<PAGE> 1
As filed with the Securities and Exchange Commission on April 30, 1998.
Registration No. 33-10146
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST-EFFECTIVE AMENDMENT NO. 13
TO
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
(Exact Name of Registrant)
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street
St. Louis, MO 63101
(Name and Address of principal executive office of depositor)
Christopher A. Martin, Esquire
General American Life Insurance Company
700 Market Street
St. Louis, MO 63101
(Name and Address of Agent for Service of Process)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., N.W.
Washington, DC 20004-2404
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It is proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b), of
Rule 485
[ X ] on May 1, 1998, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of
Rule 485
[ ] on (date), pursuant to paragraph (a)(1) of rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of
rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485
DECLARATION PURSUANT TO RULE 24f-2
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, an
indefinite number or amount of securities has been registered under the
Securities Act of 1933. The Registrant filed the 24f-2 Notice for the fiscal
year ended December 31, 1997 on March 13, 1998.
<PAGE> 3
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
Item No. of
Form N-8B-2 Caption in Prospectus
----------- ---------------------
1. Cover Page
2. Cover Page
3. Not Applicable
4. Distribution of the Policies
5. The Company and the Separate
Account
6. The Separate Account
7. Not Required
8. Not Required
9. Legal Proceedings
10. Summary; General American Capital
Company; Charges and Deductions;
Policy Benefits; Policy Rights;
Voting Rights; General Matters
11. Summary; General American Capital
Company
12. Summary; General American Capital
Company
13. Summary; Charges and Deductions;
General American Capital Company
14. Summary; Payment and Allocation of
Premiums
15. Payment and Allocation of Premiums
16. Payment and Allocation of Premiums;
General American Capital Company
17. Summary; Charges and Deductions;
Policy Rights; General American Capital
Company
18. General American Capital Company;
Payment and Allocation of Premiums
19. General Matters; Voting Rights
20. Not Applicable
21. Policy Rights; General Matters
22. Not Applicable
23. Safekeeping of the Separate
Account's Assets
24. General Matters
25. The Company and the Separate
Account
-i-
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Item No. of
Form N-8B-2 Caption in Prospectus
----------- ---------------------
26. Not Applicable
27. The Company and the Separate
Account
28. Management of the Company
29. The Company and the Separate
Account
30. Not Applicable
31. Not Applicable
32. Not Applicable
33. Not Applicable
34. Not Applicable
35. The Company and the Separate
Account
36. Not Required
37. Not Applicable
38. Summary; Distribution of the
Policies
39. Summary; Distribution of the
Policies
40. Distribution of the Policies
41. The Company and the Separate
Account; Distribution of the
Policies
42. Not Applicable
43. Not Applicable
44. Payment and Allocation of Premiums
45. Not Applicable
46. Policy Rights
47. General American Capital Company
48. Not Applicable
49. Not Applicable
50. The Separate Account
51. Cover Page; Summary; Charges and
Deductions; Policy Rights; Policy
Benefits; Payment and Allocation
of Premiums
52. General American Capital Company
53. Federal Tax Matters
54. Not Applicable
55. Not Applicable
56. Not Required
57. Not Required
58. Not Required
59. Not Required
- ii -
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FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICIES
ISSUED BY
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 Market Street St. Louis, MO 63101 (314) 231-1700
This Prospectus describes two individual flexible premium variable life
insurance policies ("the Policies") offered by General American Life
Insurance Company ("General American" or "the Company"): a policy designed
for general use ("Standard Policy") and a policy designed for use in
connection with "qualified" pension plans ("Pension Policy"). The Policies
are designed to provide lifetime insurance protection to age 95 and at the
same time provide maximum flexibility to vary premium payments and change the
level of death benefits payable under the Policies. This flexibility allows
an Owner to provide for changing insurance needs under a single insurance
policy. An Owner also has the opportunity to allocate Net Premiums among
several investment portfolios with different investment objectives.
The Policies provide for: (l) a Cash Surrender Value that can be obtained by
surrendering the Policy; (2) policy loans; and (3) a death benefit payable at
the Insured's death. As long as a Policy remains in force, the death benefit
will not be less than the current Face Amount of the Policy. A Policy will
remain in force so long as its Cash Surrender Value is sufficient to pay
certain monthly charges imposed in connection with the Policy.
After the end of the "Right to Examine Policy" period, Net Premiums may be
allocated to one or more of the Divisions of General American Separate
Account Eleven ("the Separate Account") or to General American's General
Account. If Net Premiums are allocated to the Separate Account, the amount of
the Cash Value will vary to reflect the investment performance of the
investment Divisions selected by the Owner, the policy may lapse, and,
depending on the death benefit option elected, the amount of the death
benefit above the minimum may also vary with that investment performance. The
Owner bears the entire investment risk for all amounts allocated to the
Separate Account; there is no minimum guaranteed Cash Value.
Divisions of the Separate Account invest in corresponding Funds from the
following open-end, diversified management investment companies:
General American Capital Company: S&P 500 Index Fund, Money Market Fund,
Bond Index Fund, Managed Equity Fund, Asset Allocation Fund, International
Index Fund, Mid-Cap Equity Fund, Small-Cap Equity Fund.
Russell Insurance Funds: Multi-Style Equity Fund, Aggressive Equity Fund,
Non-U.S. Fund, Core Bond Fund.
Variable Insurance Products Fund: High Income Portfolio, Equity-Income
Portfolio, Growth Portfolio, Overseas Portfolio.
Variable Insurance Products Fund II: Asset Manager Portfolio.
Van Eck Worldwide Insurance Trust: Worldwide Hard Assets Fund.
A full description of the Funds, including the investment policies,
restrictions, risks, and charges is contained in the Prospectus of each Fund.
This Prospectus generally describes only the portion of the Policies
involving the Separate Account. For a brief summary of the General
Account.(See The General Account.)
It may not be advantageous to purchase a Policy as a replacement for another
type of life insurance or as a means to obtain additional insurance
protection if the purchaser already owns another flexible premium variable
life insurance policy.
This Prospectus must be accompanied by a current Prospectus for General
American Capital Company, Russell Insurance Funds, Variable Insurance
Products Fund, Variable Insurance Products Fund II and Van Eck Investment
Trust.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Please read this Prospectus carefully and retain it for future reference.
The Date of This Prospectus Is May 1, 1998. The Policies are not available
in all states.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT BE LAWFULLY MADE. NO DEALER, SALESMAN, OR OTHER PERSON
IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Definitions 1
Summary 2
The Company and the Separate Account 6
The Company
The Separate Account
General American Capital Company
Russell Insurance Funds
Variable Insurance Products Fund
Variable Insurance Products Fund II
Van Eck Worldwide Insurance Trust
Addition, Deletion, or Substitution of Investments
Policy Benefits 10
Death Benefit
Cash Value.
Policy Rights 13
Loans
Surrender and Partial Withdrawals
Transfers
Portfolio Rebalancing
Dollar Cost Averaging
Right to Examine Policy
Conversion Privilege
Paid-up Annuity Under Pension Policy
Payment of Benefits at Maturity
Payment of Policy Benefits
Payment and Allocation of Premiums 19
Issuance of a Policy
Premiums
Allocation of Net Premiums and Cash Value
Policy Lapse and Reinstatement
Charges and Deductions 22
Premium Expense Charges
Monthly Deduction
Contingent Deferred Sales Charge
Separate Account Charges
Dividends 26
The General Account 27
General Matters 28
Distribution of the Policies 31
Federal Tax Matters 32
Unisex Requirements Under the Pension Policies, Montana Law 35
Safekeeping of the Separate Account's Assets 35
Voting Rights 36
State Regulation of the Company 36
Management of the Company 37
Legal Matters 41
Legal Proceedings 41
Experts 41
Additional Information 41
Financial Statements 41
Appendix A 42
Illustrations of Death Benefits and Cash Values
Appendix B 50
</TABLE>
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DEFINITIONS
Attained Age - The Issue Age of the Insured plus the number of completed
Policy Years.
Beneficiary - The person(s) named in the application or by later designation
to receive Policy proceeds in the event of the Insured's death. A
Beneficiary may be changed as set forth in this Prospectus.
Cash Value - The total amount that a Policy provides for investment at any
time. It is equal to the total of the amounts credited to the Owner in the
Separate Account, the General Account, and in the Loan Account.
Cash Surrender Value - The Case Value of a Policy on the date of surrender,
less any Indebtedness, any surrender charges, and any unpaid selection and
issue expense charges.
Division - A subaccount of the Separate Account. Each Division invests
exclusively in the shares of a corresponding Fund of General American Capital
Company, Russell Insurance Funds, Variable Insurance Products Fund, Variable
Insurance Products Fund II, or Van Eck Investment Trust.
Effective Date - The date as of which insurance coverage begins under a
policy.
Face Amount - The minimum death benefit under the Policy so long as the
Policy remains in force.
Fund - A separate investment portfolio of General American Capital Company,
Russell Insurance Funds, Variable Insurance Products Fund, Variable Insurance
Products Fund II, or Van Eck Investment Trust. Although sometimes referred
to elsewhere as "Portfolios", they are referred to herein as "Funds", except
where Portfolio is part of their name.
General Account - The assets of the Company other than those allocated to the
Separate Account or any other separate account. The Loan Account is part of
the General Account.
Home Office - The service office of General American Life Insurance Company,
the mailing address of which is P.O. Box 14490, St. Louis, Missouri 63178.
Indebtedness - The sum of all unpaid Policy Loans and accrued interest on
loans.
Initial Premium - The minimum initial premium required to be paid for the
Policy to become effective.
Insured - The person whose life is insured under the Policy.
Investment Start Date - The date the initial premium is applied to the
General Account and/or the Divisions of the Separate Account. This date is
the later of the Issue Date or the date the Initial Premium is received at
General American's Home Office.
Issue Age - The Insured's age at his or her nearest birthday as of the date
the Policy is issued.
Issue Date - The date from which Policy Anniversaries, Policy Years, and
Policy Months are measured.
Loan Account - The account of the Company to which amounts securing Policy
Loans are allocated. The Loan Account is part of General American's General
Account.
Loan Subaccount - A Loan Subaccount exists for the General Account and for
each Division of the Separate Account. Any Cash Value transferred to the
Loan Account will be allocated to the appropriate Loan Subaccount to reflect
the origin of the Cash Value. At any point in time, the Loan Account will
equal the sum of all the Loan Subaccounts.
Maturity Date - The Policy Anniversary on which the Insured reaches Attained
Age 95.
Monthly Anniversary - The same date in each succeeding month as the Issue
Date, except that whenever the Monthly Anniversary falls on a date other than
a Valuation Date, the Monthly Anniversary will be deemed the next Valuation
Date. If any Monthly Anniversary would be the 29th, 30th, or 31st day of a
month that does not have that number of days, then the Monthly anniversary
will be the last day of that month.
Net Premium - The premium less the premium expense charges (consisting of the
sales charge and the premium tax charge).
Owner - The Owner of a Policy, as designated in the application or as
subsequently changed.
Policy - Either or both of the flexible premium variable life insurance
policies offered by the Company and described in this Prospectus.
1
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Policy Anniversary - The same date each year as the Issue Date.
Policy Month - A month beginning on the Monthly Anniversary.
Policy Year - A period beginning on a Policy Anniversary and ending on the
day immediately preceding the next Policy Anniversary.
Portfolio - See Fund.
SEC -The United States Securities and Exchange Commission.
Separate Account - General American Separate Account Eleven, a separate
investment account established by the Company to receive and invest the Net
Premiums paid under the Policy, and certain other variable life policies,
and allocated by the Owner to provide variable benefits.
Target Premium--The amount of premiums paid that is used to determine the
amount of the Contingent Deferred Sales Charge.
Valuation Date - Each day that the New York Stock Exchange is open for
trading and the Company is open for business. The Company is not open for
business the day after Thanksgiving.
Valuation Period - The period between two successive Valuation Dates,
commencing at 4:00 P.M.(Eastern Standard Time) on a Valuation Date and ending
at 4:00 P.M. on the next succeeding Valuation Date.
SUMMARY
The following summary of Prospectus information should be read in conjunction
with the detailed information appearing elsewhere in this Prospectus. Unless
otherwise indicated, the description of the Policies contained in this
Prospectus assumes that a Policy is in force and that there is no outstanding
Indebtedness.
The Policy. Under the flexible premium variable life insurance Policies
described in this Prospectus, the Owner may, subject to certain limitations,
make premium payments in any amount and at any frequency. The Policies are
life insurance contracts with death benefits, cash values, surrender rights,
Policy Loan privileges, and other features traditionally associated with life
insurance. They are "flexible premium" Policies because, unlike traditional
insurance policies, there is no fixed schedule for premium payments. Although
the Owner may establish a schedule of premium payments ("planned premium
payments"), failure to make the planned premium payments will not necessarily
cause a Policy to lapse nor will making the planned premium payments
guarantee that a Policy will remain in force to maturity. Thus, an Owner may,
but is not required to, pay additional premiums. This flexibility permits an
Owner to provide for changing insurance needs within a single insurance
policy.
The Policies are "variable" policies because, unlike the fixed benefits under
an ordinary life insurance contract, to the extent that Net Premiums are
allocated to the Separate Account, the Cash Value and, under certain
circumstances, the death benefit under a Policy may increase or decrease
depending upon the investment performance of the Divisions of the Separate
Account to which the Owner has allocated Net Premium payments. However, so
long as a Policy's Cash Surrender Value continues to be sufficient to pay the
monthly deduction, an Owner is guaranteed a minimum death benefit equal to
the Face Amount of his or her Policy, less any outstanding Indebtedness.
A Policy will lapse (and terminate without value) when the Cash Surrender
Value is insufficient to pay the next monthly deduction and a grace period of
62 days expires without an adequate payment being made by the Owner (See
Payment and Allocation of Premiums - Policy Lapse and Reinstatement.)
The Separate Account. After the end of the "Right to Examine Policy" period,
the Owner may allocate the Net Premiums to the Separate Account, to the
General Account, or between the Separate Account and the General Account.
Amounts allocated to the Separate Account are further allocated to one or
more Divisions. Assets of each Division are invested at net asset value in
shares of a corresponding Fund. (See The Company and the Separate Account.)
An Owner may change future allocations of Net Premiums at any time.
Until the end of the "Right to Examine Policy" period (See Policy Rights -
Right to Examine Policy), all Net Premiums automatically will be allocated to
the Division that invests in the Money Market Fund. (See Payment and
Allocation of Premiums - Allocation of Net Premiums and Cash Value.)
2
<PAGE> 9
To the extent Net Premiums are allocated to the Divisions of the Separate
Account, the Cash Value will, and the death benefit may, vary with the
investment performance of the chosen Division. To the extent Net Premiums are
allocated to the General Account, the Cash Value will accrue interest at a
guaranteed minimum rate. (See The General Account.) Thus, depending upon the
allocation of Net Premiums, investment risk over the life a Policy may be
borne by the Owner, by the Company, or by both.
Subject to certain restrictions, an Owner may transfer Cash Values among the
Divisions of the Separate Account or between the Separate Account and the
General Account. Currently, no charge is assessed for transfers. The Company
reserves the right to revoke or modify the transfer privilege. (See Policy
Rights Transfers.)
Charges and Deductions. A premium expense charge will be deducted from each
premium payment prior to allocation to the Separate Account or the General
Account. The premium expense charge consists of a 6% sales charge and a 2%
charge to cover state premium taxes.
A Contingent Deferred Sales Charge, discussed below, may also be made.
A monthly deduction will be made from a Policy's Cash Value in the Divisions
of the Separate Account and/or the General Account. Under the Standard
Policy, the monthly deduction includes an administrative charge of $10 per
month during the first twelve Policy Months, and $4 for each subsequent
Policy Month; under the Pension Policy, the administrative charge is $12 per
month during the first Policy Year and $6 per month during renewal years. An
additional administrative charge of $0.08 per $1,000 of Face Amount is made
during each of the first twelve Policy Months and during each of the first
twelve Policy Months after an increase in Face Amount is put in force. A
monthly charge is also made for the cost of insurance, described below, and
the cost of any additional benefits provided by rider.
The cost of insurance charge is calculated on each Monthly Anniversary. It is
based on the Attained Age and rate class of the Insured. Monthly cost of
insurance rates will be determined by the Company based upon its expectations
as to future mortality experience. Cost of insurance rates are guaranteed not
to exceed maximum rates based upon the 1980 Commissioners Standard Ordinary
Mortality Tables.
A daily charge based on an annual charge of .85% of the net assets of each
Division of the Separate Account will be imposed for the Company's assumption
of certain mortality and expense risks incurred in connection with the
Policies. (See Charges and Deductions-Separate Account Charges.)
A Contingent Deferred Sales Charge to compensate for sales expenses may also
be assessed against the Cash Value under a Policy upon a surrender, a lapse,
a partial withdrawal, or a decrease in Face Amount during the first ten
Policy Years an amount of insurance coverage (the initial Face Amount and any
increases in Face Amount) is in force. Assuming that no increases in Face
Amount have yet become effective, the charge will be 24% of premiums paid in
the first Policy Year, up to the Target Premium for the initial Face Amount.
The amount of the charge will remain level for the first five Policy Years
and then decreases to zero at the end of ten Policy Years. The timing of
premium payments may affect the amount of the charge under a Policy, as the
charge is based only on premiums actually paid in the first Policy year. Any
increase in the Face Amount will have an additional charge equal to 24% of
premiums attributed to the increase-up to the Target Premium for the
increase-applied to it. The additional charge for the increase will also
remain level for five years and then decrease to zero after ten years. Any
decrease in the Face Amount during the first ten Policy Years an amount of
insurance coverage is in force will be assessed a charge equal to the ratio
of the decrease to that amount of insurance coverage. (See Policy
Rights-Surrender and Partial Withdrawals; Policy Benefits Death Benefit, and
Charges and Deductions-Contingent Deferred Sales Charge.) Reductions in the
Contingent Deferred Sales Charge are available to some groups. (See Reduction
of Contingent Deferred Sales Charge for Group or Sponsored Arrangements.)
The Company may make a charge for any taxes or economic burden resulting from
the application of the tax laws that it determines to be properly
attributable to the Separate Account or to the Policy. (See Federal Tax
Matters)
Currently, there are no transaction charges to cover the administrative costs
of processing partial withdrawals or transfers of Cash Value between
Divisions of the Separate Account. There are no transaction charges to cover
the administrative costs of processing transfers of Cash Value between the
Separate and General Accounts. However, the Company reserves the right to
impose such charges
3
<PAGE> 10
in the future. In addition, transfers and withdrawals are subject to
restrictions relative to amount and frequency. (See Payment and Allocation of
Premiums--Allocation of Net Premiums and Cash Value, Policy Rights--Surrender
and Partial Withdrawals, and The General Account.)
The operating expenses of the Separate Account are paid by General American.
Investment advisory fees and other operating expenses of the Funds are paid
by the Funds and are reflected in the value of the assets of the
corresponding Division of the Separate Account. For a description of these
charges, see Charges and Deductions--Separate Account Charges.
Premiums. An Owner has considerable flexibility concerning the amount and
frequency of premium payments. The Company requires the Owner to pay an
initial premium equal to one-twelfth (1/12) of the sum of the "Target
Premium" for the Policy and $36. This amount will be different for each
Policy. The Target Premium is the amount specified for each Policy based on
the requested initial Face Amount and certain requirements under the Federal
securities laws. Thereafter, an Owner may, subject to certain restrictions,
make premium payments in any amount and at any frequency. Each Owner will
also determine a planned premium payment schedule. The schedule will provide
for a premium payment of a level amount at a fixed interval over a specified
period of time. An Owner need not, however, adhere to the planned premium
payment schedule. (See Payment and Allocation of Premiums.)
A Policy will lapse only when the Cash Surrender Value is insufficient to pay
the next monthly deduction (See Charges and Deductions-Monthly Deduction) and
a grace period of 62 days expires without a sufficient payment by the Owner.
(See Payment and Allocation of Premiums-Policy Lapse and Reinstatement.)
Death Benefit. A death benefit is payable to the named Beneficiary when the
Insured under a Policy dies. Two death benefit options are available. Under
Death Benefit Option A, the death benefit is the Face Amount of the Policy
or, if greater, the applicable percentage of Cash Value. Under Death Benefit
Option B, the death benefit is the Face Amount of the Policy plus the Cash
Value or, if greater, the applicable percentage of Cash Value. So long as
Policy remains in force, the minimum death benefit under either option will
be at least the current Face Amount. The death benefit will be increased by
any paid-up additions to the Policy, any dividend accumulations, unpaid
dividends determined prior to the Insured's death, and by the amount of the
cost of insurance for the portion of the month from the date of death to the
end of the month, and reduced by any outstanding Indebtedness. The death
benefit will be paid according to settlement options available at the time of
death. (see Policy Benefits-Death Benefit.)
The minimum Face Amount at issue is $50,000 under the Company's current
rules. Subject to certain restrictions, the Owner may change the Face Amount
and the death benefit option. In certain cases evidence of insurability may
be required. (See Change in Death Benefit Option, and Change In Face Amount.)
Additional insurance benefits offered under the Policy include a children's
insurance rider, an additional insured family term rider, a waiver of
specified premium rider, a guaranteed option to increase the Face Amount
rider, an accidental death benefit rider, and a waiver of monthly deductions
rider. (See General Matters-Additional Insurance Benefits.) The cost of these
additional insurance benefits will be deducted from the Cash Value as part of
the monthly deduction. (See Charges and Deductions-Monthly Deduction.)
Cash Value. The Policies provide for a Cash Value equal to the total of the
Policy's Cash Value in the Separate Account, the General Account, and the
Loan Account (securing policy loans). A Policy's Cash Value will reflect the
amount and frequency of Net Premium payments, the investment performance of
any selected Divisions of the Separate Account, any Policy Loans, any partial
withdrawals, and the charges imposed in connection with the Policy. (See
Policy Benefits-Cash Value.) There is no minimum guaranteed Cash Value.
Policy Loans. After the first Policy Anniversary an Owner may borrow against
the Cash Value of a Policy. The Loan Value is 90% of the Cash Value of the
Policy on the date the loan request is received, less interest to the next
Policy Anniversary, less any outstanding Indebtedness, and less any surrender
charges. Loan interest is payable in advance on each Policy Anniversary and
all outstanding Indebtedness will be deducted from proceeds payable at the
Insured's death, upon maturity, or upon surrender.
A Policy loan will be allocated among the General Account and the various
Divisions of the Separate Account. When a loan is allocated to the Divisions
of the Separate Account, a portion of the Policy's Cash Value in the Division
of the Separate Account
4
<PAGE> 11
sufficient to secure the loan will be transferred to the Loan Account as
security for the loan. Therefore, a loan may have impact on the Policy's Cash
Value even if it is repaid. A Policy loan may be repaid in whole or in part
at any time while the Policy is in force. (See Policy Rights-Loans.) Loans
taken from, or secured by, a Policy may have Federal income tax consequences.
(See Federal Tax Matters.)
Surrender and Partial Withdrawals. At any time that a policy is in force, an
Owner may elect to surrender the Policy and receive its Cash Surrender Value
plus the value of any paid-up additions, dividends determined prior to the
surrender, and dividend accumulations. After the first year, an Owner may
also request a partial withdrawal of the Cash Surrender Value of the Policy.
When the death benefit is not based on an applicable percentage of the Cash
Value, a partial withdrawal reduces the death benefit payable by an amount
equal to the reduction in the Policy's Cash Value. A surrender or a partial
withdrawal may have Federal income tax consequences. (See Federal Tax
Matters.)
Right to Examine Policy. The Owner has a limited right to return a Policy
for cancellation within 20 days after receiving it (30 days if the Owner is a
resident of California and is age 60 or older), within 45 days after the
application is signed, or within 10 days after the Company mails a notice of
this cancellation right, whichever is latest. If a Policy is canceled within
this time period, a refund will be paid which will equal all premiums paid
under the Policy (except in the state of Kansas). The Owner also has a
similar right to cancel a requested increase in Face Amount. Upon
cancellation of an increase, additional charges deducted in connection with
the increase, will be added to the Cash Value. (See Policy Rights-Right to
Examine Policy.)
Illustrations of Death Benefits and Cash Surrender Values. Illustrations on
pages 44 to 41 in Appendix A show how death benefits and Cash Surrender
Values may vary based on certain rate of return assumptions and how these
benefits compare with amounts which would accumulate if premiums were
invested to earn interest at 5% compounded annually. If a Policy is
surrendered in the early Policy Years, the Cash Surrender Value payable will
be low as compared to premiums accumulated at interest, and consequently the
insurance protection provided prior to surrender will be costly. You may make
a written request for a projection of illustrated future Cash Values and
death benefits for a nominal fee not to exceed $25.00.
Tax Consequences of the Policy. If a Policy is issued on the basis of a
standard premium class or on a guaranteed or simplified issue basis, while
limited guidance exists, the Company believes that the Policy should qualify
as a life insurance contract for Federal income tax purposes. However, if a
Policy is issued on a substandard basis, it is unclear whether or not such a
Policy would qualify as a life insurance contract for Federal income tax
purposes. Assuming that the Policy qualifies as a life insurance contract
for Federal income tax purposes, the Company believes the Cash Value of the
Policy should be subject to the same Federal income tax treatment as the Cash
Value of a conventional fixed-benefit contract. If so, the Owner is not
considered to be in constructive receipt of the Cash Value under the Policy
until there is a distribution. A change of Owners, a surrender, a partial
withdrawal, a lapse with outstanding Indebtedness, or an exchange may have
tax consequences, depending on the particular circumstances. (See Federal
Tax Matters.)
A Policy may be treated as a "modified endowment contract" depending upon the
amount of premiums paid in relation to the death benefit. If the Policy is a
modified endowment contract, then all pre-death distributions, including
Policy Loans and due but unpaid loan interest, will be treated first as a
distribution of taxable income and then as a return of basis or investment in
the contract. In addition, prior to age 59 1/2 taxable income from such
distributions generally will be subject to a 10.0% additional tax.
If the Policy is not a modified endowment contract, distributions generally
will be treated first as a return of basis or investment in the contract and
then as disbursing taxable income. Moreover, loans will not be treated as
distributions. Finally, neither distributions nor loans from a Policy that
is not a modified endowment contract are subject to the 10.0% additional tax.
(See Federal Tax Matters.)
Dividends. While a Policy is in force, it may share in the divisible surplus
of the Company. Each year the Company will determine the share of divisible
surplus accruing to a Policy and will distribute the surplus as a dividend.
The Company is not obligated to pay dividends on the Policies. (See
Dividends.)
* * *
This Prospectus describes only those aspects of the Policies that relate to
the Separate Account, except where General Account matters are specifically
mentioned. For a brief summary of the aspects of the Policies relating to the
General Account. (See The General Account.)
5
<PAGE> 12
THE COMPANY AND
THE SEPARATE ACCOUNT
The Company
General American Life Insurance Company ("General American" or "the Company")
was originally incorporated as a stock company in 1933. In 1936, General
American initiated a program to convert to a mutual life insurance company.
In 1997, General American's policyholders approved a reorganization of the
Company into a mutual holding company structure under which General American
became a stock company wholly owned by GenAmerica Corporation, an
intermediate stock holding company. GenAmerica is wholly owned by General
American Mutual Life Insurance Company, a mutual holding company organized
under Missouri law. The mutual holding company structure retains mutuality
as General American's ultimate parent company is wholly owned by General
American's policyholders.
General American is principally engaged in writing individual and group life
insurance policies and annuity contracts. As of December 31, 1997, it had
consolidated assets of approximately $24 billion. It is admitted to do
business in 49 states, the District of Columbia, Puerto Rico, and in ten
Canadian provinces. The principal offices of General American are located at
700 Market Street, St. Louis, Missouri 63101. The mailing address of General
American's service center ("the Home Office") is P.O. Box 14490, St. Louis,
Missouri 63178.
The Separate Account
General American Life Insurance Company Separate Account Eleven ("the
Separate Account") was established by General American as a separate
investment account on January 24, 1985 under Missouri law. The Separate
Account will receive and invest the Net Premiums paid under this Policy and
allocated to it. In addition, the Separate Account currently receives and
invests Net Premiums for other flexible premium variable life insurance
policies and might do so for additional classes in the future.
The Separate Account has been 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 Federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices or policies of the Separate Account or General American
by the SEC.
The Separate Account currently is divided into eighteen Divisions. Divisions
invest in corresponding Funds from one of five open-end, diversified
management investment companies: (1) General American Capital Company, (2)
Russell Insurance Funds, (3) Variable Insurance Products Fund, (4) Variable
Insurance Products Fund II, and (5) Van Eck Investment Trust. Income and
both realized and unrealized gains or losses from the assets of each Division
of the Separate Account are credited to or charged against that Division
without regard to income, gains, or losses from any other Division of the
Separate Account or arising out of any other business General American may
conduct.
Although the assets of the Separate Account are the property of General
American, the assets in the Separate Account equal to the reserves and other
liabilities of the Separate Account are not chargeable with liabilities
arising out of any other business which General American may conduct. The
assets of the Separate Account are available to cover the general liabilities
of General American only to the extent that the Separate Account's assets
exceed its liabilities arising under the Policies. From time to time, the
Company may transfer to its General Account any assets of the Separate
Account that exceed the reserves and the Policy liabilities of the Separate
Account (which will always be at least equal to the aggregate Policy value
allocated to the Separate Account under the Policies). Before making any such
transfers, General American will consider any possible adverse impact the
transfer may have on the Separate Account.
General American Capital Company
General American Capital Company ("the Capital Company") is an open-end,
diversified management investment company which was incorporated in Maryland
on November 15, 1985, and commenced operations on October 1, 1987. Only the
Capital Company Funds described in this section of the Prospectus are
currently available as investment choices for this Policy even though
additional Funds may be described in the prospectus for the Capital Company.
Shares of Capital Company are currently offered to separate accounts
established by General American Life Insurance Company and affiliates. The
Capital Company's investment advisor is Conning Asset Management Company
("the Advisor"), an indirect majority-owned subsidiary of
6
<PAGE> 13
General American. The Advisor selects investments for the Funds.
The investment objectives and policies of each Fund are summarized below:
S&P 500 Index Fund: The investment objective of this Fund is to provide
investment results that parallel the price and yield performance of
publicly-traded common stocks in the aggregate. The Fund uses the Standard &
Poor's Composite Index of 500 Stocks ( "the S&P Index") as its standard for
performance comparison. The Fund attempts to duplicate the performance of the
S&P Index and includes dividend income as a component of the Fund's total
return. The Fund is not managed by Standard & Poor's.
The Money Market Fund: The investment objective of the Money Market Fund is
to obtain the highest level of current income which is consistent with the
preservation of capital and maintenance of liquidity. The Fund invests
primarily in high-quality, short-term money market instruments. An
investment in the Money Market Fund is neither insured nor guaranteed by the
U. S. Government.
Bond Index Fund: The investment objective of this Fund is to provide a rate
of return that reflects the performance of the publicly-traded bond market as
a whole. The Fund uses the Lehman Brothers Government/Corporate Bond Index
as its standard for performance comparison.
Managed Equity Fund: The investment objective of this Fund is long-term
growth of capital, obtained by investing primarily in common stocks.
Securing moderate current income is a secondary objective.
Asset Allocation Fund: The investment objective of this Fund is a high rate
of long-term total return composed of capital growth and income payments.
Preservation of capital is the secondary objective and chief limit on
investment risk. The Fund will invest only in those types of securities that
the other Capital Company Funds may invest in. The Asset Allocation Fund
invests in a combination of common stocks, bonds, or money market instruments
in accordance with guidelines established from time to time by Capital
Company's Board of Directors.
International Index Fund: The investment objective of this Fund is to obtain
investment results that parallel the price and yield performance of publicly
traded common stocks included in the Morgan Stanley Capital International
("MSCI") Europe, Australia and Far East Index ("EAFE").
Mid-Cap Equity Fund: The investment objective of this Fund is capital
appreciation. It pursues this objective by investing primarily in common
stocks of United States-based, publicly traded companies with medium
capitalizations falling within the capitalization range of the S&P Mid-Cap
400 at the time of the Fund's investment.
Small-Cap Equity Fund: The investment objective of this Fund is to provide a
rate of return that corresponds to the performance of the common stock of
small companies, while incurring a level of risk that is generally equal to
the risks associated with small company common stock. The Fund attempts to
duplicate the performance of the smallest 20% of companies, based on
capitalization size, that are based in the United States and listed on the
New York Stock Exchange ("NYSE").
Russell Insurance Funds
Russell Insurance Funds ("RIF") is organized as a Massachusetts business
trust under a Master Trust Agreement dated July 11, 1996. RIF is authorized
to issue an unlimited number of shares evidencing beneficial interests in
different investment Funds, which interests may be offered in one or more
classes. RIF is a diversified open end management investment company,
commonly known as a "mutual fund." Frank Russell Company, which is a
consultant to RIF, has been primarily engaged since 1969 in providing asset
management consulting services to large corporate employee benefit funds.
Major components of its consulting services are: (i) quantitative and
qualitative research and evaluation aimed at identifying the most appropriate
investment management firms to invest large pools of assets in accord with
specific investment objectives and styles; and (ii) the development of
strategies for investing assets using "multi-style, multi-manager
diversification." This is a method for investing large pools of assets by
dividing the assets into segments to be invested using different investment
styles, and selecting money managers for each segment based upon their
expertise in that style of investment. General management of RIF is provided
by Frank Russell Investment Management Company, a wholly-owned subsidiary of
Frank Russell Company, which furnishes officers and staff required to manage
and administer RIF on a day-to-day basis.
The investment objectives and policies of each Fund are summarized below:
7
<PAGE> 14
Multi-Style Equity Fund: The investment objective of this Fund is to provide
income and capital growth by investing principally in equity securities.
Aggressive Equity Fund: This Fund seeks to provide capital appreciation by
assuming a higher level of volatility than is ordinarily expected from the
Multi-Style Equity Fund while still investing in equity securities.
Non-U.S. Fund: This Fund's objective is to provide favorable total return and
additional diversification for U.S. investors by investing primarily in
equity and fixed-income securities of non-U.S. companies, and securities
issued by non-U.S. governments.
Core Bond Fund: This Fund's objective is to maximize total return, through
capital appreciation and income, by assuming a level of volatility consistent
with the broad fixed-income market. The Fund invests in fixed-income
securities.
Variable Insurance Products Fund
Variable Insurance Products Fund ("VIP") is an open-end, diversified
management investment company organized as a Massachusetts business trust on
November 13, 1981. It currently has five separate investment portfolios, but
only the four listed below are available as Separate Account Eleven Division
choices. Variable Insurance Products Fund shares are purchased by insurance
companies to fund benefits under variable insurance and annuity policies.
Fidelity Management & Research Company ("FMR") of Boston, Massachusetts is
the Portfolios' Manager.
The investment objectives and policies of each Portfolio are summarized
below:
Equity-Income Portfolio: The investment objective of this Fund is income,
obtained by investing primarily in income-producing equity securities. In
choosing these securities, FMR will also consider the potential for capital
appreciation. The Fund's goal is to achieve a yield which exceeds the
composite yield on the securities comprising the Standard & Poor's Composite
Index of 500 Stocks.
Growth Portfolio: The investment objective of this Portfolio is capital
appreciation. The Fund normally purchases common stocks, although its
investments are not restricted to any one type of security. Capital
appreciation may also be obtained from other types of securities, including
bonds and preferred stocks.
Overseas Portfolio: The investment objective of this Fund is long-term
growth of capital. The Fund invests primarily in foreign securities. The
Overseas Portfolio provides a means for investors to diversify their own
portfolios by participation in companies and economies outside of the United
States.
High Income Portfolio: The investment objective of this Fund is a high level
of current income. The Fund seeks to fulfill the objectives by investing
primarily in high-yielding, lower-rated, fixed-income securities, while also
considering growth of capital. Lower-rated securities, commonly referred to
as "junk bonds", involve greater risk of default or price change than
securities assigned a higher quality rating.
Variable Insurance Products Fund II
Variable Insurance Products Fund II ("VIP II") is an open-end, diversified
management investment company organized as a Massachusetts business trust on
March 21, 1988. Only the Fund(s) described in this section of the Prospectus
are currently available as investment choices for this Policy even though
additional Funds may be described in the prospectus for VIP II. VIP II
shares are purchased by insurance companies to fund benefits under variable
insurance and annuity policies. FMR is the Fund's manager.
The investment objective and policies of the Funds(s) are summarized below:
Asset Manager: The investment objective of this Fund is to seek a high total
return with reduced risk over the long-term by allocating its assets among
domestic and foreign stocks, bonds, and short-term fixed income instruments.
Van Eck Worldwide Insurance Trust
Van Eck Worldwide Insurance Trust ("Van Eck") is an open-end management
investment company organized as a Massachusetts business trust on January 7,
1987. Only the Fund described in this section of the Prospectus is
currently available as an investment choice for this Policy even though
additional Funds may be described in the prospectus for Van Eck. Shares of
Van Eck are offered only to separate accounts of various insurance companies
to support benefits of variable insurance and annuity policies. The assets of
Van Eck are managed by Van Eck Associates Corporation of New York, New York.
The investment objectives and policies of the Fund are summarized below:
8
<PAGE> 15
Worldwide Hard Assets Fund: The investment objective of the Fund is to seek
long-term capital appreciation by investing in equity and debt securities of
companies engaged in the exploration, development, production, and
distribution of one or more of the following: (i) precious metals, (ii)
ferrous and non-ferrous metals, (iii) oil and gas, (iv) forest products, (v)
real estate, and (vi) other basic non-agricultural commodities (together,
"Hard Assets"). Current income is not an objective.
There is no assurance that any of the Funds will achieve its stated
objective. It is conceivable that in the future it may be disadvantageous
for Funds to offer shares to separate accounts of various insurance companies
to serve as the investment medium for their variable products or for both
variable life and annuity separate accounts to invest simultaneously in
Capital Company. The Board of Trustees of FMR, the Board of Trustees of Van
Eck, the Board of Directors of Capital Company, the Board of Directors of
Russell, the respective advisors of each Fund, and the Company and any other
insurance companies participating in VIP, VIP II, Van Eck, Russell and
Capital Company are required to monitor events to identify any material
irreconcilable conflicts that may possibly arise, and to determine what
action, if any, should be taken in response to those events or conflicts. A
more detailed description of the Funds, their investment policies,
restrictions, risks, and charges is in the prospectuses for VIP, VIP II, Van
Eck, Russell, and Capital Company, which must accompany or precede this
Prospectus and which should be read carefully.
Addition, Deletion, or Substitution of Investments
The Company reserves the right, subject to compliance with applicable law, to
make additions to, deletions from, or substitutions for the shares that are
held by the Separate Account or that the Separate Account may purchase. The
Company reserves the right to eliminate the shares of any of the Funds and to
substitute shares of another Fund of Capital Company, Russell, VIP, VIP II,
or Van Eck, or of another registered open-end investment company if the
shares of a Fund are no longer available for investment or if in its judgment
further investment in any Fund becomes inappropriate in view of the purposes
of the Separate Account. The Company will not substitute any shares
attributable to an Owner's interest in a Division of the Separate Account
without notice to the Owner and prior approval of the SEC, to the extent
required by the 1940 Act or other applicable law. Nothing contained in this
Prospectus shall prevent the Separate Account from purchasing other
securities for other series or classes of policies, or from permitting a
conversion between series or classes of policies on the basis of requests
made by Owners.
The Company also reserves the right to establish additional Divisions of the
Separate Account, each of which would invest in a new Fund of Capital
Company, Russell, VIP, VIP II or Van Eck, or in shares of another investment
company, with a specified investment objective. New Divisions may be
established when, in the sole discretion of the Company, marketing needs or
investment conditions warrant. Any new Division will be made available to
existing Owners on a basis to be determined by the Company. To the extent
approved by the SEC, the Company may also eliminate or combine one or more
Divisions, substitute one Division for another Division, or transfer assets
between Divisions if, in its sole discretion, marketing, tax, or investment
conditions warrant.
In the event of a substitution or change, the Company may, if it considers it
necessary, make such changes in the Policy by appropriate endorsement and
offer conversion options required by law, if any. The Company will notify all
Owners of any such changes.
If deemed by the Company to be in the best interests of persons having voting
rights under the Policy, and to the extent any necessary SEC approvals or
Owner votes are obtained, the Separate Account may be: (a) operated as a
management company under the 1940 Act; (b) de-registered under that Act in
the event such registration is no longer required; or (c) combined with other
separate accounts of the Company. To the extent permitted by applicable law,
the Company may also transfer the assets of the Separate Account associated
with the Policy to another separate account.
POLICY BENEFITS
Death Benefit
As long as the Policy remains in force (See Payment and Allocation of
Premiums-Policy Lapse and Reinstatement.), the Company will, upon receipt of
proof of the Insured's death at its Home Office, pay the death benefit in a
lump sum. The amount of the death benefit payable will be determined at the
end of the Valuation Period during which the Insured's death occurred. (See
Payment of Policy Benefits-Settlement Options.) The death benefit will be
paid to the surviving Beneficiary or Beneficiaries specified in the
application or as subsequently changed.
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<PAGE> 16
The Policy provides two death benefit options: "Death Benefit Option A" and
"Death Benefit Option B". The death benefit under either option will never be
less than the current Face Amount of the Policy (less Indebtedness) as long
as the Policy remains in force. (See Payment and Allocation of
Premiums-Policy Lapse and Reinstatement.) The minimum Face Amount currently
is $50,000.
Death Benefit Option A. Under Death Benefit Option A, the death benefit is
the current Face Amount of the Policy or, if greater, the applicable
percentage of Cash Value on the date of death. The applicable percentage is
250% for an Insured Attained Age 40 or below on the Policy Anniversary prior
to the date of death. For Insureds with an Attained Age over 40 on that
Policy Anniversary, the percentage is lower and declines with age as shown in
the Applicable Percentage of Cash Value Table shown below. Accordingly, under
Death Benefit Option A the death benefit will remain level at the Face Amount
unless the applicable percentage of Cash Value exceeds the current Face
Amount, in which case the amount of the death benefit will vary as the Cash
Value varies.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
Att Applicable Att Applicable
Age Percentage Age Percentage
--- ---------- --- ----------
<S> <C> <C> <C>
Up to 40 250% 61 128%
41 243% 62 126%
42 236% 63 124%
43 229% 64 122%
44 222% 65 120%
45 215% 66 119%
46 209% 67 118%
47 203% 68 117%
48 197% 69 116%
49 191% 70 115%
50 185% 71 113%
51 178% 72 111%
52 171% 73 109%
53 164% 74 107%
54 157% 75 to 90 105%
55 150% 91 104%
56 146% 92 103%
57 142% 93 102%
58 138% 94 101%
59 134% 95+ 100%
60 130%
</TABLE>
Death Benefit Option B. Under Death Benefit Option B, the death benefit is
equal to the current Face Amount plus the Cash Value of the Policy on the
date of death or, if greater, the applicable percentage of the Cash Value on
the date of death. The applicable percentage is the same as under Death
Benefit Option A: 250% for an Insured Attained Age 40 or below on the Policy
Anniversary prior to the date of death, and for Insureds with an Attained Age
over 40 on that Policy Anniversary the percentage declines as shown in the
Applicable Percentage of Cash Value Table. Accordingly, under Death Benefit
Option B the amount of the death benefit will always vary as the Cash Value
varies (but will never be less than the Face Amount).
Change In Death Benefit Option. After the first Policy Anniversary, the
death benefit option in effect may be changed. The option may be changed once
each Policy Year, and a request for change must be made to the Company in
writing. The effective date of such a change will be the Monthly Anniversary
on or following the date the Company receives the change request. A change
in death benefit option may have Federal income tax consequences.
If the death benefit option is changed from Death Benefit Option A to Death
Benefit Option B, the Face Amount will be decreased to equal the Face Amount
before the change less the Cash Value on the effective date of the change. If
the death benefit option is changed from Death Benefit Option B to Death
Benefit Option A, the Face Amount will be increased to equal the Death
Benefit on the effective date of change.
Satisfactory evidence of insurability must be submitted to the Company in
connection with a request for a change from Death Benefit Option A to Death
Benefit Option B. A change may not be made if it would result in a Face
Amount of less than the minimum Face Amount.
A change in death benefit option will not in itself result in an immediate
change in the amount of a Policy's death benefit or Cash Value. No charges
will be imposed upon a change from Death Benefit Option B to Death Benefit
Option A. A change from Death Benefit Option A to Death Benefit Option B,
however, will result in a decrease in the Face Amount which may, in turn,
result in a surrender charge. This surrender charge will be assessed on the
decrease in Face Amount in the same manner as it would be assessed on a
requested decrease in Face Amount (See Contingent Deferred Sales Charge). In
addition, if, prior to or accompanying a change in the death benefit option,
there has been an increase in the Face Amount, the cost of insurance charge
may be different for the increased amount. (See Charges and Deductions-Cost
of Insurance.)
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<PAGE> 17
Change in Face Amount. Subject to certain limitations set forth below, an
Owner may increase or decrease the Face Amount of a Policy once each Policy
Year but not before the first Policy Anniversary. A written request is
required for a change in the Face Amount. A change in Face Amount may affect
the cost of insurance rate and the net amount at risk, both of which affect
an Owner's cost of insurance charge. (See Charges and Deductions-Cost of
Insurance.) A change in the Face Amount of a Policy may have Federal income
tax consequences. (See Federal Tax Matters.)
For an increase in the Face Amount, the Company requires that satisfactory
evidence of insurability be submitted. An application for an increase must
be received within 60 days prior to, or 30 days following, a Policy
Anniversary. If approved, the increase will become effective as of the
Policy Anniversary. In addition, the Insured must have an Attained Age of
not greater than 80 on the effective date of the increase. The increase may
not be less than $5,000 under the Standard Policy and $2,000 under the
Pension Policy. Although an increase need not necessarily be accompanied by
an additional premium (unless it is required to meet the next monthly
deduction), the Cash Surrender Value in effect immediately after the increase
must be sufficient to cover the next monthly deduction including the
selection and issue expense charge assessed in connection with the increase.
To the extent the Cash Surrender Value is not sufficient, an additional
premium must be paid. (See Charges and Deductions - Monthly Deduction.) An
increase in the Face Amount may result in certain additional charges. (See
Charges and Deductions - Monthly Deductions.)
For the Owner's rights upon an increase in Face Amount, see Policy Rights -
Right to Examine Policy. Owners should consult their sales representative
before deciding whether to increase coverage by increasing the Face Amount of
a Policy.
An Owner may elect an increase in the Face Amount that will terminate on the
Monthly Anniversary which is an exact whole number of years from the
effective date of the increase and which is nearest the Insured's 85th
birthday. The Owner may select this option only if the Insured has an
Attained Age of not less than 20 but not more than 70 on the effective date
of the requested increase. Because a termination cannot occur less than 15
years after the option is selected, no Contingent Deferred Sales Charge will
be assessed due to the decrease in Face Amount resulting from the
termination. If the Owner selects this option, the increase may have a
different cost of insurance than an increase that terminates at Attained Age
95. The cost of insurance will never exceed the monthly cost of insurance
rates set forth in the Policy.
Any decrease in the Face Amount will become effective on the Monthly
Anniversary on or following receipt of the written request by the Company.
The amount of the requested decrease must be at least $5,000 and the Face
Amount remaining in force after any requested decrease may not be less than
the minimum Face Amount. If following a decrease in Face Amount, the Policy
would not comply with the maximum premium limitations required by Federal tax
law (See Payment and Allocation of Premiums), the decrease may be limited or
Cash Value may be returned to the Owner (at the Owner's election), to the
extent necessary to meet these requirements. A decrease in the Face Amount
will reduce the Face Amount in the following order:
(a) to any Face Amount increases resulting from a change from Death Benefit
Option B to Death Benefit Option A; then to
(b) The Face Amount provided by the most recent increase;
(c) The next most recent increases successively; and
(d) The initial Face Amount.
This order of reduction will be used to determine the amount of subsequent
cost of insurance charges (See Charges and Deductions - Cost of Insurance),
and whether and in what amount a surrender charge will be deducted. If the
decrease in Face Amount is made against a coverage that has been in effect
for less than ten Policy Years, then a surrender charge will be assessed
against all Divisions and the General Account proportionately. (See Charges
and Deductions - Contingent Deferred Sales Charge.)
Payment of the Death Benefit. The death benefit under the Policy will
ordinarily be paid in a lump sum within seven days after the Company receives
all documentation required for such a payment. Payment may, however, be
postponed in certain circumstances. (See General Matters-Postponement of
Payments from the Separate Account.) The death benefit will be increased by
any paid-up additions to the Policy, any dividend accumulations and any
unpaid dividends determined prior to the Insured's death, and by the amount
of the monthly cost of insurance for the portion of the month from the date
of death to the end of the month, and reduced by any outstanding
Indebtedness. (See General Matters-
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<PAGE> 18
Additional Insurance Benefits, Dividends, and Charges and Deductions.) The
Company will pay interest on the death benefit from the date of the Insured's
death to the date of payment. Interest will be at an annual rate determined
by the Company, but will never be less than the guaranteed rate of 4.0%.
Provisions for settlement of the death benefit other than a lump sum payment
may only be made upon written agreement with the Company.
Cash Value
The Cash Value of the Policy is equal to the total of the amounts credited to
the Owner in the Separate Account, the General Account, and the Loan Account
(securing Policy Loans). The Policy's Cash Value in the Separate Account will
reflect the investment performance of the chosen divisions of the Separate
Account, the frequency and amount of net premiums paid, transfers, partial
withdrawals, loans, and the charges assessed in connection with the Policy.
An Owner may at any time surrender the Policy and receive the Policy's Cash
Surrender Value. (See Policy Rights-Surrender and Partial Withdrawals.) There
is no guaranteed minimum Cash Value.
Determination of Cash Value. Cash Value is determined on each Valuation
Date. On the Investment Start Date, the Cash Value in a Division will equal
the portion of any Net Premium allocated to the Division, reduced by the
portion allocated to that Division of the monthly deduction(s) due from the
Issue Date through the Investment Start Date. Depending upon the length of
time between the Issue Date and the Investment Start Date, this amount may be
more than the amount of one monthly deduction. (See Payment and Allocation of
Premiums.) Thereafter, on each Valuation Date, the Cash Value in a Division
of the Separate Account will equal:
(1) The Cash Value in the Division on the preceding Valuation Date,
multiplied by the Division's Net Investment Factor (defined below) for the
current Valuation Period; plus
(2) Any Net Premium payments received during the current Valuation Period
which are allocated to the Division; plus
(3) Any loan repayments allocated to the Division during the current
Valuation Period, plus
(4) Any amounts transferred to the Division from the General Account or
from another Division during the current Valuation Period; plus
(5) That portion of the interest credited on outstanding loans which is
allocated to the Division during the current Valuation Period; minus
(6) Any amounts transferred from the Division to the General Account, Loan
Account, or to another Division during the current Valuation Period
(including any transfer charges); minus
(7) Any partial withdrawals from the Division during the current Valuation
Period; minus
(8) Any withdrawal or surrender charges incurred during the current
Valuation Period attributed to the Division in connection with a partial
withdrawal or decrease in Face Amount; minus
(9) If a Monthly Anniversary occurs during the current Valuation Period,
the portion of the monthly deduction allocated to the Division during the
current Valuation Period to cover the Policy Month which starts during that
Valuation Period. (See Charges and Deductions)
The Policy's Cash Value in the Separate Account equals the sum of the
Policy's Cash Values in each Division.
Net Investment Factor. The Net Investment Factor measures the investment
performance of a Division during a Valuation Period. The Net Investment
Factor for each Division for a Valuation period is calculated as follows:
(l) 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 the assets in the Valuation Period for which the Net Investment
Factor is being determined; minus
(3) The capital losses, realized or unrealized, charged against those
assets during the Valuation Period; minus
(4) Any amount charged against each Division for taxes, including any tax
or other economic burden resulting from the application of the tax laws
determined by the Company or any amount set aside during the Valuation Period
as a reserve for taxes attributable to the operation or maintenance of each
Division; minus
(5) A charge not to exceed .002319% of the average net assets for each day
in the Valuation Period. This
12
<PAGE> 19
is equivalent to an effective annual rate of 0.85% for mortality and expense
risks; divided by
(6) The value of the assets at the end of the preceding Valuation Period.
POLICY RIGHTS
Loans
Loan Privileges. After the first Policy Anniversary, the Owner may, by
written request to General American, borrow an amount up to the Loan Value of
the Policy, with the Policy serving as sole security for such loan. A loan
taken from, or secured by, a Policy may have Federal income tax consequences.
(See Federal Tax Matters.)
The Loan Value is 90% of the Cash Value of the Policy on the date the loan
request is received, less interest to the next Policy Anniversary, less any
outstanding Indebtedness, less any surrender charges, and less any
anticipated monthly deductions to the next Policy Anniversary. If required by
state law, the Policy's Loan Value may be a greater percentage of the Cash
Value as described in the Policy.
Policy Loan interest is payable in advance on each Policy Anniversary. The
minimum amount that may be borrowed, net of the interest payable in advance,
is $500. The loan may be completely or partially repaid at any time while the
Insured is living. Any amount due to an Owner under a Policy Loan ordinarily
will be paid within seven days after General American receives the loan
request at its Home Office, although payments may be postponed under certain
circumstances. (See General Matters-Postponement of Payments from the
Separate Account.)
When a Policy Loan is made, Cash Value equal to the amount of the loan plus
the interest due on the borrowed amount to the next Policy Anniversary will
be transferred to the Loan Account as security for the loan. A Loan
Subaccount exists within the Loan Account for the General Account and each
Division of the Separate Account. Amounts transferred to the Loan Account to
secure Indebtedness are allocated to the appropriate Loan Subaccount to
reflect its origin. Unless the Owner requests a different allocation, amounts
will be transferred from the Divisions of the Separate Account and the
General Account in the same proportion that the Policy's Cash Value in each
Division and the General Account, if any, bears to the Policy's total Cash
Value, less the Cash Value in the Loan Account, at the end of the Valuation
Period during which the request for a Policy Loan is received. This will
reduce the Policy's Cash Value in the General Account and Separate Account.
These transactions will not be considered transfers for purposes of the
limitations on transfers between Divisions or to or from the General Account.
Cash Value in the Loan Account is expected to earn interest at a rate ("the
earnings rate") which is lower than the rate charged on the Policy Loan ("the
borrowing rate"). Cash Value in the Loan Account will accrue interest daily
at an earnings rate which is the greater of (a) an annual rate of 5% ("the
guaranteed earnings rate" or (b) a current rate determined by us ("the
discretionary earnings rate"). The Company may change the discretionary
earnings rate on Policy Loans at any time in its sole discretion. Currently,
we accrue interest at a discretionary earnings rate which is .75% less than
the borrowing rate we charge for Policy Loan interest. The difference
between the rate of interest earned and the borrowing rate is the "Loan
Spread". The .75% Loan Spread mentioned above is currently in effect and is
not guaranteed.
Interest earned on the Cash Value held in the Loan Account will be allocated
on Policy Anniversaries to the General Account and the Divisions of the
Separate Account in the same proportion that the Cash Value in each Loan
Subaccount bears to the Cash Value in the Loan Account. The interest earned
will also be allocated, as appropriate: (1) when a new Policy Loan is made;
(2) when a Policy Loan is partially or fully repaid; and (3) when an amount
is needed to meet a monthly deduction.
Interest Charged. The borrowing rate we charge for Policy Loan interest will
be based on an index. The indexed borrowing rate will never be more than the
maximum loan rate permitted by law. More information on the borrowing rate is
provided below.
General American will inform the Owner of the current borrowing rate when a
Policy Loan is made. General American will also mail the Owner an advance
notice if there is to be a change in the borrowing rate applicable to any
outstanding Indebtedness.
Policy Loan interest is due and payable annually in advance on each Policy
Anniversary. If the Owner does not pay the interest when it is due, an amount
of Cash Value equal to the unpaid interest will be added to the outstanding
Indebtedness as of the due date. (See Effect of Policy Loans.) The amount of
Policy Loan interest which is transferred to the Loan
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Account will be deducted from the Divisions of the Separate Account and from
the General Account in the same proportion that the portion of the Cash Value
in each Division and in the General Account, respectively, bears to the total
Cash Value of the Policy minus the Cash Value in the Loan Account.
We determine the borrowing rate at the beginning of each Policy Year. The
same rate applies to any outstanding Indebtedness and to any new Policy Loans
made during the Policy Year. The borrowing rate determined by General
American for a Policy Year may not exceed a Maximum Limit which is the
greater of:
(a) The Published Monthly Average (defined below) for the calendar month
ending two months before the beginning of the month in which the Policy
Anniversary falls (example: for a Policy with a June Policy Anniversary, the
March Published Average); or
(b) Six Percent (6%).
The Published Monthly Average means:
(i) Moody's Corporate Bond Yield Average-Monthly Average Corporates, as
published by Moody's Investors Service, Inc. or any successor to that
service; or
(ii) If that average is no longer published, as substantially similar
average. established by regulation issued by the insurance supervisory
official of the state in which this Policy is issued.
If the maximum limit for a Policy Year, as determined in this manner, is at
least 0.5% higher than the rate set for the previous Policy Year, General
American may increase the rate to no more than that limit. If the maximum
limit for a Policy Year is at least 0.5% lower than the rate set for the
previous Policy Year, General American will reduce the rate to no more than
that limit.
Effect of Policy Loans. Whether or not a Policy Loan is repaid, it will
permanently affect the Cash Value of a Policy, and may permanently affect the
amount of the death benefit, even if the loan is repaid. The collateral for
the loan (the amount held in the Loan Account) does not participate in the
performance of the Separate Account while the loan is outstanding. If the
Loan Account earnings rate is less than the investment performance of the
selected Division(s), the Cash Value of the Policy will be lower as a result
of the Policy Loan. Conversely, if the Loan Account earnings rate is higher
than the investment performance of the Division(s), the Cash Value may be
higher.
In addition, if the Indebtedness and any unpaid selection and issue expense
charges (See Charges and Deductions-Monthly Deduction.) exceeds the Cash
Value minus the surrender charge on any Monthly Anniversary, the Policy will
lapse, subject to a grace period. (See Payment and Allocation of
Premiums-Policy Lapse and Reinstatement.) A sufficient payment must be made
within the later of the grace period of 62 days from the Monthly Anniversary
immediately before the date the Indebtedness and any unpaid selection and
issue expense charges exceed the Cash Value less any surrender charges, or 31
days after notice that a Policy will terminate unless a sufficient payment has
been mailed, or the Policy will lapse and terminate without value. A lapsed
Policy, however, may later be reinstated, subject to certain limitations.
(See Payment and Allocation of Premiums-Policy Lapse and Reinstatement.)
Any outstanding Indebtedness and the accrued interest on those loans will be
deducted from the proceeds payable upon the death of the Insured, surrender,
or the maturity of the Policy.
Repayment of Indebtedness. A Policy Loan may be repaid in whole or in part
at any time prior to the death of the Insured and as long as a Policy is in
force. When a loan repayment is made, an amount securing the Indebtedness in
the Loan Account equal to the loan repayment will be transferred to the
Divisions of the Separate Account and the General Account in the same
proportion that Cash Value in each Loan Subaccount bears to Cash Value in the
Loan Account. Amounts paid while a Policy Loan is outstanding will be
treated as premiums unless the Owner requests in writing that they be treated
as repayment of Indebtedness.
Surrender and Partial Withdrawals
At any time during the lifetime of the Insured and while a Policy is in
force, the Owner may surrender the Policy by sending a written request to the
Company. After the first Policy Year, an Owner may make a partial withdrawal
by sending a written request to the Company. The amount available for
surrender is the Cash Surrender Value at the end of the Valuation Period
during which the surrender request is received at the Company's Home Office.
Amounts payable from the Separate Account upon surrender or a partial
withdrawal will ordinarily be
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<PAGE> 21
paid within seven days of receipt of the written request. (See General
Matters-Postponement of Payments from the Separate Account.)
Surrenders. To effect a surrender, either the Policy itself must be returned
to the Company along with the request or the request must be accompanied by a
completed affidavit of loss, which is available from the Company. Upon
surrender, the Company will pay the Cash Surrender Value to the Owner in a
single sum. The Cash Surrender Value equals the Cash Value on the date of
surrender, less any outstanding Indebtedness, less any surrender charge
(discussed below), and less any unpaid selection and issue expense charges.
The proceeds paid will be increased by the cash value of any paid-up
additions, any unpaid dividends determined prior to surrender and dividend
accumulations, and any unaccrued interest paid. (See Dividends.) The Company
will determine the Cash Surrender Value as of the date that an Owner's
written request is received at the Company's Home Office. If the request is
received on a Monthly Anniversary, the monthly deduction otherwise deductible
will be included in the amount paid. The Policy will terminate as of the
date of surrender. The Insured must be living at the time of a surrender. A
surrender may have Federal income tax consequences. (See Federal Tax
Matters.)
Partial Withdrawals. After the first Policy Year, an Owner may make up to
one partial withdrawal each Policy Month from the Separate Account, and up to
four partial withdrawals and transfers in any Policy Year from the General
Account. A partial withdrawal may have Federal income tax consequences. (See
Federal Tax Matters.)
The minimum amount of a partial withdrawal request, net of any applicable
surrender charges, is the lesser of (a) $500 from a Division of the Separate
Account, or (b) the Policy's Cash Value in a Division. The maximum amount
that may be withdrawn from a Division is the Policy's Cash Value in that
Division net of any applicable surrender charges. The total partial
withdrawals and transfers from the General Account over the Policy Year may
not exceed a maximum amount equal to the greater of 1) $500 or 2) 15 % of
the General Account's Cash Surrender Value at the beginning of the current
Policy Year.
The Owner may allocate the amount withdrawn plus any applicable surrender
charges, subject to the above conditions, among the Divisions of the Separate
Account and the General Account. If no allocation is specified, then the
partial withdrawal will be allocated among the Divisions of the Separate
Account and the General Account in the same proportion that the Policy's Cash
Value in each Division and the General Account bears to the total Cash Value
of the Policy, less the Cash Value in the Loan Account, on the date the
request for the partial withdrawal is received. If the limitations on
withdrawals from the General Account will not permit this proportionate
allocation, the Owner will be requested to provide an alternate allocation.
(See The General Account.)
Generally, any surrender charge imposed in connection with a partial
withdrawal will be allocated among the Divisions of the Separate Account and
the General Account in the same proportion as the partial withdrawal is
allocated. An Owner may request, however, that a surrender charge applicable
to an amount withdrawn be paid from the Owner's Cash Value in another
Division. No amount may be withdrawn that would result in there being
insufficient Cash Value to meet any surrender charges that would be payable
immediately following the withdrawal upon the surrender of the remaining Cash
Value.
The death benefit will be affected by a partial withdrawal. If Death Benefit
Option A is in effect and the death benefit equals the Face Amount, then a
partial withdrawal will decrease the Face amount by an amount equal to the
partial withdrawal plus the applicable surrender charges. If the death
benefit is based on a percentage of the Cash Value, then a partial withdrawal
will decrease the Face Amount by an amount by which the partial withdrawal
plus the applicable surrender charge exceeds the difference between the death
benefit and the Face Amount. If Death Benefit Option B is in effect, the Face
Amount will not change.
The Face Amount remaining in force after a partial withdrawal may not be less
than the minimum Face Amount. Any request for a partial withdrawal that would
reduce the Face Amount below this amount will not be implemented.
Partial withdrawals may affect the way in which the cost of insurance charge
is calculated and the amount of pure insurance protection afforded under a
Policy. (See Monthly Deduction-Cost of Insurance) Partial withdrawals will
be applied first to reduce the initial Face Amount and then to each increase
in Face Amount in order, starting with the first increase.
Charges on Surrender, Partial Withdrawals and Decreases. Surrenders and
partial withdrawals may result in a charge. If a Policy is surrendered, the
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charge will be 24% of premiums paid during the first Policy Year up to the
Target Premium for the Policy, as set forth in the Policy. The amount of the
charge remains level over the first five Policy Years and then gradually
decreases to zero (0) at the end of ten Policy Years. Additional charges
will be deducted if the Policy is surrendered following one or more increase
in face Amount. The charge applicable to each increase will be 24% of the
premiums attributed to the increase which are received within 12 Policy
Months of the increase, up to the Target Premium for that increase.
A charge also will apply to any decrease in Face Amount. A decrease in Face
Amount may decrease some or all of the initial Face Amount and any increases
in Face Amount. As noted above, a partial withdrawal may cause a decrease in
Face Amount is a portion of the charge that would be deducted upon surrender
or lapse. The portion is based on the relationship between the decrease in
Face Amount and the Face Amount before the decrease. the charge will be
allocated among the Divisions of the Separate Account and the General Account
in the same proportion that the Policy's Cash Value in each Division and the
General Account bears to the total Cash Value of the Policy less the Cash
Value in the Loan Account. Charges are described in more detail under
Charges and Deductions - Contingent Deferred Sales Charge.
General American may reduce the charge for surrenders and partial withdrawals
on policies sold to members of a class of associated individuals or to a
trustee, employer, or other entity representing such a class, where it is
expected that such multiple sales will result in savings of selling or
administrative expenses.
Transfers
Under General American's current practices, a Policy's Cash Value, except
amounts credited to the Loan Account, may be transferred among the Division
of the Separate Account and between the General Account and the Divisions.
Transfers to and from the General Account are subject to restrictions (see
The General Account). Requests for transfers from or among Divisions of the
Separate Account must be in writing. Transfers from or among the Divisions of
the Separate Account may be made once each Policy Month, and must be in
amounts of at least $500 or, if smaller, the Policy's Cash Value in a
Division. General American will effectuate transfers and determine all
values in connection with transfers as of the end of the Valuation period
during which the transfer request is received.
All requests received on the same Valuation Day will be considered a single
transfer request. Each transfer must meet the minimum requirement of $500 or
the entire Cash Value in a Division whichever is smaller. Where a Single
transfer request calls for more than one transfer, and not all of the
transfers would meet the minimum requirements, General American will
effectuate those transfers that do meet the requirements. Transfers
resulting from Policy Loans or exercise of the conversion privilege will not
be counted for purposes of the limitations on the amount or frequency of
transfers allowed in each Policy Month or Policy Year.
Although General American currently intends to continue to permit transfers
for the foreseeable future, the Policy provides that General American may at
any time revoke, modify or limit the transfer privilege, including the
minimum amount transferable. General American may in the future impose a
charge of no more than $25 per transfer request.
Portfolio Rebalancing
Over time, the funds in the General Account and the Divisions of the Separate
Account will accumulate at different rates as a result of different
investment returns. The Owner may direct that from time to time we
automatically restore the balance of your Cash Value in the General Account
and in the Divisions of the Separate Account to the percentages that you
determined in advance. There are two methods of rebalancing available -
periodic and variance.
Periodic Rebalancing. Under this option The Owner elects a frequency
(monthly, quarterly, semiannually or annually), measured from the Policy
Anniversary. On each date elected, we will rebalance the funds by generating
fund transfers to reallocate the funds according to the investment
percentages elected.
Variance Rebalancing. Under this option the Owner elects a specific
allocation percentage for the General Account and each Division of the
Separate Account. For each such account, the allocation percentage (if not
zero) must be a whole percentage and must not be less than five percent (5%).
The Owner also elects a maximum variance percentage (5%, 10%, 15%, or 20%
only), and can exclude specific funds from being rebalanced. On each
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Monthly Anniversary we will review the current fund balances to determine
whether any fund balance is outside of the variance range (either above or
below) as a percentage of the specified allocation percentage for that fund.
If any fund is outside of the variance range, we will generate transfers to
rebalance all of the specified funds back to the predetermined percentages.
Transfers resulting from portfolio rebalancing will not be counted against
the total number of transfers allowed in a Policy Year before a charge is
applied.
The Owner may elect either form of portfolio rebalancing by specifying it on
the policy application. The Owner may elect it later for an in-force Policy,
or may cancel it, by submitting a change form acceptable to General American
under its administrative rules.
Only one form of portfolio rebalancing may be elected at any one time, and
portfolio rebalancing may not be used in conjunction with dollar cost
averaging (see below).
General American reserves the right to suspend portfolio rebalancing at any
time on any class of Policies on a nondiscriminatory basis, or to charge an
administrative fee for election changes in excess of a specified number in a
Policy Year in accordance with its administrative rules.
Dollar Cost Averaging
The Owner may direct the Company to transfer amounts on a monthly basis from
the Money Market Fund to any other Division of the Separate Account. This
service is intended to allow the Owner to utilize Dollar Cost Averaging
("DCA"), a long-term investment technique which provides for regular, level
investments over time. The Company makes no guarantees that DCA will result
in a profit or protect against loss in a declining market.
The following rules and restrictions apply to DCA transfers:
(1) The minimum DCA transfer amount is $100.
(2) A written election of the DCA service, on a form provided by the
Company, must be completed by the Owner and on file with the Company in order
to begin DCA transfers.
(3) In the written election of the DCA service, the Owner indicates how DCA
transfers are to be allocated among the Divisions of the Separate Account.
For any Division chosen to receive DCA transfers, the minimum percentage that
may be allocated to a Division is 5% of the DCA transfer amount, and
fractional percentages may not be used.
(4) DCA transfers can only be made from the Money Market Fund, and DCA
transfers will not be allowed to the General Account.
(5) The DCA transfers will not count against the Policy's normal transfer
restrictions. (See Policy Rights -- Transfers.)
(6) The DCA transfer percentages may differ from the allocation percentages
the Owner specifies for the allocation of Net Premiums. (See Payment and
Allocation of Premiums -- Allocation of Net Premiums and Cash Values.)
(7) Once elected, DCA transfers from the Money Market Fund will be processed
monthly until either the value in the Money Market Fund is completely
depleted or the Owner instructs the Company in writing to cancel the DCA
service.
(8) Transfers as a result of a Policy Loan or repayment, or in exercise of
the conversion privilege, are not subject to the DCA rules and restrictions.
The DCA service terminates at the time the conversion privilege is exercised,
when any outstanding amount in any Division of the Separate Account is
immediately transferred to the General Account. (See Policy Rights -- Loans,
and Policy Rights -- Conversion Privilege.)
(9) DCA transfers will not be made until the Right to Examine Policy period
has expired (See Right to Examine Policy).
The Company reserves the right to assess a processing fee for the DCA
service. The Company reserves the right to discontinue offering DCA upon 30
days' written notice to Owners. However, any such discontinuation will not
affect DCA services already commenced. The Company reserves the right to
impose a minimum total Cash Value, less outstanding Indebtedness, in order to
qualify for DCA service. Also, the Company reserves the right to change the
minimum necessary Cash Value and the minimum required DCA transfer amount.
Right to Examine Policy
The Owner may cancel a Policy within 20 days after receiving it (30 days if
the Owner is a resident of
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<PAGE> 24
California and is age 60 or older), within 45 days after the application was
signed, or within 10 days of the Company's mailing a notice of the
cancellation right, whichever is latest. If a Policy is canceled within this
time period, a refund will be paid. Where required by state law, the refund
will equal all premiums paid under the Policy. Where required by state law,
General American will refund an amount equal to the greater of premiums paid
or (1) plus (2) where (1) is the difference between the premiums paid,
including any policy fees or other charges, and the amounts allocated to the
Separate Account under the Policy and (2) is the value of the amounts
allocated to the Separate Account under the Policy on the date the returned
Policy is received by General American or its agent.
To cancel the Policy, the Owner should mail or deliver the Policy to either
General American or the agent who sold it. A refund of premiums paid by check
may be delayed until the Owner's check has cleared the bank upon which it was
drawn. (See General Matters-Postponement of Payments from the Separate
Account.)
A request for an increase in Face Amount (see Policy Benefits-Change in Face
Amount) may also be canceled. The request for cancellation must be made
within the latest of 20 days from the date the Owner receives the new Policy
specifications page for the increase, 45 days after the application for the
increase was signed or 10 days of mailing the notice of the cancellation
right.
Conversion Privilege
During the first twenty-four Policy Months following the issuance of the
Policy, the Owner may in effect convert any Policy still in force to a
guaranteed benefit life insurance policy by instructing the Company to
transfer the Policy's Cash Value in the Separate Account to the General
Account and to allocate all subsequent Net Premiums to the General Account. A
similar conversion privilege is available during the first 24 Policy Months
following a requested increase in Face Amount. Upon exercise of this
privilege, the Cash Value in the Separate Account attributable to the
increase will be transferred to the General Account, and all subsequent Net
Premiums attributable to the increase will be allocated to the General
Account.
Transfers made pursuant to this conversion privilege will not affect the
death benefit, Face Amount, net amount at risk, rate class, or Issue Age
under a Policy. No charge will be imposed on any transfers resulting from the
exercise of this conversion privilege, and such transfers will not count
against the limitation on the amount and frequency of transfer requests
allowed in each Policy Month or Policy Year. (See Transfers.)
Notwithstanding an exercise of the conversion privilege during the first
twenty-four Policy Months following an increase in Face Amount, circumstances
in effect following the conversion could subject Cash Value in the General
Account to substantial investment risk. For example, if Cash Value in the
Separate Account is high relative to Cash Value in the General Account, poor
investment performance of the Divisions of the Separate Account to which the
Owner has allocated Net Premium payments could result in a greater likelihood
of lapse. If the Divisions of the Separate Account perform poorly and Cash
Value is not available in the Separate Account to pay monthly deductions,
Cash Value in the General Account could be wholly depleted, and the Policy
could lapse. Because circumstances can alter the expected outcome of an
exercise of the conversion privilege following an increase in Face Amount,
Owners should consult their sales representative or other competent advisor
before deciding whether to exercise the conversion privilege following an
increase in Face Amount.
Payments of Benefits at Maturity
If the Insured is living and the Policy is in force, the Company will pay the
Cash Surrender Value of the Policy on the Maturity Date, plus the cash value
of any paid-up additions, dividends due and dividend accumulations. An Owner
may elect to have amounts payable on the Maturity Date paid in a single sum
or under one of the settlement options described below. Amounts payable on
the Maturity Date ordinarily will be paid within seven days of that date,
although payments may be postponed under certain circumstances. (See General
Matters-Postponements of Payments from the Separate Account.) A Policy will
mature if and when the Insured reaches Attained Age 95.
PAYMENT AND ALLOCATION OF PREMIUMS
Issuance of a Policy
Individuals wishing to purchase a Policy must complete an application and
submit it to an authorized registered agent of General American or to General
American's Home Office. A Policy will generally be issued to Insureds of
Issue Ages 0
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through 80 for the regularly underwritten contracts, and 20 through 80 for
the Pension Policy. General American may, in its sole discretion, issue
Policies to individuals falling outside of those Issue Ages. Acceptance of an
application is subject to General American's underwriting rules, and General
American reserves the right to reject an application for any reason.
The Issue Date is determined by General American in accordance with its
standard underwriting procedures for variable life insurance policies. The
Issue Date is used to determine Policy Anniversaries, Policy Years, and
Policy Months. Insurance coverages under a Policy will not take effect until
the Policy has been delivered and the initial premium has been paid prior to
the Insured's death and prior to any change in health as shown in the
application.
Premiums
The initial premium is due on the Issue Date, and may be paid to an
authorized registered agent of General American or to General American at its
Home Office. General American currently requires that the initial premium for
a Policy be at least equal to one-twelfth (1/12) of the sum of the Minimum
Premium for the Policy. The Minimum Premium is the amount specified for each
Policy based on the requested initial Face Amount and the charges under the
Policy which vary by Attained Age, rate class, and sex (except under the
Pension Policy or any Policies sold in Montana of the Insured. (See Charges
and Deductions.) For policies issued as a result of a term conversion from
certain General American term policies, the Company requires the Owner to pay
an initial premium, which combined with conversion credits given, if any,
will equal one full Minimum Premium for the Policy. (See Charges and
Deductions.)
Following the initial premium, subject to the limitations described below,
premiums may be paid in any amount and at any interval. Premiums after the
first premium payment must be paid to General American at its Home Office. An
Owner may establish a schedule of planned premiums which will be billed by
the Company at regular intervals. Failure to pay planned premiums, however,
will not itself cause the Policy to lapse. (See Policy Lapse and
Reinstatement.) Premium receipts will be furnished upon request.
An Owner may make unscheduled premium payments at any time in any amount, or
skip planned premium payments, subject to the minimum and maximum premium
limitations described below.
If a Policy is in the intended Owner's possession, but the initial premium
has not been paid, the Policy is not in force. Under these circumstances,
the intended Owner is deemed to have the Policy for inspection only.
Premium Limitations. Every premium payment must be at least $10. In no event
may the total of all premiums paid in any Policy Year exceed the current
maximum premium limitations for that Policy Year. Maximum premium limits for
the Policy Year will be shown in the Owner's annual report.
In general, for policies issued with Death Benefit Option A or Death Benefit
Option B, the maximum premium limit for a Policy Year is the largest amount
of premium that can be paid in that Policy Year such that the sum of the
premiums paid under the Policy will not at any time exceed the guideline
premium limitations needed to comply with the tax definition of life
insurance. If at any time a premium is paid which would result in total
premiums exceeding the current maximum premium limitations, the Company will
only accept that portion of the premium which will make total premiums equal
the maximum. Any part of the premium in excess of that amount will be
returned or applied as otherwise agreed, and no further premiums will be
accepted until allowed under the current maximum premium limitations.
In addition to the foregoing tax definitional limits on premiums, for
purposes of determining whether distributions (including loans) are a return
of income first, the Company monitors the Policy to detect whether the "seven
pay limit" has been exceeded. If the seven pay limit is exceeded, the Policy
becomes a "Modified Endowment". The Company has adopted administrative steps
designed to notify an Owner when it is believed that a premium payment will
cause a Policy to become a Modified Endowment Contract. The Owner will be
given a limited amount of time to request that the premium be reversed in
order to avoid the Policy's being classified as a Modified Endowment
Contract. (See Federal Tax Matters.)
If the Company receives a premium payment which would cause the death benefit
to increase by an amount that exceeds the Net Premium portion of the payment,
then the Company reserves the right to (1) refuse that premium payment, or
(2) require additional evidence of insurability before it accepts the
premium.
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Allocation of Net Premiums and Cash Value
Allocation of Net Premiums. In the application for a Policy, the Owner
indicates how Net Premiums are to be allocated among the Divisions of the
Separate Account, to the General Account, or both. For each Division chosen,
the minimum percentage that may be allocated to a Division or the General
Account is 5% of the Net Premium, and fractional percentages may not be used.
The allocation for future Net Premiums may be changed without charge at any
time by providing notice in writing to the Company. Any change in allocation
will take effect immediately upon receipt by the Company of the written
notification. No charge is imposed for changing the allocations of future Net
Premiums. The initial allocation will be shown on the application which is
attached to the Policy.
During the period from the Issue Date to the end of the Right to Examine
Policy period, Net Premiums will automatically be allocated to the Division
that invests in the Money Market Fund of the Capital Company. (See Right to
Examine Policy.). When this period expires, the Policy's Cash Value in that
Division will be transferred to the Divisions of the Separate Account and to
the General Account (if available) in accordance with the allocation
requested in the application for the Policy, or any allocation instructions
received subsequent to receipt of the application. Net Premiums received
after the Right To Examine Policy period will be allocated according to the
allocation instructions most recently received by the Company unless
otherwise instructed for that particular premium receipt.
The Policy's Cash Value may also be transferred between Divisions of the
Separate Account, and between those Divisions and the General Account. (See
Policy Rights-Transfers.)
The value of amounts allocated to Divisions of the Separate Account will vary
with the investment performance of the chosen Divisions, and the Owner bears
the entire investment risk. This will affect the Policy's Cash Value, and may
affect the death benefit as well. Owners should periodically review their
allocations of Net Premiums and the Policy's Cash Value in light of market
conditions and their overall financial planning requirements.
Policy Lapse and Reinstatement
Lapse. Unlike conventional whole life insurance policies, the failure to
make a premium payment following the initial premium will not itself cause a
Policy to lapse. Lapse will occur when the Cash Surrender Value is
insufficient to cover the monthly deduction, and a grace period expires
without a sufficient payment being made.
The grace period, which is 62 days, begins on the Monthly Anniversary on
which the Cash Surrender Value becomes insufficient to meet the next monthly
deduction. The Company will notify the Owner that Cash Surrender Value is
insufficient to cover the monthly deduction at the beginning of the grace
period by mail addressed to the last known address on file with the Company.
The notice to the Owner will indicate the amount of additional premium that
must be paid to keep the Policy in force. The amount of the premium required
to keep the Policy in force will be the amount required to cover the
outstanding monthly deductions and premium expense charges. (See Charges and
Deductions-Monthly Deduction.) If the Company does not receive the required
amount during the grace period, the Policy will lapse and terminate without
Cash Value.
At the time of lapse, any remaining dividend accumulations and the cash value
of paid-up additions will be paid to the Owner. (See Dividends, and General
Matters-Additional Insurance Benefits.) If the Insured dies during the grace
period, any overdue monthly deductions will be deducted from the death
benefit otherwise payable.
Reinstatement. The Owner may reinstate a lapsed Policy by written
application any time within five years after the date of lapse and before the
Maturity Date. Reinstatement is subject to the following conditions:
(1) Evidence of the insurability of the Insured satisfactory to the Company
(including evidence of insurability of any person covered by a rider to
reinstate the rider).
(2) Payment of a premium that, after the deduction of premium expense
charges, is large enough to cover: (a) the monthly deductions due at the time
of lapse, and (b) two times the monthly deduction due at the time of
reinstatement.
(3) Payment or reinstatement of any Indebtedness. Any Indebtedness
reinstated will cause a Cash Value of an equal amount also to be reinstated.
Any loan
20
<PAGE> 27
paid at the time of reinstatement will cause an increase in Cash Value equal
to the amount to be reinstated.
(4) The Policy cannot be reinstated if it has been surrendered.
The amount of Cash Value on the date of reinstatement will be equal to the
amount of any Policy Loan reinstated, increased by the Net Premiums paid at
reinstatement, any Policy Loans paid at the time of reinstatement, and the
amount of any surrender charges paid at the time of lapse to the extent of
the Face Amount reinstated. The Insured must be alive on the date the Company
approves the application for reinstatement. If the Insured is not then
alive, such approval is void and of no effect.
The effective date of reinstatement is the date the Company approves the
application for reinstatement. There will be a full monthly deduction for the
Policy Month which includes that date. (See Charges and Deductions-Monthly
Deduction.)
The surrender charges in effect at the time of reinstatement will equal the
surrender charges in effect at the time of lapse. If only a portion of the
total Face Amount is reinstated, then only the applicable portion of the
surrender charges will be reinstated. If only a portion of the total Face
Amount is reinstated, the Cash Value following reinstatement will be
increased by the applicable portion of the surrender charges imposed at the
time of lapse. (See Charges and Deductions-Contingent Deferred Sales Charge.)
CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the
Company for providing the insurance benefits set forth in the Policies and
any additional benefits added by rider, administering the Policies, incurring
expenses in distributing the Policies, and assuming certain risks in
connection with the Policy.
Premium Expense Charges
Prior to allocation of Net Premiums, premium payments will be reduced by
premium expense charges consisting of a sales charge and a charge for premium
taxes. The premium payment less the premium expense charge equals the Net
Premium.
Sales Charge. A sales charge equal to 6% of the premium paid will be
deducted from each premium to partially compensate the Company for expenses
incurred in distributing the Policy and any additional benefits provided by
rider. These expenses include agent sales commissions, the cost of printing
prospectuses and sales literature, and any advertising costs. Where Policies
are issued to Insureds with higher mortality risks or to Insureds who have
selected additional insurance benefits, a portion of the amount deducted for
sales charge is used to pay distribution expenses and other costs associated
with these additional coverages.
To the extent that sales expenses are not recovered from the 6% sales charge
and the surrender charge, those expenses may be recovered from other sources,
including the mortality and expense risk charge described on page 26.
Premium Taxes. Various states and subdivisions impose a tax on premiums
received by insurance companies. Premium taxes vary from state to state. A
deduction of 2% of the premium is made from each premium payment for these
taxes. The deduction represents an amount the Company considers necessary to
pay the premium taxes imposed by the states and any subdivisions thereof.
Monthly Deduction
Charges will be deducted monthly from the Cash Value of each Policy ("the
monthly deduction") to compensate the Company for (a) certain administrative
costs; (b) insurance underwriting and acquisition expenses in connection with
issuing a Policy; (c) the cost of insurance; and (d) the cost of optional
benefits added by rider. The monthly deduction will be taken on the
Investment Start Date and on each Monthly Anniversary. It will be allocated
among the General Account and each Division of the Separate Account in the
same proportion that a Policy's Cash Value in the General Account and the
Policy's Cash Value in each Division bear to the total Cash Value of the
Policy, less the Cash Value in the Loan Account, on the date the deduction is
taken. Because portions of the monthly deduction, such as the cost of
insurance, can vary from month to month, the monthly deduction itself can
vary in amount from month to month.
Monthly Administrative Charge. The Company has responsibility for the
administration of the Policies and the Separate Account. Administrative
expenses include premium billing and collection; recordkeeping; processing
death benefit claims; cash surrenders; partial withdrawals; Policy changes,
tax reporting and overhead costs; processing
21
<PAGE> 28
applications; and establishing Policy records. As reimbursement for
administrative expenses related to the maintenance of each Policy and the
Separate Account, the Company assesses a monthly administration charge from
each Policy. This charge is $10 per month of the Standard Policy and $12 per
month for the Pension Policy during the first 12 Policy Months, and $4
(Standard) and $6 (Pension) per month thereafter. These charges are
guaranteed not to increase while the Policy is in force. The Company does not
anticipate that it will make any profit on the monthly administrative charge.
The Company may administer the Policy itself, or the Company may purchase
administrative services from such sources (including affiliates) as may be
available. Such services will be acquired on a basis which, in the Company's
sole discretion, affords the best services at the lowest cost. The Company
reserves the right to select a company to provide services which the Company
deems, in its sole discretion, is the best able to perform such services in a
satisfactory manner even though the costs for such services may be higher
than would prevail elsewhere.
Selection and Issue Expense Charge. An additional administrative charge will
be deducted from Cash Value as part of the monthly deduction during the first
12 Policy Months and for the first 12 Policy Months following an increase in
the Face Amount The charge will compensate the Company for issuance,
underwriting, processing, and start-up expenses. These expenses include the
cost of processing applications, conducting medical examinations, and
determining insurability and the Insured's rate class. The charge is $0.08
per month multiplied by the Face Amount divided by 1,000, and the Company
does not anticipate that it will result in any profit. The selection and
issue expense charge is guaranteed not to increase over the life of the
Policy.
The selection and issue expense charge is not imposed after the first Policy
Year, except that the charge is imposed with respect to an increase in Face
Amount for the first 12 Policy Months following the effective date of the
increase. If a decrease in Face Amount occurs during the first Policy Year or
first 12 months following the effective date of an increase, the charge will
no longer be taken to the extent of the decrease. The selection and issue
charge is not imposed in connection with a change from Death Benefit Option B
to Death Benefit Option A unless such change is simultaneous with a
separately requested increase in Face Amount. The full charge will be imposed
even if a Policy is surrendered during the first 12 Policy Months or the
first 12 Policy Months following an increase in Face Amount.
Cost of Insurance. The cost of insurance is deducted on each Monthly
Anniversary for the following Policy Month. Because the cost of insurance
depends upon a number of variables, the cost will vary for each Policy Month.
The cost of insurance is determined separately for the initial Face Amount
and for any subsequent increases in Face Amount. The Company will determine
the monthly cost of insurance charge by multiplying the applicable cost of
insurance rate or rates by the net amount at risk for each Policy Month.
The cost of insurance rates are determined at the beginning of each Policy
Year for the initial Face Amount and each increase in Face Amount. The rates
will be based on the Attained Age, rate class, and sex (except under the
Pension Policy or any Policies sold in Montana. See Unisex Requirements
Under the Pension Policies and Montana Law ) of the Insured at issue or the
date of an increase in Face Amount. The cost of insurance rates generally
increase as the Insured's Attained Age increases. The rate class of an
Insured also will affect the cost of insurance rate. The Company currently
places Insureds into a preferred rate class, a standard rate class, or into
rate classes involving a higher mortality risk. In an otherwise identical
Policy, Insureds in the preferred rate class will have a lower cost of
insurance than those in a rate class involving higher mortality risk. Each
rate class is also divided into two categories: smokers and nonsmokers.
Nonsmoker Insureds will generally incur a lower cost of insurance than
similarly situated Insureds who smoke. (Insureds under Attained Age 20 are
automatically assigned to the smoker rate class.) For the initial Face
Amount, the Company will use the rate class on the Issue Date. For each
increase in Face Amount, other than one caused by a change in the death
benefit option, the Company will use the rate class applicable to that
increase. If the death benefit equals a percentage of Cash Value, an increase
in Cash Value will cause an automatic increase in the death benefit. The rate
class for such increase will be the same as that used for the most recent
increase that required proof of insurability.
Actual cost of insurance rates may change, and the actual monthly cost of
insurance rates will be determined by the Company based on its expectations
as to future mortality experience. However, the actual cost of insurance
rates will not be greater than the guaranteed cost of insurance rates set
forth in the Policy. These guaranteed rates are based on the 1980
Commissioners Standard Ordinary
22
<PAGE> 29
Mortality Tables. Any change in the cost of insurance rates will apply to all
persons of the same Attached Age, rate class, and sex (except under the
Pension Policy and any Policies sold in Montana. See Unisex Requirements
Under Pension Policies and Montana Law) whose initial Face Amounts or
increases in Face Amount have been in force for the same length of time.
The net amount at risk for a Policy Month is (a) the death benefit at the
beginning of the Policy Month divided by 1.0040741 (which reduces the net
amount at risk, solely for purposes of computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 5%), less
(b) the Cash Value at the beginning of the Policy Month.
The net amount at risk for a Policy Month is (a) the death benefit at the
beginning of the Policy Month divided by 1.0040741 which reduces the net
amount at risk, solely for purposes of computing the cost of insurance, by
taking into account assumed monthly earnings at an annual rate of 5.0%), less
(b) the Cash Value at the beginning of the Policy Month. If there is an
increase in Face Amount, a net amount at risk will be calculated separately
for the initial Face Amount, and for each increase in Face Amount. If Death
Benefit Option A is in effect, for purposes of determining the net amounts at
risk for the initial Face Amount and for each increase in Face Amount, Cash
Value will first be considered a part of the initial Face Amount. If the
Cash Value is greater than the initial Face Amount, the excess Cash Value
will then be considered a part of each increase in order, starting with the
first increase. If Death Benefit Option B is in effect, the net amount at
risk will be determined separately for the initial Face Amount and for each
increase in Face Amount. In calculating the cost of insurance charges, the
cost of insurance rate for a Face Amount is applied to the net amount at risk
for that Face Amount.
Partial withdrawals and decreases in Face Amount will affect the manner in
which the net amount at risk for each rate class is calculated. (See Policy
Benefits-Death Benefit, and Policy Rights- Surrender and Partial
Withdrawals.)
Additional Insurance Benefits. The monthly deduction will include charges for
any additional benefits provided by rider. (See General Matters-Additional
Insurance Benefits.)
Contingent Deferred Sales Charge ("CDSC")
During the first ten years after the Issue Date or the effective date of a
Face Amount increase, the Company will impose a CDSC upon surrender or lapse
of the Policy, a requested decrease in Face Amount, or a partial withdrawal
that causes the Face Amount to decrease. The amount of the charge assessed
will depend on a number of factors, including whether the event is a full
surrender or lapse or only a decrease in Face Amount, the amount of premiums
received by the Company, and the Policy Year in which the surrender or other
event takes place.
The Company will assess an additional charge upon a surrender, partial
withdrawal, or requested decrease in Face Amount following each increase in
Face Amount. The additional charge will apply for the first ten Policy Years
following the effective date of the increase in Face Amount and will depend
on factors similar to those affecting the amount of the basic surrender
charge.
The Contingent Deferred Sales Charge compensates the Company for expenses
relating to the distribution of the Policy, including agents' commissions,
advertising, and the printing of the Prospectus and sales literature.
Calculation of Charge. The Contingent Deferred Sales Charge is calculated
separately for the initial Face Amount and for any increase in Face Amount.
Assuming no increases in Face Amount have yet become effective, if a Policy
is surrendered, the charge will be 24% of premiums paid during the first
Policy Year up to the Target Premium (described on page 25). The amount of
the charge remains level over the first five Policy Years and then gradually
decreases to zero (0) at the end of 10 policy years (see table on page 25).
If an increase in Face Amount has gone into effect and the Policy is
surrendered within 12 Policy Months after the effective date of increase, the
additional charge associated with the increase will equal 24% of the lesser
of premiums attributed to the increase which are received within l2 Policy
Months of the increase, and the Target Premium for the increase. The charge
applicable to an increase in Face Amount remains level for the first five
Policy Years that the increase is in effect. Thereafter, in each case, the
charge is reduced by a percentage factor until it becomes zero at the end of
ten years, as shown in the table below.
The timing of premium payments may affect the amount of the Contingent
Deferred Sales Charge
23
<PAGE> 30
under a Policy, as the charge is based only on premiums actually paid in the
first Policy Year or in the first l2 Policy months after an increase in Face
Amount.
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge Percentage Table
If surrender or lapse The following percentage
occurs in the last month of the surrender charge
of Policy Year:<F*> will be payable:<F**>
------------------------ ------------------------
<S> <C>
1 through 5 100%
6 80%
7 60%
8 40%
9 20%
10 and later 0%
<FN>
<F*>For requested increases, years are measured from the effective date of the
increase.
<F**>In addition, the percentages reduce equally for each Policy Month during
the years shown. For example, during the seventh year, the percentage reduces
equally each month from 80% at the end of the sixth Year to 60% at the end of
the seventh Year.
</TABLE>
The Target Premium depends upon the Insured's Attained Age (on the Issue Date
or on the effective date of a requested increase), and sex (except under the
Pension Policy and any Policies sold in Montana; see "Unisex Requirements
Under the Pension Policies and Montana Law.). The Target Premium will be
fixed and determined on the Issue Date or the effective date of any requested
increase in Face Amount. The Target Premium for the initial Face Amount or a
requested increase in Face Amount is determined by multiplying (a) the
applicable factor per $1,000 of Face Amount from Appendix B (using the
Insured's Attained Age on the Issue Date or on the effective date of an
increase), by (b) the initial Face Amount or the Face Amount of the increase,
and dividing the result by 1,000.
Because additional premium payments are not required to fund a requested
increase in Face Amount, a special rule applies to determine the amount of
"premiums attributable to the increase." In general, the premiums
attributable to the increase will equal the sum of a proportionate share of
the Cash Value on the effective date of the increase, before any deductions
are made, plus a proportionate share of premium payments actually made on or
after the effective date of the increase. This means that, in effect, in
calculating the amount of the Contingent Deferred Sales Charge a portion of
the existing Cash Value will be deemed to be a premium payment for the
increase, and subsequent premium payments will be prorated. The proportion of
existing Cash Value and subsequent premium payments attributable to the
increase will equal the ratio of the Target Premium for the requested
increase to the sum of the Target Premiums for the total Face Amount in
effect under the Policy, including the Target Premium for the requested
increase. See Appendix B for a table of Target Premiums.
Charge Assessed Upon Decreases. Assuming there has been no prior requested
increase in Face Amount, the amount of the Contingent Deferred Sales Charge
deducted upon a decrease in Face Amount will equal a fraction of the charge
that would be deducted if the Policy were surrendered at that time. The
fraction will be determined by dividing the amount of the decrease by the
Policy's Face amount before the decrease and multiplying the result by the
charge.
If there has been a prior increase in Face Amount, the amount of the charge
will depend on whether the initial Face Amount or subsequent increases in
Face Amounts are being decreased, which in turn will depend on whether the
decrease arises from a partial withdrawal or a requested decrease in Face
Amount. (See Policy Benefits-Death Benefit-Change in Face Amount and Policy
Rights-Surrender and Partial Withdrawals.) The charge deducted will equal the
proportionate amount of the Contingent Deferred Sales Charge for each portion
of the Face Amount being decreased, based on the relationship of the decrease
to the applicable portions of the Face Amount.
Reduction of Charges. The Policy is available for purchase by individuals,
corporations, and other institutions. For certain individuals and certain
corporate or other group or sponsored arrangements purchasing one or more
Policies, General American may waive or reduce the amount of the Contingent
Deferred Sales Charge, Selection and Issue Expense Charge, monthly
administrative charge, or other charges where the expenses associated with
the sale of the Policy or Policies or the underwriting or other
administrative costs associated with the Policy or Policies are reduced.
Sales, underwriting, or other administrative expenses may be reduced for
reasons such as expected economies resulting from a corporate purchase or a
group or sponsored arrangement; from the amount of the initial premium
payment or payments; from the amount of projected premium payments; or from
lower Target Premiums. General American will determine in its discretion if,
and in what amount, a
24
<PAGE> 31
reduction is appropriate. The Company may modify its criteria for
qualification for reduction of charges as experience is gained, subject to
the limitation that such reductions will not be unfairly discriminatory
against the interests of any Owner.
Separate Account Charges
Mortality and Expense Risk Charge. General American will deduct a daily
charge from the Separate Account at the rate of .002319% of the average net
assets of each Division of the Separate Account; which equals an effective
annual rate of .85% of those net assets. This deduction is guaranteed not to
increase while the Policy is in effect. General American may realize a profit
from this charge.
The mortality risk assumed by General American is that Insureds may die
sooner than anticipated and that therefore General American will pay an
aggregate amount of death benefits greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and administering the Policy
will exceed the amounts realized from the administrative charges assessed
against the Policy.
Fund Expenses. The value of the net assets of the Separate Account will
reflect the investment advisory fee and other expenses incurred by the
underlying investment companies. See the prospectuses for the respective
Funds for a description of investment advisory fees and other expenses
incurred by the Capital Company, Russell, VIP, VIP II, and Van Eck.
No charges are currently made to the Separate Account for Federal, state, or
local taxes that the Company incurs which may be attributable to such
Separate Account or to the Policy. The Company may make a charge for any
taxes or economic burden resulting from the application of the tax laws that
it determines to be properly attributable to the Separate Account or to the
Policy. (See Federal Tax Matters.)
DIVIDENDS
The Policy is a participating policy which is entitled to a share, if any, of
the divisible surplus of the Company as determined each year and apportioned
to it. This surplus will be distributed as a dividend payable annually on the
January Monthly Anniversary.
Dividends under participating policies may be described as refunds of
premiums which adjust the cost of a policy to the actual level of cost
emerging over time after the issue of the Policies. Both Federal and state
law recognize that dividends are generally considered to be a refund of a
portion of the premium paid and therefore are not treated as income for
Federal or state income tax purposes. However, depending on the dividend
payment option chosen (see below), dividends may have tax consequences to
Owners. Counsel or other competent tax advisors should be consulted for more
complete information.
Dividend illustrations published at the time of issue of a Policy reflect the
actual recent experience of the issuing insurance company with respect to
factors such as interest, mortality, and expenses. State law generally
prohibits a company from projecting or estimating future results. State law
also requires that dividends must be based on surplus, after setting aside
certain necessary amounts, and that such surplus must be apportioned
equitably among participating policies. In other words, in principle and by
statute, dividends must be based on actual experience and cannot be
guaranteed at issue of a Policy.
Each year the Company's actuary analyzes the current and recent past
experience and compares it to the assumptions used in determining the premium
rates at the time of issue. Some of the more important data studied includes
mortality and lapse rates, investment yield in the General Account, and
actual expenses incurred in administering the Policy. Such data is then
allocated to each dividend class, e.g., by year of issue, age and plan. The
actuary then determines what dividends can be equitably apportioned to each
Policy class and makes a recommendation to the Company's Board of Directors
("the Board"). The Board, which has the ultimate authority to declare
dividends, will vote the amount of surplus to be apportioned to each Policy
class, thereby authorizing the distribution of the annual dividend.
An Owner may choose one of the following dividend options within 31 days
after a dividend is credited. Dividends will be credited under the chosen
option until the Owner changes it. If the Owner does not choose an option,
the Company will credit the dividend under Option B until such time as the
Owner requests in writing a different option.
Option A: Cash. The amount of the dividend will be paid in cash.
Option B: Increase Cash Value. The amount of the dividend will be added to
the Policy's Cash Value on the date of the dividend payment. The Cash Value
25
<PAGE> 32
will increase by the amount of the dividend. The dividend will be allocated
to the General Account and the Divisions of the Separate Account according to
the current allocation of the Net Premium.
Option C: Paid-Up Additions. The dividend will be used to buy level paid-up
insurance (additional insurance benefits). The Owner may surrender paid-up
additions for their cash value at any time. The cash value of paid-up
additions is the net single premium for such paid-up additions at the
Attained Age of the Insured. This cash value does not depend on the
investment performance of the Separate Account and will not be less than the
dividends used to purchase such paid-up additions. Paid-up additions, if any,
will be paid as part of the death benefit proceeds, as well as upon lapse
(page 23), surrender (page 17), or Policy maturity (page 20).
Option D: Dividend Accumulations. The amount of the dividend will be left
with General American to accumulate at interest. The interest rate will be
determined by General American from time to time. This rate will never be
less than 2.5% a year, compounded annually. General American will credit
interest for full Policy Years only. The Owner may elect to use dividend
accumulations to pay premiums automatically whenever the Policy's Cash Value
is insufficient to pay the monthly deduction. This election may be made in
the application for a Policy or by written request. The Owner may also
withdraw the entire amount or any part of it in cash at any time, by making a
proper written request. Dividend accumulations, if any, will be paid as part
of the death benefit proceeds, as well as upon lapse, surrender, or Policy
maturity.
THE GENERAL ACCOUNT
Because of exemptive and exclusionary provisions, interests in the General
Account have not been registered under the Securities Act of 1933, and the
General Account has not been registered as an investment company under the
1940 Act. Accordingly, neither the General Account nor any interests therein
are subject to the provisions of these Acts and, as a result, the staff of
the SEC has not reviewed the disclosure in this Prospectus relating to the
General Account. The disclosure regarding the General Account may, however,
be subject to certain generally applicable provisions of the Federal
securities laws relating to the accuracy and completeness of statements made
in prospectuses.
General Description
The General Account consists of all assets owned by General American other
than those in the Separate Account and other separate accounts. Subject to
applicable law, General American has sole discretion over the investment of
the assets of the General Account.
An Owner may elect to allocate Net Premiums to the General Account, the
Separate Account, or both. The Owner may also transfer Cash Value from the
Divisions of the Separate Account to the General Account, or from the General
Account to the Divisions of the Separate Account. The allocation or transfer
of funds to the General Account does not entitle an Owner to share in the
investment experience of the General Account. Instead, General American
guarantees that Cash Value in the General Account will accrue interest at a
rate of at least 5%, compounded annually, independent of the actual
investment experience of the General Account.
The Loan Account is part of the General Account.
The Policy
This Prospectus describes a flexible premium variable life insurance policy.
This Prospectus is generally intended to serve as a disclosure document only
for the aspects of the Policy relating to the Separate Account. For complete
details regarding the General Account, see the Policy itself.
General Account Benefits
If the Owner allocates all Net Premiums only to the General Account and makes
no transfers, partial withdrawals, or Policy Loans, the entire investment
risk will be borne by General American, and General American guarantees that
it will pay at least a minimum specified death benefit. The Owner may select
either death benefit Option A or Death Benefit Option B under the Policy and
may change the Policy's Face Amount subject to satisfactory evidence of
insurability.
General Account Cash Value
Net Premiums allocated to the General Account are credited to the Cash Value.
General American bears the full investment risk for these amounts and
guarantees that interest will be credited to each Owner's Cash Value in the
General Account at a rate of not less than 5% per year, compounded annually.
General American may, AT ITS SOLE
26
<PAGE> 33
DISCRETION, credit a higher rate of interest, although it is not obligated to
credit interest in excess of 5% per year, and might not do so. ANY INTEREST
CREDITED ON THE POLICY'S CASH VALUE IN THE GENERAL ACCOUNT IN EXCESS OF THE
GUARANTEED MINIMUM RATE OF 5% PER YEAR WILL BE DETERMINED IN THE SOLE
DISCRETION OF GENERAL AMERICAN. THE POLICY OWNER ASSUMES THE RISK THAT
INTEREST CREDITED MAY NOT EXCEED THE GUARANTEED MINIMUM RATE OF 5% PER YEAR.
If excess interest is credited, a different rate of interest may be applied
to the Cash Value in the Loan Account. The value in the General Account will
be calculated on each Monthly Anniversary of the Policy.
General American guarantees that, on each Valuation Date, the Cash Value in
the General Account will be the amount of the Net Premiums allocated or Cash
Value transferred to the General Account, plus interest at the rate of 5% per
year, plus any excess interest which General American credits and any amounts
transferred into the General Account, less the sum of all Policy charges
allocable to the General Account and any amounts deducted from the General
Account in connection with partial withdrawals, surrender charges or
transfers to the Separate Account.
Transfers, Surrenders, Partial Withdrawals
and Policy Loans
After the first Policy Year and prior to the Maturity Date, a portion of Cash
Value may be withdrawn from the General Account or transferred from the
General Account to the Separate Account. A maximum total of four partial
withdrawals and transfers from the General Account is permitted in a Policy
Year. A partial withdrawal, net of any applicable surrender charges, and any
transfer must be at least $500 or, the Policy's entire Cash Value in the
General Account if less than $500. No amount may be withdrawn from the
General Account that would result in there being insufficient Cash Value to
meet any surrender charges that would be payable immediately following the
withdrawal upon the surrender of the remaining Cash Value of the Policy. The
total amount of transfers and withdrawals in a Policy Year cannot exceed 15%
of a Policy's Cash Value in the General Account at the beginning of the
Policy Year (net of any applicable surrender charge) (not to exceed the total
Cash Surrender Value of the Policy).
Policy loans may also be made from the Policy's Cash Value in the General
Account.
Loans and withdrawals from the General Account may have Federal income tax
consequences. (See Federal Tax Matters. )
No transfer charge currently is imposed on transfers to and from the General
Account. However, such a charge may be imposed in the future. General
American may revoke or modify the privilege of transferring amounts from the
General Account at any time. Partial withdrawals will result in the
imposition of the applicable surrender charges.
Transfers, surrenders, and partial withdrawals payable from the General
Account and the payment of Policy Loans allocated to the General Account may,
subject to certain restrictions, be delayed for up to six months. However, if
payment is deferred for 30 days or more, General American will pay interest
at the rate of 2.5% per year for the period of the deferment.
GENERAL MATTERS
Postponement of Payments from the
Separate Account
The Company usually pays amounts payable on partial withdrawal, surrender, or
Policy Loans allocated to the Separate Account Divisions within seven days
after written notice is received. Payment of any amount payable from the
Divisions of the Separate Account upon surrender, partial withdrawals, death
of Insured, or the Maturity Date, as well as payments of a Policy Loan and
transfers, may be postponed whenever: (i) the New York Exchange is closed
(other than customary weekend and holiday closings) or trading on the New
York Stock Exchange is restricted as determined by the SEC; (ii) the SEC by
order permits postponement for the protection of Owners; or (iii) an
emergency exists, as determined by the SEC, as a result of which disposal of
securities is not reasonably practicable or it is not reasonably practicable
to determine the value of the Separate Account's net assets. The Company may
defer payment of the portion of any Policy Loan from the General Account for
not more than six months.
Payments under the Policy of any amounts derived from premiums paid by check
may be delayed until as the check has cleared the bank upon which it is
drawn.
27
<PAGE> 34
The Contract
The Policy, the attached application, any riders, endorsements, any
application for an increase in Face Amount, and any application for
reinstatement constitute the entire contract. All statements made by the
Insured in the application and any supplemental applications can be used to
contest a claim or the validity of the Policy. Any change to the Policy must
be in writing and approved by the President, a Vice President, or the
Secretary of the Company. No agent has the authority to alter or modify any
of the terms, conditions, or agreements of the Policy or to waive any of its
provisions.
Control of Policy
The Insured is the Owner of the Policy unless another person is shown as the
Owner in the application. Ownership may be changed, however, as described
below. The Owner is entitled to all rights provided by the Policy, prior to
its Maturity Date. Any person whose rights of ownership depend upon some
future event does not possess any present rights of ownership. If there is
more than one Owner at a given time, all Owners must exercise the rights of
ownership. If the Owner dies, and the Owner is not the Insured, the Owner's
interest in the Policy becomes the property of his or her estate unless
otherwise provided. Unless otherwise provided, the Policy is jointly owned by
all Owners named in the Policy or by the survivors of those joint Owners.
Unless otherwise stated in the Policy, the final Owner is the estate of the
last joint Owner to die. The Company may rely on the written request of any
trustee of a trust which is the Owner of the Policy, and the Company is not
responsible for the proper administration of any such trust.
Beneficiary
The Beneficiary(ies) is (are) the person(s) specified in the application or
by later designation. Unless otherwise stated in the Policy, the Beneficiary
has no rights in a Policy before the death of the Insured. If there is more
than one Beneficiary at the death of the Insured, each Beneficiary will
receive equal payments unless otherwise provided by the Owner. Under the
Standard Policy, if no Beneficiary is living at the death of the Insured, the
proceeds will be payable to the Owner or, if the Owner is not living, to the
Owner's estate. Under the Pension Policy, if no Beneficiary is living at the
death of the Insured, the proceeds will be payable to the Insured's estate.
The Company permits the designation of various types of trusts as
Beneficiary(ies), including trusts for minor beneficiaries, trusts under a
will, and trusts under a separate written agreement. An Owner is also
permitted to designate several types of beneficiaries, including business
beneficiaries.
Change of Owner or Beneficiary
The Owner may change the ownership and Beneficiary designation by written
request in a form acceptable to the Company at any time during the Insured's
lifetime subject to any restrictions stated in the Policy and this
Prospectus. The Company may require that the Policy be returned for
endorsement of any change. If acceptable to us, the change will take effect
as of the date the request is signed, whether or not the Insured is living
when the request is received at the Company's Home Office. The Company is not
liable for any payment made or action taken before the Company received the
written request for change. If the Owner is also a Beneficiary of the Policy
at the time of the Insured's death, the Owner may, within sixty days of the
Insured's death, designate another person to receive the Policy Proceeds. Any
change will be subject to any assignment of the Policy or any other legal
restrictions.
Policy Changes
The Company reserves the right to limit the number of changes to a Policy to
one per Policy Year and to restrict changes in the first Policy Year.
Currently, only one change is permitted during any Policy Year and no change
may be made during the first Policy Year. For this purpose, changes include
increases or decreases in Face Amount and changes in the death benefit
option. No change will be permitted if, as a result, the Policywould fail to
satisfy the definition of life insurance in section 7702 of the Internal
Revenue Code or any applicable successor provision.
Conformity with Statutes
If any provision in a Policy is in conflict with the laws of the state
governing the Policy, the provision will be deemed to be amended to conform
to such laws. In addition, the Company reserves the right to change the
Policy if it determines that a change is necessary to cause this Policy to
comply with, or give the Owner the benefit of, any Federal or state statute,
rule, or regulation, including, but not limited to requirements of the
Internal Revenue Code, or its regulations or published rulings.
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Claims of Creditors
To the extent permitted by law, neither the Policy nor any payment under it
will be subject to the claims of creditors or to any legal process.
Incontestability
The Policy is incontestable after it has been in force for two years from the
Issue Date during the lifetime of the Insured. An increase in Face Amount and
an addition of a rider after the Issue Date are incontestable after such
increase or addition has been in force for two years from its effective date
during the lifetime of the Insured. Any reinstatement of a Policy is
incontestable, only after it has been in force during the lifetime of the
Insured for two years after the effective date of the reinstatement.
Assignment
The Company will be bound by an assignment of a Policy only if: (a) the
assignment is in writing; (b) the original assignment instrument or a
certified copy thereof is filed with the Company at its Home Office; and (c)
the Company returns an acknowledged copy of the assignment instrument to the
Owner. The Company is not responsible for determining the validity of any
assignment. Payment of Policy Proceeds is subject to the rights of any
assignee of record. If a claim is based on an assignment, the Company may
require proof of the interest of the claimant. A valid assignment will take
precedence over the claim of any Beneficiary.
Suicide
Suicide within two years of the Issue Date is not covered by the Policy. If
the Insured dies by suicide, while sane or insane, within two years from the
Issue Date (or within the maximum period permitted by the laws of the state
in which the Policy was delivered, if less than two years), the amount
payable will be limited to premiums paid, less any partial withdrawals and
any outstanding Indebtedness. Subject to certain limitations, if the Insured
dies by suicide, while sane or insane, within two years after the effective
date of any increase in Face Amount, the death benefit for that increase will
be limited to the amount of the monthly deductions for the increase.
If the Insured is a Missouri citizen when the Policy is issued, this
provision does not apply on the Issue Date of the Policy, or on the effective
date of any increase in Face Amount, unless the Insured intended suicide when
the Policy, or the increase in Face Amount, was applied for.
Misstatement of Age or Sex and Corrections
If the age or sex (except under the Pension Policy or any Policies sold in
Montana, as discussed in Unisex Requirements Under the Pension Policies and
Montana Law) of the Insured has been misstated in the application, the amount
of the death benefit will be that which the most recent cost of insurance
charge would have purchased for the correct age and sex.
Any payment or Policy changes made by the Company in good faith, relying on
its records or evidence supplied with respect to such payment, will fully
discharge the Company's duty. The Company reserves the right to correct any
errors in the Policy.
Change in Rate Class
Sixty days prior to the Policy Anniversary on which the Insured attains age
20, a letter will be sent to the Owner notifying the Owner of the opportunity
to apply for a change in the Insured's Rate Class from Smoker to Non-Smoker.
If the Owner does not apply for a Rate Class change, the Rate Class will
remain Smoker.
Additional Insurance Benefits
Subject to certain requirements, one or more of the following additional
insurance benefits may be added to a Policy by rider. The descriptions below
are intended to be general; the terms of the Policy riders providing the
additional benefits may vary from state to state, and the Policy should be
consulted. Many, but not all, of these additional insurance benefits require
additional charges. The cost of any additional insurance benefits which
require additional charges will be deducted as part of the monthly deduction
from the Policy's Cash Value. (See Charges and Deductions-Monthly Deduction.)
Certain restrictions may apply and are described in the applicable rider. An
insurance agent authorized to sell the Policy can describe these extra
benefits further. Samples of the provisions are available from General
American upon written request.
Waiver of Monthly Deductions Rider. Provides for the waiver of the monthly
deduction while the insured is totally disabled, subject to certain
limitations described in the rider. The Insured must have become disabled
after age 5 and before age 65.
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Waiver of Specified Premium Rider. Provides for the crediting the Policy's
Cash Value with a specified monthly premium while the Insured is totally
disabled. The monthly premium selected at issue is not guaranteed to keep the
policy in force. The Insured must have become disabled after age 5 and before
age 65.
Accidental Death Benefit Rider. Provides additional insurance if the
Insured's death results from accidental bodily injury, as defined in the
rider. Under the terms of the rider, the additional benefits provided in the
Policy will be paid upon receipt of proof by the Company that death:
resulted directly from accidental bodily injury and independently of all
other causes; occurred within 120 days from the date of injury; and occurred
on or after the Policy Anniversary nearest the Insured age 0 and before age
70.
Children's Life Insurance Rider. Provides for term insurance on the
Insured's children, as defined in the rider. Under the terms of the rider,
the death benefit will be payable to the named Beneficiary upon the death of
any insured child. Upon receipt of proof of the Insured's death before the
rider terminates insurance on the life of any insured child will continue
without further premium payments..
Guaranteed Option to Increase the Face Amount Rider. Provides that the Owner
can purchase additional insurance under an existing Policy at certain future
dates without evidence of insurability.
Additional Insured Family Term Rider. Provides for term life insurance on an
Additional Insured. An Additional Insured must be an immediate family member
(spouse or child) of the Insured. A rider is issued for each additional
family member individually. Under the terms of the rider, the death benefit
will be payable to the named Beneficiary upon the death of the Additional
Insured.
Records and Reports
The Company will maintain all records relating to the Separate Account and
will mail to the Owner once each Policy Year, at the last known address of
record, a report which shows the current Policy values, premiums paid,
deductions made since the last report, and any outstanding Policy Loans. The
Owner will also be sent a periodic report for Capital Company, VIP, VIP II,
and Van Eck, and a list of the securities held in each Fund. Receipt of
premium payments, transfers, partial withdrawals, Policy Loans, loan
repayments, changes in death benefit options, increases or decreases in Face
Amount, surrenders and reinstatements will be confirmed promptly following
each transaction.
An Owner may request in writing a projection of illustrated future Cash
Surrender Values and death benefits. This projection will be furnished by the
Company for a nominal fee which will not exceed $25.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by individuals who, in addition to being licensed
as life insurance agents for the Company, are also registered representatives
of Walnut Street Securities, Inc. ("Walnut Street"), the principal
underwriter of the Policies, or of broker-dealers who have entered into
written sales agreements with Walnut Street. Walnut Street was incorporated
under the laws of Missouri in 1984 and is a wholly-owned subsidiary of
General American Holding Company, which is, in turn, a wholly-owned
subsidiary of the Company. Walnut Street 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. No director or officer of
Walnut Street owns any units in the Separate Account.
As principal underwriter for the Policies, Walnut Street received $816,611 in
commission income on total premium payments of $10,087,640 in 1997. Walnut
Street receives no administrative fees, management fees, or other fee income
from sales of the Policies.
Writing agents will receive commissions based on a commission schedule and
rules. Currently, agent first year commissions can equal up to 40% of the
Target Premium and either 2.5% or 4% of the excess first year premium,
depending on the sales contract. In renewal years, the agent commissions
equal 2.5% or 3.0% of premium paid. For years 2 through 20, a commission of
..38% or .31% of the average monthly Cash Value for each Policy Year is paid.
In addition, bonuses based on first-year commissions may be earned during
years 2 through 10 if an agent is covered by a contract under which the lower
percent of premium commissions are paid. These are maximum commissions, and
reductions may be possible under the circumstances outlined in the section
entitled "Reduction of Contingent Deferred Sales Charge For Group or
Sponsored Arrangements". General Agents receive compensation which may be
based in part on the level of agent commissions in their agencies. The
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general agent commission schedules and rules differ for different types of
agency contracts.
FEDERAL TAX MATTERS
Introduction
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisors should be consulted for more
complete information. This discussion is based upon General American's
understanding of the present Federal income tax laws as they are currently
interpreted by the Internal Revenue Service. No representation is made as to
the likelihood of continuation of the present Federal income tax laws or of
the current interpretations by the Internal Revenue Service.
Tax Status of the Policy
Section 7702 of the Internal Revenue Code of 1986, as amended ("the Code")
includes a definition of a life insurance contract for Federal tax purposes.
The Secretary of the Treasury ("the Treasury") issued proposed regulations
which specify what will be considered reasonable mortality charges under
Section 7702. Guidance as to how Section 7702 is to be applied is, however,
limited. If a Policy were determined not to be a life insurance contract for
purposes of Section 7702, such Policy would not provide most of the tax
advantages normally provided by a life insurance policy.
With respect to a Policy issued on a basis of a standard premium class or on
a guaranteed or simplified issue basis, while there is some uncertainty due
to the limited guidance under Section 7702, the Company believes that such a
Policy should meet the Section 7702 definition of a life insurance contract.
However, with respect to a Policy issued on a substandard basis (i.e., a
premium class involving higher than standard mortality risk), it is not clear
whether such a Policy would satisfy Section 7702, particularly if the Owner
pays the full amount of premiums permitted under the Policy.
If it is subsequently determined that a Policy does not satisfy Section 7702,
the Company will take whatever steps are appropriate and necessary to attempt
to cause such a Policy to comply with Section 7702, including possibly
refunding any premiums paid that exceed the limitations allowable under
Section 7702, including possibly refunding any premiums paid that exceed the
limitations allowable under Section 7702. (together with interest or other
earnings on any such premiums refunded as required by law). For these
reasons, the Company reserves the right to modify the Policy as necessary to
attempt to qualify it as a life insurance contract under Section 7702.
Section 817(h) of the Code authorizes the Treasury to set standards by
regulation or otherwise for the investments of the Separate Account to be
"adequately diversified" in order for the Policy to be treated as a life
insurance contract for Federal tax purposes. The Separate Account, intends to
comply with the diversification requirements prescribed by the Treasury in
Regulation Section 1.817-5, which affect how assets may be invested. Although
General American does not control Capital Company, VIP, VIP II, or Van Eck,
it has entered into agreements, which require these investment companies to
be operated in compliance with the requirements prescribed by the Treasury.
The IRS has stated in published rulings that a variable contract owner will
be considered the owner of separate account assets, for federal income tax
purposes, if the contract owner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets.
If that were to be determined to be the case, income and gains from the
separate account assets would be includible in the variable contract owner's
gross income. The Treasury Department has also announced, in connection with
the issuance of regulations concerning diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor (i.e., the Owner), rather than the insurance company, to be
treated as the owner of the assets in the account." This announcement also
stated that guidance would be issued by way of regulations or rulings on the
"extent to which policyholders may direct their investments to particular
subaccounts without being treated as owners of the underlying assets."
The ownership rights under the Policy are different in certain respects from
those described by the IRS in rulings in which it was determined that policy
owners were not owners of separate account assets. For example, the Owner
has additional flexibility in allocating Premium payments and Policy Values.
These differences could result in an Owner being treated as the owner of a
pro rata portion of the assets
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of the Separate Account. In addition, the Company does not know what
standards will be set forth, if any, in the regulations or rulings which the
Treasury Department has stated it expects to issue. The Company therefore
reserves the right to modify the Policy as necessary to attempt to prevent an
Owner from being considered the owner of a pro rata share of the assets of
the Separate Account.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
(1) Tax Treatment of Policy Benefits. In general, the Company believes that
the proceeds and Cash Value increases of a Policy should be treated in a
manner consistent with a fixed-benefit life insurance policy for Federal
income tax purposes. Thus, the death benefit under the Policy should be
excludable from the gross income of the Beneficiary under Section 101(a)(1)
of the Code, unless a transfer for value (generally a sale of the policy) has
occurred.
Many changes or transactions involving a Policy may have tax consequences,
depending on the circumstances. Such changes include, but are not limited to,
the exchange of the Policy, a change of the Policy's Face Amount, a Policy
Loan, an additional premium payment, a Policy lapse with an outstanding
Policy Loan, a partial withdrawal, or a surrender of the Policy. In addition,
Federal estate and state and local estate, inheritance, and other tax
consequences of ownership or receipt of Policy proceeds depend upon the
circumstances of each Owner or Beneficiary. A competent tax advisor should be
consulted for further information.
A Policy may also be used in various arrangements, including non-qualified
deferred compensation or salary continuation plans, split dollar insurance
plans, executive bonus plans, retiree medical benefit plans and others. The
tax consequences of such plans may vary depending on the particular facts and
circumstances of each individual arrangement. Therefore, if you are
contemplating the use of a Policy in any arrangement the value of which
depends in part on its tax consequences, you should be sure to consult a
qualified tax advisor regarding the tax attributes of the particular
arrangement.
Generally, the Owner will not be deemed to be in constructive receipt of the
Cash Value, including increments thereof, under the Policy until there is a
distribution. The tax consequences of distributions from, and Policy Loans
taken from or secured by, a Policy depend on whether the Policy is classified
as a "modified endowment contract". However, upon a complete surrender or
lapse of any Policy, or when benefits are paid at such a Policy's maturity
date, if the amount received plus the amount of outstanding Indebtedness
exceeds the total investment in the Policy, the excess will generally be
treated as ordinary income subject to tax.
(2) Modified Endowment Contracts. A policy may be treated as a modified
endowment contract depending upon the amount of premiums paid in relation to
the death benefit provided under such Policy. The premium limitation rules
for determining whether a Policy is a modified endowment contract are
extremely complex. In general, however, a Policy will be a modified endowment
contract if the accumulated premiums paid at any time during the first seven
Policy Years exceed the sum of the net level premiums which would have been
paid on or before such time if the Policy provided for paid-up future
benefits after the payment of seven level annual premiums.
In addition, if a Policy is "materially changed," it may cause such Policy to
be treated as a modified endowment contract. The material change rules for
determining whether a Policy is a modified endowment contract are also
extremely complex. In general, however, the determination of whether a Policy
will be a modified endowment contract after a material change generally
depends upon the relationship among the death benefit at the time of such
change, the Cash Value at the time of the change and the additional premiums
paid in the seven Policy Years starting with the date on which the material
change occurs.
Moreover, a life insurance contract received in exchange for a life insurance
contract classified as a modified endowment contract will also be treated as
a modified endowment contract. A reduction in a Policy's benefits may also
cause such Policy to become a modified endowment contract.
Due to the Policy's flexibility, classification of a Policy as a modified
endowment contract will depend upon the circumstances of each Policy. The
Company has, however, adopted administrative steps designed to protect an
Owner against the possibility that the Policy might become a modified
endowment contract. The Company believes the safeguards are adequate for most
situations, but it cannot provide complete assurance that a Policy will not
be classified as a modified endowment contract. At the time a premium is
credited which would cause the Policy to become a modified endowment
contract,
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the Company will notify the Owner that unless a refund of the excess premium
is requested by the Owner, the Policy will become a modified endowment
contract. The Owner will have 30 days after receiving such notification to
request the refund. The excess premium paid will be returned to the Owner
upon receipt by the Company of the refund request. The amount to be refunded
will be deducted from the Policy Cash Value in the Divisions of the Separate
Account and in the General Account in the same proportion as the premium
payment was allocated to such Divisions.
Accordingly, a prospective Owner should contact a competent tax advisor
before purchasing a Policy to determine the circumstances under which the
Policy would be a modified endowment contract. In addition, an Owner should
contact a competent tax advisor before paying any additional premiums or
making any other change to, including an exchange of, a Policy to determine
whether such premium or change would cause the Policy (or the new Policy in
the case of an exchange) to be treated as a modified endowment contract.
(3) Distributions from Policies Classified as Modified Endowment Contract.
Policies classified as modified endowment contracts will be subject to the
following tax rules: First, all distributions, including distributions upon
surrender and benefits paid at maturity, from such a Policy are treated as
ordinary income subject to tax up to the amount equal to the excess (if any)
of the Cash Value immediately before the distribution over the investment in
the Policy (described below) at such time. Second, Policy Loans taken from,
or secured by, such a Policy, as well as due but unpaid interest thereon, are
treated as distributions from such a Policy and taxed accordingly. Third, a
10 % additional income tax is imposed on the portion of any distribution
from, or Policy Loan taken from or secured by, such a Policy that (a) is
included in income, except where the distribution or Policy Loan is made on
or after the Owner attains age 59 1/2, (b) is attributable to the Owner's
becoming disabled, or (c) is part of a series of substantially equal periodic
payments for the life (or life expectancy) of the Owner or the joint lives
(or joint life expectancies) of the Owner and the Owner's Beneficiary.
(4) Distributions From Policies Not Classified as Modified Endowment
Contract. Distributions from Policies not classified as a modified
endowment contract are generally treated as first recovering the investment
in Policy (described on page 37) and then, only after the return of all such
investment in the Policy, as distributing taxable income. An exception to
this general rule occurs in the case of a decrease in the Policy's death
benefit (possibly including a partial withdrawal) or any other change that
reduces benefits under the Policy in the first 15 years after the Policy is
issued and that results in cash distribution to the Owner in order for the
Policy to continue complying with the Section 7702 definitional limits. Such
a cash distribution will be taxed in whole or in part as ordinary income (to
the extent of any gain in the Policy) under rules prescribed in Section 7702.
Policy Loans from, or secured by, a Policy that is not a modified endowment
contract are not treated as distributions. Instead. such loans are treated as
indebtedness of the Owner.
Upon a complete surrender or lapse of a Policy that is not a modified
endowment contract, or when benefits are paid at such a Policy's maturity
date, if the amount received plus the amount of indebtedness exceeds the
total investment in the Policy, the excess will generally be treated as
ordinary income subject to tax.
Neither distributions (including distributions upon surrender or lapse) nor
Policy Loans from, or secured by. a Policy that is not a modified endowment
contract are subject to the 10 % additional income tax.
If a Policy which is not a modified endowment contract subsequently becomes a
modified endowment contract, then any distribution made from the Policy
within two years prior to the date of such change in status may become
taxable.
(5) Policy Loan Interest. Generally, interest paid on any loan under a life
insurance Policy owned by an individual is not deductible. In addition,
interest on any loan under a life insurance Policy owned by a business
taxpayer on the life of any individual who is an officer of or is financially
interested in the business carried on by that taxpayer is deductible only
under certain very limited circumstances. An Owner should consult a
competent tax advisor before deducting any loan interest.
(6) Interest Expense on Unrelated Indebtedness. Under provisions added to
the Code in 1997 for policies issued after June 8, 1997, if a business
taxpayer owns or is the beneficiary of a Policy on the life of any individual
who is not an officer, director, employee, or 20 percent owner of the
business, and the taxpayer also has debt unrelated to the Policy, a
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portion of the taxpayer's unrelated interest expense deductions may be lost.
No business taxpayer should purchase, exchange, or increase the death benefit
under a Policy on the life of any individual who is not an officer, director,
employee, or 20 percent owner of the business without first consulting a
competent tax Advisor.
(7) Investment in the Policy. Investment in the Policy means (i) the
aggregate amount of any premiums or other consideration paid for a Policy,
minus (ii) the aggregate amount received under the Policy which is excluded
from gross income of the Owner (except that the amount of any Policy Loan
from, or secured by, a Policy that is a modified endowment contract, to the
extent such amount is excluded from gross income, will be disregarded), plus
(iii) the amount of any Policy Loan from, or secured by, a Policy that is a
modified endowment contract to the extent that such amount is included in the
gross income of the Owner.
(8) Multiple Policies. All modified endowment contracts that are issued by
the Company (or its affiliates) to the same Owner during any calendar year
are treated as one modified endowment contract for purposes of determining
the amount includible in gross income under Section 72(e) of the Code.
(9) Possible Charge for Taxes. At the present time, the Company makes no
charge to the Separate Account for any Federal, state, or local taxes (as
opposed to Premium Tax Charges which are deducted from premium payments) that
it incurs which may be attributable to such Separate Account or to the
Policies. The Company, however, reserves the right in the future to make a
charge for any such tax or other economic burden resulting from the
application of the tax laws that it determines to be properly attributable to
the Separate Account or to the Policies.
(10) Possible Changes in Taxation. As of the date of this Prospectus, the
President's budget for fiscal year 1999 contains a number of proposals that
would adversely affect the Federal income tax treatment of life insurance
contracts. Of particular importance to owners of variable life insurance
contracts such as the Policy are two proposals under which, if adopted: (1)
the inside buildup of variable life insurance contracts like the Policy would
be taxed whenever cash values were reallocated among the available investment
options, for example, if the Periodic and Variance Rebalancing options
available under the Policy were used, and (2) it would no longer be possible
to exchange a variable life insurance contract tax free under Code section
1035. Moreover, it is always possible that any changes in the tax treatment
of life insurance contracts could be effective prior to the date of any new
legislation.
UNISEX REQUIREMENTS UNDER THE PENSION POLICIES AND MONTANA LAW
In 1983 the Supreme Court held in Arizona Governing Committee v. Norris that
optional annuity benefits provided under an employer's deferred compensation
plan could not, under Title VII of the Civil Rights Act of 1964, vary between
men and women on the basis of sex. Accordingly, the Pension Policies
described in this Prospectus will provide guaranteed cost of insurance rates
and guaranteed purchase rates for certain settlement options that do not
differentiate on the basis of sex.
In addition, the State of Montana generally prohibits the use of
actuarial tables that distinguish between men and women in determining
premiums and policy benefits for policies issued on the lives of their
residents. Therefore, all Policies offered by this Prospectus to insure
residents of Montana will have premiums and benefits which are based on
actuarial tables that do not differentiate on the basis of sex.
SAFEKEEPING OF THE SEPARATE ACCOUNT'S ASSETS
General American holds the assets of the Separate Account in a custodial
account in its name at the Bank of New York. The Company maintains records of
all purchases and redemptions of applicable Fund shares by each of the
Divisions. Additional protection for the assets of the Separate Account is
afforded by a blanket fidelity bond issued by Lloyd's Underwriters in the
amount of five million dollars, covering all officers and employees of the
Company who have access to the assets of the Separate Account.
VOTING RIGHTS
Based on its understanding of current applicable legal requirements, the
Company will vote the shares of the Funds held in the Separate Account at
regular and special shareholder meetings of the mutual funds in accordance
with the instructions received from persons having voting interests in the
corresponding Divisions of the Separate Account. If, however, the 1940 Act
or any regulation thereunder should be amended or if the present
interpretation thereof
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should change, and as a result the Company determines that it is permitted to
vote shares of the Funds in its own right, it may elect to do so. No voting
privileges apply to the Policies with respect to Cash Value removed from the
Separate Account as a result of a Policy Loan.
The number of votes which an Owner has the right to instruct will be
calculated separately for each Division. Voting rights reflect the dollar
value of the total number of units of each Division of the Separate Account
credited to the Owner at the record date, rather than the number of units
alone. Fractional shares will be counted. The number of votes of the Fund
which the Owner has the right to instruct will be determined as of the date
coincident with the date established by that Fund for determining
shareholders eligible. Voting instructions will be solicited by written
communications prior to such meeting in accordance with procedures
established by the mutual funds.
The Company will vote the shares of a Fund for which no timely instructions
are received in proportion to the voting instructions which are received with
respect to that Fund. The Company will also vote any shares of the Funds
which it owns and which are not attributable to Policies in the same
proportion.
Each person having a voting interest in a Division will receive proxy
material, reports, and other materials relating to the appropriate Fund.
Disregard of Voting Instructions. The Company may, when required by state
insurance regulatory authorities, disregard voting instructions if the
instructions require that the shares be voted so as to cause a change in the
subclassification or investment objective of the Fund or to approve or
disapprove an investment advisory contract for a Fund. In addition, the
Company itself may disregard voting instructions in favor of changes
initiated by an Owner in the investment policy or the investment advisor or
sub-advisor of a Fund if the Company reasonably disapproves of such changes.
A proposed change would be disapproved only if the proposed change is
contrary to state law or prohibited by state regulatory authorities, or the
Company determined that the change would have an adverse effect on its
General Account in that the proposed investment policy for a Fund may result
in overly speculative or unsound investments. If the Company disregards
voting instructions, a summary of that action and the reasons for such action
will be included in the next annual report to Owners.
STATE REGULATION OF THE COMPANY
The Company, a stock life insurance company organized under the laws of
Missouri, and the Separate Account are subject to regulation by the Missouri
Department of Insurance. An annual statement is filed with the Director of
Insurance on or before March 1st of each year covering the operations and
reporting on the financial condition of the Company as of December 31 of the
preceding year. Periodically, the Director of Insurance examines the
liabilities and reserves of the Company and the Separate Account and
certifies their adequacy, and a full examination of the Company's operations
is conducted by the National Association of Insurance Commissioners at least
once every three years.
In addition, the Company is subject to the insurance laws and regulations of
other states within which it is licensed or may become licensed to operate.
Generally, the insurance departments of other states apply the laws of the
state of domicile in determining permissible investments.
35
<PAGE> 42
<TABLE>
<CAPTION>
MANAGEMENT OF THE COMPANY
Principal Occupation (s)
Name During Past Five Years<F*>
---- --------------------------
Principal Officers <F**>
- ------------------------
<C> <S>
Richard A. Liddy Chairman, President and CEO, 1/95-present; Chairman of the
Executive Committee, 5/92-present. Formerly President and
CEO, 5/92-1/95; President and Chief Operating Officer,
5/88-5/92.
Robert J. Banstetter, Sr. Vice President, General Counsel and Secretary, 2/91-
present. Formerly Vice President and General Counsel,
1/83-2/91.
John W. Barber Vice President and Controller, 12/84-present.
O'Neil P. Boudreaux Vice President-Sales and Marketing, 10/96-present.
Formerly Vice President-Group Field Accounts, 4/87-10/96.
Kevin C. Eichner Executive Vice President of General American, Chairman of
GenMark, Chairman of Walnut Street Securities,
10/97-Present. President and CEO, Collaborative Strategies,
1983-Present.
E. Thomas Hughes Corporate Actuary and Treasurer, 10/94-present. Formerly
Executive Vice President-Group Pensions, 3/90-10/94
Michael P. Ingrassia Vice President-Group Executive Accounts, 3/92-present.
Formerly Vice President-Group Operations, 5/84-2/92.
Barbara L. Snyder Vice President-Product Division, 4/95-present. Formerly
Vice President and Chief Actuary, American Bankers
Insurance Company, Miami, FL.
Warren J. Winer Executive Vice President-Group Life and Health, 8/95-
present. Formerly Managing Director, William M. Mercer,
Inc., 7/93-8/95; President and Chief Operating Officer,
W. F. Corroon, 1986-7/93.
Bernard H. Wolzenski Executive Vice President-Individual Insurance, 10/91-
present. Formerly Vice President-Life Product Management,
5/86-10/91.
A. Greig Woodring President and Chief Executive Officer, Reinsurance Group of
America, 12/92-present. Executive Vice President-
Reinsurance, 3/90-present.
<FN>
<F*> All positions listed are with General American unless otherwise indicated.
<F**> The principal business address of Messrs. Banstetter, Hughes, and Liddy is
General American Life Insurance Company, 700 Market Street, St. Louis,
Missouri 63101. The principal business address for Messrs. Barber,
Boudreaux, Ingrassia, Winer and Wolzenski and for Ms. Snyder is 13045
Tesson Ferry Road, St. Louis, Missouri 63128. The principal business
address for Mr. Woodring is 660 Mason Ridge Center Drive, Suite 300,
St. Louis, Missouri 63141. The principal business address for Mr.
Eichner is 670 Mason Ridge Center Drive, Suite 100, St. Louis, Missouri
63141.
36
<PAGE> 43
<CAPTION>
Principal Occupation (s)
Name During Past Five Years<F*>
---- --------------------------
Directors
- ---------
<C> <S>
August A. Busch III Chairman of the Board and President, Anheuser-Busch
Companies, Inc. (beer business).
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118
William E. Cornelius Retired Chairman and Chief Executive Officer, Union
Union Electric Company Electric Company (electric utility business). Prior to
P.O. Box 149 1993, Chairman and Chief Executive Officer.
St. Louis, Missouri 63166
John C. Danforth Partner. Formerly, U. S. Senator, State of Missouri.
Bryan Cave
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Bernard A. Edison Past President, Edison Brothers Stores, Inc. (retail
Edison Brothers Stores, Inc. specialty stores).
P.O. Box 14020
St. Louis, Missouri 63178
Richard A. Liddy Chairman, President and CEO, General American
General American Life Insurance Co.
700 Market Street
St. Louis, MO 63101
William E. Maritz Chairman and Chief Executive Officer, Maritz, Inc.
Maritz, Inc. (motivation, travel, communications, training and marketing
1375 North Highway Drive research business).
Fenton, Missouri 63099
Craig D. Schnuck Chairman and Chief Executive Officer, Schnuck Markets, Inc.
Schnuck Markets, Inc. (retail supermarket chain). Prior to 1991, President and
11420 Lackland Road Chief Executive Officer
P.O. Box 46928
St. Louis, Missouri 63146
William P. Stiritz Chairman, Chief Executive Officer and President, Ralston
Ralston Purina Company Purina Company (pet food, batteries, and bread business);
Checkerboard Square Chairman, Ralcorp Holdings, Inc. (ready-to-eat cereal,
St. Louis, Missouri 63164 baby food, ski resorts).
Andrew C. Taylor Chief Executive Officer and President, Enterprise Rent-A-
Enterprise Rent-A-Car Car (car rental). Prior to May, 1991, President.
600 Corporate Park Drive
St. Louis, Missouri 63105
37
<PAGE> 44
<CAPTION>
MANAGEMENT OF THE COMPANY
Principal Occupation (s)
Name During Past Five Years<F*>
---- --------------------------
Directors (continued)
- ---------------------
<C> <S>
H. Edwin Trusheim Retired Chairman and Chief Executive Officer
General American Life Insurance Co.
P.O. Box 396
St. Louis, MO 63166
Robert L. Virgil Principal, Edward Jones (investments). Prior to 1993,
Edward Jones Dean, the John M. Olin School of Business, Washington
12555 Manchester University (business education)
St. Louis, Missouri 63131-3729
Virginia V. Weldon, M.D. Senior Vice President, Public Policy, Monsanto Company
Monsanto Company (chemicals diversified industry, pharmaceuticals, life
800 North Lindbergh science products, and food ingredients business). Prior to
St. Louis, Missouri 63167 1993, Vice President, Public Policy.
Ted C. Wetterau President, Wetterau Associates, L.L.C. Retired Chairman
Wetterau Associates, L.L.C. and Chief Executive Officer, Wetterau Incorporated
7700 Bonhomme, Suite 750 (retail and wholesale grocery, manufacturing business).
St. Louis, Missouri 63105
<FN>
<F*> All positions listed are with General American unless otherwise
indicated.
</TABLE>
38
<PAGE> 45
LEGAL MATTERS
All matters of Missouri law pertaining to the Policy, including the validity
of the Policy and General American's right to issue the Policy under Missouri
insurance law, have been passed upon by Robert J. Banstetter, Vice President,
General Counsel, and Secretary of General American.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account is a party or to
which the assets of the Separate Account are subject. General American is not
involved in any litigation that is of material importance in relation to its
total assets or that relates to the Separate Account.
EXPERTS
The audited financial statements of General American and the Separate Account
have been included in this Prospectus in reliance on the reports of KPMG Peat
Marwick LLP, independent certified public accountants, and on the authority
of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1997 financial
statements of General American refers to the adoption of Statement of
Financial Accounting Standards No. 120, Accounting and Reporting by Mutual
Life Insurance Enterprises and by Insurance Enterprises for Certain
Long-Duration Participating Contracts.
Actuarial matters included in this Prospectus have been examined by Alan J.
Hobbs, FSA, MAAA, LLIF, Second Vice President & Financial Actuary of General
American, as stated in the opinion filed as an exhibit to the registration
statement.
ADDITIONAL INFORMATION
A registration statement has been filed with the Securities and Exchange
Commission, under the Securities Act of 1933, as amended, with respect to the
Policy offered hereby. This Prospectus does not contain all the information
set forth in the registration statement and the amendments and exhibits to
the registration statement, to all of which reference is made for further
information concerning the Separate Account, General American and the Policy
offered hereby. Statements contained in this Prospectus as to the contents of
the Policy and other legal instruments are summaries. For a complete
statement of the terms thereof, reference is made to such instruments as
filed.
FINANCIAL STATEMENTS
The financial statements of General American which are included in this
Prospectus should be distinguished from the financial statements of the
Separate Account, and should be considered only as bearing on the ability of
General American to meet its obligations under the Policy. They should not be
considered as bearing on the investment performance of the assets held in the
Separate Account. Financial information is not provided for three of the
thirteen Divisions of the Separate Account because those Divisions have only
recently been established, and therefore, no operating history exists for
those Divisions.
39
<PAGE> 46
APPENDIX A
Illustrations of Death Benefits and Cash Values
The following tables illustrate how the Cash Value, Cash Surrender Value, and
death benefit of a Policy change with the investment experience of a Division
of the Separate Account. The tables show how the Cash Value, Cash Surrender
Value, and death benefit of a Policy issued to an insured of a given age and
at a given premium would vary over time if the investment return on the
assets held in each Division of the Separate Account were a uniform, gross,
after-tax annual rate of 0%, 6%, or 12%. The tables in Appendix A illustrate
a Policy issued to a Male, age 45 in a preferred nonsmoker rate class. If
the insured falls into a smoker rate class, the Cash Values, Cash Surrender
Values, and death benefits would be lower than those shown in the tables. In
addition, the Cash Values, Cash Surrender Values, and death benefits would be
different from those shown if the gross annual investment rates of return
averaged 0%, 6%, and 12% over a period of years, but fluctuated above and
below those averages for individual Policy Years.
The Cash Value column under the "Guaranteed" heading shows the accumulated
value of the Net Premiums paid at the stated interest rate, reflecting
deduction of the selection and issue expense charge, the monthly
administrative charges and monthly charges for the cost of insurance based on
the maximum values allowed under the 1980 Commissioners Standard Ordinary
Mortality Table. The Cash Surrender Value column under the "Guaranteed"
heading shows the projected Cash Surrender Value of the Policy, which is
calculated by taking the Cash Value under the "Guaranteed" heading and
deducting any appropriate Contingent Deferred Sales Charge. The Cash value
column under the "Current" heading shows the accumulated value of the Net
Premiums paid at the stated interest rate, reflecting deduction of the
selection and issue expense charge, the monthly administrative charges and
monthly charges for the cost of insurance at their current level, which is
less than or equal to that allowed by the 1980 Commissioners Standard
Ordinary Mortality Table. The Cash Value column under the "Current" heading
also reflects payment of the projected dividends into the Cash Value. The
Cash Surrender Value column under the "Current" heading shows the projected
Cash Surrender Value of the Policy, which is calculated by taking the Cash
Value under the "Current" heading and deducting any appropriate Contingent
Deferred Sales Charge. The illustrations of death benefits reflect the above
assumptions. The death benefits also vary between tables depending upon
whether Death Benefit Options A or C (Level Type) or Death Benefit Option
B(Increasing Type) are illustrated.
The amounts shown for Cash Value, Cash Surrender Value, and death benefit
reflect the fact that the investment rate of return is lower than the gross
after-tax return on the assets held in a Division of the Separate Account.
The charges include a .85% charge for mortality and expense risk, the
investment advisory fee (.69% of aggregate average daily net assets is
assumed but the actual investment advisory fee applicable to each Division is
shown in the respective Prospectuses of General American Capital Company,
Russell Insurance Funds, Variable Insurance Products Fund, Variable Insurance
Products Fund II, and Van Eck Investment Trust), and administrative expenses
incurred. After deduction for these amounts, the illustrated gross annual
investment rates of return of 0%, 6%, and 12% correspond to approximate net
annual rates of -1.54%, 4.46%, and 10.46%, respectively. The Prospectuses
for General American Capital Company, Russell Insurance Funds, Variable
Insurance Products Fund, Variable Insurance Products Fund II, and Van Eck
Investment Trust should be consulted for details about the nature and extent
of their expenses. There is no arrangement for reimbursing the expenses of
General American Capital Company, Russell Insurance Funds, Variable Insurance
Products Fund, Variable Insurance Products Fund II, and Van Eck Investment
Trust.
The hypothetical values shown in the tables do not reflect any charges for
Federal income taxes against the Separate Account (as opposed to Premium Tax
Charges which are deducted from premium payments), since General American is
not currently making any such charges. However, such charges may be made in
the future and, in that event, the gross annual investment rate of return of
the Divisions of the Separate Account would have to exceed 0%, 6%, and 12% by
an amount sufficient to cover the tax charges in order to produce the death
benefit and Cash Value illustration. (See Federal Tax Matters.)
The tables illustrate the Policy values that would result based upon the
investment rates of return if premiums are paid as indicated, if all Net
Premiums are allocated to the Separate Account, if no Policy Loans have been
made, and dividends are paid into the Cash Value as projected. The tables
are also based on the assumptions that the Owner has not requested an
increase or decrease in the Face
40
<PAGE> 47
Amount, that no partial withdrawals have been made, that no transfer charges
were incurred, and that no optional riders have been requested.
Upon request, General American will provide a comparable illustration based
upon the proposed Insured's age, sex, and rate class, the Face Amount or
premium requested, the proposed frequency of premium payments, and any
available riders requested.
41
<PAGE> 48
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $1,795
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.0% (NET RATE @ -1.54%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 1,795 1,885 824 1,119 100,000 824 1,119 100,000
2 47 1,795 3,863 2,074 2,369 100,000 2,050 2,346 100,000
3 48 1,795 5,941 3,285 3,580 100,000 3,228 3,523 100,000
4 49 1,795 8,123 4,448 4,743 100,000 4,369 4,664 100,000
5 50 1,795 10,414 5,564 5,859 100,000 5,463 5,758 100,000
6 51 1,795 12,819 6,704 6,940 100,000 6,572 6,808 100,000
7 52 1,795 15,344 7,789 7,966 100,000 7,625 7,802 100,000
8 53 1,795 17,996 8,820 8,938 100,000 8,626 8,744 100,000
9 54 1,795 20,780 10,050 10,109 100,000 9,563 9,623 100,000
10 55 1,795 23,704 11,261 11,261 100,000 10,430 10,430 100,000
11 56 1,795 26,774 12,404 12,404 100,000 11,167 11,167 100,000
12 57 1,795 29,997 13,502 13,502 100,000 11,836 11,836 100,000
13 58 1,795 33,382 14,552 14,552 100,000 12,418 12,418 100,000
14 59 1,795 36,935 15,554 15,554 100,000 12,925 12,925 100,000
15 60 1,795 40,667 16,506 16,506 100,000 13,336 13,336 100,000
16 61 1,795 44,584 17,402 17,402 100,000 13,644 13,644 100,000
17 62 1,795 48,698 18,238 18,238 100,000 13,839 13,839 100,000
18 63 1,795 53,018 19,005 19,005 100,000 13,912 13,912 100,000
19 64 1,795 57,553 19,700 19,700 100,000 13,843 13,843 100,000
20 65 1,795 62,316 20,319 20,319 100,000 13,610 13,610 100,000
25 70 1,795 89,946 22,688 22,688 100,000 9,340 9,340 100,000
30 75 1,795 125,209 22,669 22,669 100,000 0 0 0
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF
INSURANCE RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON
A POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS. NO
REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES, GENERAL
AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
42
<PAGE> 49
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $1,795
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.46%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 1,795 1,885 907 1,202 100,000 907 202 100,000
2 47 1,795 3,863 2,315 2,610 100,000 2,291 2,586 100,000
3 48 1,795 5,941 3,767 4,062 100,000 3,707 4,002 100,000
4 49 1,795 8,123 5,255 5,550 100,000 5,168 5,463 100,000
5 50 1,795 10,414 6,780 7,075 100,000 6,667 6,962 100,000
6 51 1,795 12,819 8,417 8,653 100,000 8,265 8,501 100,000
7 52 1,795 15,344 10,088 10,265 100,000 9,895 10,072 100,000
8 53 1,795 17,996 11,796 11,914 100,000 11,560 11,678 100,000
9 54 1,795 20,780 13,795 13,854 100,000 13,254 13,313 100,000
10 55 1,795 23,704 15,885 15,885 100,000 14,969 14,969 100,000
11 56 1,795 26,774 18,023 18,023 100,000 16,650 16,650 100,000
12 57 1,795 29,997 20,236 20,236 100,000 18,359 18,359 100,000
13 58 1,795 33,382 22,527 22,527 100,000 20,081 20,081 100,000
14 59 1,795 36,935 24,901 24,901 100,000 21,830 21,830 100,000
15 60 1,795 40,667 27,361 27,361 100,000 23,592 23,592 100,000
16 61 1,795 44,584 29,909 29,909 100,000 25,361 25,361 100,000
17 62 1,795 48,698 32,547 32,547 100,000 27,134 27,134 100,000
18 63 1,795 53,018 35,275 35,275 100,000 28,907 28,907 100,000
19 64 1,795 57,553 38,100 38,100 100,000 30,668 30,668 100,000
20 65 1,795 62,316 41,026 41,026 100,000 32,406 32,406 100,000
25 70 1,795 89,946 58,825 58,825 100,000 40,509 40,509 100,000
30 75 1,795 125,209 82,244 82,244 100,000 46,385 46,385 100,000
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE
RATES AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT
COMBINATION OF PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON
A POLICY ISSUE DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES,
GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
43
<PAGE> 50
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT LEVEL (OPTION A) ANNUAL PREMIUM: $1,795
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.46%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 1,795 1,885 990 1,285 100,000 990 1,285 100,000
2 47 1,795 3,863 2,567 2,862 100,000 2,542 2,838 100,000
3 48 1,795 5,941 4,290 4,585 100,000 4,227 4,522 100,000
4 49 1,795 8,123 6,165 6,460 100,000 6,071 6,366 100,000
5 50 1,795 10,414 8,209 8,504 100,000 8,082 8,377 100,000
6 51 1,795 12,819 10,513 10,749 100,000 10,338 10,574 100,000
7 52 1,795 15,344 13,019 13,196 100,000 12,791 12,968 100,000
8 53 1,795 17,996 15,751 15,869 100,000 15,465 15,583 100,000
9 54 1,795 20,780 18,988 19,047 100,000 18,378 18,437 100,000
10 55 1,795 23,704 22,571 22,571 100,000 21,550 21,550 100,000
11 56 1,795 26,774 26,493 26,493 100,000 24,954 24,954 100,000
12 57 1,795 29,997 30,823 30,823 100,000 28,689 28,689 100,000
13 58 1,795 33,382 35,606 35,606 100,000 32,781 32,781 100,000
14 59 1,795 36,935 40,899 40,899 100,000 37,287 37,287 100,000
15 60 1,795 40,667 46,761 46,761 100,000 42,248 42,248 100,000
16 61 1,795 44,584 53,260 53,260 100,000 47,722 47,722 100,000
17 62 1,795 48,698 60,475 60,475 100,000 53,777 53,777 100,000
18 63 1,795 53,018 68,494 68,494 100,000 60,495 60,495 100,000
19 64 1,795 57,553 77,425 77,425 100,000 67,969 67,969 100,000
20 65 1,795 62,316 87,369 87,369 106,591 76,311 76,311 100,000
25 70 1,795 89,946 158,312 158,312 183,642 133,372 133,372 154,711
30 75 1,795 125,209 278,134 278,134 297,604 225,351 225,351 241,126
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE RATES
AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT COMBINATION OF
PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A POLICY ISSUE
DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES,
GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
44
<PAGE> 51
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $3,896
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 0.05 (NET RATE @ -1.54%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 3,896 4,090 2,723 3,018 103,018 2,723 3,018 103,018
2 47 3,896 8,385 5,838 6,133 106,133 5,814 6,109 106,109
3 48 3,896 12,895 8,881 9,176 109,176 8,822 9,117 109,117
4 49 3,896 17,630 11,842 12,137 112,137 11,760 12,056 112,056
5 50 3,896 22,602 14,722 15,017 115,017 14,618 14,913 114,913
6 51 3,896 27,823 17,593 17,829 117,829 17,455 17,691 117,691
7 52 3,896 33,304 20,373 20,550 120,550 20,201 20,378 120,378
8 53 3,896 39,060 23,064 23,182 123,182 22,859 22,977 122,977
9 54 3,896 45,103 25,983 26,042 126,042 25,418 25,477 125,477
10 55 3,896 51,449 28,861 28,861 128,861 27,868 27,868 127,868
11 56 3,896 58,112 31,693 31,693 131,693 30,150 30,150 130,150
12 57 3,896 65,108 34,450 34,450 134,450 32,327 32,327 132,327
13 58 3,896 72,454 37,126 37,126 137,126 34,375 34,375 134,375
14 59 3,896 80,167 39,722 39,722 139,722 36,310 36,310 136,310
15 60 3,896 88,265 42,232 42,232 142,232 38,107 38,107 138,107
16 61 3,896 96,769 44,652 44,652 144,652 39,759 39,759 139,759
17 62 3,896 105,698 46,976 46,976 146,976 41,256 41,256 141,256
18 63 3,896 115,073 49,191 49,191 149,191 42,588 42,588 142,588
19 64 3,896 124,917 51,293 51,293 151,293 43,733 43,733 143,733
20 65 3,896 135,254 53,277 53,277 153,277 44,672 44,672 144,672
25 70 3,896 195,224 62,630 62,630 162,630 45,744 45,744 145,744
30 75 3,896 271,763 68,565 68,565 168,565 38,468 38,468 138,468
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE RATES
AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT COMBINATION OF
PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A POLICY ISSUE
DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES,
GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
45
<PAGE> 52
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $5,886
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 6.0% (NET RATE @ 4.46%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 3,896 4,090 2,992 3,217 103,217 2,922 3,217 103,217
2 47 3,896 8,385 6,429 6,725 106,725 6,405 6,700 106,700
3 48 3,896 12,895 10,069 10,364 110,364 10,007 10,302 110,302
4 49 3,896 17,630 13,835 14,130 114,130 13,745 14,040 114,040
5 50 3,896 22,602 17,732 18,027 118,027 17,614 17,909 117,909
6 51 3,896 27,823 21,837 22,073 122,073 21,677 21,913 121,913
7 52 3,896 33,304 26,074 26,251 126,251 25,870 26,047 126,047
8 53 3,896 39,060 30,448 30,566 130,566 30,199 30,317 130,317
9 54 3,896 45,103 35,303 35,362 135,362 34,657 34,716 134,716
10 55 3,896 51,449 40,380 40,380 140,380 39,268 39,268 139,268
11 56 3,896 58,112 45,683 45,683 145,683 43,889 43,889 143,889
12 57 3,896 65,108 51,194 51,194 151,194 48,674 48,674 148,674
13 58 3,896 72,454 56,918 56,918 156,918 53,575 53,575 153,575
14 59 3,896 80,167 62,865 62,865 162,865 58,609 58,609 158,609
15 60 3,896 88,265 69,038 69,038 169,038 63,758 63,758 163,758
16 61 3,896 96,769 75,442 75,442 175,442 69,015 69,015 169,015
17 62 3,896 105,698 82,079 82,079 182,079 74,372 74,372 174,372
18 63 3,896 115,073 88,948 88,948 188,948 79,822 79,822 179,822
19 64 3,896 124,917 96,052 96,052 196,052 85,345 85,345 185,345
20 65 3,896 135,254 103,397 103,397 203,397 90,920 90,920 190,920
25 70 3,896 195,224 147,051 147,051 247,051 118,965 118,965 218,965
30 75 3,896 271,763 199,753 199,753 299,753 144,406 144,406 244,406
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE RATES
AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT COMBINATION OF
PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A POLICY ISSUE
DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES,
GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
46
<PAGE> 53
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY
FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE
POLICY FACE AMOUNT: $100,000 MALE PREFERRED NONSMOKER AGE 45
DEATH BENEFIT INCREASING (OPTION B) ANNUAL PREMIUM: $3,896
FOR SEPARATE ACCOUNT ELEVEN A HYPOTHETICAL
GROSS ANNUAL RATE OF RETURN @ 12.0% (NET RATE @ 10.46%)
======== CURRENT ======== ======== GUARANTEED ========
END PREM
OF ANNUAL ACCUM SURR CASH DEATH SURR CASH DEATH
YEAR AGE PAYMNT @ 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 46 3,896 4,090 3,120 3,415 103,415 3,120 3,415 103,415
2 47 3,896 8,385 7,045 7,340 107,340 7,020 7,315 107,315
3 48 3,896 12,895 11,355 11,650 111,650 11,290 11,585 111,585
4 49 3,896 17,630 16,079 16,374 116,374 15,981 16,276 116,276
5 50 3,896 22,602 21,258 21,553 121,553 21,125 21,420 121,420
6 51 3,896 27,823 27,014 27,250 127,250 26,829 27,065 127,065
7 52 3,896 33,304 33,314 33,492 133,492 33,072 33,249 133,249
8 53 3,896 39,060 40,218 40,336 140,336 39,913 40,031 140,031
9 54 3,896 45,103 48,152 48,211 148,211 47,400 47,459 147,459
10 55 3,896 51,449 56,926 56,926 156,926 55,588 55,588 155,588
11 56 3,896 58,112 66,624 66,624 166,624 64,493 64,493 164,493
12 57 3,896 65,108 77,318 77,318 177,318 74,253 74,253 174,253
13 58 3,896 72,454 89,110 89,110 189,110 84,935 84,935 184,935
14 59 3,896 80,167 102,119 102,119 202,119 96,646 96,646 196,646
15 60 3,896 88,265 116,467 116,467 216,467 109,470 109,470 209,470
16 61 3,896 96,769 132,292 132,292 232,292 123,510 123,510 223,510
17 62 3,896 105,698 149,743 149,743 249,743 138,881 138,881 238,881
18 63 3,896 115,073 168,983 168,983 268,983 155,711 155,711 255,711
19 64 3,896 124,917 190,196 190,196 290,196 174,127 174,127 274,127
20 65 3,896 135,254 213,587 213,587 313,587 194,270 194,270 294,270
25 70 3,896 195,224 380,063 380,063 480,063 327,193 327,193 427,193
30 75 3,896 271,763 659,410 659,410 759,410 535,170 535,170 635,170
</TABLE>
GUARANTEED VALUES REFLECT INVESTMENT RESULTS USING GUARANTEED COST OF INSURANCE
RATES.
CURRENT VALUES REFLECT INVESTMENT RESULTS USING CURRENT COST OF INSURANCE RATES
AND DIVIDENDS BASED ON THE CURRENT DIVIDEND SCALE FOR THE EXACT COMBINATION OF
PREMIUMS AND BENEFITS SHOWN. THESE VALUES ARE ALSO BASED ON A POLICY ISSUE
DATE OF JANUARY 1 FOR PURPOSES OF DETERMINING DIVIDEND AMOUNTS.
THE HYPOTHETICAL INVESTMENT RATE OF RETURN SHOWN ABOVE IS ILLUSTRATIVE ONLY,
AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE RESULTS. ACTUAL
INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND UPON A
NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATION MADE BY THE POLICY OWNER
AND THE INVESTMENT RESULTS FOR FUNDS OF GENERAL AMERICAN CAPITAL COMPANY,
RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE PRODUCTS FUND, VARIABLE INSURANCE
PRODUCTS FUND II, AND VAN ECK INVESTMENT TRUST. THE CASH VALUE, CASH SURRENDER
VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF
THE ACTUAL RATES OF RETURN AVERAGED THE RATE SHOWN ABOVE OVER A PERIOD OF YEARS,
BUT ALSO FLUCTUATED ABOVE OR BELOW THAT AVERAGE FOR INDIVIDUAL POLICY YEARS.
NO REPRESENTATION CAN BE MADE BY THE COMPANY, WALNUT STREET SECURITIES,
GENERAL AMERICAN CAPITAL COMPANY, RUSSELL INSURANCE FUNDS, VARIABLE INSURANCE
PRODUCTS FUND, VARIABLE INSURANCE PRODUCTS FUND II, VAN ECK INVESTMENT TRUST,
OR ANY REPRESENTATIVE THEREOF, THAT THIS HYPOTHETICAL RATE OF RETURN CAN BE
ACHIEVED FOR ANY ONE YEAR, OR SUSTAINED OVER ANY PERIOD OF TIME.
ILLUSTRATED VALUES SHOWN ABOVE ARE AS OF THE END OF THE POLICY YEARS INDICATED
AND ASSUME ANY ADDITIONAL PREMIUMS SHOWN ARE RECEIVED ON THE POLICY
ANNIVERSARIES. ILLUSTRATED VALUES ASSUME ALL PREMIUM TAXES ARE PAID BY THE
COMPANY.
47
<PAGE> 54
<TABLE>
<CAPTION>
APPENDIX B
Target Premium Factors per Thousand of Face Amount
Male Standard Policy
Age Factor Age Factor
<S> <C> <C> <C>
0 3.26 40 10.20
1 3.33 41 10.58
2 3.45 42 10.98
3 3.58 43 11.40
4 3.71 44 11.84
5 3.86 45 12.30
6 4.02 46 12.80
7 4.18 47 13.35
8 4.35 48 13.95
9 4.44 49 14.60
10 4.54 50 15.30
11 4.63 51 16.06
12 4.72 52 16.87
13 4.87 53 17.73
14 4.91 54 18.64
15 5.01 55 19.60
16 5.10 56 20.67
17 5.19 57 21.85
18 5.29 58 23.14
19 5.38 59 24.55
20 5.48 60 26.10
21 5.68 61 27.82
22 5.90 62 29.71
23 6.14 63 31.77
24 6.38 64 34.00
25 6.65 65 36.40
26 6.84 66 39.04
27 6.99 67 41.92
28 7.15 68 45.05
29 7.32 69 48.40
30 7.50 70 52.00
31 7.68 71 55.94
32 7.88 42 60.23
33 8.10 73 64.87
34 8.34 74 69.86
35 8.60 75 75.20
36 8.88 76 81.71
37 9.18 77 89.39
38 9.50 78 98.24
39 9.84 79 108.27
80 119.50
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
APPENDIX B
Target Premium Factors per Thousand of Face Amount
Female Standard Policy
Age Factor Age Factor
<S> <C> <C> <C>
0 3.07 40 9.18
1 3.07 41 9.52
2 3.07 42 9.88
3 3.07 43 10.26
4 3.07 44 10.66
5 3.07 45 11.07
6 3.07 46 11.52
7 3.17 47 12.02
8 3.29 48 12.56
9 3.43 49 13.14
10 3.58 50 13.77
11 3.74 51 14.45
12 3.90 52 15.18
13 4.07 53 15.96
14 4.14 54 16.78
15 4.22 55 17.64
16 4.30 56 18.60
17 4.37 57 19.67
18 4.45 58 20.83
19 4.53 59 22.10
20 4.61 60 23.49
21 4.80 61 25.04
22 5.01 62 26.74
23 5.23 63 28.59
24 5.46 64 30.60
25 5.69 65 32.76
26 5.94 66 35.14
27 6.21 67 37.73
28 6.44 68 40.55
29 6.59 69 43.56
30 6.75 70 46.80
31 6.91 71 50.35
32 7.09 42 54.21
33 7.29 73 58.38
34 7.51 74 62.87
35 7.74 75 67.68
36 7.99 76 73.54
37 8.26 77 80.45
38 8.55 78 88.42
39 8.86 79 97.44
80 107.55
</TABLE>
49
<PAGE> 56
<TABLE>
<CAPTION>
APPENDIX B
Target Premium Factors per Thousand of Face Amount
Pension Policy
Age Factor Age Factor
<S> <C> <C> <C>
20 5.39 50 15.15
21 5.59 51 15.90
22 5.81 52 16.70
23 6.05 53 17.55
24 6.29 54 18.45
25 6.55 55 19.40
26 6.75 56 20.46
27 6.91 57 21.63
28 7.08 58 22.91
29 7.25 59 24.31
30 7.43 60 25.84
31 7.60 61 27.54
32 7.80 62 29.41
33 8.02 63 31.45
34 8.26 64 33.66
35 8.51 65 36.04
36 8.79 66 38.65
37 9.09 67 41.50
38 9.41 68 44.60
39 9.74 69 47.92
40 10.10 70 51.48
41 10.47 71 55.38
42 10.87 42 59.63
43 11.29 73 64.22
44 11.72 74 69.16
45 12.18 75 74.45
46 12.67 76 80.89
47 13.22 77 88.50
48 13.81 78 97.26
49 14.45 79 107.19
80 118.31
</TABLE>
50
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholder of General American Life Insurance Company:
We have audited the accompanying consolidated balance sheets of General American
Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholder equity, and cash
flows for each of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 General American
Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1997, in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1996 the
Company adopted Statement of Financial Accounting Standards No. 120, ACCOUNTING
AND REPORTING BY MUTUAL LIFE INSURANCE ENTERPRISES AND BY INSURANCE ENTERPRISES
FOR CERTAIN LONG-DURATION PARTICIPATING CONTRACTS.
St. Louis, Missouri
March 5, 1998
<PAGE> 58
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31
ASSETS 1997 1996
<S> <C> <C>
Fixed maturities:
Available-for-sale, at fair value $ 9,115,519 6,758,309
Mortgage loans, net 2,140,262 2,273,627
Real estate, net 140,145 203,767
Equity securities, at fair value 24,211 20,905
Policy loans 2,073,152 1,917,861
Short-term investments 190,374 55,594
Other invested assets 243,921 183,612
----------- ----------
Total investments 13,927,584 11,413,675
Cash and cash equivalents 358,879 142,724
Accrued investment income 168,592 148,419
Reinsurance recoverables and other contract deposits 4,117,958 3,264,644
Deferred policy acquisition costs 695,253 652,251
Other assets 488,582 442,139
Separate account assets 4,118,860 2,833,258
----------- ----------
Total assets $23,875,708 18,897,110
=========== ==========
LIABILITIES AND STOCKHOLDER EQUITY
Policy and contract liabilities:
Future policy benefits $ 4,933,787 4,238,033
Policyholder account balances:
Universal life 2,534,744 1,960,726
Annuities 4,161,946 4,321,241
Pension funds 4,732,400 2,778,834
Policy and contract claims 458,606 352,433
Dividends payable to policyholders 113,525 103,019
----------- ----------
Total policy and contract liabilities 16,935,008 13,754,286
Amounts payable to reinsurers 310,592 142,661
Long-term debt and notes payable 214,477 295,614
Other liabilities and accrued expenses 826,868 670,109
Deferred tax liability 89,046 43,277
Separate account liabilities 4,112,666 2,810,907
----------- ----------
Total liabilities 22,488,657 17,716,854
Minority interests 216,555 182,469
Stockholder equity:
Common stock, $1 par value, 5,000,000 shares
authorized, 3,000,000 shares issued and
outstanding in 1997 and 0 in 1996 3,000 -
Additional paid in capital 3,000 -
Retained earnings 1,055,233 963,230
Foreign currency translation adjustments,
net of taxes (19,481) (15,810)
Unrealized gain on investments, net of taxes 128,744 50,367
----------- ----------
Total stockholder equity 1,170,496 997,787
----------- ----------
Total liabilities and stockholder equity $23,875,708 18,897,110
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 59
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
REVENUES 1997 1996 1995
<S> <C> <C> <C>
Insurance premiums and other considerations $1,768,169 1,623,228 1,498,013
Net investment income 945,542 806,883 676,404
Ceded commissions 44,902 27,538 18,523
Other income 362,160 280,803 182,193
Net realized investment gains 28,538 24,531 280,756
--------- --------- ---------
Total revenues 3,149,311 2,762,983 2,655,889
BENEFITS AND EXPENSES
Policy benefits 1,528,333 1,379,803 1,150,188
Interest credited to policyholder account balances 345,937 262,532 192,522
--------- --------- ---------
Total policyholder benefits 1,874,270 1,642,335 1,342,710
Dividends to policyholders 182,146 171,904 264,658
Policy acquisition costs 168,045 143,094 138,811
Other insurance and operating expenses 739,814 642,636 522,986
--------- --------- ---------
Total benefits and expenses 2,964,275 2,599,969 2,269,165
--------- --------- ---------
Income before provision for income taxes
and minority interest 185,036 163,014 386,724
--------- --------- ---------
Income tax provision (benefit):
Current 65,778 45,902 115,769
Deferred (113) 13,992 29,411
--------- --------- ---------
Total provision for income taxes 65,665 59,894 145,180
--------- --------- ---------
Income before minority interest 119,371 103,120 241,544
Minority interest in earnings of consolidated subsidiaries (22,134) (19,888) (17,512)
--------- --------- ---------
Net income $ 97,237 83,232 224,032
========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 60
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Foreign
currency Unrealized
translation gain (loss) on Total
Common Additional Retained adjustments, investments, stockholder
stock paid in capital earnings net of taxes net of taxes equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ - - 646,727 (20,175) (65,409) 561,143
Net income 224,032 224,032
Foreign currency translation adjustments 5,908 5,908
Change in unrealized gain (loss) on
investments, net of tax 162,864 162,864
Other, net 3,136 3,136
--------------------------------------------------------------------------------
Balance at December 31, 1995 - - 873,895 (14,267) 97,455 957,083
Net income 83,232 83,232
Foreign currency translation adjustments (1,543) (1,543)
Change in unrealized gain (loss) on
investments, net on tax (47,088) (47,088)
Other, net 6,103 6,103
--------------------------------------------------------------------------------
Balance at December 31, 1996 - - 963,230 (15,810) 50,367 997,787
Net income 97,237 97,237
Foreign currency translation adjustments (3,671) (3,671)
Change in unrealized gain (loss) on
investments, net of tax 78,377 78,377
Issuance of common stock 3,000 3,000 (6,000) -
Dividend to parent (4,480) (4,480)
Other, net 5,246 5,246
--------------------------------------------------------------------------------
Balance at December 31, 1997 $3,000 3,000 1,055,233 (19,481) 128,744 1,170,496
================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 61
<TABLE>
<CAPTION>
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996 1995
Net income $ 97,237 83,232 224,032
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Change in:
Accrued investment income (20,568) (16,275) (22,202)
Reinsurance recoverables and other contract deposits (838,390) (159,713) 262,054
Deferred policy acquisition costs (113,040) (87,249) (23,141)
Other assets (61,796) (51,444) (67,650)
Future policy benefits 693,052 330,511 399,261
Policy and contract claims 105,503 14,652 74,173
Other liabilities and accrued expenses 319,787 65,184 184,756
Deferred income taxes (113) 13,992 29,411
Policyholder considerations (137,163) (144,748) (140,475)
Interest credited to policyholder account balances 345,937 262,532 192,522
Amortization and depreciation 32,744 28,375 19,196
Net realized investment (gains) (28,538) (24,531) (280,756)
Other, net 372 (14,554) 2,488
----------- ---------- ----------
Net cash provided by operating activities 395,024 299,964 853,669
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from investments sold or redeemed:
Fixed maturities available-for-sale 2,070,743 1,822,169 1,482,122
Mortgage loans 594,151 182,650 206,520
Equity securities 31,602 13,427 468,143
Short-term and other invested assets 163,393 84,748 414,102
Cost of investments purchased:
Fixed maturities available-for-sale (4,463,100) (3,428,943) (3,010,016)
Fixed maturities held-to-maturity - - (3,068)
Equity securities (47,283) (39,553) (89,062)
Short-term and other invested assets (293,857) (97,426) (16,471)
Mortgage loan originations (438,959) (593,438) (431,043)
Maturity of fixed maturities held-to-maturity - - 6,365
Maturity of fixed maturities available-for-sale 281,736 225,087 75,518
Increase in policy loans, net (153,399) (210,624) (211,526)
Investments in subsidiaries (6,032) (4,807) (126,363)
----------- ---------- ----------
Net cash used in investing activities (2,261,005) (2,046,710) (1,234,779)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net policyholder account and contract deposits 2,121,488 1,632,495 294,685
Issuance of debt 1,857 106,903 100,219
Repayment of debt (80,606) (19,497) (4,800)
Dividends (2,112) (1,832) (4,376)
Other, net 46,829 26,770 17,498
----------- ---------- ----------
Net cash provided by financing activities 2,087,456 1,744,839 403,226
----------- ---------- ----------
Effect of exchange rate changes (5,320) (266) 5,908
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 216,155 (2,173) 28,024
----------- ---------- ----------
Cash and cash equivalents at beginning of year 142,724 144,897 116,873
----------- ---------- ----------
Cash and cash equivalents at end of year $ 358,879 142,724 144,897
=========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 62
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REORGANIZATION
In September 1996, the Board of Directors of General American Life Insurance
Company (General American) adopted the Reorganization Plan (Plan) which
authorized the reorganization (Reorganization) of General American into a mutual
insurance holding company structure. The Missouri Department of Insurance held
a public hearing on the Reorganization on December 19, 1996 and approved the
Plan on January 24, 1997. The policyholders of General American approved the
Plan on January 28, 1997 and the Reorganization became effective on April 24,
1997 (effective date). General American was the first company to obtain
approval and to form a mutual insurance holding company under the Missouri
Mutual Holding Company Statute.
Pursuant to the Reorganization, General American (the Company) (i) formed
General American Mutual Holding Company (GAMHC) as a mutual insurance holding
company under the insurance laws of the State of Missouri, (ii) formed
GenAmerica Corporation (GenAmerica) as an intermediate stock holding company
under the general laws of the State of Missouri, and (iii) amended and restated
its Charter and Articles of Incorporation to authorize the issuance of capital
stock and the continuance of its existence as a stock life insurance company
under the same name. GAMHC may, among other things, elect all of the directors
of GenAmerica and approve matters submitted for shareholder approval. As of the
effective date of the Reorganization, the membership interests and the
contractual rights of the policyholders of the Company were separated - the
membership interests automatically became, by operation of law, membership
interests in GAMHC and the contractual rights remained with the Company. Each
person who becomes the owner of a designated policy or contract of insurance or
annuity issued by the Company after the effective date of the Reorganization
(subject to certain exceptions and conditions set forth in the Articles of
Incorporation of GAMHC) will become a member of GAMHC and have a membership
interest in GAMHC by operation of law so long as such policy or contract remains
in force. The membership interests in GAMHC follow, and are not severable, from
the insurance policy or annuity contract from which the membership interest in
GAMHC is derived.
The Company issued 3 million shares of its authorized shares of capital stock to
GAMHC in 1997. GAMHC then contributed all of these to GenAmerica in exchange
for 1 thousand shares of its common stock. As a result, GenAmerica directly
owns the Company, and GAMHC indirectly owns the Company, through GenAmerica. In
addition, the Company capitalized $3 million of its unassigned surplus to paid
in capital.
The consolidated financial statements include the assets, liabilities, and
results of operations of the Company and its wholly owned subsidiaries, General
American Holding Company, a non-insurance holding company; Cova Corporation, an
insurance holding company; Paragon Life Insurance Company; Security Equity Life
Insurance Company; General Life Insurance Company of America; General Life
Insurance Company, its 63.8 percent owned subsidiary, Reinsurance Group of
America, Incorporated (RGA), an insurance holding company, and its 62.7 percent
owned subsidiary, Conning Corporation.
The Company's principal lines of business, conducted through General American or
one of its subsidiaries, are: Individual Life Insurance, Annuities, Group Life
and Health Insurance, Asset Management, and Reinsurance. The Company
distributes its products and services primarily through a nationwide network of
general agencies, independent brokers, and group sales and claims offices. The
Company (including its subsidiaries) is licensed to do business in all fifty
states, twelve Canadian provinces, Puerto Rico, and the District of Columbia.
Through its subsidiaries, the Company has operations in Europe, Pacific Rim
countries, and Latin America.
INITIAL PUBLIC OFFERING
In December 1997, the Company's subsidiary, Conning Corporation (Conning)
successfully completed an Initial Public Offering (IPO) of 2.875 million shares
of its common stock. Conning received net proceeds of approximately $34.5
million from the offering. After the IPO, the Company owns 62.7 percent of the
total shares outstanding of Conning's common stock. The publicly held stock of
Conning is listed on the NASDAQ National Market System
SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are prepared on the basis of
generally accepted accounting principles (GAAP) and include the accounts of the
Company and its majority owned subsidiaries. Less than majority-owned entities
in which the Company has at least a 20 percent interest are reported on the
equity basis. All significant intercompany accounts and transactions have been
eliminated in consolidation. The preparation of financial statements requires
the use of estimates by management which affect the amounts reflected in the
financial statements. Actual results could differ from those estimates.
Accounts that the Company deems to be sensitive to changes in estimates include
future policy benefits and policy and contract claims, deferred acquisition
costs, and investment and deferred tax valuation allowances.
In April 1993, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 40, APPLICABILITY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
TO MUTUAL LIFE INSURANCE AND OTHER ENTERPRISES. This Interpretation requires
mutual life insurance enterprises which had traditionally issued statutory based
financial statements that had been reported to be in conformity with GAAP, to
apply all authoritative accounting pronouncements in preparing those statements,
effective for periods beginning after December 31, 1994. In January 1995, the
FASB issued Statement of Financial Accounting Standards No. 120 (SFAS 120),
ACCOUNTING AND REPORTING BY MUTUAL LIFE INSURANCE ENTERPRISES AND BY INSURANCE
ENTERPRISES FOR CERTAIN LONG DURATION PARTICIPATING CONTRACTS, and the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
95-1 (SOP 95-1), ACCOUNTING FOR CERTAIN INSURANCE ACTIVITIES OF MUTUAL LIFE
ENTERPRISES, which together define the GAAP model for mutual life insurance
enterprises. These pronouncements define the enterprises and method of
accounting for certain participating life insurance contracts of mutual and
stock life insurance companies that meet the criteria defined in SOP 95-1. SFAS
120 also deferred implementation of Interpretation No. 40 to be concurrent with
implementation of SFAS 120. SFAS 120 and SOP 95-1 are effective for financial
statements issued for fiscal years beginning after December 15, 1995. The
effect of initially applying this new accounting model has been reported
retroactively through restatement of all periods presented.
<PAGE> 63
The significant accounting policies of the Company are as follows:
RECOGNITION OF REVENUE
For traditional life policies, including participating businesses, premiums are
recognized when due, less allowances for estimated uncollectible balances. For
limited payment contracts, net premiums are recorded as revenue, and the
difference between the gross premium and the net premium is deferred and
recognized in income in a constant relationship to insurance in force over the
estimated policy life. For universal life and annuity products, contract charges
for mortality, surrender, and expense, other than front-end expense charges, are
reported as income when charged to policyholders' accounts.
Other income represents the fees generated from the Company's non-insurance
operations, primarily service and contract fees relating to asset management,
system development, and third-party administration. Amounts are recognized when
earned.
INVESTED ASSETS
FIXED MATURITY AND EQUITY SECURITIES: Investment securities are accounted for
in accordance with SFAS 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. SFAS 115 requires debt and equity securities to be
classified into categories of available-for-sale, trading securities, or held-
to-maturity depending on an entity's ability and positive intent to hold a
security to maturity. All of the Company's securities are classified as
available-for-sale. Fixed maturities available-for-sale are reported at fair
value and are so classified based on the possibility that such securities could
be sold prior to maturity if that action enables the Company to execute its
investment philosophy and appropriately match investment results to operating
and liquidity needs. Equity securities are carried at fair value.
Realized gains or losses on the sale of securities are determined on the basis
of specific identification. Unrealized gains and losses are recorded, net of
related income tax effects, in a separate component of stockholder equity.
MORTGAGE LOANS: Mortgage loans on real estate are stated at an unpaid principal
balance, net of unamortized discounts and valuation allowances for possible
impairment in value. The Company discontinues the accrual of interest on
mortgage loans which are more than 90 days delinquent. Interest received on
nonaccrual mortgage loans is generally reported as interest income.
POLICY LOANS, REAL ESTATE AND OTHER INVESTED ASSETS: Policy loans are carried at
an unpaid principal balance and are generally secured by the cash surrender
value. Investment real estate which the Company has the intent to hold for the
production of income is carried at depreciated cost, net of writedowns for other
than temporary declines in fair value and encumbrances. Properties held for
sale (primarily acquired through foreclosure) are carried at the lower of
depreciated cost (fair value at foreclosure plus capital additions less
accumulated depreciation and encumbrances) or fair value. Adjustments to
carrying value of properties held for sale are recorded in a valuation reserve
when the fair value is below depreciated cost. The accumulated depreciation and
encumbrances on real estate amounted to $47.0 million and $53.0 million at
December 31, 1997 and 1996, respectively. Direct valuation allowances amounted
to $6.7 million and $15.7 million at December 31, 1997 and 1996, respectively.
Other invested assets are principally recorded at fair value.
SHORT-TERM INVESTMENTS: Short-term investments, consisting primarily of money
market instruments and other debt issues purchased with an original maturity of
less than a year, are carried at amortized cost, which approximates fair value.
INVESTED ASSET IMPAIRMENT AND VALUATION ALLOWANCES: Invested assets are
considered impaired when the Company determines that collection of all amounts
due under the contractual terms is doubtful. The Company adjusts invested
assets to their estimated net realizable value at the point at which it
determines an impairment is other than temporary. In addition, the Company has
established valuation allowances for mortgage loans and other invested assets.
Valuation allowances for other than temporary impairments in value are netted
against the asset categories to which they apply. Additions to valuation
allowances are included in realized gains and losses.
The Company recognizes its proportionate share of the resultant gains or losses
on the issuance or repurchase of its subsidiaries' stock as a direct credit or
charge to retained earnings.
CASH AND CASH EQUIVALENTS: For purposes of reporting, cash and cash equivalents
represent cash, demand deposits and highly liquid short-term investments, which
include U.S. Treasury bills, commercial paper, and repurchase agreements with
original or remaining maturities of 90 days or less when purchased.
INVESTMENT INCOME
Bond premium and discounts are amortized into income using the scientific yield
method over the term of the security. Amortization of the premium or discount
on mortgage-backed securities is recognized using a scientific yield method
which considers the estimated timing and amount of prepayments of underlying
mortgage loans. Actual prepayment experience is periodically reviewed and
effective yields are adjusted when differences arise between the prepayments
originally anticipated and the actual prepayments received and currently
anticipated. When such differences occur, the net investment in the
mortgage-backed security is adjusted to the amount that would have existed had
the new effective yield been applied since the acquisition of the security with
a corresponding charge or credit to interest income (the "retrospective
method").
POLICY AND CONTRACT LIABILITIES
For traditional life insurance policies, future policy benefits are computed
using a net level premium method with actuarial assumptions as to mortality,
persistency, and interest established at policy issue. Assumptions established
at policy issue as to
<PAGE> 64
mortality and persistency are based on industry standards and the Company's
historical experience which, together with interest and expense assumptions,
provide a margin for adverse deviation. Interest rate assumptions generally
range from 2.5 percent to 11.0 percent.
For participating policies, future policy benefits are computed using a net
level premium method based on the guaranteed cash value basis for mortality and
interest. Mortality rates are similar to those used for statutory valuation
purposes. Interest rates generally range from 2.5 percent to 6.0 percent.
Dividend liabilities are established when earned.
When the liabilities for future policy benefits plus the present value of
expected future gross premiums are insufficient to provide for expected policy
benefits and expenses, unrecoverable deferred policy acquisition costs are
written off and thereafter a premium deficiency reserve is established through a
charge to earnings.
Policyholder account balances for universal life and annuity policies are equal
to the policyholder account value before deduction of any surrender charges.
The policyholder account value represents an accumulation of gross premium
payments plus credited interest less expense and mortality charges and
withdrawals. These expense charges are recognized in income as earned.
The range of weighted average interest crediting rates used by the Company and
its life insurance subsidiaries were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Universal life 6.00-7.10% 6.00-7.56% 6.00-7.87%
Annuities 5.70-6.20% 5.70-6.20% 5.69-6.29%
</TABLE>
Accident and health benefits for active lives are calculated using the net level
premium method and assumptions as to future morbidity, withdrawals, and interest
which provide a margin for adverse deviation. Benefit liabilities for disabled
lives are calculated using the present value of future benefits and experience
assumptions for claim termination, expense, and interest which also provide a
margin for adverse deviation.
POLICY AND CONTRACT CLAIMS
The Company establishes a liability for unpaid claims based on estimates of the
ultimate cost of claims incurred, which is comprised of aggregate case basis
estimates, average claim costs for reported claims, and estimates of unreported
losses based on past experience. Policy and contract claims include a provision
for both life and accident and health claims. Management believes the
liabilities for unpaid claims are adequate to cover the ultimate liability;
however, due to the underlying risks and the high degree of uncertainty
associated with the determination of the liability for unpaid claims, the
amounts which will ultimately be paid to settle these liabilities cannot be
determined precisely and may vary from the estimated amount included in the
consolidated balance sheets.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, which vary with and are primarily related
to the production of new business, have been deferred to the extent that such
costs are deemed recoverable from future profitability of the underlying
business. Such costs include commissions, premium taxes, as well as certain
other costs of policy issuance and underwriting.
For limited payment and other nonparticipating traditional life insurance
policies, the deferred policy acquisition costs are amortized with interest in
proportion to the ratio of the expected annual premium revenue to the expected
total premium revenue. Expected future premium revenue is estimated with the
same assumptions used for computing liabilities for future policy benefits for
these policies.
For participating life insurance, universal life, and annuity type contracts,
the deferred policy acquisition costs are amortized over a period of not more
than thirty years in relation to the present value of estimated gross profits
arising from interest margin, cost of insurance, policy administration, and
surrender charges.
The range of average rates of assumed interest used by the Company and its
insurance subsidiaries in estimated gross margins were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Participating life 8.17% 8.70% 7.81%
Universal life 6.25-7.79% 6.00-8.20% 6.00-7.56%
Annuities 7.00-7.84% 7.83% 8.04%
</TABLE>
The estimates of expected gross margins are evaluated regularly and are revised
if actual experience or other evidence indicates that revision is appropriate.
Upon revision, total amortization recorded to date is adjusted by a charge or
credit to current earnings. Under SFAS 115, deferred policy acquisition costs
are adjusted for the impact on estimated gross margins as if the net unrealized
gains and losses on securities had actually been realized.
REINSURANCE
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured by ceding risks to other insurance enterprises or
reinsurers under various types of contracts including coinsurance and excess
coverage. The Company's retention level per individual life ranges between $50
thousand and $2.5 million depending on the entity writing the policy.
The Company assumes and retrocedes financial reinsurance contracts which
represent low mortality risk reinsurance treaties. These contracts are reported
as deposits and are included in reinsurance recoverable/payable in the
accompanying consolidated balance sheet. The amount of revenue reported on these
contracts represents fees and the cost of insurance under the terms of the
reinsurance agreement.
<PAGE> 65
Reinsurance activities are accounted for consistent with terms of the risk
transfer reinsurance contracts. Premiums ceded to other companies have been
reported as a reduction of premiums. Amounts applicable to reinsurance ceded
for future policy benefits and claim liabilities have been reported as assets
for these items and commissions and expense allowances received in connection
with reinsurance ceded have been accounted for in income as earned. Reinsurance
does not relieve the Company from its primary responsibility to meet claim
obligations. The Company evaluates the financial conditions of its reinsurers
annually.
FEDERAL INCOME TAXES
The Company and certain of its U.S. subsidiaries file a consolidated federal
income tax return. In order to consolidate, the Company must possess both 80
percent of the total voting power and 80 percent of the value of the stock of
the subsidiary. Further, even if it meets the 80 percent test, any acquired
life insurance company is not included in the consolidated return until the
acquired company has been a member of the group for five years. Prior to
satisfying the five-year requirement, the subsidiary files a separate federal
return. RGA Barbados, a subsidiary of RGA, also files a U.S. tax return. The
Company's Canadian, Argentine, Australian, Chilean, Mexican, Spanish, and United
Kingdom subsidiaries are taxed under applicable local statutes. The Company
uses the asset and liability method to record deferred income taxes.
Accordingly, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, using enacted tax rates, expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
SEPARATE ACCOUNT BUSINESS
The assets and liabilities of the separate accounts represent segregated funds
administered and invested by the Company for purposes of funding variable life
insurance and annuity contracts for the exclusive benefit of the contract
holders. The Company charges the separate accounts for cost of insurance and
administrative expense associated with a contract and charges related to early
withdrawals by contract holders. The assets and liabilities of the separate
account are carried at fair value. The Company's participation in the separate
accounts (seed money) is carried at its fair value in the separate account, and
amounted to $6.2 million and $22.3 million at December 31, 1997 and 1996,
respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the Company's entire holdings of a particular financial
instrument. Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could significantly
affect the estimates and such estimates should be used with care. The following
assumptions were used to estimate the fair value of each class of financial
instrument for which it was practicable to estimate fair value:
INVESTMENT SECURITIES: Fixed maturities are valued using quoted market prices,
if available. For securities 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 yield, credit quality, and
maturity of investments. The fair values of equity securities are based on
quoted market prices.
MORTGAGE LOANS: The fair values of mortgage loans are estimated using discounted
cash flow analyses and interest rates currently being offered for similar loans
to borrowers with similar credit ratings. Loans with similar characteristics
are aggregated for purposes of the calculations.
POLICY LOANS: The fair value of policy loans approximates the carrying value.
The majority of these loans are indexed, with yield tied to a stated return.
POLICYHOLDER ACCOUNT BALANCES ON INVESTMENT TYPE CONTRACTS: Fair values for the
Company's liabilities under investment-type contracts are estimated using
discounted cash flow calculations based on interest rates currently being
offered for similar contracts with maturities consistent with those remaining
for the contracts being valued. For contracts with no defined maturity date, the
carrying value approximates fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The separate account assets and
liabilities are carried at fair value as determined by the market value of the
underlying segregated investments.
SHORT-TERM INVESTMENTS AND CASH AND CASH EQUIVALENTS: The carrying amount is
considered a reasonable estimate of fair value.
LONG-TERM DEBT AND NOTES PAYABLE: The fair value of long-term debt and notes
payable is estimated using discounted cash flow calculations based on interest
rates currently being offered for similar instruments.
Refer to Note 4 for additional information on fair value of financial
instruments.
RECLASSIFICATION
The Company has reclassified the presentation of certain prior period
information to conform with the 1997 presentation.
<PAGE> 66
(2) SIGNIFICANT ACQUISITIONS AND DIVESTITURES
On June 1, 1995, the Company acquired Xerox Life Insurance Companies, now known
as Cova Corporation (Cova). At acquisition, Cova had total assets of
approximately $635.6 million. The purchase price of approximately $107.7
million was funded from the Company's operations.
Effective July 31, 1995, the Company entered into a merger arrangement with
Conning Corporation and Subsidiaries (Conning), an investment management firm,
whereby the Company acquired Conning and subsequently contributed Conning and
General American Investment Management Company, a wholly owned subsidiary, to
form Conning Asset Management Company (CAM). At acquisition, Conning had total
assets of approximately $16.0 million. The purchase price consisted of
approximately $12.0 million in cash (from the Company's operations) and 3.2
million shares of CAM convertible redeemable preferred stock, with fair value of
approximately $17.0 million.
These transactions were accounted for using the purchase method of accounting.
The results of operations of the acquired entities are included in the
consolidated financial statements subsequent to the respective acquisition
dates. The excess of cost over fair value of net assets acquired amounted to
approximately $56.6 million and $23.1 million for Cova and Conning,
respectively, and is being amortized over approximately 20 years.
On January 3, 1995, the Company sold its 72 percent ownership in GenCare Health
Systems, Inc. to United HealthCare Corporation. Proceeds received net of
expenses were $365.0 million and the net realized gain on sale was $170.2
million.
The Company distributed its ownership of its wholly owned subsidiary, Walnut
Street Securities, Inc. (WSS), at December 31, 1997 to GenAmerica. The net book
value of WSS, was $4.48 million at the time of distribution. The revenue and
expenses of WSS are included in the Company's consolidated statement of
operations for 1997.
<PAGE> 67
(3) INVESTMENTS
Fixed maturities and equity securities
The amortized cost and estimated fair value of fixed maturity and equity
securities at December 31, 1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 48,074 1,125 (27) 49,172
Government agency
obligations 378,002 84,425 (1,281) 461,146
Corporate securities 5,491,210 319,682 (45,790) 5,765,102
Mortgage-backed securities 2,544,241 45,211 (17,832) 2,571,620
Asset-backed securities 265,725 3,380 (626) 268,479
---------- ---------- ---------- ---------
Total fixed maturities
available-for-sale $8,727,252 453,823 (65,556) 9,115,519
========== ========== ========== =========
Equity securities $ 23,558 653 - 24,211
========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
1996
Gross Gross Estimated
Amortized unrealized unrealized fair
cost gains losses value
<S> <C> <C> <C> <C>
Available-for-sale:
U. S. Treasury securities $ 28,980 368 (151) 29,197
Government agency
obligations 343,945 41,324 (970) 384,299
Corporate securities 4,071,775 158,361 (39,623) 4,190,513
Mortgage-backed securities 1,949,717 18,927 (14,386) 1,954,258
Asset-backed securities 198,934 1,599 (491) 200,042
---------- ---------- ---------- ---------
Total fixed maturities
available-for-sale $6,593,351 220,579 (55,621) 6,758,309
========== ========== ========== =========
Equity securities $ 21,460 1,137 (1,692) 20,905
========== ========== ========== =========
</TABLE>
The Company manages its credit risk associated with fixed maturities by
diversifying its portfolio. At December 31, 1997 and 1996, the Company held no
corporate debt securities or foreign government debt securities of a single
issuer which had a carrying value in excess of 10 percent of stockholder equity.
The amortized cost and estimated fair value of fixed maturities at December 31,
1997, by contractual maturity, are shown below (in thousands). Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized fair
cost value
<S> <C> <C>
Due in one year or less $ 67,409 67,921
Due after one year through five years 1,279,675 1,303,178
Due after five years through ten years 1,816,231 1,855,188
Due after ten years through twenty years 3,019,696 3,317,612
Mortgage-backed securities 2,544,241 2,571,620
------------- ---------
Total $ 8,727,252 9,115,519
============= =========
</TABLE>
<PAGE> 68
The sources of net investment income follow (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Fixed maturities $ 561,709 464,512 368,033
Mortgage loans 194,504 171,781 143,047
Real estate 34,164 39,062 37,108
Equity securities 1,317 755 622
Policy loans 148,316 133,511 127,920
Short-term investments 16,600 13,979 26,920
Other 13,943 9,705 (368)
-------- ------- -------
Investment revenue 970,553 833,305 703,282
Investment expenses (25,011) (26,422) (26,878)
-------- ------- -------
Net investment income $ 945,542 806,883 676,404
======== ======= =======
</TABLE>
Net realized gains (losses) from sales of investments consist of the following
(in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Fixed maturities:
Realized gains $ 23,969 27,928 30,139
Realized losses (16,796) (10,398) (9,000)
Equity securities:
Realized gains 1,835 6,146 306,142
Realized losses (1,457) (288) (5,259)
Other investments, net 20,987 1,143 (41,266)
------- ------- -------
Net realized investment gains $ 28,538 24,531 280,756
======= ======= =======
</TABLE>
Included in the net realized losses are permanent write-downs of approximately
$4.8 million during 1997.
A summary of the components of the net unrealized appreciation (depreciation) on
invested assets carried at fair value is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Unrealized appreciation (depreciation):
Fixed maturities available-for-sale $ 388,267 164,957
Equity securities and short-term investments 658 605
Derivatives 888 -
Effect of unrealized appreciation (depreciation) on:
Deferred policy acquisition costs (142,187) (70,038)
Present value of future profits (2,901) 1,986
Deferred income taxes (91,779) (36,705)
Other 139 -
Minority interest, net of taxes (24,341) (10,438)
---------- ---------
Net unrealized appreciation $ 128,744 50,367
========== =========
</TABLE>
The Company and its insurance subsidiaries have securities on deposit with
various state insurance departments and regulatory authorities with an amortized
cost of approximately $ 293.5 million and $278.6 million at December 31, 1997
and 1996, respectively.
MORTGAGE LOANS
The Company originates mortgage loans on income-producing properties, such as
apartments, retail and office buildings, light warehouses, and light industrial
facilities. Loan to value ratios at the time of loan approval are 75 percent or
less. The Company minimizes risk through a thorough credit approval process and
through geographic and property type diversification.
The Company's mortgage loans were distributed as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Arizona $ 156,453 7.2% $ 185,575 8.0%
California 358,443 16.5 378,376 16.4
Colorado 228,797 10.5 226,531 9.8
Florida 153,174 7.0 193,570 8.4
Georgia 131,861 6.1 141,442 6.1
Illinois 155,184 7.1 183,883 8.0
Maryland 104,567 4.8 99,944 4.3
Missouri 100,815 4.6 102,111 4.4
Texas 191,619 8.8 225,697 9.8
Virginia 84,140 3.9 92,663 4.0
Other 513,213 23.5 481,546 20.8
----------- --------- ----------- --------
Subtotal 2,178,266 100.0% 2,311,338 100.0%
Valuation reserve (38,004) (37,711)
----------- --------- ----------- --------
Total $ 2,140,262 $ 2,273,627
=========== ========= =========== ========
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
1997 1996
Carrying Percent of Carrying Percent of
Value Total Value Total
<S> <C> <C> <C> <C>
Property Type
Apartment $ 101,038 4.6% $ 131,352 5.7%
Retail 903,438 41.5 966,298 41.8
Office building 622,185 28.6 641,204 27.7
Industrial 445,253 20.4 479,755 20.8
Other commercial 106,352 4.9 92,729 4.0
----------- --------- ----------- --------
Subtotal 2,178,266 100.0% 2,311,338 100.0%
Valuation reserve (38,004) (37,711)
----------- --------- ----------- --------
Total $ 2,140,262 $ 2,273,627
=========== ========= =========== ========
</TABLE>
An impaired loan is measured at the present value of expected future cash
flows or, alternatively, the observable market price or the fair value of the
collateral.
Mortgage loans which have been non-income producing for the preceding twelve
months were $8.7 million and $5.1 million at December 31, 1997 and 1996,
respectively. At December 31, 1997 and 1996, the recorded investment in
mortgage loans that were considered impaired under SFAS 114, ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN, was $119.7 million and $86.5 million,
respectively, with related allowances for credit losses of $12.7 million and
$8.0 million, respectively. The average recorded investment in impaired
loans during 1997 and 1996 was $103.1 million and $107.9 million,
respectively. For the years ended December 31, 1997, 1996, and 1995, the
Company recognized $9.7 million, $6.6 million, and $11.9 million,
respectively, of interest income on those impaired loans, which included $9.9
million, $6.7 million, and $12.0 million, respectively, of interest income
recognized using the cash basis method of income recognition.
The Company has outstanding mortgage loan commitments as of December 31, 1997
totaling $284.6 million. During 1995, the Company entered into an agreement
whereby approximately $109.8 million of mortgage loans were sold by the
Company for securitization and resale by a financial institution as mortgage
pass-through certificates. In conjunction with this transaction, the Company
entered into futures positions to hedge against interest rate risk. The sale
of these mortgage loans resulted in a net loss of approximately $.4 million.
In addition, the close-out of the futures positions related to this
transaction resulted in a net loss of approximately $6.4 million.
DERIVATIVES The Company has a variety of reasons to use derivative
instruments, such as to attempt to protect the Company against possible
changes in the market value of its portfolio as a result of interest rate
changes and to manage the portfolio's effective yield, maturity, and
duration. The Company does not invest in derivatives for speculative
purposes. Upon disposition, a realized gain or loss is recognized
accordingly, except when exercising an option contract or taking delivery of
a security underlying a futures contract. In these instances, the
recognition of gain or loss is postponed until the disposal of the security
underlying the option or futures contract.
Summarized below are the specific types of derivative instruments used by the
Company.
INTEREST RATE SWAPS: The Company manages interest rate risk on certain
contracts, primarily through the utilization of interest rate swaps. Under
interest rate swaps, the Company agrees with counterparties to exchange, at
specified intervals, the payments between floating and fixed-rate interest
amounts calculated by reference to notional amounts. Net interest payments are
recognized within net investment income in the consolidated statements of
operations.
At December 31, 1997, the Company had thirty outstanding interest rate swap
agreements which expire at various dates through 2025. Under thirteen of the
agreements, the Company receives a fixed rate ranging from 5.975 percent to
7.51 percent on a notional amount of $68.6 million and pays a floating rate
based on London Interbank Offered Rate (LIBOR). Under the remaining
seventeen outstanding interest rate swap agreements, the Company receives a
floating rate based on LIBOR on a notional amount of $93 million and pays a
fixed rate ranging from 6.495 percent to 8.562 percent. The estimated fair
value of the agreements was a net loss of approximately $2.5 million which is
not recognized in the accompanying consolidated balance sheet.
At December 31, 1996, the Company had eight outstanding interest rate swap
agreements which expire at various dates through 2025. Under six of the
agreements, the Company receives a fixed rate ranging from 5.825 percent to
8.31 percent on a notional amount of $25.4 million and pays a floating rate
based on LIBOR. Under the remaining two outstanding interest rate swap
agreements, the Company receives a floating rate based on LIBOR on a notional
amount of $15 million and pays a fixed rate ranging from 6.52 percent to 6.90
percent. The estimated fair value of the agreements was a net gain of
approximately $0.3 million which is not recognized in the accompanying
consolidated balance sheet.
<PAGE> 70
CURRENCY SWAPS: Under foreign currency swaps, the Company agrees with
other parties to exchange at specified intervals, the difference between two
currencies on an exchange rate basis the interest amounts calculated by
reference to an agreed notional principal amount. The Company uses this
technique for foreign denominated assets to match dollar denominated
liabilities of various fixed income products. Net interest payments are
recognized within net investment income in the consolidated statements of
operations.
At December 31, 1997 and 1996, the Company had six and two outstanding
currency swap agreements, respectively, which expire at various dates through
2026. The notional amount was $34.3 million and $13.9 million, respectively.
The estimated fair value of the agreements was a net loss of $1.3 million
and $2.3 million, respectively, which is not recognized in the accompanying
consolidated balance sheet.
FUTURES: A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The
Company generally invests in futures on U.S. Treasury Bonds, U.S. Treasury
Notes, and the S&P 500 Index and typically closes the contract prior to the
delivery date. These contracts are generally used to manage the portfolio's
effective maturity and duration.
<PAGE> 71
Futures contracts outstanding as of years ending 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
($ in thousands)
NET (SOLD)
PURCHASE NOTIONAL FAIR UNREALIZED
POSITION AMOUNT VALUE GAIN(LOSS)
<S> <C> <C> <C> <C>
December 31, 1997 (510) $51,000 60,940 ($907)
December 31, 1996 50 12,500 14,653 404
</TABLE>
OPTIONS: Currently, the Company buys both exchange-traded and
over-the-counter options based on the S&P 500 Index to support equity indexed
annuity policies. An equity indexed annuity is a product under which
contractholders receive a minimum guaranteed value and also participate in
stock market appreciation. Options are marked to market value quarterly. The
change in value is reflected in investment income to assure proper matching
of the hedge to changes in the liability. The amounts involved are not
material.
The Company is exposed to credit related risk in the event of nonperformance
by counterparties to financial instruments but does not expect any
counterparties to fail to meet their obligations. Where appropriate, master
netting agreements are arranged and collateral is obtained in the form of
rights to securities to lower the Company's exposure to credit risk. It is
the Company's policy to deal only with highly rated companies. There are not
any significant concentrations with counterparties.
(4) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1997 and 1996. SFAS
107, DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS, defines fair
value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties (in thousands):
<TABLE>
<CAPTION>
1997 1996
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
<S> <C> <C> <C> <C>
Assets:
Fixed maturities $ 9,115,519 9,115,519 6,758,309 6,758,309
Mortgage loans 2,140,262 2,333,895 2,273,627 2,354,072
Policy loans 2,073,152 2,073,152 1,917,861 1,917,861
Short-term investments 190,374 190,374 55,594 55,594
Other invested assets 243,921 243,921 183,612 183,628
Separate account assets 4,118,860 4,118,860 2,833,258 2,833,258
Liabilities:
Policyholder account
balances relating to
investment contracts $ 6,696,690 6,608,068 6,281,967 6,190,919
Long term debt and
notes payable 214,477 222,419 295,614 293,913
Separate account
liabilities 4,112,666 4,112,666 2,810,907 2,810,907
</TABLE>
(5) REINSURANCE
The Company is a major reinsurer to the life and health industry. The effect
of reinsurance on premiums and other considerations is as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Direct $ 1,120,169 1,097,340 1,069,248
Assumed 996,861 827,171 700,152
Ceded (348,861) (301,283) (271,387)
----------- --------- ---------
Net insurance premiums and other
considerations $ 1,768,169 1,623,228 1,498,013
=========== ========= =========
</TABLE>
Reinsurance assumed represents approximately $212.5 billion, $160.0 billion,
and $157.9 billion, of insurance in force at December 31, 1997, 1996, and
1995, respectively. The amount of ceded insurance in force, including
retrocession, was $50.4 billion, $53.2 billion, and $48.7 billion, for 1997,
1996, and 1995, respectively.
<PAGE> 72
(6) FEDERAL INCOME TAXES
Income tax expense (benefit) attributable to income from operations consists
of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Current income tax expense $ 65,778 45,902 115,769
Deferred income tax expense
(benefit) (113) 13,992 29,411
---------- ------- -------
Provision for income taxes $ 65,665 59,894 145,180
========== ======= =======
</TABLE>
Income tax expense attributable to income from operations differed from the
amounts computed by applying the U.S. federal income tax rate of 35 percent
to pre-tax income as a result of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Computed "expected" tax expense $ 64,763 57,055 135,353
Increase (decrease) in income tax
resulting from:
Surplus tax on mutual life
insurance companies 5,325 4,777 -
Foreign tax rate in excess
of U.S. tax rate 556 941 763
Tax preferred investment
income (6,583) (7,318) (5,784)
State tax net of federal benefit 830 971 292
GAAP/tax basis difference
on GenCare sale - - 15,710
Foreign tax credit (594) - -
Goodwill amortization 956 895 567
Difference in book vs. tax
basis in domestic
subsidiaries 2,166 2,230 1,547
Other, net (1,754) 343 (3,268)
---------- ------- -------
Provision for income taxes $ 65,665 59,894 145,180
========== ======= =======
</TABLE>
Total income taxes were allocated as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Provision for income taxes $ 65,665 59,894 145,180
Income tax from stockholder equity:
Unrealized holding gain
or loss on debt and
equity securities
recognized for financial
reporting purposes 55,923 (24,612) 99,871
Foreign currency translation (12,122) - -
Other (437) (1,023) -
---------- ------- -------
Total income tax $ 109,029 34,259 245,051
========== ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1997 and 1996
are presented below (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Reserve for future policy benefits $ 149,496 138,848
Deferred acquisition costs capitalized
for tax 110,418 95,332
Difference in basis of post retirement
benefits 6,846 13,993
Net operating loss 40,915 22,789
Other, net 132,354 106,263
---------- -------
Gross deferred tax assets 442,029 377,225
Less valuation allowance 1,150 1,299
---------- -------
Total deferred tax asset after valuation
allowance $ 438,879 375,926
========== =======
</TABLE>
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax liabilities:
Unrealized gain on investments $ 78,420 63,204
Deferred acquisition costs capitalized
for financial reporting 282,714 246,858
Difference in the tax basis of
cash and invested assets 45,551 19,222
Other, net 121,240 89,919
---------- -------
Total deferred tax liabilities 527,925 419,203
---------- -------
Net deferred tax liability $ 89,046 43,277
========== =======
</TABLE>
<PAGE> 73
The Company has not recognized a deferred tax liability for the
undistributed earnings of its wholly owned foreign subsidiaries because the
Company currently does not expect those unremitted earnings to become taxable
to the Company in the foreseeable future. This is because the unremitted
earnings will not be repatriated in the foreseeable future, or because those
unremitted earnings that may be repatriated will not be taxable through the
application of tax planning strategies that management would utilize.
As of December 31, 1997, the Company has provided for a 100 percent valuation
allowance against the deferred tax asset related to the net operating losses
of RGA's Australian, Argentine, and UK subsidiaries and Genelco's Spanish and
Mexican subsidiaries. The Company has provided for a 50 percent valuation
allowance against the deferred tax asset related to International
Underwriting Services' net operating losses which were incurred in separate
return limitation years. Based on income projections for future years, a 50
percent valuation allowance is appropriate.
At December 31, 1997, the Company had capital loss carryforwards of $.8
million. During 1997, 1996, and 1995 the Company paid income taxes totaling
approximately $70.8 million, $20.7 million, and $121.7 million, respectively.
At December 31, 1997, the Company's subsidiaries had recognized deferred tax
assets associated with net operating loss carryforwards of approximately
$115.7 million. The net operating loss and capital losses are expected to be
utilized during the period allowed for carryforwards.
(7) DEFERRED POLICY ACQUISITION COSTS
A summary of the policy acquisition costs deferred and amortized is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $ 652,251 526,939 664,452
Transfer of present value of future
profits 19,279 - -
Policy acquisition costs deferred 267,008 206,790 163,218
Policy acquisition costs amortized (211,979) (182,038) (176,216)
Interest credited 40,843 38,944 37,405
Deferred policy acquisition costs relating
to change in unrealized (gain) loss on
investments available for sale (72,149) 61,616 (161,920)
---------- ------- --------
Balance at end of year $ 695,253 652,251 526,939
========== ======= ========
</TABLE>
(8) ASSOCIATE BENEFIT PLANS AND POSTRETIREMENT BENEFITS
The Company has a defined benefit plan covering substantially all associates.
The benefits are based on years of service and each associate's compensation
level. The Company's funding policy is to contribute annually the maximum
amount deductible for federal income tax purposes. Contributions provide for
benefits attributed to service to date and for those expected to be earned in
the future.
The Company also has several non-qualified, defined benefit, and defined
contribution plans for directors and management associates. The plans are
unfunded and are deductible for federal income tax purposes when the benefits
are paid.
Net periodic defined benefit plan costs consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Service cost $ 5,915 5,421 4,074
Interest 8,597 8,047 7,160
Return on plan assets (29,043) (14,207) (27,984)
Amortization and deferral 18,637 4,646 19,841
Other - 192 -
---------- --------- ---------
Pension costs $ 4,106 4,099 3,091
========== ========= =========
</TABLE>
<PAGE> 74
The following table presents the plans' funded status and amount
recognized in the Company's consolidated balance sheets at December 31, 1997
and 1996 based on the actuarial valuations as of December 31, 1997 and 1996
(in thousands):
<TABLE>
<CAPTION>
1997 1996
Qualified Other Qualified Other
Plans Plans Plans Plans
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit
obligation, including vested
benefits of $79,995 and
$19,057 for 1997 and
$74,223 and $18,560
for 1996 82,758 27,965 76,928 26,897
--------- ------ --------- ------
Projected benefit obligation for
service rendered to date 97,662 32,168 92,825 29,726
Plan assets at fair value primarily
listed stocks and bonds 133,477 128,545
Plan assets in excess (less than)
projected benefit obligations 35,815 (32,168) 35,720 (29,726)
Unrecognized net transition obligation
at December 31 4,021 2,701
Pension cost funded in advance $ 35,815 35,720
========= =======
Accrued pension liability (28,147) (27,025)
======== ========
</TABLE>
Assumptions used for the December 31, 1997 and 1996 projected benefit obligation
included a 7.25 percent current discount rate, a same age-based salary scale and
4.50 percent increase rate, respectively, for future compensation levels, and a
9.25 percent projected return on plan assets.
The Board of Directors has adopted an associate incentive plan applicable to
full-time salaried associates with at least one year of service. Contributions
to the plan are determined annually by the Board of Directors and are based upon
salaries of eligible associates. Full vesting occurs after five years of
continuous service. The Company's contribution to the plan was $10.4 million,
$8.8 million, and $9.2 million for 1997, 1996, and 1995, respectively
In addition to pension benefits, the Company provides certain health care and
life insurance benefits for retired employees. Substantially all employees may
become eligible for these benefits if they reach retirement age while working
for the Company. Alternatively, retirees may elect certain prepaid health care
benefit plans.
The Company uses the accrual method to account for the costs of its retiree
benefit plans and amortizes its transition obligation for retirees and fully
eligible or vested employees over 20 years. The unamortized transition
obligation was $16.8 million and $17.8 million at December 31, 1997 and 1996,
respectively. Net postretirement benefit costs for the years ended December 31,
1997, 1996, and 1995 were $5.1 million, $5.8 million, and $5.4 million,
respectively, and include the expected cost of such benefits for newly eligible
or vested employees, interest cost, gains and losses arising from difference
between actuarial assumptions and actual experience, and amortization of the
transition obligation. The liability for the Company as of December 31, 1997 and
$27.8 million and $25.6 million, respectively.
Assumptions used were as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Discount rate in determining benefit obligations 7.25% 7.25%
Healthcare cost trend
First year:
Indemnity plan 8.0% 9.0%
HMO plan 8.0% 8.0%
Dental plan 8.0% 9.0%
Ultimate 5.00% 5.25%
</TABLE>
The health care cost trend rate assumption has a significant effect on the
amount reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1997 by $4.7 million or
12.5 percent. The aggregate of the service cost and interest cost components of
net periodic postretirement benefit cost for 1997 would increase by $.6 million
or 15.5 percent.
<PAGE> 75
(9) DEBT
The Company's long-term debt and notes payable consists of the following
($ in millions):
<TABLE>
<CAPTION>
Face value
at December 31,
Description Rate Maturity 1997 1996
<S> <C> <C> <C> <C>
Long-term debt:
General American surplus note 7.625% January 2024 $107.0 $107.0
RGA senior note 7.250% April 2006 100.0 100.0
Notes payable
General American 5.555% March 1997 - 80.5
RGA Australia Hldgs. 5.460% April 1998 7.8 7.6
------ ------
Total long-term debt and notes payable $214.8 $295.1
====== ======
</TABLE>
The difference between the face value of debt and the carrying value per the
consolidated balance sheets is unamortized discount.
General American's surplus note pays interest on January 15 and July 15 of
each year. The note is not subject to redemption prior to maturity. Payment
of principal and interest on the note may be made only with the approval of
the Missouri Director of Insurance.
The RGA senior note pays interest semiannually on April 1 and October 1. The
ability of RGA to make debt principal and interest payments as well as make
dividend payments to shareholders is ultimately dependent on the earnings and
surplus of its subsidiaries and the investment earnings on the undeployed
debt proceeds. The transfer of funds from the insurance subsidiaries to
Reinsurance Group of America, Incorporated is subject to applicable insurance
laws and regulations.
The General American note payable was retired during December of 1997.
The RGA Australian note had drawdowns for the respective years of $2.0
million in January 1997, $5.6 million in January 1996, and $2.0 million in
July 1996. Principal repayments are due in April 1998 and are expected to be
renewed under the terms of the line of credit. This agreement contains
various restrictive covenants which primarily pertain to limitations on the
quality and types of investments, minimum requirements of net worth, and
minimum rating requirements.
Interest paid on debt during 1997, 1996, and 1995 amounted to $20.0 million,
$19.9 million, and $9.0 million, respectively.
As of December 31, 1997, the Company was in compliance with all covenants
under its debt agreements.
(10) REGULATORY MATTERS
The Company and its insurance subsidiaries are subject to financial statement
filing requirements in their respective state of domicile, as well as the
states in which they transact business. Such financial statements, generally
referred to as statutory financial statements, are prepared on a basis of
accounting which varies in some respects from GAAP. Statutory accounting
practices include: (1) charging of policy acquisition costs to income as
incurred; (2) establishment of a liability for future policy benefits
computed using required valuation standards; (3) nonprovision of deferred
federal income taxes resulting from temporary differences between financial
reporting and tax bases of assets and liabilities; (4) recognition of
statutory liabilities for asset impairments and yield stabilization on fixed
maturity dispositions prior to maturity with asset valuation reserves based
on a statutorily determined formulas; and (5) valuation of investments in
bonds at amortized cost.
Net income and policyholders' surplus of the Company for the years ended
December 31, 1997, 1996, and 1995, as determined in accordance with statutory
accounting practices, are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Net income $ 39,737 18,464 236,962
Policyholders' surplus 844,110 636,260 589,783
</TABLE>
Under Risk-Based Capital (RBC) requirements, General American and its
insurance subsidiaries are required to measure its solvency against certain
parameters. As of December 31, 1997, the Company and its insurance
subsidiaries exceeded the established RBC minimums. In addition, the Company
and its insurance subsidiaries exceeded the minimum statutory capital and
surplus requirements of their respective states of domicile.
The Company and its insurance subsidiaries are subject to limitations on the
payment of dividends. Generally, dividends during any year may not be paid
without prior regulatory approval, in excess of the lessor of (and with
respect to life and health subsidiaries in Missouri, in excess of the greater
of): (a) 10 percent of the statutory surplus as of the preceding December 31
or (b) the statutory gain from operations for the preceding year.
<PAGE> 76
(11) LEASE COMMITMENTS
The Company has entered into operating leases for office space and other
assets, principally office furniture and equipment. Future minimum lease
obligations under noncancelable leases are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended December 31:
<S> <C>
1998 $ 17,583
1999 15,510
2000 12,621
2001 8,680
2002 6,276
Thereafter 3,107
</TABLE>
Operating lease expense totaled $16.4 million, $17.0 million, and $11.6 million
in 1997, 1996, and 1995, respectively
(12) PARTICIPATING POLICIES AND DIVIDENDS TO POLICYHOLDERS
Over 27.5 percent and 31.2 percent of the Company's business in force relates
to participating policies as of December 31, 1997 and 1996, respectively.
These participating policies allow the policyholders to receive dividends
based on actual interest, mortality, and expense experience for the related
policies. These dividends are distributed to the policyholders through an
annual dividend, using current dividend scales which are approved by the
Board of Directors.
(13) CONTINGENT LIABILITIES
From time to time, the Company is subject to litigation related to its
insurance business and to employment related matters in the normal course of
business. Management does not believe that the Company is party to any such
pending litigation which would have a material adverse effect on its
financial position or future operations.
<PAGE> 77
INDEPENDENT AUDITORS' REPORT
The Board of Directors
General American Life Insurance Company
and Policyholders of General American
Separate Account Eleven:
We have audited the statements of assets and liabilities, including the
schedule of investments, of the S & P 500 Index, Money Market, Bond Index,
Managed Equity, Asset Allocation, International Index, Mid-Cap Equity,
Small-Cap Equity, Equity-Income, Growth, Overseas, Asset Manager, High
Income, Worldwide Hard Assets, Multi-style Equity, Core Bond, Aggressive
Equity, and Non-US Fund Divisions of General American Separate Account
Eleven as of December 31, 1997, and the related statements of operations and
changes in net assets for each of the years in the three-year period then
ended. These financial statements are the responsibility of the management
of General American Separate Account Eleven. 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.
Investments owned as of December 31, 1997 were verified by audit of the
statements of assets and liabilities of the underlying portfolios of General
American Capital Company and confirmation by correspondence with respect to
the Variable Insurance Products Fund and the Variable Insurance Products
Fund II sponsored by Fidelity Investments, the Van Eck World Wide Insurance
Trust sponsored by Van Eck Associates Corporation, and the Russell Insurance
Funds sponsored by Frank Russell Investment Company. 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 the S & P 500 Index,
Money Market, Bond Index, Managed Equity, Asset Allocation, International
Index, Mid-Cap Equity, Small-Cap Equity, Equity-Income, Growth, Overseas,
Asset Manager, High Income, Worldwide Hard Assets, Multi-Style Equity, Core
Bond, Aggressive Equity, and Non-US Fund Divisions of General American
Separate Account Eleven as of December 31, 1997, the results of their
operations and changes in their net assets for each of the years in the
three-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
St. Louis, Missouri
February 9, 1998
<PAGE> 78
LEGAL COUNSEL
Stephen E. Roth
Sutherland, Asbill & Brennan, Washington, D.C.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
If distributed to prospective investors, this report must be preceded or
accompanied by a current prospectus.
The prospectus is incomplete without reference to the financial data
contained in the annual report.
<PAGE> 79
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
S & P 500 MONEY BOND MANAGED ASSET
INDEX MARKET INDEX EQUITY ALLOCATION
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company at market value
(see Schedule of Investments): $20,581,893 $8,600,564 $3,450,248 $4,241,762 $10,482,605
Receivable from General American Life
Insurance Company 0 715,691 0 0 0
----------- ---------- ---------- ---------- -----------
Total assets 20,581,893 9,316,255 3,450,248 4,241,762 10,482,605
----------- ---------- ---------- ---------- -----------
Liabilities:
Payable to General American Life
Insurance Company 3,570 0 1,704 6,447 6,300
----------- ---------- ---------- ---------- -----------
Total net assets $20,578,323 $9,316,255 $3,448,544 $4,235,315 $10,476,305
=========== ========== ========== ========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $ 8,460,347 $ 782,727 $2,066,526 $2,634,705 $ 8,267,995
Individual Variable General Select Plus
cash value invested in Separate Account 5,747,133 6,532,380 655,815 740,703 1,259,015
Individual Variable Universal Life-100
cash value invested in Separate Account 6,370,843 1,911,272 726,203 859,907 949,295
Russell Variable Universal Life
cash value invested in Separate Account 0 89,876 0 0 0
----------- ---------- ---------- ---------- -----------
Total net assets $20,578,323 $9,316,255 $3,448,544 $4,235,315 $10,476,305
=========== ========== ========== ========== ===========
Total units held - VUL-95 236,305 46,703 97,454 92,710 282,838
Total units held - VGSP 248,494 535,853 50,400 37,481 72,507
Total units held - VUL-100 292,865 166,128 55,636 44,402 55,074
Total units held - Russell VUL 0 8,547 0 0 0
VUL-95 Net unit value $ 35.80 $ 16.76 $ 21.21 $ 28.42 $ 29.23
VGSP Net unit value $ 23.13 $ 12.19 $ 13.01 $ 19.76 $ 17.36
VUL-100 Net unit value $ 21.75 $ 11.50 $ 13.05 $ 19.37 $ 17.24
Russell VUL Net unit value $ 10.52
Cost of investments $17,072,779 $8,673,549 $3,434,435 $3,756,762 $ 8,720,069
See accompanying notes to the financial statements.
(continued)
</TABLE>
<PAGE> 80
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
INTERNATIONAL MID-CAP SMALL-CAP EQUITY-
INDEX EQUITY EQUITY INCOME GROWTH
FUND DIVISION<F*> FUND DIVISION<F**> FUND DIVISION FUND DIVISION FUND DIVISION
----------------- ------------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments in General American
Capital Company at market value
(see Schedule of Investments): $7,866,879 $6,232,329 $1,143,813 $ 0 $ 0
Investments in Variable Insurance
Products Fund at market value
(see Schedule of Investments): 0 0 0 17,001,106 22,237,647
Receivable from General American
Life Insurance Company 0 2,387 41 0 0
---------- ---------- ---------- ----------- -----------
Total assets 7,866,879 6,234,716 1,143,854 17,001,106 22,237,647
---------- ---------- ---------- ----------- -----------
Liabilities:
Payable to General American Life
Insurance Company 2,586 0 0 5,289 9,056
---------- ---------- ---------- ----------- -----------
Total net assets $7,864,293 $6,234,716 $1,143,854 $16,995,817 $22,228,591
========== ========== ========== =========== ===========
Total net assets represented by:
Individual Variable Universal Life cash
value invested in Separate Account $2,758,129 $3,609,898 $ 458,303 $ 6,510,189 $ 8,787,216
Individual Variable General Select Plus
cash value invested in Separate Account 953,767 1,616,472 391,596 5,047,948 6,674,197
Individual Variable Universal Life-100
cash value invested in Separate Account 966,544 1,008,346 293,955 5,437,680 6,767,178
General American Life Insurance
Company seed money 3,185,853 0 0 0 0
---------- ---------- ---------- ----------- -----------
Total net assets $7,864,293 $6,234,716 $1,143,854 $16,995,817 $22,228,591
========== ========== ========== =========== ===========
Total units held - VUL-95 175,226 174,121 35,177 292,344 407,913
Total units held - VGSP 70,058 77,919 30,027 226,141 328,018
Total units held - VUL-100 83,423 53,229 22,570 282,274 362,381
Total units held - Seed Money 200,000 0 0 0 0
VUL-95 Net unit value $ 15.74 $ 20.73 $ 13.03 $ 22.27 $ 21.54
VGSP Net unit value $ 13.61 $ 20.75 $ 13.04 $ 22.32 $ 20.35
VUL-100 Net unit value $ 11.59 $ 18.94 $ 13.02 $ 19.26 $ 18.67
Cost of investments $7,797,863 $5,262,750 $1,277,188 $13,670,582 $17,509,262
<FN>
<F*> This fund was formerly known as the International Equity Fund.
