<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
FINANCIAL STATEMENTS
December 31, 1999
(With Independent Auditors' Report Thereon)
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................... F-1
Statements of Assets and Liabilities....................................... F-2
Statements of Operations................................................... F-3
Statements of Changes in Net Assets........................................ F-6
Notes to Financial Statements.............................................. F-9
</TABLE>
<PAGE>
Independent Auditors' Report
Contractholders
GNA Variable Investment Account
and
The Board of Directors
General Electric Capital Assurance Company:
We have audited the accompanying statements of assets and liabilities of
GNA Variable Investment Account (the Account) (comprising the GE Investments
Funds, Inc. -- Income, Premier Growth Equity, Value Equity, International
Equity, U.S. Equity, and Money Market Funds) as of December 31, 1999 and the
related statements of operations and changes in net assets for the
aforementioned funds and the GNA Variable Series Trust Portfolios -- GNA
Adjustable Rate, GNA Government, GNA Growth and GNA Value Portfolios; and the
GE Variable Investment Trust Portfolios -- GE U.S. Equity, GE International
Equity, GE Fixed Income and GE Money Market Portfolios of the GNA Variable
Investment Account 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 transfer agent of the underlying mutual funds. 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 the GNA Variable Investment Account 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.
KPMG LLP
Richmond, Virginia
February 11, 2000
F-1
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
--------------------------------------------------------------------
Premier
Growth Value International U.S. Money
Income Equity Equity Equity Equity Market
Fund Fund Fund Fund Fund Fund
----------- ---------- ---------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in GE
Investments Funds,
Inc., at fair value:
Income Fund (1,769,654
shares, cost --
$24,174,587)......... $20,368,722 -- -- -- -- --
Premier Growth Equity
Fund (290,987 shares,
cost -- $20,243,377).. -- 25,796,021 -- -- -- --
Value Equity Fund
(927,982 shares,
cost -- $13,937,980).. -- -- 14,652,840 -- -- --
International Equity
Fund (846,830 shares,
cost -- $11,706,177).. -- -- -- 12,253,630 -- --
U.S. Equity Fund
(870,351 shares,
cost -- $28,989,521).. -- -- -- -- 32,986,295 --
Money Market Fund
(5,159,160 shares,
cost -- $5,159,160)... -- -- -- -- -- 5,159,160
----------- ---------- ---------- ---------- ---------- ---------
Total assets........... $20,368,722 25,796,021 14,652,840 12,253,630 32,986,295 5,159,160
=========== ========== ========== ========== ========== =========
Net assets:
Attributable to General
Electric Capital
Assurance Company..... $16,547,197 12,619,272 6,071,086 10,095,375 18,681,981 3,309,755
Attributable to
deferred variable
annuity
contractholders....... 3,821,525 13,176,749 8,581,754 2,158,255 14,304,314 1,849,405
----------- ---------- ---------- ---------- ---------- ---------
$20,368,722 25,796,021 14,652,840 12,253,630 32,986,295 5,159,160
=========== ========== ========== ========== ========== =========
Outstanding units held
by contractholders..... 369,944 705,016 689,852 142,084 973,745 171,718
=========== ========== ========== ========== ========== =========
Net asset value per
unit.................. $ 10.33 18.69 12.44 15.19 14.69 10.77
=========== ========== ========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
------------------------------------------------------------------------------
Income Fund Premier Growth Equity Fund
--------------------------------------- --------------------------------------
