<PAGE>
As filed with the Securities and Exchange Commission on 27 March 1998.
Registration No. 33-54774
811-7252
Securities and Exchange Commission
Washington, DC 20549
FORM N-4
Registration Statement Under the Securities Act of 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [ X ]
Registration Statement Under the Investment Company Act of 1940
Amendment No. 12 [ X ]
General American Separate Account Twenty-Nine
(Exact Name of Registrant)
General American Life Insurance Company
(Name of Depositor)
700 Market Street
St. Louis, Missouri 63101
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (314) 231-1700
Christopher A. Martin, Esquire
General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
(Name and address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Ave., NW
Washington, DC 20004-2404
i
<PAGE>
It is proposed that this filing will become effective (check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b), of Rule 485
[ X ] 1 April 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 31 December 1997 on 13 March 1998.
ii
<PAGE>
Cross Reference Sheet
Pursuant to Rule 481
Showing Location in Part A (Prospectus) and Part B
(Statement of Additional Information) of Registration Statement
of Information Required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
1. Cover Page. . . . . . . . . . . . Cover Page
2. Definitions . . . . . . . . . . . Definitions
3. Synopsis. . . . . . . . . . . . . Questions and Answers
About the Contract
4. Condensed Financial
Information . . . . . . . . . . . Financial Statements
5. General Description of
(a) Depositor . . . . . . . . . . General American
(b) Registrant. . . . . . . . . . The Separate Accounts
(c) Portfolio Company . . . . . . GT Global Variable Investment Trust and
GT Global Variable Investment Series
(d) Fund Prospectus . . . . . . . GT Global Variable Investment Trust and
GT Global Variable Investment Series
(e) Voting Rights . . . . . . . . Voting Rights
(f) Administrators. . . . . . . . N/A
6. Deductions and Expenses
(a) General . . . . . . . . . . . Charges and Deductions
(b) Sales Load %. . . . . . . . . Surrender Charge
(c) Special Purchase Plan . . . . N/A
(d) Commissions . . . . . . . . . Principal Underwriter
(e) Expenses - Registrant. . . . Administrative Charges; Mortality and
Expense Assurance Charge
(f) Fund Expenses . . . . . . . . Advisory Fees and Other Expenses of the
Funds and Trusts
(g) Organizational Expenses . . . N/A
7. Contracts
(a) Persons with Rights . . . . . Summary; The Contracts; Distributions
Under the Contracts; Voting Rights
ii
<PAGE>
(b) (i) Allocation of Purchase
Payments . . . . . . . Allocation of Net Purchase Payments
(ii) Transfers . . . . . . . Transfer Privilege
(iii) Exchanges . . . . . . . N/A
(c) Changes . . . . . . . . . . . Additions, Deletions or Substitutions of
Investments
8. Annuity Period. . . . . . . . . . Annuity Provisions; Annuity Date;
Annuity Options
9. Death Benefit . . . . . . . . . . Death Benefits
10 Purchases and Contract Value
(a) Purchases . . . . . . . . . . Contract Application and Purchase
Payments
(b) Valuation . . . . . . . . . . Value of Accumulation Units
(c) Daily Calculation . . . . . . Value of Accumulation Units
(d) Underwriter . . . . . . . . . Principal Underwriter
11. Redemptions
(a) - By Owners . . . . . . . . . Surrender Charge; Cash Withdrawals;
Systematic Withdrawal Plan
- By Annuitant. . . . . . . . Annuity Options
(b) