of insurance
and administrative
expenses........... (1,578) -- (8,969) (602) 231 (703)
Transfers (to) from
the Guarantee Ac-
count................ 4,508 -- (3,439) 353 (1,473) 2,167
Interfund transfers... 38,024 -- (569,612) 1,764 1,669 (13,779)
------- ------- -------- ------ ------- -------
Net increase (decrease)
in units from capital
transactions........... 46,836 -- (55,219) (4,706) 137 (10,890)
------- ------- -------- ------ ------- -------
Units outstanding at De-
cember 31, 1998........ 140,437 -- 692,577 59,645 20,749 47,312
------- ------- -------- ------ ------- -------
From capital transac-
tions:
Net premiums.......... 4,635 -- 453,065 283 -- 593
Loan interest......... (80) -- 2,062 (23) -- (65)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- -- --
Surrenders.......... (12,655) -- (253,135) (4,209) -- (2,315)
Loans............... (319) -- (45,695) (167) -- (262)
Cost of insurance
and administrative
expenses........... (1,697) -- (9,438) (586) (244) (546)
Transfers (to) from
the Guarantee Ac-
count................ 27 -- -- 16 -- --
Interfund transfers... 32,129 -- 111,903 (2,341) 1,517 (2,972)
------- ------- -------- ------ ------- -------
Net increase (decrease)
in units from capital
transactions........... 22,040 -- 258,762 (7,027) 1,273 (5,567)
------- ------- -------- ------ ------- -------
Units outstanding at De-
cember 31, 1999........ 162,477 -- 951,339 52,618 22,022 41,745
======= ======= ======== ====== ======= =======
</TABLE>
F-45
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
GE Investments Funds, Inc. (continued)
----------------------------------------------
Global Value U.S. Premier
Income Equity Income Equity Growth Equity
Fund Fund Fund Fund Fund
------ ------ ------- ------ -------------
<S> <C> <C> <C> <C> <C>
Units outstanding at December
31, 1996...................... -- -- -- -- --
----- ------ ------- ------ ------
From capital transactions:
Net premiums................. -- 356 -- -- --
Loan interest................ -- -- -- -- --
Transfers (to) from the gen-
eral account of
GE Life & Annuity:
Death benefits............. -- -- -- -- --
Surrenders................. -- -- -- -- --
Loans...................... -- -- (240) -- --
Cost of insurance and ad-
ministrative expenses..... (2) (48) (74) -- --
Transfers (to) from the
Guarantee Account........... -- -- -- -- --
Interfund transfers.......... 1,338 18,848 122,212 -- --
----- ------ ------- ------ ------
Net increase (decrease) in
units from capital
transactions.................. 1,336 19,156 121,898 -- --
----- ------ ------- ------ ------
Units outstanding at December
31, 1997...................... 1,336 19,156 121,898 -- --
----- ------ ------- ------ ------
From capital transactions:
Net premiums................. -- 1,214 1 -- --
Loan interest................ -- (63) (366) -- --
Transfers (to) from the gen-
eral account of
GE Life & Annuity:
Death benefits............. -- -- -- -- --
Surrenders................. -- -- (252) -- --
Loans...................... -- (90) (2,123) -- --
Cost of insurance and ad-
ministrative expenses..... (25) (370) (1,466) (3) --
Transfers (to) from the
Guarantee Account........... -- -- 764 -- --
Interfund transfers.......... 1,172 18,643 19,037 955 --
----- ------ ------- ------ ------
Net increase (decrease) in
units from capital
transactions.................. 1,147 19,334 15,595 952 --
----- ------ ------- ------ ------
Units outstanding at December
31, 1998...................... 2,483 38,490 137,493 952 --
----- ------ ------- ------ ------
From capital transactions:
Net premiums................. 3 243 1,551 -- (1)
Loan interest................ -- (66) (457) -- --
Transfers (to) from the gen-
eral account of
GE Life & Annuity:
Death benefits............. -- -- -- -- --
Surrenders................. -- -- (8,378) -- --
Loans...................... 15 (445) (428) -- (30)
Cost of insurance and ad-
ministrative expenses..... (4) (525) (1,456) (46) (204)
Transfers (to) from the
Guarantee Account........... -- 1,886 1,928 -- --
Interfund transfers.......... 162 7,567 (2,666) 9,329 39,537
----- ------ ------- ------ ------
Net increase (decrease) in
units from capital
transactions.................. 176 8,660 (9,906) 9,283 39,302