Period from Period from
December 12, December 12,
Year ended Year ended 1997 to Year ended Year ended 1997 to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment
income:
Income --
Ordinary
dividends...... $ 1,065,589 2,351,187 53,264 22,498 68,908 9,920
Expenses:
Mortality and
expense risk
charges (note
3)............. 77,964 67,377 3,285 194,543 129,274 6,135
----------- ---------- ------- --------- --------- -------
Net investment
income (loss)... 987,625 2,283,810 49,979 (172,045) (60,366) 3,785
----------- ---------- ------- --------- --------- -------
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... (81,882) 1,314,687 (62) 3,833,269 2,049,328 13,532
Unrealized
appreciation
(depreciation)
on
investments.... (1,316,475) (2,472,562) (16,828) 2,375,104 2,657,926 519,614
Capital gain
distribution... 28,460 409,811 -- 773,974 760,446 --
----------- ---------- ------- --------- --------- -------
Net realized and
unrealized gain
(loss) on
investments..... (1,369,897) (748,064) (16,890) 6,982,347 5,467,700 533,146
----------- ---------- ------- --------- --------- -------
Increase
(decrease) in
net assets from
operations...... $ (382,272) 1,535,746 33,089 6,810,302 5,407,334 536,931
=========== ========== ======= ========= ========= =======
<CAPTION>
Value Equity Fund
--------------------------------------
Period from
December 12,
Year ended Year ended 1997 to
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Investment
income:
Income --
Ordinary
dividends...... 109,159 68,723 --
Expenses:
Mortality and
expense risk
charges (note
3)............. 129,863 127,916 6,415
------------ ------------ ------------
Net investment
income (loss)... (20,704) (59,193) (6,415)
------------ ------------ ------------
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... 1,248,167 1,206,800 8,652
Unrealized
appreciation
(depreciation)
on
investments.... 928,877 (542,115) 328,098
Capital gain
distribution... -- 324,326 --
------------ ------------ ------------
Net realized and
unrealized gain
(loss) on
investments..... 2,177,044 989,011 336,750
------------ ------------ ------------
Increase
(decrease) in
net assets from
operations...... 2,156,340 929,818 330,335
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF OPERATIONS, CONTINUED
<TABLE>
<CAPTION>
GE Investments Funds, Inc.
-----------------------------------------------------------------------------
International Equity Fund U.S. Equity Fund
-------------------------------------- --------------------------------------
Period from Period from
December 12, December 12,
Year ended Year ended 1997 to Year ended Year ended 1997 to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Investment
income:
Income --
Ordinary
dividends...... $ 27,799 51,882 -- 178,284 233,750 11,628
Expenses:
Mortality and
expense risk
charges (note
3)............. 27,331 27,791 1,349 225,853 170,197 7,503
---------- --------- ------- --------- --------- -------
Net investment
income (loss)... 468 24,091 (1,349) (47,569) 63,553 4,125
---------- --------- ------- --------- --------- -------
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... 1,894,334 867,620 4,562 2,991,967 2,176,519 4,856
Unrealized
appreciation
(depreciation)
on
investments.... 221,880 151,208 174,364 828,272 2,615,198 553,304
Capital gain
distribution... 748,170 440,888 -- 1,560,856 509,664 --
---------- --------- ------- --------- --------- -------
Net realized and
unrealized gain
(loss) on
investments..... 2,864,384 1,459,716 178,926 5,381,095 5,301,381 558,160
---------- --------- ------- --------- --------- -------
Increase
(decrease) in
net assets from
operations...... $2,864,852 1,483,807 177,577 5,333,526 5,364,934 562,285
========== ========= ======= ========= ========= =======
<CAPTION>
Money Market Fund
--------------------------------------
Period from
December 12,
Year ended Year ended 1997 to
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Investment
income:
Income --
Ordinary
dividends...... 239,354 253,615 6,805
Expenses:
Mortality and
expense risk
charges (note
3)............. 33,728 35,594 835
------------ ------------ ------------
Net investment
income (loss)... 205,626 218,021 5,970
------------ ------------ ------------
Net realized and
unrealized gain
(loss) on
investments:
Net realized
gain (loss).... -- -- --
Unrealized
appreciation
(depreciation)
on
investments.... -- -- --
Capital gain
distribution... -- -- --
------------ ------------ ------------
Net realized and
unrealized gain
(loss) on
investments..... -- -- --
------------ ------------ ------------
Increase
(decrease) in
net assets from
operations...... 205,626 218,021 5,970
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF OPERATIONS, CONTINUED
<TABLE>
<CAPTION>
GNA Variable Series Trust Portfolios
-------------------------------------------------------
GNA GNA GNA
Adjustable Government Growth GNA Value
Rate Portfolio Portfolio Portfolio Portfolio
--------------- ----------- ------------ ------------
Period from January 1, 1997 to December 11, 1997
-------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Income --
dividends....... $ 388,100 488,825 -- 76,044
Expenses:
Mortality and
expense risk
charges (note
3)............... 5,383 23,496 102,106 105,445
----------- ---------- ------------ ------------
Net investment
income (loss)..... 382,717 465,329 (102,106) (29,401)
----------- ---------- ------------ ------------
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)........... 130,953 273,899 6,005,331 5,204,833
Unrealized
appreciation
(depreciation) on
investments...... (188,288) (100,222) (2,470,123) (1,474,306)
----------- ---------- ------------ ------------
Net realized and
unrealized gain
(loss) on
investments....... (57,335) 173,677 3,535,208 3,730,527
----------- ---------- ------------ ------------
Increase (decrease)
in net assets from
operations........ $ 325,382 639,006 3,433,102 3,701,126
=========== ========== ============ ============
<CAPTION>
GE Variable Investment Trust Portfolios
-----------------------------------------------------------
GE U.S. GE International GE Fixed GE Money
Equity Equity Income Market
Portfolio Portfolio Porfolio Portfolio
-------------- ----------------- ------------- ------------
Period from January 1, 1997 to December 11, 1997
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Income --
dividends....... -- -- 323,899 210,867
Expenses:
Mortality and
expense risk
charges (note
3)............... 127,409 25,225 32,166 7,958
-------------- ----------------- ------------- ------------
Net investment
income (loss)..... (127,409) (25,225) 291,733 202,909
-------------- ----------------- ------------- ------------
Net realized and
unrealized gain
(loss) on
investments:
Net realized gain
(loss)........... 6,278,595 654,601 (100,939) --
Unrealized
appreciation
(depreciation) on
investments...... (998,789) (345,887) 218,413 --
-------------- ----------------- ------------- ------------
Net realized and
unrealized gain
(loss) on
investments....... 5,279,806 308,714 117,474 --
-------------- ----------------- ------------- ------------
Increase (decrease)
in net assets from
operations........ 5,152,397 283,489 409,207 202,909
============== ================= ============= ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GE Investments Fund, Inc.
------------------------------------------------------------------------------
Income Fund Premier Growth Equity Fund
--------------------------------------- --------------------------------------
Period from Period from
December 12, December 12,
Year ended Year ended 1997 to Year ended Year ended 1997 to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment
income (loss)... $ 987,625 2,283,810 49,979 (172,045) (60,366) 3,785
Net realized gain
(loss).......... (81,882) 1,314,687 (62) 3,833,269 2,049,328 13,532
Unrealized
appreciation
(depreciation)
on investments.. (1,316,475) (2,472,562) (16,828) 2,375,104 2,657,926 519,614
Capital gain
distribution.... 28,460 409,811 -- 773,974 760,446 --
----------- ---------- ---------- ---------- ---------- ----------
Increase
(decrease) in
net assets from
operations..... (382,272) 1,535,746 33,089 6,810,302 5,407,334 536,931
----------- ---------- ---------- ---------- ---------- ----------
From capital
transactions:
Net effect of
transactions by
General Electric
Capital
Assurance
Company......... 77,962 67,401 15,388,105 295,079 129,456 6,271,166
Net contract
purchase
payments........ 4,029 45,225 2,780 99,070 107,326 4,382
Transfers to the
general account
of General
Electric Capital
Assurance
Company:
Surrender
benefits........ (678,640) (500,898) (5,457) (948,351) (424,894) (6,778)
Certificate
maintenance
charges......... (743) (1,119) (394) (3,360) (3,985) (736)
Transfers from
(to) the Fixed
Guarantee Period
Account
(note 1)........ 63,060 (252,919) -- (164,240) (229,573) --
Interfund
transfers....... (216,987) 105,581 5,085,173 (170,409) (1,353,201) 9,440,502
----------- ---------- ---------- ---------- ---------- ----------
Increase
(decrease) in
net assets from
capital
transactions... (751,319) (536,729) 20,470,207 (892,211) (1,774,871) 15,708,536
----------- ---------- ---------- ---------- ---------- ----------
Increase
(decrease) in
net assets..... (1,133,591) 999,017 20,503,296 5,918,091 3,632,463 16,245,467
Net assets at
beginning of
period........... 21,502,313 20,503,296 -- 19,877,930 16,245,467 --
----------- ---------- ---------- ---------- ---------- ----------
Net assets at end
of period........ $20,368,722 21,502,313 20,503,296 25,796,021 19,877,930 16,245,467
=========== ========== ========== ========== ========== ==========
<CAPTION>
Value Equity Fund
--------------------------------------
Period from
December 12,
Year ended Year ended 1997 to
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
From operations:
Net investment
income (loss)... (20,704) (59,193) (6,415)
Net realized gain
(loss).......... 1,248,167 1,206,800 8,652
Unrealized
appreciation
(depreciation)
on investments.. 928,877 (542,115) 328,098
Capital gain
distribution.... -- 324,326 --
------------ ------------ ------------
Increase
(decrease) in
net assets from
operations..... 2,156,340 929,818 330,335
------------ ------------ ------------
From capital
transactions:
Net effect of
transactions by
General Electric
Capital
Assurance
Company......... 205,906 129,504 4,457,440
Net contract
purchase
payments........ 16,478 53,453 5,063
Transfers to the
general account
of General
Electric Capital
Assurance
Company:
Surrender
benefits........ (891,503) (562,195) (6,683)
Certificate
maintenance
charges......... (2,452) (3,006) (770)
Transfers from
(to) the Fixed
Guarantee Period
Account
(note 1)........ (118,006) (151,878) --
Interfund
transfers....... (394,326) (1,412,184) 9,911,506
------------ ------------ ------------
Increase
(decrease) in
net assets from
capital
transactions... (1,183,903) (1,946,306) 14,366,556
------------ ------------ ------------
Increase
(decrease) in
net assets..... 972,437 (1,016,488) 14,696,891
Net assets at
beginning of
period........... 13,680,403 14,696,891 --
------------ ------------ ------------
Net assets at end
of period........ 14,652,840 13,680,403 14,696,891
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
GE Investments Fund, Inc.