<F**>This fund was formerly known as the Special Equity Fund.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 81
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
ASSET HIGH WORLDWIDE
OVERSEAS MANAGER INCOME HARD ASSETS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION<F*>
------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Variable Insurance
Products Fund at market value
(see Schedule of Investments): $8,174,972 $ 0 $2,175,014 $ 0
Investments in Variable Insurance
Products Fund II at market value
(see Schedule of Investments): 0 577,825 0 0
Investments in Van Eck Worldwide
Insurance Trust at market value
(see Schedule of Investments): 0 0 0 269,764
Receivable from General American
Life Insurance Company 0 0 0 41
---------- -------- ---------- --------
Total assets 8,174,972 577,825 2,175,014 269,805
---------- -------- ---------- --------
Liabilities:
Payable to General American Life
Insurance Company 3,488 368 2,095 0
---------- -------- ---------- --------
Total net assets $8,171,484 $577,457 $2,172,919 $269,805
========== ======== ========== ========
Total net assets represented by:
Individual Variable Universal Life
cash value invested in Separate Account $4,197,173 $ 30,870 $ 264,448 $117,116
Individual Variable General Select Plus
cash value invested in Separate Account 2,612,802 111,623 923,865 32,914
Individual Variable Universal Life-100
cash value invested in Separate Account 1,361,509 434,964 984,606 119,775
---------- -------- ---------- --------
Total net assets $8,171,484 $577,457 $2,172,919 $269,805
========== ======== ========== ========
Total units held - VUL-95 242,563 2,132 18,572 10,326
Total units held - VGSP 168,708 7,680 64,632 2,892
Total units held - VUL-100 100,943 30,075 69,238 10,573
VUL-95 Net unit value $ 17.30 $ 14.48 $ 14.24 $ 11.34
VGSP Net unit value $ 15.49 $ 14.53 $ 14.29 $ 11.38
VUL-100 Net unit value $ 13.49 $ 14.46 $ 14.22 $ 11.33
Cost of investments $7,472,992 $523,566 $1,954,241 $280,524
<FN>
<F*>This fund was formerly known as the Gold & Natural Resources Fund.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 82
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<CAPTION>
MULTI-STYLE AGGRESSIVE
EQUITY CORE BOND EQUITY NON-US
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Assets:
Investments in Russell Insurance Fund
at market value
(see Schedule of Investments): $2,538,339 $1,153,638 $1,344,291 $782,951
Receivable from General American
Life Insurance Company 941 769 1,134 892
---------- ---------- ---------- --------
Total assets 2,539,280 1,154,407 1,345,425 783,843
---------- ---------- ---------- --------
Liabilities:
Payable to General American Life
Insurance Company 0 0 0 0
---------- ---------- ---------- --------
Total net assets $2,539,280 $1,154,407 $1,345,425 $783,843
========== ========== ========== ========
Total net assets represented by:
Individual Variable General Select Plus
cash value invested in Separate Account $ 601,650 $ 235,820 $ 335,282 $293,990
Russell Variable Universal Life
cash value invested in Separate Account 1,937,630 918,587 1,010,143 489,853
---------- ---------- ---------- --------
Total net assets $2,539,280 $1,154,407 $1,345,425 $783,843
========== ========== ========== ========
Total units held - VGSP 46,930 21,414 25,100 28,578
Total units held - Russell VUL 151,491 84,125 75,156 49,083
VGSP Net unit value $ 12.82 $ 11.01 $ 13.36 $ 10.29
Russell VUL Net unit value $ 12.79 $ 10.92 $ 13.44 $ 9.98
Cost of investments $2,536,786 $1,126,156 $1,320,664 $840,268
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 83
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
---------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F*> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (59,320) (38,288) (31,973) (7,951) (8,690) (13,058)
Mortality and expense charges - VGSP (29,674) (16,887) (3,459) (12,872) (21,323) (8,747)
Mortality and expense charges - VUL-100 (36,234) (9,712) (233) (13,566) (10,113) (1,350)
Mortality and expense charges - Russell VUL 0 0 0 (1,626) 0 0
---------- ---------- ---------- --------- --------- ---------
Total expenses (125,228) (64,887) (35,665) (36,015) (40,126) (23,155)
---------- ---------- ---------- --------- --------- ---------
Net investment expense (125,228) (64,887) (35,665) (36,015) (40,126) (23,155)
---------- ---------- ---------- --------- --------- ---------
Net realized gain on investments:
Realized gain from distributions 913,559 435,253 128,459 121,801 363,544 231,929
Realized gain (loss) on sales 1,570,537 244,401 339,252 (48,325) 14,173 65,400
---------- ---------- ---------- --------- --------- ---------
Net realized gain on investments 2,484,096 679,654 467,711 73,476 377,717 297,329
---------- ---------- ---------- --------- --------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 1,982,215 851,246 (10,068) (256,852) (158,740) (31,189)
Unrealized gain (loss) on investments,
end of period 3,509,114 1,982,215 851,246 (72,985) (256,852) (158,740)
---------- ---------- ---------- --------- --------- ---------
Net unrealized gain (loss) on investments 1,526,899 1,130,969 861,314 183,867 (98,112) (127,551)
---------- ---------- ---------- --------- --------- ---------
Net gain on investments 4,010,995 1,810,623 1,329,025 257,343 279,605 169,778
---------- ---------- ---------- --------- --------- ---------
Net increase in net assets
resulting from operations $3,885,767 $1,745,736 $1,293,360 $ 221,328 $ 239,479 $ 146,623
========== ========== ========== ========= ========= =========
<FN>
<F*>See Note 2C.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 84
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
--------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
--------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F*> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (14,601) (11,376) (18,478) (20,327) (16,463) (16,717)
Mortality and expense charges - VGSP (3,943) (10,234) (153) (4,370) (1,751) (208)
Mortality and expense charges - VUL-100 (4,363) (1,802) (24) (4,815) (1,080) (40)
--------- --------- --------- -------- -------- ---------
Total expenses (22,907) (23,412) (18,655) (29,512) (19,294) (16,965)
--------- --------- --------- -------- -------- ---------
Net investment expense (22,907) (23,412) (18,655) (29,512) (19,294) (16,965)
--------- --------- --------- -------- -------- ---------
Net realized gain (loss) on investments:
Realized gain from distributions 165,804 496,106 70,070 251,405 292,621 193,544
Realized gain (loss) on sales (176,276) (15,797) (31,850) 95,532 11,431 (1,087)
--------- --------- --------- -------- -------- ---------
Net realized gain (loss) on investments (10,472) 480,309 38,220 346,937 304,052 192,457
--------- --------- --------- -------- -------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period (234,659) 19,005 (313,506) 116,769 (26,912) (408,116)
Unrealized gain (loss) on investments,
end of period 15,812 (234,659) 19,005 485,000 116,769 (26,912)
--------- --------- --------- -------- -------- ---------
Net unrealized gain (loss) on investments 250,471 (253,664) 332,511 368,231 143,681 381,204
--------- --------- --------- -------- -------- ---------
Net gain on investments 239,999 226,645 370,731 715,168 447,733 573,661
--------- --------- --------- -------- -------- ---------
Net increase in net assets
resulting from operations $ 217,092 $ 203,233 $ 352,076 $685,656 $428,439 $ 556,696
========= ========= ========= ======== ======== =========
<FN>
<F*>See Note 2C.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 85
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F*>
---------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (67,466) (52,462) (46,892) (23,446) (19,773) (13,991)
Mortality and expense charges - VGSP (7,499) (5,214) (5,214) (5,564) (3,014) (2,260)
Mortality and expense charges - VUL-100 (5,279) (1,078) (10) (6,468) (2,475) (66)
Mortality and expense charges - Seed Money 0 0 0 (27,476) (25,684) (23,784)
---------- ---------- ---------- --------- -------- ---------
Total expenses (80,244) (58,754) (52,116) (62,954) (50,946) (40,101)
---------- ---------- ---------- --------- -------- ---------
Net investment expense (80,244) (58,754) (52,116) (62,954) (50,946) (40,101)
---------- ---------- ---------- --------- -------- ---------
Net realized gain on investments:
Realized gain from distributions 311,438 554,498 474,238 220,590 164,186 514,927
Realized gain on sales 195,821 36,291 131,272 136,741 43,830 41,508
---------- ---------- ---------- --------- -------- ---------
Net realized gain on investments: 507,259 590,789 605,510 357,331 208,016 556,435
---------- ---------- ---------- --------- -------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period 657,734 197,823 (765,423) 268,331 40,286 198,307
Unrealized gain on investments,
end of period 1,762,536 657,734 197,823 69,016 268,331 40,286
---------- ---------- ---------- --------- -------- ---------
Net unrealized gain (loss) on investments 1,104,802 459,911 963,246 (199,315) 228,045 (158,021)
---------- ---------- ---------- --------- -------- ---------
Net gain on investments 1,612,061 1,050,700 1,568,756 158,016 436,061 398,414
---------- ---------- ---------- --------- -------- ---------
Net increase in net assets
resulting from operations $1,531,817 $ 991,946 $1,516,640 $ 95,062 $385,115 $ 358,313
========== ========== ========== ========= ======== =========
<FN>
<F*> This fund was formerly known as the International Equity Fund.
<F**>See Note 2C.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 86
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------
1997 1996 1995 1997<F***>
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Investment income<F**> $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges - VUL-95 (26,828) (21,527) (16,741) (787)
Mortality and expense charges - VGSP (7,567) (4,349) (3,645) (869)
Mortality and expense charges - VUL-100 (6,142) (2,084) (72) (627)
Mortality and expense charges - Seed Money 0 (5,213) (11,191) 0
---------- ---------- -------- ---------
Total expenses (40,537) (33,173) (31,649) (2,283)
---------- ---------- -------- ---------
Net investment expense (40,537) (33,173) (31,649) (2,283)
---------- ---------- -------- ---------
Net realized gain on investments:
Realized gain from distributions 262,603 805,221 210,225 149,353
Realized gain on sales 188,905 417,832 121,217 1,064
---------- ---------- -------- ---------
Net realized gain on investments: 451,508 1,223,053 331,442 150,417
---------- ---------- -------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of period 24,121 464,281 75,550 0
Unrealized gain (loss) on investments,
end of period 969,578 24,121 464,281 (133,375)
---------- ---------- -------- ---------
Net unrealized gain (loss) on investments 945,457 (440,160) 388,731 (133,375)
---------- ---------- -------- ---------
Net gain on investments 1,396,965 782,893 720,173 17,042
---------- ---------- -------- ---------
Net increase in net assets
resulting from operations $1,356,428 $ 749,720 $688,524 $ 14,759
========== ========== ======== =========
<FN>
<F*> This fund was formerly known as the Special Equity Fund.
<F**> See Note 2C.
<F***>The Small-Cap Equity Fund began operations on May 1, 1997.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 87
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 186,680 $ 9,260 $ 94,314 $ 94,061 $ 21,639 $ 21,771
Expenses:
Mortality and expense charges - VUL-95 (49,108) (38,120) (24,157) (65,287) (51,026) (34,577)
Mortality and expense charges - VGSP (27,082) (13,918) (6,731) (37,459) (19,582) (11,893)
Mortality and expense charges - VUL-100 (34,605) (10,210) (378) (42,613) (14,179) (439)
---------- ---------- ---------- ---------- ---------- ----------
Total expenses (110,795) (62,248) (31,266) (145,359) (84,787) (46,909)
---------- ---------- ---------- ---------- ---------- ----------
Net investment income (loss) 75,885 (52,988) 63,048 (51,298) (63,148) (25,138)
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments:
Realized gain from distributions 938,582 265,454 125,686 421,033 546,396 0
Realized gain on sales 310,747 130,118 67,467 381,175 254,460 176,048
---------- ---------- ---------- ---------- ---------- ----------
Net realized gain on investments: 1,249,329 395,572 193,153 802,208 800,856 176,048
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain on investments:
Unrealized gain on investments,
beginning of period 1,528,943 868,207 17,485 2,039,425 1,501,642 51,539
Unrealized gain on investments,
end of period 3,330,524 1,528,943 868,207 4,728,383 2,039,425 1,501,642
---------- ---------- ---------- ---------- ---------- ----------
Net unrealized gain on investments 1,801,581 660,736 850,722 2,688,958 537,783 1,450,103
---------- ---------- ---------- ---------- ---------- ----------
Net gain on investments 3,050,910 1,056,308 918,189 3,491,166 1,338,639 1,626,151
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations $3,126,795 $1,003,320 $1,106,923 $3,439,868 $1,275,491 $1,601,013
========== ========== ========== ========== ========== ==========
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 88
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION
-------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995<F*>
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 98,942 $ 41,332 $ 8,707 $ 9,219 $ 2,632 $ 0
Expenses:
Mortality and expense charges - VUL-95 (32,823) (24,616) (17,340) (219) (126) (3)
Mortality and expense charges - VGSP (15,095) (8,371) (5,232) (597) (193) (20)
Mortality and expense charges - VUL-100 (9,246) (3,542) (152) (2,776) (1,031) (29)
-------- -------- -------- ------- ------- ------
Total expenses (57,164) (36,529) (22,724) (3,592) (1,350) (52)
-------- -------- -------- ------- ------- ------
Net investment income (loss) 41,778 4,803 (14,017) 5,627 1,282 (52)
-------- -------- -------- ------- ------- ------
Net realized gain on investments:
Realized gain from distributions 392,769 45,464 8,707 23,126 2,171 0
Realized gain on sales 73,551 42,658 19,162 10,620 1,016 13
-------- -------- -------- ------- ------- ------
Net realized gain on investments: 466,320 88,122 27,869 33,746 3,187 13
-------- -------- -------- ------- ------- ------
Net unrealized gain on investments:
Unrealized gain (loss) on investments,
beginning of period 639,437 210,998 (36,045) 19,793 1,779 0
Unrealized gain on investments,
end of period 710,980 639,437 210,998 54,259 19,793 1,779
-------- -------- -------- ------- ------- ------
Net unrealized gain on investments 62,543 428,439 247,043 34,466 18,014 1,779
-------- -------- -------- ------- ------- ------
Net gain on investments 528,863 516,561 266,205 68,212 21,201 1,792
-------- -------- -------- ------- ------- ------
Net increase in net assets
resulting from operations $570,641 $521,364 $260,895 $73,839 $22,483 $1,740
======== ======== ======== ======= ======= ======
<FN>
<F*>The Asset Manager Fund began operations on July 19, 1995.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 89
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F**>
---------------------------------- -----------------------------------
1997 1996 1995<F*> 1997 1996 1995<F*>
-------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income $ 91,441 $28,732 $ 0 $ 3,388 $ 1,298 $ 32
Expenses:
Mortality and expense charges - VUL-95 (2,255) (1,639) (122) (754) (389) (3)
Mortality and expense charges - VGSP (4,993) (1,456) (55) (186) (214) 0
Mortality and expense charges - VUL-100 (6,583) (2,645) (76) (917) (410) (11)
-------- ------- ------ -------- ------- ----
Total expenses (13,831) (5,740) (253) (1,857) (1,013) (14)
-------- ------- ------ -------- ------- ----
Net investment income (loss) 77,610 22,992 (253) 1,531 285 18
-------- ------- ------ -------- ------- ----
Net realized gain (loss) on investments:
Realized gain from distributions 11,302 5,621 0 4,590 1,273 0
Realized gain (loss) on sales 17,736 (202) 1,132 (1,380) 1,682 (5)
-------- ------- ------ -------- ------- ----
Net realized gain (loss) on investments: 29,038 5,419 1,132 3,210 2,955 (5)
-------- ------- ------ -------- ------- ----
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of period 57,062 2,337 0 3,346 370 0
Unrealized gain (loss) on investments,
end of period 220,773 57,062 2,337 (10,760) 3,346 370
-------- ------- ------ -------- ------- ----
Net unrealized gain (loss) on investments 163,711 54,725 2,337 (14,106) 2,976 370
-------- ------- ------ -------- ------- ----
Net gain (loss) on investments 192,749 60,144 3,469 (10,896) 5,931 365
-------- ------- ------ -------- ------- ----
Net increase (decrease) in net assets
resulting from operations $270,359 $83,136 $3,216 $ (9,365) $ 6,216 $383
======== ======= ====== ======== ======= ====
<FN>
<F*> The High Income Fund and Worldwide Hard Assets Fund began operations on May
24, and August 9, 1995, respectively.
<F**>This fund was formerly known as the Gold & Natural Resources Fund.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 90
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<CAPTION>
MULTI-STYLE AGGRESSIVE
EQUITY CORE BOND EQUITY NON-US
FUND DIVISION<F*> FUND DIVISION<F*> FUND DIVISION<F*> FUND DIVISION<F*>
----------------- ----------------- ----------------- -----------------
1997 1997 1997 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Investment income:
Dividend income $ 599 $ 2,483 $ 23 $ 0
Expenses:
Mortality and expense charges - VGSP (996) (408) (505) (496)
Mortality and expense charges - Russell VUL (1,582) (1,146) (682) (649)
------- ------- ------- --------
Total expenses (2,578) (1,554) (1,187) (1,145)
------- ------- ------- --------
Net investment income (loss) (1,979) 929 (1,164) (1,145)
------- ------- ------- --------
Net realized gain on investments:
Realized gain from distributions 0 0 0 0
Realized gain on sales 5,224 705 2,158 78
------- ------- ------- --------
Net realized gain on investments: 5,224 705 2,158 78
------- ------- ------- --------
Net unrealized gain (loss) on investments:
Unrealized gain on investments,
beginning of period 0 0 0 0
Unrealized gain (loss) on investments,
end of period 1,553 27,482 23,627 (57,317)
------- ------- ------- --------
Net unrealized gain (loss) on investments 1,553 27,482 23,627 (57,317)
------- ------- ------- --------
Net gain (loss) on investments 6,777 28,187 25,785 (57,239)
------- ------- ------- --------
Net increase (decrease) in net assets
resulting from operations $ 4,798 $29,116 $24,621 $(58,384)
======= ======= ======= ========
<FN>
<F*>The Multi-Style Equity Fund, Core Bond Fund, Aggressive Equity Fund, and
Non-US Fund began operations on January 2, 1997.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 91
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
------------------------------------ ----------------------------------
1997 1996 1995 1997 1996 1995
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (125,228) $ (64,887) $ (35,665) $ (36,015) $ (40,126) $ (23,155)
Net realized gain on investments 2,484,096 679,654 467,711 73,476 377,717 297,329
Net unrealized gain (loss) on investments 1,526,899 1,130,969 861,314 183,867 (98,112) (127,551)
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 3,885,767 1,745,736 1,293,360 221,328 239,479 146,623
Net deposits into (deductions from)
Separate Account 2,209,424 8,067,322 (145,477) 932,501 3,557,381 2,340,021
----------- ----------- ---------- ---------- ---------- ----------
Increase in net assets 6,095,191 9,813,058 1,147,883 1,153,829 3,796,860 2,486,644
Net assets, beginning of period 14,483,132 4,670,074 3,522,191 8,162,426 4,365,566 1,878,922
----------- ----------- ---------- ---------- ---------- ----------
Net assets, end of period $20,578,323 $14,483,132 $4,670,074 $9,316,255 $8,162,426 $4,365,566
=========== =========== ========== ========== ========== ==========
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 92
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------------ ----------------------------------
1997 1996 1995 1997 1996 1995
----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (22,907) $ (23,412) $ (18,655) $ (29,512) $ (19,294) $ (16,965)
Net realized gain (loss) on investments (10,472) 480,309 38,220 346,937 304,052 192,457
Net unrealized gain (loss) on investments 250,471 (253,664) 332,511 368,231 143,681 381,204
----------- ---------- ----------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 217,092 203,233 352,076 685,656 428,439 556,696
Net deposits into (deductions from)
Separate Account (3,532,130) 5,128,242 (1,271,114) 779,803 436,005 (487,360)
----------- ---------- ----------- ---------- ---------- ----------
Increase (decrease) in net assets (3,315,038) 5,331,475 (919,038) 1,465,459 864,444 69,336
Net assets, beginning of period 6,763,582 1,432,107 2,351,145 2,769,856 1,905,412 1,836,076
----------- ---------- ----------- ---------- ---------- ----------
Net assets, end of period $ 3,448,544 $6,763,582 $ 1,432,107 $4,235,315 $2,769,856 $1,905,412
=========== ========== =========== ========== ========== ==========
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 93
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F*>
----------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
----------- ---------- ---------- ---------- ---------- ----------
<C> <C> <C> <C> <C> <C>
Operations:
Net investment expense $ (80,244) $ (58,754) $ (52,116) $ (62,954) $ (50,946) $ (40,101)
Net realized gain on investments 507,259 590,789 605,510 357,331 208,016 556,435
Net unrealized gain (loss) on investments 1,104,802 459,911 963,246 (199,315) 228,045 (158,021)
----------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 1,531,817 991,946 1,516,640 95,062 385,115 358,313
Net deposits into (deductions from)
Separate Account 909,812 1,086,684 (709,124) 979,833 1,016,960 789,597
----------- ---------- ---------- ---------- ---------- ----------
Increase in net assets 2,441,629 2,078,630 807,516 1,074,895 1,402,075 1,147,910
Net assets, beginning of period 8,034,676 5,956,046 5,148,530 6,789,398 5,387,323 4,239,413
----------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period $10,476,305 $8,034,676 $5,956,046 $7,864,293 $6,789,398 $5,387,323
=========== ========== ========== ========== ========== ==========
<FN>
<F*>This fund was formerly known as the International Equity Fund.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 94
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F*> FUND DIVISION
---------------------------------- ----------------
1997 1996 1995 1997<F**>
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Operations:
Net investment expense $ (40,537) $ (33,173) $ (31,649) $ (2,283)
Net realized gain on investments 451,508 1,223,053 331,442 150,417
Net unrealized gain (loss) on investments 945,457 (440,160) 388,731 (133,375)
---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations 1,356,428 749,720 688,524 14,759
Net deposits into (deductions from)
Separate Account 793,111 (860,933) 229,832 1,129,095
---------- ---------- ---------- ----------
Increase (decrease) in net assets 2,149,539 (111,213) 918,356 1,143,854
Net assets, beginning of period 4,085,177 4,196,390 3,278,034 0
---------- ---------- ---------- ----------
Net assets, end of period $6,234,716 $4,085,177 $4,196,390 $1,143,854
========== ========== ========== ==========
<FN>
<F*> This fund was formerly known as the Special Equity Fund.
<F**>The Small-Cap Equity Fund began operations on May 1, 1997.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 95
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
------------------------------------- ------------------------------------
1997 1996 1995 1997 1996 1995
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (expense) $ 75,885 $ (52,988) $ 63,048 $ (51,298) $ (63,148) $ (25,138)
Net realized gain on investments 1,249,329 395,572 193,153 802,208 800,856 176,048
Net unrealized gain on investments 1,801,581 660,736 850,722 2,688,958 537,783 1,450,103
----------- ----------- ---------- ----------- ----------- ----------
Net increase in net assets
resulting from operations 3,126,795 1,003,320 1,106,923 3,439,868 1,275,491 1,601,013
Net deposits into Separate Account 3,516,214 3,869,404 2,068,778 5,418,111 4,760,220 1,991,002
----------- ----------- ---------- ----------- ----------- ----------
Increase in net assets 6,643,009 4,872,724 3,175,701 8,857,979 6,035,711 3,592,015
Net assets, beginning of period 10,352,808 5,480,084 2,304,383 13,370,612 7,334,901 3,742,886
----------- ----------- ---------- ----------- ----------- ----------
Net assets, end of period $16,995,817 $10,352,808 $5,480,084 $22,228,591 $13,370,612 $7,334,901
=========== =========== ========== =========== =========== ==========
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 96
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION<F*>
----------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (expense) $ 41,778 $ 4,803 $ (14,017) $ 5,627 $ 1,282 $ (52)
Net realized gain on investments 466,320 88,122 27,869 33,746 3,187 13
Net unrealized gain on investments 62,543 428,439 247,043 34,466 18,014 1,779
---------- ---------- ---------- -------- -------- -------
Net increase in net assets
resulting from operations 570,641 521,364 260,895 73,839 22,483 1,740
Net deposits into Separate Account 2,154,913 1,491,289 1,053,659 227,154 202,863 49,378
---------- ---------- ---------- -------- -------- -------
Increase in net assets 2,725,554 2,012,653 1,314,554 300,993 225,346 51,118
Net assets, beginning of period 5,445,930 3,433,277 2,118,723 276,464 51,118 0
---------- ---------- ---------- -------- -------- -------
Net assets, end of period $8,171,484 $5,445,930 $3,433,277 $577,457 $276,464 $51,118
========== ========== ========== ======== ======== =======
<FN>
<F*>The Asset Manager Fund began operations on July 19, 1995.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 97
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F*>
---------------------------------- ---------------------------------
1997 1996 1995<F**> 1997 1996 1995<F**>
---------- ---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (expense) $ 77,610 $ 22,992 $ (253) $ 1,531 $ 285 $ 18
Net realized gain (loss) on investments 29,038 5,419 1,132 3,210 2,955 (5)
Net unrealized gain (loss) on investments 163,711 54,725 2,337 (14,106) 2,976 370
---------- ---------- -------- -------- -------- ------
Net increase (decrease) in net assets
resulting from operations 270,359 83,136 3,216 (9,365) 6,216 383
Net deposits into Separate Account 711,529 904,946 199,733 92,851 170,306 9,414
---------- ---------- -------- -------- -------- ------
Increase in net assets 981,888 988,082 202,949 83,486 176,522 9,797
Net assets, beginning of period 1,191,031 202,949 0 186,319 9,797 0
---------- ---------- -------- -------- -------- ------
Net assets, end of period $2,172,919 $1,191,031 $202,949 $269,805 $186,319 $9,797
========== ========== ======== ======== ======== ======
<FN>
<F*> This fund was formerly known as the Gold & Natural Resources Fund.
<F**>The High Income Fund and the Worldwide Hard Assets Fund began operations on May 24, and August 9, 1995, respectively.
See accompanying notes to the financial statements. (continued)
</TABLE>
<PAGE> 98
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1997
<CAPTION>
MULTI-STYLE AGGRESSIVE
EQUITY CORE BOND EQUITY NON-US
FUND DIVISION<F*> FUND DIVISION<F*> FUND DIVISION<F*> FUND DIVISION<F*>
----------------- ----------------- ----------------- -----------------
1997 1997 1997 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Operations:
Net investment income (expense) $ (1,979) $ 929 $ (1,164) $ (1,145)
Net realized gain on investments 5,224 705 2,158 78
Net unrealized gain (loss) on investments 1,553 27,482 23,627 (57,317)
---------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations 4,798 29,116 24,621 (58,384)
Net deposits into Separate Account 2,534,482 1,125,291 1,320,804 842,227
---------- ---------- ---------- --------
Increase in net assets 2,539,280 1,154,407 1,345,425 783,843
Net assets, beginning of period 0 0 0 0
---------- ---------- ---------- --------
Net assets, end of period $2,539,280 $1,154,407 $1,345,425 $783,843
========== ========== ========== ========
<FN>
<F*>The Multi-Style Equity Fund, Core Bond Fund, Aggressive Equity Fund, and Non-US Fund began operations on January 2,
1997.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 99
<TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
<CAPTION>
No. of Shares Market Value
------------- ------------
<S> <C> <C>
S & P 500 Index Fund
General American Capital Company<F*> 522,436 $20,581,893
Money Market Fund
General American Capital Company<F*> 471,869 8,600,564
Bond Index Fund
General American Capital Company<F*> 148,761 3,450,248
Managed Equity Fund
General American Capital Company<F*> 135,951 4,241,762
Asset Allocation Fund
General American Capital Company<F*> 329,020 10,482,605
International Index Fund<F**>
General American Capital Company<F*> 474,049 7,866,879
Mid-Cap Equity Fund<F***>
General American Capital Company<F*> 282,331 6,232,329
Small-Cap Equity Fund
General American Capital Company<F*> 23,695 1,143,813
Equity-Income Fund
Variable Insurance Products Fund 700,210 17,001,106
Growth Fund
Variable Insurance Products Fund 599,398 22,237,647
Overseas Fund
Variable Insurance Products Fund 425,780 8,174,972
Asset Manager Fund
Variable Insurance Products Fund II 32,084 577,825
High Income Fund
Variable Insurance Products Fund 160,163 2,175,014
Worldwide Hard Assets Fund<F****>
Van Eck Worldwide Insurance Trust 17,172 269,764
Multi-Style Equity Fund
Russell Insurance Funds 198,618 2,538,339
Core Bond Fund
Russell Insurance Funds 110,396 1,153,638
Aggressive Equity Fund
Russell Insurance Funds 99,947 1,344,291
Non-US Fund
Russell Insurance Funds 78,061 782,951
<FN>
<F*> These funds use consent dividending. See Note 2C.
<F**> This fund was formerly known as the International Equity Fund.
<F***> This fund was formerly known as the Special Equity Fund.
<F****>This fund was formerly known as the Gold & Natural Resources Fund.
See accompanying notes to the financial statements.
</TABLE>
<PAGE> 100
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Note 1 - Organization
General American Separate Account Eleven (the Separate Account) commenced
operations on September 15, 1987 and is registered under the Investment
Company Act of 1940 (1940 Act) as a unit investment trust. The Separate
Account offers four products: Variable Universal Life (VUL-95), Variable
General Select Plus (VGSP), Variable Universal Life (VUL-100), and Russell
Variable Universal Life (Russell VUL) that receive and invest net premiums
for flexible premium variable life insurance policies that are issued by
General American Life Insurance Company (General American). The Separate
Account is divided into eighteen Divisions. Each Division invests exclusively
in shares of a single Fund of either General American Capital Company,
Variable Insurance Products Fund, Variable Insurance Products Fund II, Van
Eck Worldwide Insurance Trust or Russell Insurance Funds which are open-end,
diversified management companies. The Funds of the General American Capital
Company, sponsored by General American, are the S & P 500 Index (formerly
Equity Index), Money Market, Bond Index, Managed Equity, Asset Allocation,
International Index (formerly International Equity), Mid-Cap Equity (formerly
Special Equity), and the Small-Cap Equity Fund Divisions. The Funds of the
Variable Insurance Products Fund, managed by Fidelity Management & Research
Company, are the Equity-Income, Growth, Overseas, and the High Income Fund
Divisions. The Funds of the Variable Insurance Products Fund II, managed by
Fidelity Management and Research Company is the Asset Manager Fund. The Fund
of the Van Eck Worldwide Insurance Trust, managed by Van Eck Associates
Corporation, is the Worldwide Hard Assets Fund, formerly known as the Gold
and Natural Resources Fund. The Funds of the Russell Variable Insurance
Product, managed by Frank Russell Investment Management Company are the
Multi-style Equity, Core Bond, Aggressive Equity, and Non-US Fund Divisions.
Policyholders have the option of directing their premium payments into one or
all of the Funds as well as into the general account of General American,
which is not generally subject to regulation under the Securities Act of 1933
or the 1940 Act.
Note 2 - Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Separate Account in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
A. Investments
The Separate Accounts' investments in the eighteen Funds are valued
daily based on the net asset values of the respective Fund shares held
as reported to General American by General American Capital Company,
Variable Insurance Products Fund, Variable Insurance Products Fund II,
Van Eck Worldwide Insurance Trust, and Russell Insurance Funds. The
specific identification method is used in determining the cost of
shares sold on withdrawals by the Separate Account. Share transactions
are recorded on the trade date, which is the same as the settlement
date.
B. Federal Income Taxes
Under current federal income tax law, capital gains from sales of
investments of the Separate Account are not taxable. Therefore, no
federal income tax expense has been provided.
C. Distribution of Income and Realized Capital Gains
General American Capital Company follows the federal income tax
practice known as consent dividending, whereby substantially all of its
net investment income and realized gains are deemed to be passed
through to the Separate Account. As a result, General American Capital
Company does not pay any dividends or capital gain distributions.
During December of each year, accumulated investment income and capital
gains of the underlying Capital Company Fund are allocated to the
Separate Account by increasing the cost basis and recognizing a capital
gain in the Separate Account. The Variable Insurance Products Fund,
Variable Insurance Products Fund II, Van Eck Worldwide Insurance Trust
and Russell Insurance Funds intend to pay out all of their net
investment income and net realized capital gains each year. Dividends
from the funds are distributed at least annually on a per share basis
and are recorded on the ex dividend date. Normally, net realized
capital gains, if any, are distributed each year for each fund. Such
income and capital gain distributions are automatically reinvested in
additional shares of the funds.
<PAGE> 101
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
D. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of increase
and decrease in net assets from operations during the period. Actual
results could differ from those estimates.
Note 3 - Policy Charges
Charges are deducted from premiums and paid to General American for providing
the insurance benefits set forth in the contracts and any additional benefits
added by rider, administering the policies, reimbursement of expenses
incurred in distributing the policies, and assuming certain risks in
connection with the policies.
Prior to the allocation of net premiums among General American's general
account and the Fund Divisions of the Separate Account, premium payments are
reduced by premium expense charges, which consist of a sales charge and a
charge for premium taxes. The premium payment, less the premium expense
charge, equals the net premium.
Sales Charge: A sales charge equal to 6% is deducted from each VUL-95
-------------
premium paid. A sales charge of 5% in years one through ten and 2.25%
thereafter is deducted from each VGSP premium paid. A maximum sales
charge of 5% in years one through ten and a maximum 2.25% thereafter
based on initial deposit is deducted from each Russell VUL premium
paid. This charge is deducted to partially reimburse General American
for expenses incurred in distributing the policy and any additional
benefits provided by rider. No sales charge is deducted from VUL-100
premiums.
Premium Taxes: Various state and political subdivisions impose a tax
--------------
on premiums received by insurance companies. Premium taxes vary from
state to state. A deduction of 2% of each VUL-95 premium, 2.5% of each
VGSP premium, 2.10% of each VUL-100 premium, and 2.5% of each Russell
VUL premium is made from each premium payment for these taxes. In
addition, a 1.25% deduction is taken from VUL-100 premiums to cover the
company's Federal income tax costs attributable to the amount of
premium received.
Charges are deducted monthly from the cash value of each policy to compensate
General American for (a) certain administrative costs; (b) insurance
underwriting and acquisition expenses in connection with issuing a policy;
(c) the cost of insurance, and (d) the cost of optional benefits added by
rider.
Administrative Charge: General American has responsibility for the
----------------------
administration of the policies and the Separate Account. As
reimbursement for administrative expenses related to the maintenance of
each policy and the Separate Account, General American assesses a
monthly administrative charge against each policy. This charge is $10
per month for a standard policy and $12 per month for a pension policy
during the first 12 policy months and $4 (standard) and $6 (pension)
per month for all policy months beyond the 12th for VUL-95 contracts.
The charge is $4 per month for VGSP and Russell VUL contracts. The
charge is $13 per month during the first 12 policy months and $6 per
month thereafter for VUL-100 contracts.
Insurance Underwriting and Acquisition Expense Charge: An additional
------------------------------------------------------
administrative charge is deducted from the policy cash value for VUL-95
as part of the monthly deduction during the first 12 policy months and
for the first 12 policy months following an increase in the face
amount. The charge is $0.08 per month multiplied by the face amount
divided by 1,000. For VUL-100, the charge during the first 12 policy
months is $0.16 per month multiplied by the face amount divided by
1,000, and in all policy years thereafter, the charge is $0.01 per
month multiplied by the face amount divided by 1,000.
<PAGE> 102
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
Cost of Insurance: The cost of insurance is deducted on each monthly
------------------
anniversary date for the following policy month. Because the cost of
insurance depends upon a number of variables, the cost varies for each
policy month. The cost of insurance is determined separately for the
initial face amount and for any subsequent increases in face amount.
General American determines the monthly cost of insurance charge by
multiplying the applicable cost of insurance rate or rates by the net
amount at risk for each policy month.
Optional Rider Benefits Charge: This monthly deduction includes
-------------------------------
charges for any additional benefits provided by rider.
Contingent Deferred Sales Charge: During the first ten policy years
---------------------------------
for VUL-95, VGSP, and Russell VUL, and the first fifteen years for VUL-
100, General American also assesses a charge upon surrender or lapse of
a Policy, a requested decrease in face amount, or a partial withdrawal
that causes the face amount to decrease. The amount of the charge
assessed depends on a number of factors, including whether the event is
a full surrender or lapse or only a decrease in face amount, the amount
of premiums received to date by General American, and the policy year
in which the surrender or other event takes place.
Mortality and Expense Charge: In addition to the above charges, a daily
- -----------------------------
charge is made at the separate account level for the mortality and expense
risks assumed by General American. General American deducts a daily charge
from the Separate Account at the rate of .002319% for VUL-95, .0019111% for
VGSP, .002455% for VUL-100, and .001366% for Russell VUL of the net assets of
each division of the Separate Account, which equals an annual rate of .85%,
..70%, .90%, and .50% for VUL-95, VGSP, VUL-100, and Russell VUL,
respectively. VUL-95, VGSP, VUL-100, and Russell VUL mortality and expense
charges for 1997 were $398,648, $160,175, $174,234, and $5,685,
respectively. The mortality risk assumed by General American is the risk that
those insured may die sooner than anticipated and therefore, that General
American will pay an aggregate amount of death benefits greater than
anticipated. The expense risk assumed is that expenses incurred in issuing
and administering the policy will exceed the amounts realized from the
administrative charges assessed against the policy.
NOTE 4 - INVESTMENT OBJECTIVES, MANAGER CHANGES AND NEW DIVISIONS
Effective January 1, 1997, the International Equity Fund became the
International Index Fund. The investment objective of the International Index
Fund is to obtain investment results that parallel the price and yield
performance of publicly-traded common stocks in the Morgan Stanley Capital
International Europe, Australia, and Far East Index ("EAFE Index"). The
portfolio manager of the International Index Fund is Conning Asset Management
Company and the management fee for the fund is .50% on the first $10 million
in assets, .40% on the balance over $10 million and less than $20 million and
..30% on any balance in excess of $20 million.
Effective January 1, 1997, the Special Equity Fund became the Mid-Cap Equity
Fund. The investment objective of the Mid-Cap Equity Fund is to seek
sustained growth of capital by investing primarily in common stocks of United
States-bases publicly traded companies with "medium market capitalization".
"Medium market capitalization companies" are those whose market
capitalization falls within the range of the S&P MidCap 400 at the time of
the Fund's investment. The portfolio manager of the Mid-Cap Equity Fund is
Conning Asset Management Company and the total management fee rate remained
unchanged from that of the Special Equity Fund.
On March 1, 1997, Conning Asset Management Company became the manager of the
Managed Equity Fund. The management fee is .40% on the first $10 million in
assets, .30% on the balance over $10 million and less than $30 million, and
..25% on the balance in excess of $30 million.
<PAGE> 103
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
On January 2, 1997, four new divisions and a new product -Russell VUL- were
added to Separate Account Eleven. The four divisions were the Multi-Style
Equity, Core Bond, Aggressive Equity and Non-US. The underlying funds in
these divisions are offered by Russell Insurance Funds and managed by Frank
Russell Company. The investment objectives of each of these new divisions are
as follows:
Multi-Style Equity Fund - To provide income and capital growth by investing
- -----------------------
principally in equity securities.
Core Bond Fund - To provide effective diversification against equities and a
- --------------
stable level of cash flow by investing in fixed income securities.
Aggressive Equity Fund - To maximize total return through capital
- ----------------------
appreciation and by assuming a higher level of volatility than is ordinarily
expected from the Multi-Style Equity Fund, while still investing in equity
securities.
Non-US Fund - To provide favorable total return and additional
- -----------
diversification for United States investors by investing primarily in equity
and fixed income securities of non-US companies and securities issued by
non-United States governments.
The underlying products currently offered by these divisions are Russell VUL
and VGSP.
On May 1, 1997, the Small Cap Equity division was added to Separate Account
Eleven. The underlying fund in this division is offered by General American
Capital Company and is managed by Conning Asset Management Company. The
investment objective of the fund is to provide a rate of return that
corresponds to the performance of the common stock of small companies, while
incurring a level of risk that is generally equal to the risks associated
with small company common stock. The Fund attempts to duplicate the
performance of the smallest 20% of companies based on capitalization size,
that are based in the United States and listed on the New York Stock
Exchange.
The underlying products currently offered by this division are VUL-95, VGSP,
and VUL-100.
<PAGE> 104
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 5 - PURCHASES AND SALES
During the year ended December 31, 1997, purchases including net realized
gain and income from distribution and proceeds from sales of General American
Capital Company shares were as follows:
<TABLE>
<CAPTION>
S & P 500 Money Bond Managed Asset International Mid-Cap Small-Cap
Index Market Index Equity Allocation Index Equity Equity
Fund Fund Fund Fund Fund Fund Fund Fund
---------- ----------- ---------- ---------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Purchases $8,442,192 $18,247,884 $1,749,901 $1,578,051 $2,343,633 $1,765,214 $2,156,245 $1,293,907
========== =========== ========== ========== ========== ========== ========== ==========
Sales $5,448,171 $17,983,425 $5,140,723 $ 590,072 $1,218,119 $ 628,010 $1,147,830 $ 17,782
========== =========== ========== ========== ========== ========== ========== ==========
</TABLE>
During the year ended December 31, 1997, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund
Shares were as follows:
<TABLE>
<CAPTION>
Equity-Income Growth Overseas High Income
Fund Fund Fund Fund
------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Purchases $5,671,668 $6,780,325 $3,016,982 $1,043,519
========== ========== ========== ==========
Sales $1,100,161 $ 960,461 $ 418,954 $ 240,128
========== ========== ========== ==========
</TABLE>
During the year ended December 31, 1997, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund II
shares were as follows:
<TABLE>
<CAPTION>
Asset Manager
Fund
-------------
<S> <C>
Purchases $367,321
========
Sales $111,483
========
</TABLE>
During the year ended December 31, 1997, purchases (including dividend
reinvestment) and proceeds from sales of Van Eck Worldwide Insurance Trust
shares were as follows:
<TABLE>
<CAPTION>
Worldwide Hard
Assets Fund
--------------
<S> <C>
Purchases $152,061
========
Sales $ 53,087
========
</TABLE>
During the year ended December 31, 1997, purchases (including dividend
reinvestment) and proceeds from sales of Russell Insurance Funds shares were as
follows:
<TABLE>
<CAPTION>
Multi-Style Core Bond Aggressive Non-US
Equity Fund Fund Equity Fund Fund
----------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Purchases $2,574,829 $1,160,983 $1,338,577 $863,517
========== ========== ========== ========
Sales $ 43,266 $ 35,533 $ 20,072 $ 23,327
========== ========== ========== ========
</TABLE>
<PAGE> 105
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
--------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 70,404 56,960 78,391 98,719 52,946 206,798
Withdrawals (29,686) (32,408) (101,054) (110,821) (79,319) (215,226)
Outstanding units, beginning of year 195,587 171,035 193,698 58,805 85,178 93,606
-------- ------- -------- -------- ---------- --------
Outstanding units, end of year 236,305 195,587 171,035 46,703 58,805 85,178
======== ======= ======== ======== ========== ========
Variable General Select Plus:
Deposits 146,632 376,931 30,100 942,448 1,489,642 344,162
Withdrawals (305,772) (16,019) (15,451) (900,950) (1,173,354) (215,211)
Outstanding units, beginning of year 407,634 46,722 32,073 494,355 178,067 49,116
-------- ------- -------- -------- ---------- --------
Outstanding units, end of year 248,494 407,634 46,722 535,853 494,355 178,067
======== ======= ======== ======== ========== ========
Variable Universal Life-100:<F*>
Deposits 212,106 151,173 14,240 738,912 729,350 214,797
Withdrawals (41,462) (42,505) (687) (707,676) (698,266) (110,989)
Outstanding units, beginning of period 122,221 13,553 0 134,892 103,808 0
-------- ------- -------- -------- ---------- --------
Outstanding units, end of period 292,865 122,221 13,553 166,128 134,892 103,808
======== ======= ======== ======== ========== ========
Russell Variable Universal Life:<F**> 435,785
Deposits (427,238)
Withdrawals 0
--------
Outstanding units, beginning of period
Outstanding units, end of period 8,547
========
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F**>The Russell Variable Universal Life product was introduced in 1997, and
the first deposit was received on May 6, 1997.
(continued)
</TABLE>
$" "
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years ended
December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
--------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
-------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 45,996 20,690 28,341 20,213 22,639 37,042
Withdrawals (19,985) (19,502) (102,229) (19,170) (23,620) (68,803)
Outstanding units, beginning of year 71,443 70,255 144,143 91,667 92,648 124,409
-------- ------- -------- ------- ------- -------
Outstanding units, end of year 97,454 71,443 70,255 92,710 91,667 92,648
======== ======= ======== ======= ======= =======
Variable General Select Plus:
Deposits 26,599 422,790 5,765 22,411 20,875 5,835
Withdrawals (398,540) (6,268) (1,249) (10,526) (1,816) (595)
Outstanding units, beginning of year 422,341 5,819 1,303 25,596 6,537 1,297
-------- ------- -------- ------- ------- -------
Outstanding units, end of year 50,400 422,341 5,819 37,481 25,596 6,537
======== ======= ======== ======= ======= =======
Variable Universal Life-100:<F*>
Deposits 38,781 31,945 1,670 38,918 15,297 1,823
Withdrawals (8,471) (8,214) (75) (8,793) (2,675) (168)
Outstanding units, beginning of period 25,326 1,595 0 14,277 1,655 0
-------- ------- -------- ------- ------- -------
Outstanding units, end of period 55,636 25,326 1,595 44,402 14,277 1,655
======== ======= ======== ======= ======= =======
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 106
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F*>
------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 58,255 67,461 80,183 56,157 60,637 74,018
Withdrawals (49,785) (33,247) (98,461) (45,488) (32,650) (28,390)
Outstanding units, beginning of year 274,368 240,154 258,432 164,557 136,570 90,942
------- ------- ------- ------- ------- -------
Outstanding units, end of year 282,838 274,368 240,154 175,226 164,557 136,570
======= ======= ======= ======= ======= =======
Variable General Select Plus:
Deposits 21,682 21,668 12,925 35,709 24,970 16,837
Withdrawals (10,372) (18,560) (31,947) (10,776) (12,229) (6,722)
Outstanding units, beginning of year 61,197 58,089 77,111 45,125 32,384 22,269
------- ------- ------- ------- ------- -------
Outstanding units, end of year 72,507 61,197 58,089 70,058 45,125 32,384
======= ======= ======= ======= ======= =======
Variable Universal Life-100:<F**>
Deposits 44,721 23,767 1,072 56,601 46,973 4,468
Withdrawals (11,617) (2,830) (39) (15,926) (7,916) (777)
Outstanding units, beginning of year 21,970 1,033 0 42,748 3,691 0
------- ------- ------- ------- ------- -------
Outstanding units, end of year 55,074 21,970 1,033 83,423 42,748 3,691
======= ======= ======= ======= ======= =======
General American Life Insurance Company
seed money:
Deposits 0 0 0 0 0 0
Withdrawals 0 0 0 0 0 0
Outstanding units, beginning of year 0 0 0 200,000 200,000 200,000
------- ------- ------- ------- ------- -------
Outstanding units, end of year 0 0 0 200,000 200,000 200,000
======= ======= ======= ======= ======= =======
<FN>
<F*> This fund was formerly known as the International Equity Fund.