----- ------ ------- ------ ------
Units outstanding at December
31, 1999...................... 2,659 47,150 127,587 10,235 39,302
===== ====== ======= ====== ======
</TABLE>
F-46
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
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>
Units outstanding at De-
cember 31, 1996........ 10,387 81,322 177,408 78,571 135,468 103,922
------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- 567 5,184 4,979 3,036 515
Loan interest......... -- 10 (15) (57) (20) (30)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- -- (83)
Surrenders.......... -- -- (182) -- (291) --
Loans............... -- (938) (2,466) (1,925) (949) 364
Cost of insurance
and administrative
expenses........... (104) (792) (2,250) (1,203) (1,459) (1,248)
Transfers (to) from
the Guarantee Ac-
count................ -- 465 2,796 2,441 -- 999
Interfund transfers... (10,283) 80,017 25,443 45,075 71,340 18,636
------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... (10,387) 79,329 28,510 49,310 71,657 19,153
------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1997........ -- 160,651 205,918 127,881 207,125 123,075
------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- 3,023 9,796 3,787 331 45
Loan interest......... -- 88 655 (82) (50) (40)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- (1,322) (854)
Surrenders.......... -- (3,818) (21,555) (4,162) (16,597) (6,487)
Loans............... -- (34) (58,985) (3,464) (993) (2,318)
Cost of insurance
and administrative
expenses........... -- (1,373) (7,454) (1,353) (1,787) (1,472)
Transfers (to) from
the Guarantee Ac-
count................ -- 399 693 1,693 812 1,351
Interfund transfers... -- (52,085) 47,191 63,068 5,503 4,993
------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... -- (53,800) (29,659) 59,487 (14,103) (4,782)
------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1998........ -- 106,851 176,259 187,368 193,022 118,293
------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- 934 1,328 925 212 1,302
Loan interest......... -- 137 (126) (79) (64) (7)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- (554) -- -- --
Surrenders.......... -- (1,554) (10,319) (17,001) (2,950) (6,514)
Loans............... -- (1,336) (3,056) (4,252) (3,614) (369)
Cost of insurance
and administrative
expenses........... -- (934) (1,687) (1,190) (1,595) (1,088)
Transfers (to) from
the Guarantee Ac-
count................ -- 284 199 -- 13 32
Interfund transfers... -- (32,896) (25,280) (71,462) (47,495) (8,763)
------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... -- (35,365) (39,495) (93,059) (55,493) (15,407)
------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1999........ -- 71,486 136,764 94,309 137,529 102,886
======= ======= ======= ======= ======= =======
</TABLE>
F-47
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Variable Insurance
Variable Insurance Products Fund Products Fund II
------------------------------------------------- --------------------
Money High Equity Asset
Market Income Income Growth Overseas Manager Contrafund
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at De-
cember 31, 1996........ 73,394 53,819 478,350 320,102 315,896 405,585 283,121
------- ------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- -- 8,841 6,684 600 3,583 9,027
Loan interest......... (523) -- (237) (259) (114) (180) (173)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- (749) (139) -- (5,411) (94)
Surrenders.......... (765) (6,032) (2,952) (2,453) (1,224) (325) (497)
Loans............... (1,169) (238) (4,978) (12,995) (6,601) (3,524) (6,225)
Cost of insurance
and administrative
expenses........... (526) (432) (6,220) (8,445) (2,771) (3,562) (3,816)
Transfers (to) from
the Guarantee
Account.............. -- -- 4,627 3,782 2,879 1,223 7,878
Interfund transfers... (70,411) (47,117) 12,774 3,763 (65,198) (2,171) 95,951
------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... (73,394) (53,819) 11,106 (10,062) (72,429) (10,367) 102,051
------- ------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1997........ -- -- 489,456 310,040 243,467 395,218 385,172
------- ------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- -- 4,258 1,424 799 92 7,384