------------------------------------------------------------------------------
International Equity Fund U.S. Equity Fund
--------------------------------------- --------------------------------------
Period from Period from
December 12, December 12,
Year ended Year ended 1997 to Year ended Year ended 1997 to
December 31, December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1999 1998 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
From operations:
Net investment
income (loss)... $ 468 24,091 (1,349) (47,569) 63,553 4,125
Net realized gain
(loss).......... 1,894,334 867,620 4,562 2,991,967 2,176,519 4,856
Unrealized
appreciation
(depreciation)
on investments.. 221,880 151,208 174,364 828,272 2,615,198 553,304
Capital gain
distribution.... 748,170 440,888 -- 1,560,856 509,664 --
----------- --------- --------- ---------- ---------- ----------
Increase
(decrease) in net
assets from
operations....... 2,864,852 1,483,807 177,577 5,333,526 5,364,934 562,285
----------- --------- --------- ---------- ---------- ----------
From capital
transactions:
Net effect of
transactions by
General Electric
Capital
Assurance
Company......... (39,025) 27,943 6,458,980 561,944 170,255 11,801,519
Net contract
purchase
payments........ 11,241 28,976 2,870 78,795 200,374 4,000
Transfers to the
general account
of General
Electric Capital
Assurance
Company:
Surrender
benefits........ (147,344) (261,740) (2,671) (1,313,010) (613,113) (12,952)
Certificate
maintenance
charges......... (669) (833) (162) (3,056) (3,746) (900)
Transfers from
(to) the Fixed
Guarantee Period
Account
(note 1)........ (6,222) (28,938) -- (577,187) (132,959) --
Interfund
transfers....... (84,939) (293,109) 2,063,036 17,344 (28,884) 11,577,126
----------- --------- --------- ---------- ---------- ----------
Increase
(decrease) in net
assets from
capital
transactions..... (266,958) (527,701) 8,522,053 (1,235,170) (408,073) 23,368,793
----------- --------- --------- ---------- ---------- ----------
Increase
(decrease) in
net assets..... 2,597,894 956,106 8,699,630 4,098,356 4,956,861 23,931,078
Net assets at
beginning of
period........... 9,655,736 8,699,630 -- 28,887,939 23,931,078 --
----------- --------- --------- ---------- ---------- ----------
Net assets at end
of period........ $12,253,630 9,655,736 8,699,630 32,986,295 28,887,939 23,931,078
=========== ========= ========= ========== ========== ==========
<CAPTION>
Money Market Fund
--------------------------------------
Period from
December 12,
Year ended Year ended 1997 to
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
From operations:
Net investment
income (loss)... 205,626 218,021 5,970
Net realized gain
(loss).......... -- -- --
Unrealized
appreciation
(depreciation)
on investments.. -- -- --
Capital gain
distribution.... -- -- --
------------ ------------ ------------
Increase
(decrease) in net
assets from
operations....... 205,626 218,021 5,970
------------ ------------ ------------
From capital
transactions:
Net effect of
transactions by
General Electric
Capital
Assurance
Company......... 33,528 41,821 2,939,080
Net contract
purchase
payments........ 7,452 20,139 517
Transfers to the
general account
of General
Electric Capital
Assurance
Company:
Surrender
benefits........ (976,067) (2,370,648) (1,563)
Certificate
maintenance
charges......... (1,019) (1,098) (100)
Transfers from
(to) the Fixed
Guarantee Period
Account
(note 1)........ 148,230 (230,400) --
Interfund
transfers....... 849,317 2,981,797 1,288,557
------------ ------------ ------------
Increase
(decrease) in net
assets from
capital
transactions..... 61,441 441,611 4,226,491
------------ ------------ ------------
Increase
(decrease) in
net assets..... 267,067 659,632 4,232,461
Net assets at
beginning of
period........... 4,892,093 4,232,461 --
------------ ------------ ------------
Net assets at end
of period........ 5,159,160 4,892,093 4,232,461
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<TABLE>
<CAPTION>
GNA Variable Series Trust Portfolios GE Variable Investment Trust Portfolios
--------------------------------------------------- ----------------------------------------------------
GNA GNA GNA GE U.S. GE International GE Fixed GE Money
Adjustable Government Growth GNA Value Equity Equity Income Market
Rate Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- ---------- ----------- ----------- ----------- ---------------- ---------- ----------