<F**> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 107
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, 1996, and 1995, for the Mid-Cap Equity Fund
Division and the period ended December 31, 1997, for the Small-Cap Equity Fund
Division:
<TABLE>
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F*> FUND DIVISION
------------------------------- -------------------------------
1997 1996 1995 1997<F***>
------- -------- ------- ----------
<S> <C> <C> <C> <C>
Variable Universal Life - 95:
Deposits 50,013 67,217 94,909 35,503
Withdrawals (61,032) (50,100) (88,190) (326)
Outstanding units, beginning of period 185,140 168,023 161,304 0
------- ------- ------- ------
Outstanding units, end of period 174,121 185,140 168,023 35,177
======= ======= ======= ======
Variable General Select Plus:
Deposits 43,764 17,983 22,352 30,298
Withdrawals (14,054) (16,026) (12,685) (271)
Outstanding units, beginning of period 48,209 46,252 36,585 0
------- ------- ------- ------
Outstanding units, end of period 77,919 48,209 46,252 30,027
======= ======= ======= ======
Variable Universal Life - 100:<F**>
Deposits 36,664 35,395 4,498 23,110
Withdrawals (15,674) (6,929) (725) (540)
Outstanding units, beginning of period 32,239 3,773 0 0
------- ------- ------- ------
Outstanding units, end of period 53,229 32,239 3,773 22,570
======= ======= ======= ======
General American Life Insurance Company
seed money:
Deposits 0 0 0
Withdrawals 0 (100,000) 0
Outstanding units, beginning of year 0 100,000 100,000
------- ------- -------
Outstanding units, end of year 0 0 100,000
======= ======= =======
<FN>
<F*> This fund was formerly known as the Special Equity Fund.
<F**> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F***> The Small-Cap Equity Fund began operations on May 1, 1997.
(continued)
</TABLE>
<PAGE> 108
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, 1996, and 1995:
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
------------------------------- -------------------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 73,369 100,383 143,543 110,237 141,831 181,296
Withdrawals (68,932) (61,252) (48,670) (69,361) (101,041) (80,832)
Outstanding units, beginning of year 287,907 248,776 153,903 367,037 326,247 225,783
------- ------- ------- ------- -------- -------
Outstanding units, end of year 292,344 287,907 248,776 407,913 367,037 326,247
======= ======= ======= ======= ======== =======
Variable General Select Plus:
Deposits 107,293 95,653 78,040 151,169 136,928 90,761
Withdrawals (41,943) (24,220) (34,513) (56,898) (38,737) (60,661)
Outstanding units, beginning of year 160,791 89,358 45,831 233,747 135,556 105,456
------- ------- ------- ------- -------- -------
Outstanding units, end of year 226,141 160,791 89,358 328,018 233,747 135,556
======= ======= ======= ======= ======== =======
Variable Universal Life-100:<F*>
Deposits 161,018 167,806 20,481 227,448 213,702 25,375
Withdrawals (42,604) (22,709) (1,718) (64,065) (38,214) (1,865)
Outstanding units, beginning of period 163,860 18,763 0 198,998 23,510 0
------- ------- ------- ------- -------- -------
Outstanding units, end of period 282,274 163,860 18,763 362,381 198,998 23,510
======= ======= ======= ======= ======== =======
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 109
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, 1996, and 1995, for the Overseas Fund Division
and for the years ended December 31, 1997, and 1996, and the period ended
December 31, 1995, for the Asset Manager Division:.
<TABLE>
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION
------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995<F*>
------- ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 73,211 86,129 97,609 1,053 1,196 331
Withdrawals (33,419) (57,328) (42,775) (363) (80) (4)
Outstanding units, beginning of period 202,771 173,970 119,136 1,443 327 0
------- ------- ------- ------ ------ -----
Outstanding units, end of period 242,563 202,771 173,970 2,132 1,443 327
======= ======= ======= ====== ====== =====
Variable General Select Plus:
Deposits 78,015 59,185 46,058 4,792 4,133 1,534
Withdrawals (24,003) (18,099) (24,367) (1,323) (1,450) (6)
Outstanding units, beginning of period 114,696 73,610 51,919 4,211 1,528 0
------- ------- ------- ------ ------ -----
Outstanding units, end of period 168,708 114,696 73,610 7,680 4,211 1,528
======= ======= ======= ====== ====== =====
Variable Universal Life-100:<F**>
Deposits 61,939 59,253 9,829 19,775 17,799 3,044
Withdrawals (16,003) (12,929) (1,146) (6,893) (3,550) (100)
Outstanding units, beginning of period 55,007 8,683 0 17,193 2,944 0
------- ------- ------- ------ ------ -----
Outstanding units, end of period 100,943 55,007 8,683 30,075 17,193 2,944
======= ======= ======= ====== ====== =====
<FN>
<F*> The Asset Manager fund began operations on July 19, 1995.
<F**>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 110
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the years
ended December 31, 1997, and 1996, and the period ended December 31, 1995:
<TABLE>
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F**>
---------------------------------- ---------------------------------
1997 1996 1995<F*> 1997 1996 1995<F*>
------- ------ -------- ------ ----- --------
<S> <C> <C> <C> <C> <C> <C>
Variable Universal Life-95:
Deposits 8,197 18,576 6,217 5,256 6,777 135
Withdrawals (10,956) (3,225) (237) (857) (976) (9)
Outstanding units, beginning of period 21,331 5,980 0 5,927 126 0
------- ------ ----- ------ ------ ---
Outstanding units, end of period 18,572 21,331 5,980 10,326 5,927 126
======= ====== ===== ====== ====== ===
Variable General Select Plus:
Deposits 36,763 32,705 6,436 1,994 4,222 0
Withdrawals (8,788) (2,369) (115) (3,232) (92) 0
Outstanding units, beginning of period 36,657 6,321 0 4,130 0 0
------- ------ ----- ------ ------ ---
Outstanding units, end of period 64,632 36,657 6,321 2,892 4,130 0
======= ====== ===== ====== ====== ===
Variable Universal Life-100:<F***>
Deposits 39,145 41,415 6,662 7,159 6,746 890
Withdrawals (9,470) (8,355) (159) (2,531) (1,660) (31)
Outstanding units, beginning of period 39,563 6,503 0 5,945 859 0
------- ------ ----- ------ ------ ---
Outstanding units, end of period 69,238 39,563 6,503 10,573 5,945 859
======= ====== ===== ====== ====== ===
<FN>
<F*> The High Income Fund and Worldwide Hard Assets Fund began operations on May
24, and August 9, 1995, respectively.
<F**> This fund was formerly known as the Gold & Natural Resources Fund.
<F***>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 111
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 6 - ACCUMULATION UNIT ACTIVITY (CONTINUED)
The following is a summary of the accumulation unit activity for the period
ended December 31, 1997:
<TABLE>
<CAPTION>
MULTI-STYLE AGGRESSIVE
EQUITY CORE BOND EQUITY NON-US
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- -------------- -------------
1997<F*> 1997<F*> 1997<F*> 1997<F*>
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Variable General Select Plus:<F**>
Deposits 47,597 21,805 25,379 28,863
Withdrawals (667) (391) (279) (285)
Outstanding units, beginning of period 0 0 0 0
------- ------ ------ ------
Outstanding units, end of period 46,930 21,414 25,100 28,578
======= ====== ====== ======
Russell Variable Universal Life:<F***>
Deposits 153,054 86,149 75,650 50,101
Withdrawals (1,563) (2,024) (494) (1,018)
Outstanding units, beginning of period 0 0 0 0
------- ------ ------ ------
Outstanding units, end of period 151,491 84,125 75,156 49,083
======= ====== ====== ======
<FN>
<F*> The Multi-Style Equity Fund, Core Bond Fund, Aggressive Equity Fund, and
Non-US Fund began operations on January 2, 1997.
<F**> The Variable General Select Plus product was introduced in 1997, and the
first deposit was received on June 26, 1997.
<F***>The Russell Variable Universal Life product was introduced in 1997, and
the first deposit was received on June 6, 1997.
</TABLE>
<PAGE> 112
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT
Deposits into the Separate Account are used to purchase shares in the
Capital Company, Variable Insurance Products Funds, Variable Insurance
Products Fund II, Van Eck Worldwide Insurance Trust, or Russell Insurance
Funds. Net deposits represent the amounts available for investment in such
shares after deduction of sales charges, premium taxes, administrative
costs, insurance, underwriting and acquisition expense, cost of insurance,
and cost of optional benefits by rider. Realized and unrealized capital
gains (losses) have been excluded from net deposits into the Separate
Account because they have been included in increase (decrease) in net assets
resulting from operations in the Statements or Changes in Net Assets.
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
----------------------------------- ------------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,099,723 $1,063,999 $ 919,322 $ 1,794,475 $ 575,302 $ 2,001,421
Transfers between fund divisions and
General American 931,860 139,650 472,868 (1,471,521) (728,445) (1,597,558)
Surrenders and withdrawals (144,131) (82,719) (1,380,995) (20,934) (107,442) (346,828)
---------- ---------- ----------- ----------- --------- -----------
Total gross deposits, transfers between
fund divisions and surrenders 1,887,452 1,120,930 11,195 302,020 (260,585) 57,035
---------- ---------- ----------- ----------- --------- -----------
Deductions:
Premium load charges 84,994 84,266 82,459 371,169 46,330 194,508
Cost of insurance and administrative expenses 481,051 430,221 435,147 135,973 105,165 329,711
---------- ---------- ----------- ----------- --------- -----------
Total deductions 566,045 514,487 517,606 507,142 151,495 524,219
---------- ---------- ----------- ----------- --------- -----------
Net deposits into (withdrawals from)
Separate Account $1,321,407 $ 606,443 $ (506,411) $ (205,122) $(412,080) $ (467,184)
========== ========== =========== =========== ========= ===========
(continued)
</TABLE>
<PAGE> 113
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
---------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995
--------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 312,433 $ 321,458 $ 421,967 $ 359,432 $ 395,649 $ 465,063
Transfers between fund divisions and
General American 504,481 20,627 62,346 53,604 (120,443) (121,086)
Surrenders and withdrawals (161,856) (171,083) (1,586,477) (162,045) (83,215) (647,675)
--------- --------- ----------- --------- --------- ---------
Total gross deposits, transfers between
fund divisions and surrenders 655,058 171,002 (1,102,164) 250,991 191,991 (303,698)
--------- --------- ----------- --------- --------- ---------
Deductions:
Premium load charges 24,355 25,685 32,747 27,564 31,741 38,137
Cost of insurance and administrative expenses 111,704 119,034 206,477 191,337 187,326 234,100
--------- --------- ----------- --------- --------- ---------
Total deductions 136,059 144,719 239,224 218,901 219,067 272,237
--------- --------- ----------- --------- --------- ---------
Net deposits into (withdrawals from)
Separate Account $ 518,999 $ 26,283 $(1,341,388) $ 32,090 $ (27,076) $(575,935)
========= ========= =========== ========= ========= =========
(continued)
</TABLE>
<PAGE> 114
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F*>
------------------------------------ ---------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,571,785 $1,478,021 $ 1,361,239 $ 674,809 $ 657,882 $635,309
Transfers between fund divisions and
General American (542,327) (26,293) (10,959) (244,489) 132,812 302,360
Surrenders and withdrawals (261,445) (117,682) (1,175,619) (27,295) (102,036) (45,598)
---------- ---------- ----------- --------- --------- --------
Total gross deposits, transfers between
fund divisions and surrenders 768,013 1,334,046 174,661 403,025 688,658 892,071
---------- ---------- ----------- --------- --------- --------
Deductions:
Premium load charges 115,555 113,909 115,321 53,326 52,174 54,639
Cost of insurance and administrative
expenses 472,278 467,810 559,425 206,172 215,112 211,351
---------- ---------- ----------- --------- --------- --------
Total deductions 587,833 581,719 674,746 259,498 267,286 265,990
---------- ---------- ----------- --------- --------- --------
Net deposits into (withdrawals from)
Separate Account $ 180,180 $ 752,327 $ (500,085) $ 143,527 $ 421,372 $626,081
========== ========== =========== ========= ========= ========
<FN>
<F*> This fund was formerly known as the International Equity Fund.
(continued)
</TABLE>
<PAGE> 115
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- --------------------------
<TABLE>
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F*> FUND DIVISION
----------------------------------- ---------------------
1997 1996 1995 1997<F***>
--------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Total gross deposits $ 731,205 $ 927,388 $ 713,819 $ 81,175
Transfers between fund divisions and
General American (545,250) (325,567) (319,339) 386,732
Surrenders and withdrawals (30,828) (74,752) (35,191) 0
Seed withdrawals <F**> 0 (1,494,837) 0 0
--------- ----------- --------- --------
Total gross deposits, transfers between
fund divisions and surrenders 155,127 (967,768) 359,289 467,907
--------- ----------- --------- --------
Deductions:
Premium load charges 55,258 73,857 57,765 6,341
Cost of insurance and administrative expenses 226,846 224,222 228,560 4,229
--------- ----------- --------- --------
Total deductions 282,104 298,079 286,325 10,570
--------- ----------- --------- --------
Net deposits into (withdrawals from)
Separate Account $(126,977) $(1,265,847) $ 72,964 $457,337
========= =========== ========= ========
<FN>
<F*> This fund was formerly known as the Special Equity Fund.
<F**> Represents funds distributed to General American Life Insurance Company
in repayment of seed money used to start the Special Equity Fund in 1993.
<F***>The Small-Cap Equity Fund began operations on May 1, 1997.
(continued)
</TABLE>
<PAGE> 116
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,258,958 $1,399,658 $1,217,315 $1,700,056 $2,077,054 $1,771,614
Transfers between fund divisions and
General American (346,404) 10,733 565,593 124,428 (252,029) 348,401
Surrenders and withdrawals (243,196) (186,491) (37,075) (260,054) (286,745) (61,341)
---------- ---------- ---------- ---------- ---------- ----------
Total gross deposits, transfers between
fund divisions and surrenders 669,358 1,223,900 1,745,833 1,564,430 1,438,280 2,058,674
---------- ---------- ---------- ---------- ---------- ----------
Deductions:
Premium load charges 98,808 111,476 101,562 134,071 165,735 145,300
Cost of insurance and administrative expenses 470,011 473,165 406,596 606,328 610,838 588,684
---------- ---------- ---------- ---------- ---------- ----------
Total deductions 568,819 584,641 508,158 740,399 776,573 733,984
---------- ---------- ---------- ---------- ---------- ----------
Net deposits into Separate Account $ 100,539 $ 639,259 $1,237,675 $ 824,031 $ 661,707 $1,324,690
========== ========== ========== ========== ========== ==========
(continued)
</TABLE>
<PAGE> 117
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION
---------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995<F*>
---------- ---------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 927,173 $1,128,054 $ 978,388 $ 9,236 $ 3,210 $ 24
Transfers between fund divisions and
General American 262,454 (173,088) 156,839 3,098 10,046 3,317
Surrenders and withdrawals (121,639) (163,405) (33,911) 0 0 0
---------- ---------- ---------- ------- ------- ------
Total gross deposits, transfers between
fund divisions and surrenders 1,067,988 791,561 1,101,316 12,334 13,256 3,341
---------- ---------- ---------- ------- ------- ------
Deductions:
Premium load charges 71,458 89,820 79,076 706 248 3
Cost of insurance and administrative expenses 302,840 289,700 317,551 1,874 896 39
---------- ---------- ---------- ------- ------- ------
Total deductions 374,298 379,520 396,627 2,580 1,144 42
---------- ---------- ---------- ------- ------- ------
Net deposits into Separate Account $ 693,690 $ 412,041 $ 704,689 $ 9,754 $12,112 $3,299
========== ========== ========== ======= ======= ======
<FN>
<F*>The Asset Manager Fund began operations on July 19, 1995.
(continued)
</TABLE>
<PAGE> 118
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-95:
- ---------------------------
<TABLE>
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F**>
--------------------------------- --------------------------------
1997 1996 1995<F*> 1997 1996 1995<F*>
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 61,425 $ 47,325 $ 6,373 $29,642 $ 7,990 $1,007
Transfers between fund divisions and
General American (76,243) 146,648 59,489 31,281 63,119 387
-------- -------- ------- ------- ------- ------
Total gross deposits, transfers between
fund divisions and surrenders (14,818) 193,973 65,862 60,923 71,109 1,394
-------- -------- ------- ------- ------- ------
Deductions:
Premium load charges 4,910 3,747 499 2,223 595 81
Cost of insurance and administrative expenses 19,821 16,948 2,512 5,330 3,272 87
-------- -------- ------- ------- ------- ------
Total deductions 24,731 20,695 3,011 7,553 3,867 168
-------- -------- ------- ------- ------- ------
Net deposits into (withdrawals from)
Separate Account $(39,549) $173,278 $62,851 $53,370 $67,242 $1,226
======== ======== ======= ======= ======= ======
<FN>
<F*> The High Income Fund and Worldwide Hard Assets fund began operations on May
24, and August 9, 1995, respectively.
<F**>This fund was formerly known as the Gold & Natural Resources Fund.
(continued)
</TABLE>
<PAGE> 119
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
------------------------------------ --------------------------------------
1997 1996 1995 1997 1996 1995
----------- ---------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 1,229,167 $ 475,955 $ 47,504 $11,949,827 $ 18,203,638 $ 3,333,097
Transfers between fund divisions
and General American 1,639,191 5,512,487 182,278 (6,333,824) (13,115,248) (1,350,435)
Surrenders and withdrawals (5,100,149) (28,210) (15,259) (4,042,319) (15,934) (10,440)
----------- ---------- -------- ----------- ------------ -----------
Total gross deposits, transfers between
fund divisions and surrenders (2,231,791) 5,960,232 214,523 1,573,684 5,072,456 1,972,222
----------- ---------- -------- ----------- ------------ -----------
Deductions:
Premium load charges 88,924 35,750 11,884 870,893 1,315,430 232,745
Cost of insurance and administrative expenses 158,092 63,207 21,050 158,166 126,052 88,973
----------- ---------- -------- ----------- ------------ -----------
Total deductions 247,016 98,957 32,934 1,029,059 1,441,482 321,718
----------- ---------- -------- ----------- ------------ -----------
Net deposits into (withdrawals from)
Separate Account $(2,478,807) $5,861,275 $181,589 $ 544,625 $ 3,630,974 $ 1,650,504
=========== ========== ======== =========== ============ ===========
(continued)
</TABLE>
<PAGE> 120
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
------------------------------------ --------------------------------
1997 1996 1995 1997 1996 1995
----------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $ 170,971 $ 68,383 $ 9,129 $225,421 $131,764 $ 9,302
Transfers between fund divisions
and General American 109,381 4,780,139 57,441 49,038 170,404 60,563
Surrenders and withdrawals (4,675,478) (5,060) (12,416) (28,866) 0 0
----------- ---------- -------- -------- -------- -------
Total gross deposits, transfers between
fund divisions and surrenders (4,395,126) 4,843,462 54,154 245,593 302,168 69,865
----------- ---------- -------- -------- -------- -------
Deductions:
Premium load charges 12,639 5,137 614 16,872 9,560 645
Cost of insurance and administrative expenses 24,838 16,027 1,862 24,211 11,739 1,602
----------- ---------- -------- -------- -------- -------
Total deductions 37,477 21,164 2,476 41,083 21,299 2,247
----------- ---------- -------- -------- -------- -------
Net deposits into (withdrawals from)
Separate Account $(4,432,603) $4,822,298 $ 51,678 $204,510 $280,869 $67,618
=========== ========== ======== ======== ======== =======
(continued)
</TABLE>
<PAGE> 121
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F*>
-------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $225,188 $170,662 (34,323) $273,454 $181,044 $ 76,251
Transfers between fund divisions
and General American 92,485 (27,308) (131,408) 190,371 32,353 76,707
Surrenders and withdrawals (48,400) (26,276) (10,179) (47,175) (10,048) (4,465)
-------- -------- --------- -------- -------- --------
Total gross deposits, transfers between
fund divisions and surrenders 269,273 117,078 (175,910) 416,650 203,349 148,493
-------- -------- --------- -------- -------- --------
Deductions:
Premium load charges 17,168 12,611 6,512 19,728 13,690 7,697
Cost of insurance and administrative expenses 67,268 52,342 39,594 37,091 23,940 16,684
-------- -------- --------- -------- -------- --------
Total deductions 84,436 64,953 46,106 56,819 37,630 24,381
-------- -------- --------- -------- -------- --------
Net deposits into (withdrawals from)
Separate Account $184,837 $ 52,125 $(222,016) $359,831 $165,719 $124,112
======== ======== ========= ======== ======== ========
<FN>
<F*>This fund was formerly known as the International Equity Fund.
(continued)
</TABLE>
<PAGE> 122
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F*> FUND DIVISION
-------------------------------- ----------------
1997 1996 1995 1997<F**>
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Total gross deposits $376,253 $191,049 $ 81,787 $ 59,270
Transfers between fund divisions
and General American 301,956 (58,467) 76,580 326,392
Surrenders and withdrawals (53,267) (52,717) (11,584) 0
-------- -------- -------- --------
Total gross deposits, transfers between
fund divisions and surrenders 624,942 79,865 146,783 385,662
-------- -------- -------- --------
Deductions:
Premium load charges 29,256 13,676 12,214 4,711
Cost of insurance and administrative expenses 40,346 26,565 21,651 3,518
-------- -------- -------- --------
Total deductions 69,602 40,241 33,865 8,229
-------- -------- -------- --------
Net deposits into Separate Account $555,340 $ 39,624 $112,918 $377,433
======== ======== ======== ========
<FN>
<F*> This fund was formerly known as the Special Equity Fund.
<F**>The Small-Cap Equity Fund began operations on May 1, 1997.
(continued)
</TABLE>
<PAGE> 123
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,043,306 $ 673,157 $285,714 $1,354,928 $ 899,999 $ 392,035
Transfers between fund divisions and
General American 658,129 638,476 446,973 957,813 888,367 225,243
Surrenders and withdrawals (148,279) (10,403) (62,763) (268,257) (48,837) (161,933)
---------- ---------- -------- ---------- ---------- ---------
Total gross deposits, transfers between
fund divisions and surrenders 1,553,156 1,301,230 669,924 2,044,484 1,739,529 455,345
---------- ---------- -------- ---------- ---------- ---------
Deductions:
Premium load charges 78,543 53,024 20,534 101,854 69,694 34,454
Cost of insurance and administrative expenses 163,469 112,967 58,881 206,497 136,072 82,849
---------- ---------- -------- ---------- ---------- ---------
Total deductions 242,012 165,991 79,415 308,351 205,766 117,303
---------- ---------- -------- ---------- ---------- ---------
Net deposits into Separate Account $1,311,144 $1,135,239 $590,509 $1,736,133 $1,533,763 $ 338,042
========== ========== ======== ========== ========== =========
(continued)
</TABLE>
<PAGE> 124
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION
-------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995<F*>
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $763,625 $385,284 $154,142 $53,004 $ 8,754 $ 255
Transfers between fund divisions
and General American 265,722 271,694 200,230 3,027 26,425 15,583
Surrenders and withdrawals (56,432) (45,712) (55,346) (2,184) (2,067) 0
-------- -------- -------- ------- ------- -------
Total gross deposits, transfers between
fund divisions and surrenders 972,915 611,266 299,026 53,847 33,112 15,838
-------- -------- -------- ------- ------- -------
Deductions:
Premium load charges 57,640 29,621 13,147 3,927 670 10
Cost of insurance and administrative expenses 71,616 46,151 31,516 3,625 1,631 56
-------- -------- -------- ------- ------- -------
Total deductions 129,256 75,772 44,663 7,552 2,301 66
-------- -------- -------- ------- ------- -------
Net deposits into Separate Account $843,659 $535,494 $254,363 $46,295 $30,811 $15,772
======== ======== ======== ======= ======= =======
<FN>
<F*> The Asset Manager Fund began operations on July 19, 1995.
(continued)
</TABLE>
<PAGE> 125
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F**>
--------------------------------- ------------------------------------
1997 1996 1995<F*> 1997 1996 1995<F*>
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $201,994 $ 91,307 $ 603 $ 22,621 $ 1,869 $0
Transfers between fund divisions and
General American 207,353 278,491 68,178 1,823 45,785 0
Surrenders and withdrawals (6,433) 0 0 (36,871) 0 0
-------- -------- ------- -------- ------- --
Total gross deposits, transfers between
fund divisions and surrenders 402,914 369,798 68,781 (12,427) 47,654 0
-------- -------- ------- -------- ------- --
Deductions:
Premium load charges 15,004 7,156 37 1,715 175 0
Cost of insurance and administrative expenses 25,526 12,823 1,198 890 1,041 0
-------- -------- ------- -------- ------- --
Total deductions 40,530 19,979 1,235 2,605 1,216 0
-------- -------- ------- -------- ------- --
Net deposits into (withdrawals from)
Separate Account $362,384 $349,819 $67,546 $(15,032) $46,438 $0
======== ======== ======= ======== ======= ==
<FN>
<F*> The High Income Fund and Worldwide Hard Assets Fund began operations on May
24, and August 9, 1995, respectively.
<F**>This fund was formerly known as the Gold & Natural Resources Fund.
(continued)
</TABLE>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable General Select Plus:
- -----------------------------
<TABLE>
<CAPTION>
MULTI-STYLE AGGRESSIVE
EQUITY CORE BOND EQUITY NON-US
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- -------------
1997<F*> 1997<F*> 1997<F*> 1997<F*>
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Total gross deposits $ 80,451 $ 17,978 $ 54,099 $ 42,059
Transfers between fund divisions and
General American 532,364 215,118 281,507 276,242
-------- -------- -------- --------
Total gross deposits and transfers
between fund divisions 612,815 233,096 335,606 318,301
-------- -------- -------- --------
Deductions:
Premium load charges 5,866 1,346 3,761 3,283
Cost of insurance and administrative expenses 8,425 2,474 3,632 3,028
-------- -------- -------- --------
Total deductions 14,291 3,820 7,393 6,311
-------- -------- -------- --------
Net deposits into Separate Account $598,524 $229,276 $328,213 $311,990
======== ======== ======== ========
<FN>
<F*>The Multi-Style Equity Fund, Core Bond Fund, Aggressive Equity Fund, and
Non-US Fund began operations on January 2, 1997.
(continued)
</TABLE>
<PAGE> 126
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
S & P 500 INDEX MONEY MARKET
FUND DIVISION FUND DIVISION
------------------------------------ ---------------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,995,433 $ 606,419 $ 16,519 $ 8,679,144 $ 7,989,872 $ 2,385,983
Transfers between fund divisions and
General American 2,177,143 1,285,071 172,340 (7,303,949) (6,898,282) (1,031,031)
Surrenders and withdrawals (68,513) (12,850) 0 (3,421) (242) 0
---------- ---------- -------- ----------- ----------- -----------
Total gross deposits, transfers between
fund divisions and surrenders 4,104,063 1,878,640 188,859 1,371,774 1,091,348 1,354,952
---------- ---------- -------- ----------- ----------- -----------
Deductions:
Premium load charges 66,092 20,294 458 286,729 250,193 73,630
Cost of insurance and administrative expenses 671,147 258,742 9,056 599,119 502,668 124,621
---------- ---------- -------- ----------- ----------- -----------
Total deductions 737,239 279,036 9,514 885,848 752,861 198,251
---------- ---------- -------- ----------- ----------- -----------
Net deposits into Separate Account $3,366,824 $1,599,604 $179,345 $ 485,926 $ 338,487 $ 1,156,701
========== ========== ======== =========== =========== ===========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 127
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
BOND INDEX MANAGED EQUITY
FUND DIVISION FUND DIVISION
-------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $184,259 $ 58,468 $ 2,634 $228,756 $102,809 $ 1,658
Transfers between fund divisions and
General American 265,500 257,285 16,903 432,012 120,203 21,497
Surrenders and withdrawals (4,282) (2,419) 0 (13,613) (413) 0
-------- -------- ------- -------- -------- -------
Total gross deposits, transfers between
fund divisions and surrenders 445,477 313,334 19,537 647,155 222,599 23,155
-------- -------- ------- -------- -------- -------
Deductions:
Premium load charges 6,186 1,906 79 7,603 3,442 48
Cost of insurance and administrative expenses 57,817 31,767 862 96,349 36,945 2,150
-------- -------- ------- -------- -------- -------
Total deductions 64,003 33,673 941 103,952 40,387 2,198
-------- -------- ------- -------- -------- -------
Net deposits into Separate Account $381,474 $279,661 $18,596 $543,203 $182,212 $20,957
======== ======== ======= ======== ======== =======
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 128
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
ASSET ALLOCATION INTERNATIONAL INDEX
FUND DIVISION FUND DIVISION<F**>
-------------------------------- --------------------------------
1997 1996 1995 1997 1996 1995
-------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $297,431 $ 91,429 $ 926 $380,598 $202,195 $20,494
Transfers between fund divisions and
General American 423,970 233,391 12,569 259,917 315,663 27,674
Surrenders and withdrawals (7,250) (906) 0 (12,338) (2,005) 0
-------- -------- ------- -------- -------- -------
Total gross deposits, transfers between
fund divisions and surrenders 714,151 323,914 13,495 628,177 515,853 48,168
-------- -------- ------- -------- -------- -------
Deductions:
Premium load charges 10,273 3,162 30 12,990 6,724 656
Cost of insurance and administrative expenses 159,083 38,520 488 138,712 79,260 8,108
-------- -------- ------- -------- -------- -------
Total deductions 169,356 41,682 518 151,702 85,984 8,764
-------- -------- ------- -------- -------- -------
Net deposits into Separate Account $544,795 $282,232 $12,977 $476,475 $429,869 $39,404
======== ======== ======= ======== ======== =======
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F**>This fund was formerly known as the International Equity Fund.
(continued)
</TABLE>
<PAGE> 129
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life-100:<F*>
- --------------------------------
<TABLE>
<CAPTION>
MID-CAP EQUITY SMALL-CAP EQUITY
FUND DIVISION<F**> FUND DIVISION
-------------------------------- ----------------
1997 1996 1995 1997<F***>
-------- -------- ------- ----------
<S> <C> <C> <C> <C>
Total gross deposits $405,467 $232,270 $18,525 $ 48,912
Transfers between fund divisions and
General American 129,102 228,709 34,407 254,044
Surrenders and withdrawals (15,375) (5,591) 0 0
-------- -------- ------- --------
Total gross deposits, transfers between
fund divisions and surrenders 519,194 455,388 52,932 302,956
-------- -------- ------- --------
Deductions:
Premium load charges 13,537 7,772 598 1,579
Cost of insurance and administrative expenses 140,909 82,326 8,384 7,052
-------- -------- ------- --------
Total deductions 154,446 90,098 8,982 8,631
-------- -------- ------- --------
Net deposits into Separate Account $364,748 $365,290 $43,950 $294,325
======== ======== ======= ========
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F**> This fund was formerly known as the Special Equity Fund.
<F***>The Small-Cap Equity Fund began operations on May 1, 1997.
(continued)
</TABLE>
<PAGE> 130
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
EQUITY-INCOME GROWTH
FUND DIVISION FUND DIVISION
---------------------------------- ----------------------------------
1997 1996 1995 1997 1996 1995
---------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $1,996,233 $ 914,095 $ 44,385 $2,402,233 $1,361,304 $ 50,500
Transfers between fund divisions and
General American 792,184 1,521,792 219,488 1,492,743 1,759,062 304,735
Surrenders and withdrawals (44,826) (7,812) 0 (114,282) (38,619) 0
---------- ---------- -------- ---------- ---------- --------
Total gross deposits, transfers between
fund divisions and surrenders 2,743,591 2,428,075 263,873 3,780,694 3,081,747 355,235
---------- ---------- -------- ---------- ---------- --------
Deductions:
Premium load charges 66,340 29,267 1,400 80,190 44,819 1,424
Cost of insurance and administrative
expenses 572,720 303,902 21,879 842,557 472,178 25,541
---------- ---------- -------- ---------- ---------- --------
Total deductions 639,060 333,169 23,279 922,747 516,997 26,965
---------- ---------- -------- ---------- ---------- --------
Net deposits into Separate Account $2,104,531 $2,094,906 $240,594 $2,857,947 $2,564,750 $328,270
========== ========== ======== ========== ========== ========
<FN>
<F*>The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
(continued)
</TABLE>
<PAGE> 131
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION
-------------------------------- ---------------------------------
1997 1996 1995 1997 1996 1995<F**>
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $508,810 $373,593 $ 25,338 $147,295 $ 50,502 $ 964
Transfers between fund divisions and
General American 313,710 307,488 82,196 109,004 137,452 30,404
Surrenders and withdrawals (22,505) (13,206) 0 (5,778) (2,165) 0
-------- -------- -------- -------- -------- -------
Total gross deposits, transfers between
fund divisions and surrenders 800,015 667,875 107,534 250,521 185,789 31,368
-------- -------- -------- -------- -------- -------
Deductions:
Premium load charges 17,197 11,611 762 4,955 1,674 28
Cost of insurance and administrative expenses 165,254 112,510 12,165 74,461 24,175 1,033
-------- -------- -------- -------- -------- -------
Total deductions 182,451 124,121 12,927 79,416 25,849 1,061
-------- -------- -------- -------- -------- -------
Net deposits into Separate Account $617,564 $543,754 $ 94,607 $171,105 $159,940 $30,307
======== ======== ======== ======== ======== =======
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F**>The Asset Manager Fund began operations on July 19, 1995.
(continued)
</TABLE>
<PAGE> 132
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Variable Universal Life - 100:<F*>
- ----------------------------------
<TABLE>
<CAPTION>
HIGH INCOME WORLDWIDE HARD ASSETS
FUND DIVISION FUND DIVISION<F***>
--------------------------------- --------------------------------
1997 1996 1995<F**> 1997 1996 1995<F**>
-------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Total gross deposits $300,761 $158,842 $ 5,221 $63,004 $22,003 $ 193
Transfers between fund divisions and
General American 224,109 297,097 65,982 18,216 53,910 8,300
Surrenders and withdrawals (20,348) (11,551) 0 (4,909) (5,154) 0
-------- -------- ------- ------- ------- ------
Total gross deposits, transfers between
fund divisions and surrenders 504,522 444,388 71,203 76,311 70,759 8,493
-------- -------- ------- ------- ------- ------
Deductions:
Premium load charges 10,110 4,982 174 2,147 712 8
Cost of insurance and administrative expenses 105,718 57,557 1,693 19,651 13,421 297
-------- -------- ------- ------- ------- ------
Total deductions 115,828 62,539 1,867 21,798 14,133 305
-------- -------- ------- ------- ------- ------
Net deposits into Separate Account $388,694 $381,849 $69,336 $54,513 $56,626 $8,188
======== ======== ======= ======= ======= ======
<FN>
<F*> The Variable Universal Life 100 product was introduced in 1995, and the
first deposit was received on June 7, 1995.
<F**> The High Income Fund and Gold & Natural Resources Fund began operations on
May 24, and August 9, 1995, respectively.
<F***>This fund was formerly known as the Gold & Natural Resources Fund.
(continued)
</TABLE>
<PAGE> 133
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 7 - SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONTINUED)
Russell Variable Universal Life:<F*>
- ------------------------------------
<TABLE>
<CAPTION>
MONEY MULTI-STYLE CORE AGGRESSIVE
MARKET EQUITY BOND EQUITY NON-US
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------ ------------- ------------- -------------
1997<F**> 1997<F**> 1997<F**> 1997<F**> 1997<F**>
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total gross deposits $ 4,627,386 $ 19,255 $ 3,472 $ 12,641 $ 8,990
Transfers between fund divisions and
General American (4,374,607) 1,937,967 914,278 987,308 532,277
Surrenders and withdrawals 0 (328) 0 (94) (137)
----------- ---------- -------- -------- --------
Total gross deposits, transfers between
fund divisions and surrenders 252,779 1,956,894 917,750 999,855 541,130
----------- ---------- -------- -------- --------
Deductions:
Premium load charges 72,762 1,369 0 822 548
Cost of insurance and administrative expenses 72,945 19,567 21,735 6,442 10,345
----------- ---------- -------- -------- --------
Total deductions 145,707 20,936 21,735 7,264 10,893
----------- ---------- -------- -------- --------
Net deposits into Separate Account $ 107,072 $1,935,958 $896,015 $992,591 $530,237
=========== ========== ======== ======== ========
<FN>
<F*> Russell Variable Universal Life product was introduced in 1997, and the
first deposit was received on June 6, 1997.
<F**>The Multi-Style Equity Fund, Core Bond Fund, Aggressive Equity Fund, and
Non-US Fund began operations on January 2, 1997.
</TABLE>
<PAGE> 134
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file
with the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant
to authority conferred in that section.
RULE 484 UNDERTAKING
Section 351.355 of the Missouri General and Business Corporation Law, in
brief, allows a corporation to indemnify any person who is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, against expenses, including attorneys'
fees, judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation. When any person was or is a party or is
threatened to be made a party in an action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the Fact that he is
or was a director, officer, employee, or agent of the corporation,
indemnification may be paid unless such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation. In the event of such a determination indemnification is allowed if
a court determines that the person is fairly and reasonably entitled to
indemnity. A corporation has the power to give any further indemnity to any
person who is or was a director, officer, employee, or agent, provided for in
the articles of incorporation or as authorized by any by-law which has been
adopted by vote of the shareholders, provided that no such indemnity shall
indemnify any person's conduct which was finally adjudged to have been
II-1
<PAGE> 135
knowingly fraudulent, deliberately dishonest, or willful misconduct.
In accordance with Missouri law, General American's Board of Directors, at
its meeting on 19 November 1987, and the policyholders of General American at
the annual meeting held on 26 January 1988, adopted the following
resolutions:
"BE IT RESOLVED THAT
1. The company shall indemnify any person who is, or was a director,
officer, or employee of the company, or is or was serving at the
request of the company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against any and all expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement, actually and
reasonably incurred by him or her in connection with any civil,
criminal, administrative, or investigative action, proceeding, or
claim (including an action by or in the right of the company), by
reason of the fact that he or she was serving in such capacity if he
or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
company; provided that such person's conduct is not finally adjudged
to have been knowingly fraudulent, deliberately dishonest, or willful
misconduct.
2. The indemnification provided herein shall not be deemed exclusive
of any other rights to which a director, officer, or employee may be
entitled under any agreement, vote of policyholders or disinterested
directors, or otherwise, both as to action in his or her official
capacity and as to action in another capacity which holding such
office, and shall continue as to a person who has ceased to be a
director, officer, or employee and shall inure to the benefit of the
heirs, executors and administrators of such a person."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the
II-2
<PAGE> 136
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
REASONABLENESS OF FEES AND CHARGES
General American, of which Registrant forms a part, hereby represents that
the fees and charges deducted under the terms of the Contract are, in the
aggregate, reasonable in relationship to the services rendered, the expenses
expected, and the risks assumed by General American.
II-3
<PAGE> 137
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following Papers and Documents:
The facing sheet.
The Prospectus, consisting of 110 pages.
The undertaking to file reports required by Section 15 (d), 1934 Act.
The undertaking pursuant to Rule 484.
Reasonableness of Fees and Charges.
The signatures.
1. The following exhibits (which correspond in number to the numbers
under paragraph A of the instructions for exhibits to Form N-8B-2):
(1) Resolution of the Board of Directors of General
American authorizing establishment of the Separate
Account <F1>
(2) Not Applicable
(3) (a) Principal Underwriting Agreement <F3>
(b) Proposed form of Selling Agreement <F2>
(c) Commission Schedule <F3>
(4) Not Applicable
(5) (a) Form of Standard Policy and Policy Riders <F1>
(b) Form of Pension Policy and Policy Riders <F1>
(c) Additional Insured Family Term Rider <F4>
(d) Waiver of Specified Premium Rider <F4>
(6) (a) Amended Charter and Articles of Incorporation of
General American <F6>
(b) Amended By-Laws of General American <F6>
(7) Not Applicable
(8) (a) Form of Agreement to Purchase Shares of
II-4
<PAGE> 138
General American Capital Company <F2>
(b) Form of Participation Agreement with Variable
Insurance Products Fund <F2>
(9) Not Applicable
(10) (a) Form of Application for Standard Policy <F2>
(b) Form of Application for Pension Policy <F2>
2. Memorandum describing General American's issuance, transfer, and
redemption procedures for the Policies and General American's procedure for
conversion to a fixed benefit policy <F2>
3. The following exhibits are numbered to correspond to the numbers in the
instructions as to exhibits for Form S-6
(1) See above
(2) Opinion of Robert J. Banstetter, General Counsel of General
American <F2>
(3) No financial statements are omitted from the Prospectus
pursuant to prospectus instructions 1(b) or (c)
(4) Not Applicable
5. Opinion and Consent of Alan J. Hobbs, F.S.A. <F5>
6. The consent of KPMG Peat Marwick LLP, Independent Certified Public
Accountants
7. Officer's Certificate pursuant to Rule 27d-2(a)(2), Investment Company
Act
[FN]
Footnotes:
<F1> Incorporated by reference to the initial Registration Statement and
Post-Effective Amendment No. 2 of the Separate Account, File No. 33-10146.
<F2> Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement, File No. 33-10146
<F3> Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement, File No. 33-10146
II-5
<PAGE> 139
<F4> Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement, File No. 33-10146
<F5> Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement, File No. 33-10146
<F6> Filed herewith.
II-6
<PAGE> 140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, General American
Life Insurance Company and General American Separate Account Eleven certify
that they meet all of the requirements for effectiveness of this amended
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and have duly caused this Registration Statement to be signed on their
behalf by the undersigned thereunto duly authorized, and the seal of General
American Life Insurance Company to be hereunto affixed and attested, all in
the City of St. Louis, State of Missouri, on the 29th day of April, 1998.
GENERAL AMERICAN SEPARATE ACCOUNT
ELEVEN (Registrant)
(Seal)
BY: GENERAL AMERICAN LIFE
INSURANCE COMPANY (for Registrant
and as Depositor)
Attest:/s/ Robert J. Banstetter By: /s/ Richard A. Liddy
------------------------ --------------------
Robert J. Banstetter, Sr. Richard A. Liddy,
Secretary Chairman, President, and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Richard A. Liddy
- -------------------------- Chairman, President, 4/29/98
Richard A. Liddy and Chief Executive
Officer (Principal
Executive Officer)
/s/ John W. Barber
- -------------------------- Vice President and 4/29/98
John W. Barber Controller (Principal
Accounting Officer and
Principal Financial
Officer)
II-7
<PAGE> 141
- --------------------------
August A. Busch, III<F*> Director
- --------------------------
William E. Cornelius<F*> Director
- --------------------------
John C. Danforth<F*> Director
- --------------------------
Bernard A. Edison<F*> Director
/s/ Richard A. Liddy 4/29/98
- --------------------------
Richard A. Liddy Director
- --------------------------
William E. Maritz<F*> Director
- ------------------------
Craig D. Schnuck<F*> Director
- --------------------------
William P. Stiritz<F*> Director
- --------------------------
Andrew C. Taylor<F*> Director
- --------------------------
H. Edwin Trusheim<F*> Director
- --------------------------
Robert L. Virgil, Jr.<F*> Director
- --------------------------
Virginia V. Weldon<F*> Director
- --------------------------
Ted C. Wetterau<F*> Director
II-8
<PAGE> 142
By /s/ Matthew P. McCauley 4/29/98
--------------------------
Matthew P. McCauley
<FN>
<F*> Original powers of attorney authorizing Matthew P. McCauley to sign this
Registration Statement and Amendments thereto on behalf of the Board of
Directors of General American Life Insurance Company are on file with the
Securities and Exchange Commission.
</TABLE>
II-9
<PAGE> 143
The Board of Directors
General American Life Insurance Company:
Re: VUL-95
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Registration Statement and
Prospectus for General American Separate Account Eleven. Our report on the
consolidated financial statements of General American Life Insurance Company and
subsidiaries refers to the adoption of Statement of Financial Accounting
Standards No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises
and by Insurance Enterprises for Certain Long-Duration Participating Contracts
in 1996.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
April 29, 1998
II-10
<PAGE> 1
- -------------------------------------------------------------------------------
Exhibit 6(a)
AMENDED AND RESTATED CHARTER
and
ARTICLES OF INCORPORATION
of
GENERAL AMERICAN LIFE INSURANCE COMPANY
ARTICLE I
The name of the Company shall continue to be General American Life
Insurance Company.
ARTICLE II
The principal office of the Company shall continue to be located at 700
Market Street in the City of St. Louis, in the State of Missouri.
ARTICLE III
The Company is incorporated for the purpose of making insurance upon
the lives of individuals and every assurance pertaining thereto or connected
therewith, to grant, purchase and dispose of annuities and endowments of
every kind and description whatsoever, to provide an indemnity against death
and for weekly or other periodic indemnity for disability occasioned by
accident or sickness to the person of the assured and to have all the further
rights, powers and privileges granted or permitted life insurance companies
organized under the provisions of Chapter 376 R.S.Mo., and all Acts
amendatory thereof or additional thereto.