Loan interest......... -- -- (318) (483) (64) (276) (287)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- (1,780) (685) (1,283) (1,619) (1,038)
Surrenders.......... -- -- (6,479) (16,160) (9,040) (12,811) (935)
Loans............... -- -- (11,737) (15,030) (3,925) (9,503) (3,564)
Cost of insurance
and administrative
expenses........... -- -- (4,890) (3,495) (1,986) (3,990) (3,917)
Transfers (to) from
the Guarantee
Account.............. -- -- 3,580 2,834 (363) 2,750 3,497
Interfund transfers... -- -- (5,896) 13,096 12,401 6,154 41,115
------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... -- -- (23,235) (18,499) (3,461) (19,203) 42,255
------- ------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1998........ -- -- 466,221 291,541 240,006 376,015 427,427
------- ------- ------- ------- ------- ------- -------
From capital transac-
tions:
Net premiums.......... -- -- 839 3,218 754 84 2,850
Loan interest......... -- -- (355) (326) (99) (301) (344)
Transfers (to) from
the general account
of
GE Life & Annuity:
Death benefits...... -- -- -- -- (885) -- (948)
Surrenders.......... -- -- (14,522) (27,627) (7,933) (28,550) (21,891)
Loans............... -- -- (6,257) (3,276) (4,471) (2,115) (6,131)
Cost of insurance
and administrative
expenses........... -- -- (4,198) (2,672) (1,663) (3,578) (4,071)
Transfers (to) from
the Guarantee
Account.............. -- -- (3,506) 112 18 1,395 262
Interfund transfers... -- -- (37,767) (9,026) (64,727) (27,162) (30,229)
------- ------- ------- ------- ------- ------- -------
Net increase (decrease)
in units from capital
transactions........... -- -- (65,766) (39,597) (79,006) (60,227) (60,502)
------- ------- ------- ------- ------- ------- -------
Units outstanding at De-
cember 31, 1999........ -- -- 400,455 251,944 161,000 315,788 366,925
======= ======= ======= ======= ======= ======= =======
</TABLE>
F-48
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Variable Insurance Products Neuberger & Berman
Fund III Advisers Management Trust
-------------------------------- ------------------------------
Growth & Growth
Income Opportunities Balanced Bond Growth
Portfolio Portfolio Portfolio Portfolio Portfolio
------------- --------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Units outstanding at
December 31, 1996...... -- -- 114,320 52,241 49,204
------------- ------------- -------- ------- -------
From capital
transactions:
Net premiums.......... 1,078 1,677 -- -- --
Loan interest......... -- -- (36) (192) (49)
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- --
Surrenders.......... -- -- (1,036) -- --
Loans............... -- -- (219) 4,440 (417)
Cost of insurance
and administrative
expenses........... (139) (149) (1,045) (423) (428)
Transfers (to) from
the Guarantee
Account.............. -- 271 -- -- --
Interfund transfers... 32,242 26,820 (111,984) (56,066) (48,310)
------------- ------------- -------- ------- -------
Net increase (decrease)
in units from capital
transactions........... 33,181 28,619 (114,320) (52,241) (49,204)
------------- ------------- -------- ------- -------
Units outstanding at
December 31, 1997...... 33,181 28,619 -- -- --
------------- ------------- -------- ------- -------
From capital
transactions:
Net premiums.......... 1,845 2,945 -- -- --
Loan interest......... (31) (10) -- -- --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- --
Surrenders.......... -- -- -- -- --
Loans............... (252) -- -- -- --
Cost of insurance
and administrative
expenses........... (609) (383) -- -- --
Transfers (to) from
the Guarantee
Account.............. 1,097 649 -- -- --
Interfund transfers... 28,309 10,821 -- -- --
------------- ------------- -------- ------- -------
Net increase (decrease)
in units from capital
transactions........... 30,359 14,022 -- -- --
------------- ------------- -------- ------- -------
Units outstanding at
December 31, 1998...... 63,540 42,641 -- -- --
------------- ------------- -------- ------- -------
From capital
transactions:
Net premiums.......... 837 38 -- -- --
Loan interest......... (1) (6) -- -- --
Transfers (to) from
the general account
of GE Life & Annuity:
Death benefits...... -- -- -- -- --
Surrenders.......... (2,372) (1,140) -- -- --