Period from January 1, 1997 to December 11, 1997 Period from January 1, 1997 to December 11, 1997
--------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
From operations:
Net investment
income (loss)... $ 382,717 465,329 (102,106) (29,401) (127,409) (25,225) 291,733 202,909
Net realized gain
(loss).......... 130,953 273,899 6,005,331 5,204,833 6,278,595 654,601 (100,939) --
Unrealized
appreciation
(depreciation)
on investments.. (188,288) (100,222) (2,470,123) (1,474,306) (998,789) (345,887) 218,413 --
---------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
Increase
(decrease) in
net assets from
operations..... 325,382 639,006 3,433,102 3,701,126 5,152,397 283,489 409,207 202,909
---------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
From capital
transactions:
Net effect of
transactions by
General Electric
Capital
Assurance
Company......... (6,158,342) (6,488,903) (6,153,825) (4,342,012) (11,661,721) (6,429,736) (2,619,291) (2,907,614)
Net contract
purchase
payments........ 10,245 8,146 184,598 196,401 326,796 68,681 11,635 108,361
Transfers to the
general account
of General
Electric Capital
Assurance
Company:
Surrender
benefits........ (23,205) (112,501) (541,696) (506,461) (723,956) (112,780) (327,061) (471,661)
Certificate
maintenance
charges......... (646) (2,820) (12,286) (12,654) (15,289) (3,051) (3,860) (2,151)
Transfers from
(to) the Fixed
Guarantee Period
Account
(note 1)........ -- 317 5,292 61,352 19,082 318 -- 672,162
Interfund
transfers....... (500,222) (2,106,593) (9,318,325) (9,555,206) (11,090,320) (1,984,547) (2,838,511) (1,972,176)
---------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
Increase
(decrease) in
net assets from
capital
transactions... (6,672,170) (8,702,354) (15,836,242) (14,158,580) (23,145,408) (8,461,115) (5,777,088) (4,573,079)
---------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
Increase
(decrease) in
net assets..... (6,346,788) (8,063,348) (12,403,140) (10,457,454) (17,993,011) (8,177,626) (5,367,881) (4,370,170)
Net assets at
beginning of
period........... 6,346,788 8,063,348 12,403,140 10,457,454 17,993,011 8,177,626 5,367,881 4,370,170
---------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
Net assets at end
of period........ $ -- -- -- -- -- -- -- --
========== ========== =========== =========== =========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
(1) Description of Entity
GNA Variable Investment Account (the Account) is a separate investment
account established in 1981 by Great Northern Insured Annuity Corporation
(GNA) under laws of the State of Washington. The Account is registered with
the Securities and Exchange Commission under the Investment Company Act of
1940, as amended, as a unit investment trust. Effective January 1, 1999, GNA
merged with and into General Electric Capital Assurance Company (GECA), its
parent company. GECA is an indirect wholly-owned subsidiary of GNA
Corporation, General Electric Capital Corporation (GECC) and General Electric
Company (GE Company). The merger has no impact on net assets or unit values of
the Account.
The Account holds certain benefits for group deferred variable annuity
policies issued by GNA. No new contracts are issued in the Account, however,
existing contractholders can continue to add premiums to the Account.
On December 11, 1997, the Account added the GE Investments Funds, Inc.--
Income, Premier Growth Equity, Value Equity, International Equity, U.S. Equity
and Money Market Funds. Effective December 11, 1997, the Securities and
Exchange Commission approved the substitution of certain investment
subdivisions. Assets were transferred as follows:
<TABLE>
<CAPTION>
Before the Substitution After the Substitution
----------------------- ----------------------
<S> <C>
Shares of Adjustable Rate
Portfolio-- Shares of Income Fund--
GNA Variable Series Trust GE Investments Funds, Inc.
Shares of Government Portfolio-- Shares of Income Fund--
GNA Variable Series Trust GE Investments Funds, Inc.
Shares of Fixed Income Portfolio-- Shares of Income Fund--
GE Variable Investment Trust GE Investments Funds, Inc.
Shares of Growth Portfolio-- Shares of Premier Growth Equity Fund--
GNA Variable Series Trust GE Investments Funds, Inc.
Shares of Value Portfolio-- Shares of Value Equity Fund--
GNA Variable Series Trust GE Investments Funds, Inc.
Shares of International Equity
Portfolio-- Shares of International Equity Fund--
GE Variable Investment Trust GE Investments Funds, Inc.