ARTICLE IV
The Company was originally organized as a domestic stock and mutual
life insurance company in 1933 and, in a process initiated in 1936, converted
to a mutual company with no capital stock. Pursuant to a Plan of
Reorganization (the "Plan") adopted by the Company as of 26 September 1996,
and in accordance with Senate Bill No. 759 as enacted by the 1996 Session of
the 88th General
II-11
<PAGE> 2
Assembly of the State of Missouri (Section 376.1300 et seq. R.S.Mo.)(the "MHC
Statute"), the Company converted to a stock form life insurance company,
without members, and each member of the Company immediately prior to the
consummation of the reorganization described in the Plan became,
automatically by operation of law, a member of General American Mutual
Holding Company in accordance with the provisions of the Articles of
Incorporation and By-laws of General American Mutual Holding Company and the
MHC Statute.
The aggregate number of shares of stock that the Company shall be
authorized to issue shall be five million (5,000,000) shares of common stock,
with par value of one dollar ($1.00) per share.
No holder of stock of the Company shall be entitled as a matter of
right to subscribe for or purchase any part of any new or additional issue of
stock, or securities convertible into stock, of any class whatsoever, whether
now or hereafter authorized, and all such additional shares of stock or other
securities convertible into stock may be issued and disposed of by the Board
of Directors to such person or persons and on such terms and for such
consideration (so far as may be permitted by law) as the Board of Directors,
in its absolute discretion, may deem advisable.
The Company shall be a continuation of the original corporation of the
same name whose first Certificate of Authority to transact a life insurance
business was granted by the Superintendent of the Insurance Department on the
5th day of September, 1933.
ARTICLE V
The corporate powers of the Company shall be vested in a Board of
Directors and shall be exercised by the Board and by such officers, agents,
employees and committees, including an Advisory Committee, as the Board may,
in its discretion, from time to time appoint and empower. The Board shall
have the power from time to time to make, amend or repeal such By-laws, rules
and regulations for the transaction of the business of the Company as the
Board
II-12
<PAGE> 3
may deem expedient and as are not inconsistent with this Amended and Restated
Charter and Articles of Incorporation or the constitution or other laws of
the State of Missouri. The Company shall have perpetual succession for a
term of nine hundred ninety-nine (999) years.
ARTICLE VI
The Board of Directors shall consist of not less than nine (9) and not
more than fifteen (15) persons elected as hereinafter provided. At least one
Director shall be a citizen and resident of the state of Missouri, and a
majority of the Directors shall be policyholders of the Company. Meetings of
the Board of Directors shall be held at such time and place and upon such
notice as shall be prescribed by the By-laws of the Company. Vacancies in
the Board of Directors may be filled by the shareholders at any regular
meeting or at any special meeting called for that purpose, or by vote of a
majority of Directors present at any regular or special meeting. Vacancies
occasioned by death, resignation or disqualification when filled shall be
filled for the unexpired term for which such Director was elected. Any
Director elected by the Board to fill a vacancy shall have the same
qualifications required of the Director whose place he or she takes. A
majority of the members of the Board of Directors, or such greater number
thereof as may from time to time be provided for in the By-laws of the
Company, shall constitute a quorum for the transaction of business, but a
smaller number may meet and adjourn from time to time until a quorum is
present.
ARTICLE VII
The incumbent members of the Board of Directors shall continue to be
Directors of the Company until their respective terms have expired or until
their successors are duly elected and qualified. New Directors will be
elected by class so as to equalize as nearly as possible the number in each
class of Directors. There shall continue to be three classes of Directors,
each class serving for a three year term expiring one year after expiration
of the term of the immediately preceding class (effective at the annual
meeting of the Company for the year in which the term expires), so that the
term of one class will expire each year. Each Director shall serve during
the term for which he
II-13
<PAGE> 4
or she was elected or until a successor is duly elected and qualified and
nothing in this Amended and Restated Charter and Articles of Incorporation
shall be interpreted to prevent a Director whose term is expiring from being
eligible for re-election.
ARTICLE VIII
The annual meeting of the Company shall be held at the office of the
Company in the City of St. Louis, State of Missouri, on the fourth Thursday
in April in each year or at such other place as may be selected by the Board
of Directors and shall be held at such time as shall be selected by the Board
of Directors or as provided in the By-laws of the Company. Special meetings
of the Company shall be called at any time by the vote of a majority of the
entire number of the members of the Board of Directors, or upon the written
request of five percent of those shareholders of the Company eligible to vote
at such meeting, which request shall specify the matters proposed to be acted
upon. Notice of any annual or special meeting shall be given in the manner
provided in the By-laws.
Each outstanding share of stock shall be entitled to one vote upon each
matter submitted to a vote at any annual or special meeting of the Company.
On all propositions which shall be submitted for decision at any annual or
special meeting of the Company, such matter shall be decided by the vote of
the majority of the shares voting at such meeting.
ARTICLE IX
The policyholders of the Company shall benefit in the earnings and
profits of the Company in such manner as shall be determined from time to
time by the Board of Directors under the laws of the State of Missouri, and
particularly Section 376.360 R.S.Mo. and all Acts amendatory thereof. Any
allocation of earnings and profits as made by the Board of Directors pursuant
to the provisions of this Article shall be binding and conclusive upon every
person who is entitled to share in its profits or earnings.
II-14
<PAGE> 5
ARTICLE X
This Amended and Restated Charter and Articles of Incorporation may be
amended at any annual or special meeting of the Company by the majority vote
of the shareholders voting at such meeting; provided that if it is proposed
to amend the same at any special meeting a copy of the proposed amendment and
a copy of the notice of the meeting of the shareholders of the Company called
for that purpose shall be mailed at least ten (10) days before such meeting
to each shareholder as the shareholder's address appears upon the books of
the Company.
If it be proposed to amend Articles IV, V, IX and X of this Amended and
Restated Charter and Articles of Incorporation at any meeting, annual or
otherwise, then the notice and a copy of the proposed amendment, provided in
the preceding paragraph, shall be mailed at least thirty (30) days before
such meeting and a true and correct list of the shareholders of the Company,
together with the address of each as shown on the books and records of the
Company, shall be filed with the Director of the Department of Insurance of
the State of Missouri at least twenty (20) days before such meeting.
ARTICLE XI
Whenever in this Amended and Restated Charter and Articles of
Incorporation notice is required or permitted to be given by mail, the
affidavit of the person who mailed such notice, filed with the Secretary of
the Company, shall constitute conclusive evidence that such notice has been
given and mailed.
ARTICLE XII: INDEMNIFICATION
The Company shall indemnify each of its directors, officers, employees,
and agents to the full extent specified by Section 351.355 R.S.Mo., as
amended from time to time (the "Indemnification Statute"), and, in addition,
shall indemnify each of them against all expenses (including, without
limitation, attorneys' fees, judgments, fines, taxes, and amounts paid in
settlement) actually and reasonably incurred by him or her in connection with
any claim (including, without limitation, any threatened, pending, or
completed action, suit, or proceeding whether civil, criminal, administrative,
or investigative and
II-15
<PAGE> 6
whether or not by or in the right of any corporation) by reason of the fact
that he or she is or was serving the Company or at the request of the Company
in any of the capacities referred to in the Indemnification Statute or
arising out of his or her status in any such capacity, provided that the
Company shall not indemnify any person from or on account of such person's
conduct which was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct.
The Company is authorized to give or supplement any of the aforesaid
indemnifications by By-law, agreement, or otherwise and support them by
insurance to the extent it deems appropriate. Amounts to be paid under this
Article XII shall be disbursed at such times and upon such procedures as the
Company shall determine. All such indemnification shall continue as to any
person who has ceased to serve in any of the aforesaid capacities and shall
inure to the benefit of the heirs, devisees, and personal representatives of
such person. Indemnification given under this Article XII shall survive
elimination or modification of this Article XII with respect to any such
expenses incurred in connection with claims arising out of acts or omissions
occurring prior to such elimination or modification and persons to whom such
indemnification is given shall be entitled to rely on such indemnification as
a contract with the Company.
Originally filed 2/21/97
Amended 9/10/97 (Article IV, paragraph 2)
II-16
<PAGE> 1
- -------------------------------------------------------------------------------
Exhibit 6 (b)
AMENDED AND RESTATED BY-LAWS
of
GENERAL AMERICAN LIFE INSURANCE COMPANY
ARTICLE I
Shareholders
Section 1. Annual Meeting. The annual meeting of the Company shall be
--------------
held on the fourth Thursday in April in each year, if not a legal holiday,
and if a legal holiday, then on the next day not a legal holiday, when
members of the Board of Directors shall be elected to succeed those whose
terms are then expiring and such other business shall be transacted as may
properly be brought before the meeting.
Section 2. Special Meetings. Special meetings of the Company may be
----------------
called at any time by the vote of a majority of the entire number of the
members of the Board of Directors. Business transacted at all special
meetings of the Company shall be confined to the purpose or purposes stated
in the notice of the meeting.
Section 3. Place and Hour of Meeting. Every annual meeting of the
-------------------------
Company shall commence immediately after the annual meeting of the members of
General American Mutual Holding Company shall have been concluded. Every
special meeting of the Company shall be held at such time as may be selected
by the Board of Directors. Every meeting of the Company, whether an annual
or a special meeting, shall be continued during at least three hours, unless
the object for which it was called shall be accomplished sooner and shall be
held at the office of the Company in the City of St. Louis, in the State of
Missouri, or at such other place as may be selected by the Board of
Directors.
Section 4. Notice of Meetings; Record Date. Notice of each meeting of
-------------------------------
the Company shall be mailed to each shareholder of the Company not less than
ten nor more than fifty days previous to such meeting, and every such notice
shall state the day and hour and the place at which the meeting is to be held
and, in the case
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<PAGE> 2
of any special meeting, shall indicate briefly the purpose or purposes
thereof. The Board of Directors of the Company shall have the power to close
the transfer books of the Company for a period not exceeding seventy days
preceding the date of any meeting of shareholders or the date of payment of
any dividend or the date for the allotment of rights or the date when any
change or conversion or exchange of shares goes into effect. In lieu,
however, of closing the stock transfer books, the Board of Directors may fix
in advance a date, not exceeding seventy days preceding the dates of the
aforenamed occurrences, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend or
to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of shares. In such case, such
shareholders, and only such shareholders as are shareholders of the Company
of record on the date of closing the transfer books or on the record date so
fixed, are entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the Company after
such date of closing of the transfer books or such record date so fixed. If
the Board of Directors shall not close the transfer books or set a record
date for the determination of the shareholders entitled to notice of, and to
vote at, a meeting of shareholders, only the shareholders who are
shareholders of record at the close of business on the 20th day preceding the
date of the meeting are entitled to notice of, and to vote at, the meeting
and any adjournment of the meeting.
Section 5. List of Voters. A complete list of all shareholders
--------------
entitled to vote at any annual and special meeting of the Company's
shareholders is to be compiled at least ten days before such meeting by the
officer or agent having charge of the transfer books for shares of stock of
the Company. Such list is to be compiled in alphabetical order with the
address and the number of shares held by each shareholder. The list must be
kept on file in the registered office of the Company for a period of at least
ten days prior to such meeting and must be open to inspection by any
shareholder for such period during usual business hours. Such list must also
be present and kept open at
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<PAGE> 3
the time and place of such meeting and is subject to the inspection of any
shareholder during such meeting. The original share ledger or transfer book,
or a duplicate thereof kept in Missouri, is prima facie evidence as to who
are the shareholders of the Company entitled to examine such list or share
ledger or transfer book, or to vote at any meeting of shareholders. Failure
to comply with the requirements of this section does not affect the validity
of any action taken at such meeting.
Section 6. Quorum. A majority of the outstanding shares entitled to
------
notice of and to vote at a meeting, present in person or by proxy conforming
to Section 9 of this Article I, shall constitute a quorum for the transaction
of any business coming before any regular or special meeting of the Company
duly and properly called, except as provided by law, the Amended and Restated
Charter and Articles of Incorporation of the Company, or these By-Laws. If,
however, such quorum of shareholders shall not be present or represented at
any meeting of the Company, the shareholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
requisite number of shareholders shall be present. At any such adjourned
meeting at which the requisite number of shareholders shall be represented
any business may be transacted which might have been transacted at the
meeting as originally notified.
Section 7. Voting Rights. Each outstanding share of stock shall be
-------------
entitled to one vote upon each matter submitted to a vote at any annual or
special meeting of the Company.
Section 8. Inspectors of Election. At every meeting of the Company,
----------------------
the President shall appoint not less than two persons, who are not Directors,
inspectors to receive and canvass the votes given at the meeting, and certify
the result to him. At the next meeting of the Board of Directors held
thereafter, the President shall lay before the Board the returns so
certified, and thereupon such proceedings shall be had as the subject-matter
decided by the election or the vote may require. Each such inspector, before
he shall enter on the duties of his office, shall take and subscribe the
following oath before any officer authorized by law to administer oaths: "I
do solemnly swear that I will execute the
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<PAGE> 4
duties of an inspector of the election now to be held with strict impartiality
and according to the best of my ability."
Section 9. Voting by Proxy. Every person legally entitled to vote as
---------------
a shareholder at any election, or on any question relating to the management
or business of the Company may cast such vote by proxy; but said proxy shall
be a shareholder of the Company otherwise entitled to vote, and the authority
to cast such vote shall be in writing and shall state the name of the person
authorized to cast such vote and the date of the meeting at which such vote
shall be cast. In no event shall a proxy be valid for more than one annual
or special meeting, as the case may be.
Section 10. Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares of stock in the name of another corporation, foreign
or domestic, are to be voted by such officer, agent, or proxy as the bylaws
of such corporation may prescribe, or in the absence of such provision, as
the Board of Directors of such corporation may determine.
(b) Shares of stock in the name of a deceased person are to be
voted by his executor or administrator in person or by proxy.
(c) Shares of stock in the name of a fiduciary, such as
guardian, curator, or trustee are to be voted by such fiduciary either in
person or by proxy provided the books of the Company show the stock to be in
the name of such fiduciary in such capacity.
(d) Shares of stock in the name of a receiver are to be voted
by such receiver, and shares held by, or in the control of, a receiver are to
be voted by such receiver without the transfer thereof into his name, if such
voting authority is contained in an appropriate order of the court by which
such receiver was appointed.
(e) Shares of stock which have been pledged are to be voted by
the pledgor until the shares of stock have been transferred into the name of
the pledgee, and thereafter, the pledgee is entitled to vote the shares so
transferred.
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<PAGE> 5
Section 11. Informal Action by Unanimous Consent of Shareholders. Any
----------------------------------------------------
action required by law to be taken at a meeting of the shareholders of the
Company, or any action which may be taken at a meeting of the shareholders,
may be taken without a meeting if all of the shareholders entitled to vote
with respect to the subject matter thereof sign written consents that set
forth the action so taken. Such consents have the same force and effect as a
unanimous vote of the shareholders at a meeting duly held, and may be stated
as such in any certificate or document filed with the Secretary of State of
the State of Missouri or any other state in the United States of America or
other Country. The Secretary of the Company shall file such consents with
the minutes of the meetings of the shareholders of the Company.
Section 12. Shareholder Proposals and Director Nominations. (a) All
----------------------------------------------
shareholder proposals and Director nominations that have not been proposed,
adopted, or ratified by the Company's Board of Directors must be submitted by
certified mail to, and received by, the Company's Secretary no later than
sixty (60) days prior to the date of meeting at which the proposal or
nomination is to be voted upon by the shareholders. All such proposals must
be accompanied by: (i) the proponent's name, address, and telephone number;
(ii) a brief narrative that describes in sufficient detail the purpose and
the anticipated costs and benefits of the proposal; and (iii) the financial
interests, if any, of the proponent in the proposal. All such Director
nominations must be accompanied by the nominee's biographical, background,
and related information as required by federal securities laws in the
solicitation of proxies for the election of directors, as if proxies were
being solicited for the election of the nominee under the federal securities
laws. In addition, all such shareholder proposals and Director nominations
must be accompanied by: (i) a list of shareholders that have signed written
consents in support of the proposal or Director nomination; (ii) an affidavit
attesting that the list of shareholders is accurate and that each person on
the list has submitted a signed written consent in favor of the proposal or
nomination; and (iii) copies of the written consents. The list must contain
at least five percent (5%) of the shares eligible to vote on the proposal or
nomination. The Secretary shall examine the list and written consents in
order to satisfy himself or
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<PAGE> 6
herself of the validity and level of shareholder support. If the Secretary
determines that the proposal or nomination is supported by less than five
percent (5%) of the Company's shares eligible to vote, then this requirement
will not be met.
(b) All costs associated with complying with this Section 12 of
the Bylaws shall be borne by the proponent of the proposal or nomination.
Shareholder proposals and Director nominations that have not been proposed,
adopted, or ratified by the Company's Board of Directors, and that fail to
comply fully with each of the requirements set forth in this Section 12 of
the Bylaws shall be considered void and of no effect, and shall not be
presented to the shareholders for consideration or vote.
ARTICLE II
Board of Directors
Section 1. Number and Term of Office. The property and the business
-------------------------
of the Company shall be managed by its Board of Directors, at least nine and
not more than fifteen in number, at least one of whom shall be a citizen and
resident of the State of Missouri. Directors will be elected by class so as
to equalize as nearly as possible the number in each class of Directors.
There shall be three classes of Directors, each class serving for a three
year term expiring one year after expiration of the term of the immediately
preceding class (effective at the annual meeting of the Company for the year
in which the term expires), so that the term of one class will expire each
year. All Directors shall serve during the term for which they were elected
or until their successors are duly elected and qualified, except that if any
Director shall fail to attend at least two meetings (either regular or
special) of the Board of Directors during a calendar year, he may be deemed
to have resigned as a Director effective on December 31 of such year, and the
vacancy so created shall be filled by the Board of Directors in the manner
provided in Section 2 of Article II of these By-Laws. Nothing in these
By-Laws shall be interpreted to prevent a Director or Officer whose term is
expiring from being eligible for re-election or reappointment.
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<PAGE> 7
Section 2. Filling of Vacancies. Vacancies in the Board of Directors
--------------------
when not filled by shareholders may be filled by the Directors, as provided
for in Article VI of the Amended and Restated Charter and Articles of
Incorporation. Vacancies occasioned by death, resignation, or
disqualification, when filled, shall be filled for the unexpired term for
which such Director was elected. Any Director elected by the Board to fill
such a vacancy shall have the same qualifications required of the Director
whose seat he fills.
Section 3. Place of Meeting, etc. The Board of Directors may hold
---------------------
their meetings and have one or more offices, and keep the books of the
Company, except as otherwise required by law, at the office of the Company,
in the City of St. Louis, Missouri, or at such other place or places as they
may from time to time by resolution determine.
Section 4. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held on the Thursday following the fourth Tuesday of
January, on the fourth Thursday of February, April, July, October, and on the
third Thursday of December in each year and shall commence immediately after
the meeting of the Board of Directors of General American Mutual Holding
Company shall have been concluded, or at such time or times of day as the
Board may determine.
Section 5. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President on three days' notice to each
Director specifying the time and place of such meeting, which notice may be
given, either personally or by mail or by facsimile addressed to the
Director; and shall be called by the Secretary in like manner and on like
notice on the written request of any five Directors. Every special meeting
shall be held either at the office of the Company in the City of St. Louis,
Missouri, or at some other place which shall have been previously designated
by resolution of the Board as one of the places at which special meetings of
the Board may be held. Except as herein otherwise provided, or unless
otherwise indicated in the notice thereof, any business may be transacted at
any special meeting, and any business may be transacted at any meeting at
which every Director shall be present, even though without any notice.
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<PAGE> 8
Section 6. Quorum. At all meetings of the Board of Directors, a
------
majority of the Directors then in office shall be necessary and sufficient to
constitute a quorum for the transaction of business, but if, at any meeting,
less than a quorum shall be present, a majority of those present may adjourn
the meeting from time to time, and the act of a majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Board of Directors, except as may be otherwise specifically provided by
statute or by the Amended and Restated Charter and Articles of Incorporation
of the Company or by these By-laws.
Section 7. Compensation of Directors. Members of the Board of
-------------------------
Directors, who are not salaried officers of the Company, shall receive such
annual compensation as shall be fixed from time to time by resolution of the
Board of Directors; and, in addition, the Directors who are not salaried
officers of the Company shall receive a sum in such amount as shall be fixed
from time to time by resolution of the Board of Directors, and the expenses
of attendance, if any, for attendance at each regular or special meeting of
the Board, whether or not an adjournment be had because of the absence of a
quorum.
Section 8. Action by Unanimous Consent of Directors. If all the
----------------------------------------
Directors severally or collectively consent in writing to any action taken or
to be taken by the Directors, such consents have the same force and effect as
a unanimous vote of the Directors at a meeting duly held, and may be stated
as such in any certificate or document filed with the Secretary of State of
the State of Missouri or any other state in the United States of America or
other Country. The Secretary of the Company shall file such consents with
the minutes of the meetings of the Board of Directors.
ARTICLE III
Executive Committee; Other Committees
Section 1. Executive Committee, Powers. The Chief Executive Officer
---------------------------
of the Company may, subject to the approval of the Board of Directors,
appoint an Executive Committee to consist of himself, the President of the
Company, whether or not he is the
II-24
<PAGE> 9
Chief Executive Officer, the elected Chairman of the Executive Committee, if
any, and five other Directors. The Committee shall have and exercise any or
all of the powers of the Board of Directors in the management of the business
and affairs of the Company, and the action of the Chief Executive Officer and
any three other members of said Committee shall for all purposes be and be
deemed to be the action of the Executive Committee whether or not the other
members thereof shall have had notice of such action or of the meeting at
which such action shall have been taken.
The Chief Executive Officer may, for the purpose of completing a
quorum, or to obtain the benefit of the advice and judgment of any Director
or Directors, invite any Director or Directors not a member or members of the
Executive Committee to attend any meeting of the Committee and each Director
so invited shall at such meeting have all the powers and authority of a
member of the Committee, including the right to vote.
Section 2. Term of Office. The members of the Executive Committee
--------------
shall hold office until the meeting of the Board of Directors next following
the annual meeting of the Company after their appointment, and until their
successors are appointed, but any member of the Executive Committee ceasing
to be a Director shall forthwith cease to be a member of the Executive
Committee, and all or any of the members of the Executive Committee may be
removed at any time by a majority vote of the Board of Directors.
Section 3. Organization. The Chairman of the Executive Committee, if
------------
any, shall preside at its meetings but in the absence of the Chairman of the
Executive Committee, the President shall preside. In all other matters the
Executive Committee shall fix its own rules of procedure and shall meet where
and as provided by such rules.
Section 4. Quorum. At all meetings of the Executive Committee four
------
Directors shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the affirmative vote of four of the regular or
acting members of the Committee in all cases shall be necessary for its
adoption of any resolution. Any resolution adopted by the affirmative vote
of a majority of the regular or acting members of the Executive
II-25
<PAGE> 10
Committee and any action taken by such majority shall for all purposes be
deemed to be the act of said Committee, whether or not such vote be had or
action taken at a meeting duly called and held in conformity with these
By-laws or with any rules of procedure adopted by the Committee.
Section 5. Contracts. Any member of the Executive Committee, or of
---------
any other Committee of the Board of Directors, individually, may be a party
to, or may be interested in any contract or transaction of the Company;
provided that such contract or transaction shall be approved or ratified by
the affirmative vote of a majority of the members of such Committee not so
interested (if such majority shall be sufficient to constitute a quorum); and
no such Committee member shall be liable or responsible on account of such
contract or transaction, but the mere ownership of stock in another
corporation by any Director (whether or not a member of the Executive
Committee or of any other Committee of the Board of Directors), shall not
disqualify him to vote as a Director, or as a member of said Committee, in
respect of any transaction between the Company and such other corporation.
Section 6. Minutes. The minutes of all proceedings of the Executive
-------
Committee shall be entered in a book kept for that purpose.
Section 7. Other Committees. The Chief Executive Officer of the
----------------
Company may appoint a Compensation Committee to consist of himself and not
less than two other officers of the Company which, to the extent provided by
resolution or resolutions passed by a majority of the Board of Directors,
shall have and exercise the powers of the Board of Directors in compensation
matters. Further, the Board of Directors may, by resolution or resolutions
passed by a majority of the whole Board, designate one or more committees,
each committee to consist of three or more of the Directors of the Company
which, to the extent provided in said resolution or resolutions, shall have
and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Company and may have power to authorize the
seal of the Company to be affixed to all papers which may require it. Each
such committee shall have such name as may be determined from time to time by
resolution adopted by the Board of Directors.
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<PAGE> 11
Section 8. Compensation. Members of the Executive Committee, who are
------------
not salaried officers of the Company, shall receive such annual compensation
as shall be fixed from time to time by resolution of the Board of Directors;
and members of the Executive Committee, and of any other committee or
committees of the Board of Directors, including Directors invited by the
Chairman or President to sit thereon at any meeting, except salaried officers
of the Company, may be allowed such additional sum, and the expenses of
attendance, if any, as shall be fixed from time to time by resolution of the
Board of Directors for attendance at each meeting of any committee specified
in any such resolution, whether or not an adjournment be had because of the
absence of a quorum.
ARTICLE IV
Advisory Council
Section 1. Advisory Council. Subject to the approval of the Board of
----------------
Directors, the President may appoint annually an Advisory Council to consist
of not more than five members.
Section 2. Term. The members of the Advisory Council shall be
----
appointed for a term of not to exceed one year, the term expiring on the date
of each annual meeting, and all or any of the members of the Advisory Council
may be removed at any time by a majority vote of the Board of Directors.
Section 3. Organization. The Board of Directors shall each year
------------
select a Chairman of the Advisory Council; otherwise the Advisory Council
shall fix its own rules of procedure and shall meet where and as provided by
such rules.
Section 4. Duties. The duties and functions of the Advisory Council
------
shall be advisory only, the purpose of such Council being to secure the
advice of capable and competent people interested in the Company and its
affairs for the benefit of the Board of Directors and officers of the Company
in transacting the business of the Company.
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<PAGE> 12
Section 5. Quorum. At all meetings of the Advisory Council, a
------
majority of those then appointed shall constitute a quorum for the
transaction of business.
Section 6. Chairman. The Chairman of the Advisory Council shall be
--------
invited by the President to attend all meetings of the Board and he shall
receive the same compensation as then prevails as the compensation for
Directors. On the date of his attendance at any such Directors' meeting, if
there be an Executive Committee meeting or meetings, then the Chairman of the
Advisory Council shall be invited to attend such Executive Committee meeting
or meetings and shall receive such attendance fees as are then provided for
the members of the Executive Committee.
ARTICLE V
Officers
Section 1. Officers. The officers of the Company shall be chosen by
--------
the Board of Directors and shall be a Chairman of the Board, unless the Board
of Directors desires the duties of the Chairman of the Board to devolve upon
the President, a Chairman of the Executive Committee, a President, one or
more Executive Vice-Presidents, as deemed necessary, one or more
Vice-Presidents, a Secretary, one or more Assistant Secretaries, an Actuary, a
Medical Director, General Counsel, Treasurer, and such other officers as the
Board of Directors may deem advisable, who shall have such authority and
perform such duties as from time to time may be prescribed by the Board of
Directors, or, in the event of their failure so to prescribe, then by the
President. The Chairman of the Board, the Chairman of the Executive
Committee and the President shall be chosen from among the Directors and
other officers may, but need not, be Directors. All such officers shall be
elected by the Board of Directors at the regular meeting of the Board held
after each annual meeting of the shareholders. One person may hold more than
one office except that no one person shall hold the offices of President and
Secretary and no one person shall hold the offices of Chairman of the Board
and Secretary.
Section 2. Chairman of the Board. The Chairman of the Board or the
---------------------
President, if it is the desire of the Board of Directors
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<PAGE> 13
that the duties of the Chairman of the Board devolve upon him, shall preside
at all meetings of the Board of Directors. The Chairman of the Board shall
have such other duties as may from time to time be provided by a resolution
or resolutions of the Board of Directors and he may be designated as the
Chief Executive Officer of the Company if the Board of Directors shall so
determine.
Section 2A. Chairman of the Executive Committee. The Chairman of the
-----------------------------------
Executive Committee, if any, otherwise the President, shall preside at all
meetings of the Executive Committee. In the absence of the Chairman of the
Executive Committee, the President shall preside. The Chairman of the
Executive Committee shall have such other duties as may from time to time be
provided by resolution or resolutions of the Board of Directors.
Section 2B. Chief Executive Officer. Either the Chairman of the Board
-----------------------
of Directors or the President shall be designated the Chief Executive Officer
of the Company and such designation shall be made by the Board of Directors
by a resolution or resolutions adopted from time to time.
The Chief Executive Officer shall have general charge and control of
all of its business and affairs and shall preside at all meetings of the
Company. He shall be ex-officio a member of all committees of the Board of
Directors and he shall from time to time secure information concerning the
business and affairs of the Company and shall promptly lay such information
before the Board of Directors or any of its committees authorized for such
purpose.
The Chairman of the Board, when he is the Chief Executive Officer of
the Company, shall exercise all powers and duties otherwise specifically
delegated in these By-laws to the President of the Company, provided that in
the absence of the Chairman of the Board of Directors his duties and
responsibilities as Chief Executive Officer of the Company shall devolve upon
the President, as provided for in Article V, Section 3 of these By-laws,
notwithstanding the provisions of Article V, Section 4 of these By-laws, as
amended, and provided further that the President of the Company, regardless
of whether he is the Chief Executive Officer, the Chairman of the Board, if
he is the Chief Executive
II-29
<PAGE> 14
Officer, an Executive Vice-President or a Vice-President may sign contracts
with the Secretary in the name of the Company, as authorized in Article V,
Section 6 of these By-laws.
Section 3. President. The President may be designated as the Chief
---------
Executive Officer of the Company if the Board of Directors shall so
determine.
If he is not designated as Chief Executive Officer, the President shall
perform such duties as may from time to time be assigned to him by resolution
of the Board of Directors or of the Executive Committee or by the Chairman of
the Board. In the absence of the Chairman of the Board of Directors his
duties and responsibilities as Chief Executive Officer of the Company shall
devolve upon the President.
Section 4. Executive Vice-Presidents. Each Executive Vice-President
-------------------------
shall perform such duties as may from time to time be assigned to him by
resolution of the Board of Directors or of the Executive Committee or by the
Chief Executive Officer of the Company or by the President of the Company.
In the absence of the President, his duties should devolve upon the Executive
Vice-Presidents.
Section 5. Vice-Presidents. Each Vice-President shall perform such
---------------
duties as may from time to time be assigned to him by resolution of the Board
of Directors or of the Executive Committee or by the President.
Section 6. Secretary. The Secretary shall keep the minutes of all
---------
meetings of the Board of Directors and the minutes of all meetings of the
Company in books provided for that purpose; he shall attend to the giving or
serving of all notices of the Company; he may sign with the President, an
Executive Vice-President, or a Vice-President, in the name of the Company,
all contracts authorized by the Board of Directors or by any Committee of the
Company, having the requisite authority and, when so ordered by the Board of
Directors or such Committee, he shall affix the seal of the Company thereto;
he shall have charge of such books and papers as the Board of Directors or
the Executive Committee shall direct, all of which shall at all reasonable
times be open to the examination of any Director, upon application at
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<PAGE> 15
the office of the Company during business hours; and he shall in general
perform all the duties incident to the office of the Secretary, subject to
the control of the Board of Directors, the Executive Committee, the Chairman
of the Board, and the President.
Section 7. Compensation of Officers. The President and the other
------------------------
officers of the Company shall be entitled to receive such compensation for
their services as may from time to time be determined by the Board of
Directors.
Section 8. Removal of Officers. The President, subject to the
-------------------
approval of the Board of Directors, may at any time remove any of the
officers of the Company and the salary of any officer so removed by him shall
cease upon the approval of such removal being given by the Board. Except
where otherwise expressly provided in a contract duly authorized by the Board
of Directors, all officers and agents shall be subject to removal at any time
by the affirmative vote of a majority of the whole Board of Directors, and
all officers, agents, and employees other than officers appointed by the
Board of Directors shall hold office at the discretion of the Committee or of
the officers appointing them.
Section 9. Offices to Be Kept in Missouri. The Chairman of the Board,
------------------------------
when he is the Chief Executive Officer, the President, the Executive
Vice-Presidents, the Treasurer, and the Secretary of the Company shall have
and keep their offices in this State.
Section 10. Other Employees. Except as hereinbefore provided, the
---------------
President shall have full power to appoint, remove, and fix the compensation
of each and every person employed by the Company.
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<PAGE> 16
ARTICLE VI
Indemnification of Officers and Directors
Against Liabilities and Expenses
Section 1. Indemnification with Respect to Third Party Actions. The
---------------------------------------------------
Company shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the Company) by reason of the fact that
he is or was a director, officer, employee, or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee,
partner, trustee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, taxes, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, does not, of itself, create a presumption
- ---- ----------
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Company, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful. Any indemnification under this
Section 1 is to be made by the Company only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee, partner, trustee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in this Section 1.
Such determination is to be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit, or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (c) by the shareholders.
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<PAGE> 17
Section 2. Indemnification with Respect to Actions by or in the Right
----------------------------------------------------------
of the Company. The Company shall indemnify any person who was or is a party
- --------------
or is threatened to be made a party to any threatened, pending, or completed
action or suit by or in the right of the Company to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee,
or agent of the Company, or is or was serving at the request of the Company
as a director, officer, employee, partner, trustee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses (including attorneys' fees), judgments, fines, taxes, and amounts
paid in settlement actually and reasonably incurred by him in connection with
such action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company. No indemnification, however, shall be made in respect of any claim,
issue or matter as to which such person has been adjudged to be liable for
gross negligence or willful misconduct in the performance of his duty to the
Company unless and only to the extent that the court in which such action or
suit was brought determines upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
deems proper. Any indemnification under this Section 2 (unless ordered by a
court) is to be made by the Company only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee,
partner, trustee, or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in this Section 2. Such
determination is to be made (a) by the Board of Directors by a majority vote
of a quorum consisting of Directors who were not parties to such action,
suit, or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (c) by the shareholders.
Section 3. Payment of Expenses in Advance of Disposition of Action.
-------------------------------------------------------
Expenses incurred in defending any actual or threatened civil or criminal
action, suit, or proceeding shall be paid by the Company in advance of the
final disposition of such action, suit, or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of
II-33
<PAGE> 18
the Director, officer, employee, partner, trustee, or agent to repay such
amount if it is ultimately determined that he is not entitled to be
indemnified by the Company as authorized in this Article.
Section 4. Indemnification Provided in This Article Non-Exclusive.
------------------------------------------------------
The indemnification provided by this Article is not exclusive of any other
rights to which one seeking indemnification may be entitled under any By-law,
agreement, vote of shareholders or disinterested Directors, or otherwise,
both as to action in his official capacity while holding such office, and as
to a person who has ceased to be a Director, officer, employee, partner,
trustee, or agent and the indemnification inures to the benefit of the heirs,
executors, and administrators of such a person.
Section 5. Definition of "Company". For the purposes of this Article,
-----------------------
references to the "Company" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation
so that any person who is or was a director, officer, employee, partner,
trustee, or agent of such a constituent corporation or is or was serving at
the request of such constituent corporation as a director, officer, employee,
partner, trustee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise stands in the same position under the
provisions of this Article with respect to the resulting or surviving
corporation in the same capacity.
ARTICLE VII
Miscellaneous Provisions
Section 1. Corporate Seal. The Board of Directors shall provide a
--------------
suitable seal, containing the name of the Company, the year of its
incorporation and the words CORPORATE SEAL, MISSOURI, which seal shall be in
charge of the Secretary. Such seal may from time to time, upon the order of
the Board of Directors, expressed by a resolution of said Board, be used by
causing a facsimile thereof to be impressed, affixed, or reproduced. If and
when so directed by the Board of Directors, a duplicate of the seal may be
kept and be used by any Assistant Secretary or other officer.
II-34
<PAGE> 19
Section 2. Fiscal Year. The fiscal year of the Company shall begin on
-----------
the first day of January and terminate on the thirty-first day of December in
each year.
Section 3. Manner of Giving Notice. Whenever under the provisions of
-----------------------
these By-laws notice is required to be given to any Director or shareholder,
it shall not be construed to mean personal notice, but such notice may be
given in writing, by mail, by depositing the same in a postoffice or letter
box, in a post-paid sealed wrapper, addressed to such Director or shareholder
at his address as it appears on the records of the Company, and such notice
shall be deemed to be given at the time when the same shall be thus mailed.
Any shareholder of the Company, Director, officer or committee member may
waive any notice required to be given under these By-laws. Whenever in the
Company's Amended and Restated Charter and Articles of Incorporation or these
By-laws notice is required or permitted to be given by mail, the affidavit of
the person who mailed such notice, filed with the Secretary of the Company,
shall constitute conclusive evidence that such notice has been given and
mailed.
Section 4. Certificates for Shares. The Board of Directors is to
-----------------------
prescribe the form of the certificate of stock of the Company. The
certificate is to be signed by the President or Vice-President and by the
Secretary, Treasurer, or Assistant Secretary or Assistant Treasurer, is to be
sealed with the seal of the Company and is to be numbered consecutively. The
name of the owner of the certificate, the number of shares of stock
represented thereby, and the date of issue are to be recorded on the books of
the Company. Certificates of stock surrendered to the Company for transfer
are to be canceled, and new certificates of stock representing the
transferred shares issued. New stock certificates may be issued to replace
lost, destroyed or mutilated certificates upon such terms and with such
security to the Company as the Board of Directors may require.
Section 5. Transfer of Shares. Shares of stock of the Company may be
------------------
transferred on the books of the Company by the delivery of the certificates
representing such shares to the Company for cancellation, and with an
assignment in writing on the back of the certificate executed by the person
named in the certificates as the owner thereof, or by a written power of
II-35
<PAGE> 20
attorney executed for such purpose by such person. The person registered on
the books of the Company as the owner of shares of stock of the Company is
deemed the owner thereof and is entitled to all rights of ownership with
respect to such shares.
Section 6. Transfer Books. Transfer books are to be maintained under
--------------
the direction of the Secretary, showing the ownership and transfer of all
certificates of stock issued by the Company.
Section 7. Construction. Whenever a word in the masculine gender is
------------
used in these By-laws it shall be understood to be in or include the feminine
gender where appropriate under the circumstances. These By-laws are to be
construed to be consistent with applicable law, and if such construction is
not possible then the invalidity of a By-law or a portion thereof shall not
affect the validity of the remainder of the By-laws, which shall remain in
full force and effect.
ARTICLE VIII
Amendments
These By-laws may be altered, amended or repealed, or new By-laws may
be adopted, by vote of a majority of all of the members of the Board of
Directors then in office, at any regular or special meeting of the Board;
provided, no By-law may be adopted or amended so as to be inconsistent with
the Amended and Restated Charter and Articles of Incorporation of the Company
or the Constitution or other laws of the State of Missouri.
Amendments:
Article I, Section 12 added by amendment on 1/29/98
II-36
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - S&P 500 Index
<NUMBER> 1
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 17,073
<INVESTMENTS-AT-VALUE> 20,582
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<TOTAL-ASSETS> 20,582
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<NET-INVESTMENT-INCOME> (125)
<REALIZED-GAINS-CURRENT> 2,484
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<DISTRIBUTIONS-OF-INCOME> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Money Market
<NUMBER> 2
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<INVESTMENTS-AT-VALUE> 8,600
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<TOTAL-ASSETS> 9,316
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 9,316
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (36)
<NET-INVESTMENT-INCOME> (36)
<REALIZED-GAINS-CURRENT> 73
<APPREC-INCREASE-CURRENT> 184
<NET-CHANGE-FROM-OPS> 221
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,154
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Bond Index
<NUMBER> 3
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,450
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 3,448
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<INTEREST-INCOME> 0
<OTHER-INCOME> 0
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<NET-INVESTMENT-INCOME> (23)
<REALIZED-GAINS-CURRENT> (10)
<APPREC-INCREASE-CURRENT> 250
<NET-CHANGE-FROM-OPS> 217
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (3,315)
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Managed Equity
<NUMBER> 4
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
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<EXPENSES-NET> (29)
<NET-INVESTMENT-INCOME> (29)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Asset Allocation
<NUMBER> 5
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
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<NET-INVESTMENT-INCOME> (80)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - International Equity
<NUMBER> 6
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
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<EXPENSES-NET> (63)
<NET-INVESTMENT-INCOME> (63)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Mid-Cap Equity
<NUMBER> 7
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<OTHER-ITEMS-ASSETS> 0
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 282
<SHARES-COMMON-PRIOR> 249
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<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,235
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (41)
<NET-INVESTMENT-INCOME> (41)
<REALIZED-GAINS-CURRENT> 452
<APPREC-INCREASE-CURRENT> 945
<NET-CHANGE-FROM-OPS> 1,356
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,150
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 0
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<EXPENSE-RATIO> 0
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Small-Cap Equity
<NUMBER> 8
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,277
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<TOTAL-ASSETS> 1,144
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 24
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,144
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (2)
<NET-INVESTMENT-INCOME> (2)
<REALIZED-GAINS-CURRENT> 150
<APPREC-INCREASE-CURRENT> (133)
<NET-CHANGE-FROM-OPS> 15
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,144
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Equity Income
<NUMBER> 9
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 13,671
<INVESTMENTS-AT-VALUE> 17,001
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,001
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5
<TOTAL-LIABILITIES> 5
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 700
<SHARES-COMMON-PRIOR> 491
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 16,996
<DIVIDEND-INCOME> 187
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (111)
<NET-INVESTMENT-INCOME> 76
<REALIZED-GAINS-CURRENT> 1,249
<APPREC-INCREASE-CURRENT> 1,802
<NET-CHANGE-FROM-OPS> 3,127
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,643
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Growth
<NUMBER> 10
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 17,509
<INVESTMENTS-AT-VALUE> 22,238
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,238
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9
<TOTAL-LIABILITIES> 9
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 599
<SHARES-COMMON-PRIOR> 429
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 22,229
<DIVIDEND-INCOME> 94
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (145)
<NET-INVESTMENT-INCOME> (51)
<REALIZED-GAINS-CURRENT> 802
<APPREC-INCREASE-CURRENT> 2,689
<NET-CHANGE-FROM-OPS> 3,440
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,858
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Overseas
<NUMBER> 11
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 7,473
<INVESTMENTS-AT-VALUE> 8,175
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,175
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4
<TOTAL-LIABILITIES> 4
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 426
<SHARES-COMMON-PRIOR> 289
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 8,171
<DIVIDEND-INCOME> 99
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (57)
<NET-INVESTMENT-INCOME> 42
<REALIZED-GAINS-CURRENT> 466
<APPREC-INCREASE-CURRENT> 63
<NET-CHANGE-FROM-OPS> 571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Asset Manager
<NUMBER> 12
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 524
<INVESTMENTS-AT-VALUE> 578
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 578
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 32
<SHARES-COMMON-PRIOR> 16
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 578
<DIVIDEND-INCOME> 9
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (3)
<NET-INVESTMENT-INCOME> 6
<REALIZED-GAINS-CURRENT> 34
<APPREC-INCREASE-CURRENT> 34
<NET-CHANGE-FROM-OPS> 74
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 301
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - High Income
<NUMBER> 13
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,954
<INVESTMENTS-AT-VALUE> 2,175
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,175
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2
<TOTAL-LIABILITIES> 2
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 160
<SHARES-COMMON-PRIOR> 95
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,173
<DIVIDEND-INCOME> 91
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (14)
<NET-INVESTMENT-INCOME> 77
<REALIZED-GAINS-CURRENT> 29
<APPREC-INCREASE-CURRENT> 164
<NET-CHANGE-FROM-OPS> 270
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 982
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Worldwide Hard Assets
<NUMBER> 14
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 281
<INVESTMENTS-AT-VALUE> 270
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 270
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 17
<SHARES-COMMON-PRIOR> 11
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 270
<DIVIDEND-INCOME> 4
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (2)
<NET-INVESTMENT-INCOME> 2
<REALIZED-GAINS-CURRENT> 3
<APPREC-INCREASE-CURRENT> (14)
<NET-CHANGE-FROM-OPS> (9)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 83
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Multi-Style Equity
<NUMBER> 15
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2,537
<INVESTMENTS-AT-VALUE> 2,538
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,539
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 199
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,539
<DIVIDEND-INCOME> 1
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (3)
<NET-INVESTMENT-INCOME> (2)
<REALIZED-GAINS-CURRENT> 5
<APPREC-INCREASE-CURRENT> 2
<NET-CHANGE-FROM-OPS> 5
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,539
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Core Bond
<NUMBER> 16
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,126
<INVESTMENTS-AT-VALUE> 1,154
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,155
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 110
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,155
<DIVIDEND-INCOME> 3
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (2)
<NET-INVESTMENT-INCOME> 1
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 27
<NET-CHANGE-FROM-OPS> 29
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,154
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NAME> Sep. Acct. 11 - Aggressive Equity
<NUMBER> 17
<MULTIPLIER> 1000
<PERIOD-START> JAN-01-1997
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1,321
<INVESTMENTS-AT-VALUE> 1,344
<RECEIVABLES> 1
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,345
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 100
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,345
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> (1)
<NET-INVESTMENT-INCOME> (1)
<REALIZED-GAINS-CURRENT> 2
<APPREC-INCREASE-CURRENT> 24
<NET-CHANGE-FROM-OPS> 25
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,345
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
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<NAME> Sep. Acct. 11 - Non-US
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