Loans............... (661) (64) -- -- --
Cost of insurance
and administrative
expenses........... (1,112) (549) -- -- --
Transfers (to) from
the Guarantee
Account.............. 729 -- -- -- --
Interfund transfers... 27,874 17,414 -- -- --
------------- ------------- -------- ------- -------
Net increase (decrease)
in units from capital
transactions........... 25,294 15,693 -- -- --
------------- ------------- -------- ------- -------
Units outstanding at
December 31, 1999...... 88,834 58,334 -- -- --
============= ============= ======== ======= =======
</TABLE>
F-49
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
PBHG Insurance
Federated Insurance Series Alger American Fund Series Fund, Inc.
----------------------------- ------------------------ --------------------
American High Small PBHG Large PBHG
Leaders Income Bond Utility Capitalization Growth Cap Growth Growth II
Fund II Fund II Fund II Portfolio Portfolio Portfolio Portfolio
-------- ----------- ------- -------------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at December 31, 1996....... 1,606 50,680 17,985 111,215 125,545 -- --
------- ------- ------ ------- ------- ------ ------
From capital transactions:
Loan interest.............................. -- (91) (4) -- (24) -- --
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits........................... -- -- -- -- -- -- --
Surrenders............................... -- -- -- (138) (266) -- --
Loans.................................... 16 (768) (2,368) (5,683) (3,238) -- --
Cost of insurance and administrative
expenses................................ (247) (600) (238) (1,990) (1,118) (11) (44)
Transfers (to) from the Guarantee Account.. 418 364 719 8,023 1,345 283 239
Interfund transfers........................ 26,797 95,909 7,319 16,471 7,897 2,446 8,006
------- ------- ------ ------- ------- ------ ------
Net increase (decrease) in units from capital
transactions................................ 34,250 97,733 5,428 26,536 5,852 2,718 8,640
------- ------- ------ ------- ------- ------ ------
Units outstanding at December 31, 1997....... 35,856 148,413 23,413 137,751 131,397 2,718 8,640
------- ------- ------ ------- ------- ------ ------
From capital transactions:
Net premiums............................... 5,835 1,842 1,248 4,733 3,551 (1) 424
Loan interest.............................. (14) (27) (48) (35) (66) -- (7)
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits........................... -- -- -- (1,209) (1,398) -- --
Surrenders............................... -- -- -- (6,320) (3,136) (82) --
Loans.................................... (779) (954) (1,114) 2,007 (4,993) (18) --
Cost of insurance and administrative
expenses................................ (675) (936) (330) (1,753) (1,998) (54) (133)
Transfers (to) from the Guarantee Account.. 971 392 -- 2,095 2,530 -- 2,947
Interfund transfers........................ 20,774 (74,663) 4,692 112,713 45,241 (201) 255
------- ------- ------ ------- ------- ------ ------
Net increase (decrease) in units from capital
transactions................................ 26,112 (74,346) 4,448 112,231 39,731 (356) 3,486
------- ------- ------ ------- ------- ------ ------
Units outstanding at December 31, 1998....... 61,968 74,067 27,861 249,982 171,128 2,362 12,126
------- ------- ------ ------- ------- ------ ------
From capital transactions:
Net premiums............................... 3,371 1,529 (1) 3,927 2,689 433 264
Loan interest.............................. (5) (21) (31) (366) (102) 2 (25)
Transfers (to) from the general account of
GE Life & Annuity:
Death benefits........................... -- -- -- -- (1,165) -- --
Surrenders............................... -- (2,467) (751) -- (12,596) -- --
Loans.................................... (360) (6,501) (1,452) 288 (3,825) (48) (1,324)
Cost of insurance and administrative
expenses................................ (740) (1,180) (271) (2,117) (2,044) (123) (643)
Transfers (to) from the Guarantee Account.. 537 -- -- 982 22 -- --
Interfund transfers........................ (12,336) 557 (3,563) (87,931) 59,998 9,061 4,386
------- ------- ------ ------- ------- ------ ------
Net increase (decrease) in units from capital