Shares of U.S. Equity Portfolio-- Shares of U.S. Equity Fund--
GE Variable Investment Trust GE Investments Funds, Inc.
Shares of Money Market Portfolio-- Shares of Money Market Fund--
GE Variable Investment Trust GE Investments Funds, Inc.
</TABLE>
The foregoing substitutions were carried out with the approval of any
necessary departments of insurance. Effective December 12, 1997, GNA closed
the Variable Series Trust and GE Variable Investment Trust Portfolios.
Participants may transfer amounts among the Account's portfolios and the
Fixed Guarantee Period Account that is part of the general account of GECA.
The net assets related to deferred variable annuity policies are the property
of GECA and cannot be used to settle liabilities arising out of any other
business of GECA.
(2) Summary of Significant Accounting Policies
(a) Investments
Investments in shares of the portfolios are recorded at their net asset
value. The net asset value is based upon the underlying assets of the mutual
funds as determined by quoted market prices. Purchases and sales of
investments are recorded on the trade date. Realized gains and losses on
investments are determined on an average-cost basis. Dividend income is
recorded on the ex-dividend date.
F-9
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
NOTES TO FINANCIAL STATEMENTS -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
The aggregate cost of investments acquired and the aggregate proceeds of
investments sold, for the year ended December 31, 1999 were:
<TABLE>
<CAPTION>
1999
-----------------------
Cost of Proceeds
shares from
acquired shares sold
----------- -----------
<S> <C> <C>
GE Investments Funds, Inc.:
Income Fund............................................ $ 1,490,890 1,226,124
Premier Growth Equity Fund............................. 34,455,281 34,745,563
Value Equity Fund...................................... 6,722,234 7,926,841
International Equity Fund.............................. 26,864,326 26,382,646
U.S. Equity Fund....................................... 36,156,111 35,877,994
Money Market Fund...................................... 1,799,800 1,532,733
</TABLE>
(b) Unit Activity
The increase (decrease) in outstanding units from capital transactions for
the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
GE Investment Funds, Inc.
---------------------------------------------------------------
Premier
Growth Value International U.S. Money
Income Equity Equity Equity Equity Market
Fund Fund Fund Fund Fund Fund
-------- -------- -------- ------------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Units outstanding,
12/31/96............... -- -- -- -- -- --
Units purchased......... 278 440 508 287 402 52
Units redeemed.......... (546) (659) (660) (263) (1,276) (156)
Units exchanged......... 508,517 944,046 991,184 206,271 1,157,743 128,855
-------- -------- -------- -------- --------- --------
Units outstanding,
12/31/97............... 508,249 943,827 991,032 206,295 1,156,869 128,751
Units purchased......... 71,462 172,206 163,497 60,655 124,349 511,772
Units redeemed.......... (130,434) (336,153) (347,927) (107,212) (175,739) (471,310)
-------- -------- -------- -------- --------- --------
Units outstanding,
12/31/98............... 449,277 779,880 806,602 159,738 1,105,479 169,213
Units purchased......... 30,218 54,769 44,081 17,657 35,580 137,012
Units redeemed.......... (109,551) (129,633) (160,831) (35,311) (167,314) (134,507)
-------- -------- -------- -------- --------- --------
Units outstanding,
12/31/99............... 369,944 705,016 689,852 142,084 973,745 171,718
======== ======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
GNA Variable Series Trust Portfolios
------------------------------------------
GNA
Adjustable GNA GNA GNA
Rate Government Growth Value
Portfolio Portfolio Portfolio Portfolio
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Units outstanding, 12/31/96......... 43,230 177,813 501,297 479,779
Units purchased..................... 871 763 10,439 10,707
Units redeemed...................... (1,978) (9,454) (31,630) (28,076)
Units exchanged..................... (42,123) (169,122) (480,106) (462,410)
------- -------- -------- --------
Units outstanding, 12/31/97......... -- -- -- --
======= ======== ======== ========
</TABLE>
F-10
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
NOTES TO FINANCIAL STATEMENTS -- Continued
December 31, 1999
(2) Summary of Significant Accounting Policies -- Continued
<TABLE>
<CAPTION>
GE Variable Investment Trust Portfolios
----------------------------------------------
GE GE GE
GE International Fixed Money
U.S. Equity Equity Income Market
Portfolio Portfolio Portfolio Portfolio
----------- ------------- --------- ---------
<S> <C> <C> <C> <C>
Units outstanding, 12/31/96.... 558,978 149,105 253,249 147,357
Units purchased................ 17,293 4,870 1,453 9,686
Units redeemed................. (37,907) (8,165) (27,725) (40,900)
Units exchanged................ (538,364) (145,810) (226,977) (116,143)
-------- -------- -------- --------
Units outstanding, 12/31/97 ... -- -- -- --
======== ======== ======== ========
</TABLE>
(c) Distributions
The net investment income (loss) and realized capital gains of the Account
are retained and reinvested within the Account.