transactions................................ (9,533) (8,083) (6,069) (85,217) 42,977 9,325 2,658
------- ------- ------ ------- ------- ------ ------
Units outstanding at December 31, 1999....... 52,435 65,984 21,792 164,765 214,105 11,687 14,784
======= ======= ====== ======= ======= ====== ======
</TABLE>
F-50
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<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>
Units outstanding at December 31, 1996..... 129,703 190,622 319,680 51,766 14,100 33,423 --
------- ------- ------- ------- ------ ------- -------
From capital transactions:
Net premiums............................. 4,146 6,158 19,120 2,260 1,522 4,872 --
Loan interest............................ (5) (37) (53) (3) (2) (135) --
Transfers (to) from the general account
of GE Life & Annuity:
Death benefits......................... -- -- (99) -- -- -- --
Surrenders............................. (22) (692) (308) (171) -- -- --
Loans.................................. (4,697) (6,214) (4,281) 1,907 (2,130) (812) --
Cost of insurance and administrative
expenses.............................. (1,702) (2,647) (4,547) (949) (137) (1,301) (9)
Transfers (to) from the Guarantee Account.. 2,380 5,134 6,252 2,912 225 9,973 --
Interfund transfers...................... 34,709 67,507 104,621 183,798 215 84,860 959
------- ------- ------- ------- ------ ------- -------
Net increase (decrease) in units from
capital transactions...................... 34,809 69,209 120,705 189,754 (307) 97,457 950
------- ------- ------- ------- ------ ------- -------
Units outstanding at December 31, 1997..... 164,512 259,831 440,385 241,520 13,793 130,880 950
------- ------- ------- ------- ------ ------- -------
From capital transactions:
Net premiums............................. 2,149 3,907 11,534 1,293 409 2,672 867
Loan interest............................ (102) (332) (131) (259) (25) (46) --
Transfers (to) from the general account
of GE Life & Annuity:
Death benefits......................... -- -- (2,881) (1,183) -- (863) --
Surrenders............................. (470) (6,229) (4,378) (338) (4,063) (4,468) --
Loans.................................. (1,267) (9,616) (4,057) (4,970) 1,652 334 (2,698)
Cost of insurance and administrative
expenses.............................. (1,289) (3,337) (4,595) (2,749) (287) (1,797) (597)
Transfers (to) from the Guarantee Account.. 425 1,109 (540) 2,947 7 5,745 --
Interfund transfers...................... (40,437) 18,470 36,057 25,041 20,985 60,164 48,939
------- ------- ------- ------- ------ ------- -------
Net increase (decrease) in units from
capital transactions...................... (40,991) 3,972 31,009 19,782 18,678 61,741 46,511
------- ------- ------- ------- ------ ------- -------
Units outstanding at December 31, 1998..... 123,521 263,803 471,394 261,302 32,471 192,621 47,461
------- ------- ------- ------- ------ ------- -------
From capital transactions:
Net premiums............................. 951 3,045 (14,576) 1,734 727 1,178 3,576
Loan interest............................ (122) (294) 445 (319) (3) 123 (56)
Transfers (to) from the general account
of GE Life & Annuity:
Death benefits......................... -- (856) 1,883 (1,042) -- -- --
Surrenders............................. (4,770) (12,134) 24,665 (16,600) -- (810) (2,035)
Loans.................................. (3,253) (4,155) 6,992 (14,729) 190 (445) (389)
Cost of insurance and administrative
expenses.............................. (1,672) (2,652) 10,281 (2,424) (310) (1,582) (1,386)
Transfers (to) from the Guarantee Account.. -- 130 (2,893) 629 -- -- --
Interfund transfers...................... 96,474 46,586 (21,666) 56,360 (6,244) (56,821) 66,036
------- ------- ------- ------- ------ ------- -------
Net increase (decrease) in units from
capital transactions...................... 87,608 29,670 5,131 23,609 (5,640) (58,357) 65,746
------- ------- ------- ------- ------ ------- -------
Units outstanding at December 31, 1999..... 211,129 293,473 476,525 284,911 26,831 134,264 113,207
======= ======= ======= ======= ====== ======= =======
</TABLE>
F-51
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
Goldman Sachs
Variable Salomon Brothers
Insurance Variable Series
Trust Fund Inc.
-------------- ----------------
Growth Mid
and Cap Total
Income Value Strategic Return
Fund Fund Bond Fund Fund
------ ------ --------- ------
<S> <C> <C> <C> <C>
Units outstanding at December 31, 1996......... -- -- -- --
----- ------ ------ ---
From capital transactions:
Net premiums................................. -- -- -- --
Loan interest................................ -- -- -- --
Transfers (to) from the general account of GE
Life & Annuity:
Death benefits............................. -- -- -- --
Surrenders................................. -- -- -- --
Loans...................................... -- -- -- --
Cost of insurance and administrative
expenses.................................. -- -- -- --
Transfers (to) from the Guarantee Account.... -- -- -- --
Interfund transfers.......................... -- -- -- --
----- ------ ------ ---
Net increase (decrease) in units from capital
transactions.................................. -- -- -- --
----- ------ ------ ---
Units outstanding at December 31, 1997......... -- -- -- --
----- ------ ------ ---
From capital transactions:
Net premiums................................. -- -- -- --
Loan interest................................ -- -- -- --
Transfers (to) from the general account of GE
Life & Annuity:
Death benefits............................. -- -- -- --
Surrenders................................. -- -- -- --
Loans...................................... -- -- -- --
Cost of insurance and administrative
expenses.................................. -- (33) -- --
Transfers (to) from the Guarantee Account.... -- -- -- --
Interfund transfers.......................... 598 9,410 -- --
----- ------ ------ ---
Net increase (decrease) in units from capital
transactions.................................. 598 9,377 -- --
----- ------ ------ ---
Units outstanding at December 31, 1998......... 598 9,377 -- --
----- ------ ------ ---
From capital transactions:
Net premiums................................. 131 2,015 -- --
Loan interest................................ (9) 256 19 --
Transfers (to) from the general account of GE
Life & Annuity:
Death benefits............................. -- -- -- --
Surrenders................................. -- -- -- --
Loans...................................... -- -- 940 (12)
Cost of insurance and administrative
expenses.................................. (52) (803) (203) (6)
Transfers (to) from the Guarantee Account.... -- 6,364 -- --
Interfund transfers.......................... 6,777 11,931 9,347 624
----- ------ ------ ---
Net increase (decrease) in units from capital
transactions.................................. 6,847 19,763 10,103 606
----- ------ ------ ---
Units outstanding at December 31, 1999......... 7,445 29,140 10,103 606
===== ====== ====== ===
</TABLE>
F-52
<PAGE>
GE LIFE & ANNUITY SEPARATE ACCOUNT III
Notes to Financial Statements -- Continued
December 31, 1999
(c) 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.
(d) 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
The premiums transferred from GE Life & Annuity to the Account represent
gross premiums recorded by GE Life & Annuity on its variable life insurance
policies. During the first ten years following a premium payment, a charge is
deducted monthly at an effective annual rate of .50% of the premium payment
from the policy cash value to cover distribution expenses and premiums taxes.