(d) Federal Income Taxes
The operations of the Account are a part of, and are taxed with, the
operations of GECA. Therefore, the Account is not separately taxed as a
regulated investment company under Subchapter M of the Internal Revenue Code.
Under existing federal income tax laws, investment income and capital gains of
the Account are not taxed. Accordingly, the Account paid no federal income
taxes and no federal income tax provision was required. GECA is taxed as a
life insurance company under the Internal Revenue Code.
(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 and Contract Charges
Net contract purchase payments transferred from GECA to the Account
represent gross purchase payments recorded by GECA on its group deferred
variable annuity products, less deductions for premium taxes in certain
states. Withdrawals charge (contingent deferred sales charge) may be assessed
against certain amounts withdrawn within five years of any purchase payment.
Subject to certain limitations, this charge equals 5% (or less) of the
purchase payment surrendered, depending on the time between purchase payment
and surrender.
Each year GECA will deduct a certificate maintenance charge of $40 plus an
administration charge at an annual rate of .15% of average daily net assets as
partial compensation for certain administrative services. GECA will waive the
certificate maintenance charge if at the time of the assessment the account
value is $40,000 or greater. In addition, GECA charges the Account at an
annual rate of 1.25% of average daily net assets for the mortality and expense
risk that GECA assumes.
Administrative expenses as well as mortality and risk charges are deducted
daily and reflect the effective annual rates.
Units are not assigned to purchases made by GECA and no contract charges
are assessed against GECA's net assets.
GE Investment Management Incorporated (Investment Advisor), a wholly-owned
subsidiary of GE Company, 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 average daily
net assets at an effective rate of .50% for the Money Market and Income Funds,
.55% for the U.S. Equity Fund, .65% for the Value Equity and Premier Growth
Equity Funds, and 1.00%
F-11
<PAGE>
GNA VARIABLE INVESTMENT ACCOUNT
NOTES TO FINANCIAL STATEMENTS -- Continued
December 31, 1999
(3) Related Party Transactions and Contract Charges -- Continued
for the International Equity Fund. Prior to December 12, 1997, GNA Capital
Management, Inc., a wholly-owned subsidiary of GNA Corporation, served as
investment advisor to the GNA Variable Investment Trust Portfolios (VST
portfolios) and GE Investment Management Incorporated served as investment
advisor of the GE Variable Investment Trust Portfolios (VIT portfolios). The
VST portfolios paid GNA Capital Management, Inc. a fee based upon each
portfolio's daily net assets, calculated at an effective annual rate of .40%
to .80% depending on the type of portfolio and the portfolio's combined
average daily net assets. The VIT portfolios paid GE Investment Management
Incorporated a fee based upon each portfolio's daily net assets, calculated at
an effective annual rate of .30% to .85% depending on the nature of the
portfolio.
F-12