If a policy is surrendered or lapses during the first nine years, a charge is
made by GE Life & Annuity to cover the expenses of issuing the policy. Subject
to certain limitations, the charge generally equals 6% of the premium
withdrawn in the first four years, and this charge decreases 1% per year for
every year thereafter. 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 GE Life & Annuity for the
cost of insurance. In addition, GE Life & Annuity charges the Account for the
mortality and expense (M&E) risk that GE Life & Annuity assumes. This M&E
charge is deducted daily and equals the effective annual rate of .90% of the
net assets of the Account. GE Life & Annuity also charges the Account for
certain administrative charges which are deducted daily at the effective
annual rate of .40% of the net assets of the Account.
GE Investments Funds, Inc. (the Fund) is an open-end diversified management
investment company.
Capital Brokerage Corporation, an affiliate of GE Life & Annuity, is a
Washington Corporation registered with the Commission under the Securities
Exchange Act of 1934 as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc. Capital Brokerage Corporation serves
as principal underwriter for variable life insurance policies and variable
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, and Total Return Funds, 1.00% for the International
Equity Fund, .85% for the Real Estate Securities Fund, .60% for the Global
Income Fund, .55% for the U.S. Equity Fund and .65% for the Value Equity and
Premier Growth Equity Funds. Prior to May 1, 1997, Aon Advisors, Inc. served
as investment advisor to the Fund and was subject to the same compensation
arrangement as GE Investment Management Incorporated.
Certain officers and directors of GE Life & Annuity are also officers and
directors of Capital Brokerage Corporation.
F-53
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2000
(Unaudited)
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
TABLE OF CONTENTS
June 30, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
(Unaudited)
Consolidated Balance Sheet............................................... 2
Consolidated Statement of Income......................................... 3
Consolidated Statement of Shareholders' Interest......................... 4
Notes to Consolidated Financial Statements (Unaudited)..................... 5
</TABLE>
F-1
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
Consolidated Balance Sheet
June 30, 2000
(Unaudited)
(Dollar amounts in millions, except per share amounts)
<TABLE>
<S> <C>
Assets
Investments:
Fixed maturities available-for-sale, at fair value................. $ 8,228.8
Equity securities available-for-sale, at fair value:
Common stocks..................................................... 8.7
Preferred stocks, non-redeemable.................................. 18.7
Investment in subsidiary........................................... 2.6
Mortgage loans, net of valuation allowance of $24.5................ 923.7
Policy loans....................................................... 76.7
Real estate owned.................................................. 2.5
Other invested assets.............................................. 168.6
---------
Total investments................................................. 9,430.3
---------
Cash................................................................ --
Accrued investment income........................................... 188.0
Deferred acquisition costs.......................................... 630.2
Intangible assets................................................... 449.6
Reinsurance recoverable............................................. 95.9
Deferred income tax asset........................................... 102.4
Other assets........................................................ 110.4
Separate account assets............................................. 10,855.4
---------
Total assets...................................................... $21,862.2
=========
Liabilities and Shareholders' Interest
Liabilities:
Future annuity and contract benefits............................... $ 9,244.2
Liability for policy and contract claims........................... 121.7
Other policyholder liabilities..................................... 158.0
Accounts payable and accrued expenses.............................. 231.1
Separate account liabilities....................................... 10,855.4
---------
Total liabilities................................................. 20,610.4
---------
Shareholders' interest:
Net unrealized investment losses................................... (153.7)
---------
Accumulated non-owner changes in equity............................ (153.7)
Preferred stock, Series A ($1,000 par value, $1,000 redemption and
liquidation value, 200,000 shares authorized, 120,000 shares
issued and outstanding)........................................... 120.0
Common stock ($1,000 par value, 50,000 authorized, 25,651 shares
issued and outstanding)........................................... 25.6
Additional paid-in capital......................................... 1,050.7
Retained earnings.................................................. 209.2
---------
Total shareholders' interest...................................... 1,251.8
---------
Total liabilities and shareholders' interest...................... $21,862.2
=========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
Consolidated Statement of Income
Six Months Ended June 30, 2000
(Unaudited)
(Dollar amounts in millions)
<TABLE>
<S> <C>
Revenues:
Net investment income................................................. $ 345.7
Net realized investment losses........................................ (0.8)
Premiums.............................................................. 60.5
Cost of insurance..................................................... 64.2
Variable product fees................................................. 70.4
Other income.......................................................... 33.2
-------
Total revenues....................................................... 573.2
-------
Benefits and expenses:
Interest credited..................................................... 252.5
Benefits and other changes in policy reserves......................... 128.8
Commissions........................................................... 133.2
General expenses...................................................... 62.0
Amortization of intangibles, net...................................... 27.0
Change in deferred acquisition costs, net............................. (139.4)
Interest expense...................................................... 0.2
-------
Total benefits and expenses.......................................... 464.3
-------
Income before income taxes .......................................... 108.9
Provision for income taxes............................................. 38.5
-------
Net income........................................................... 70.4
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' INTEREST
(Dollar amounts in millions, except share amounts)
(Unaudited)
<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(a) Earnings Interest
------- ------ ------ ------ ------- ------- ---------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1999................... 120,000 120.0 25,651 25.6 -- -- 1,050.7 (134.2) 143.6 1,205.7
Changes other than
transactions with
shareholders:
Net income.............. -- -- -- -- -- -- -- -- 70.4 70.4
Net unrealized losses
on investment
securities ............ -- -- -- -- -- -- -- (19.5) -- (19.5)
-------
Total changes other
than transactions with
shareholders.......... 50.9
Cash dividend declared
and paid............... -- -- -- -- -- -- -- -- (4.8) (4.8)
------- ----- ------ ---- ------- ------- ------- ------ ----- -------
Balances at June 30,
2000................... 120,000 120.0 25,651 25.6 -- -- 1,050.7 (153.7) 209.2 1,251.8
======= ===== ====== ==== ======= ======= ======= ====== ===== =======
</TABLE>
--------
(a) Presented net of deferred taxes of $82.8 at June 30, 2000.
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GE LIFE AND ANNUITY ASSURANCE COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
1. The accompanying consolidated year-to-date financial statements represent
GE Life and Annuity Assurance Company and its consolidated subsidiary,
Assigned Settlements Inc. (collectively "the Company"). All significant
intercompany transactions have been eliminated.
2. The consolidated year-to-date financial statements are unaudited. These
statements include all adjustments (consisting of normal recurring
accruals) considered necessary by management to present a fair statement of
the results of operations and financial position. The results reported in
these consolidated financial statements should not be regarded as
necessarily indicative of results that may be expected for the entire year.
3. The Financial Accounting Standards Board has issued, then subsequently
amended, Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities, effective for
the Company on January 1, 2001. Upon adoption, all derivative instruments
(including certain derivative instruments embedded in other contracts) will
be recognized in the consolidated balance sheet 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 shareholders' interest pending recognition in
earnings. Management has not determined the total probable effects on its
financial statements of adopting SFAS No. 133, as amended, and does not
believe that an estimate of such effects would be meaningful at this time.
F-5
<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-1
<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
redemption and liquidation value, 200,000 shares
authorized, 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-2
<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-3
<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
securities (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
dividend............... 120,000 120.0 -- -- -- -- -- -- (120.0) --
Common stock dividend
declared but not
issued................. -- -- -- -- 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
securities (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-4
<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
discounts.................................. (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
activities.............................. 201.5 374.8 233.8
--------- --------- ---------
Cash flows from investing activities:
Proceeds from sales and maturities of
investment 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
contracts................................... 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-5
<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-6
<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-7
<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-8
<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-9
<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
before 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-10
<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-11
<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-12
<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-13
<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-14
<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-15
<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-16
<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-17
<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-18
<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-19
<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-20
<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-21
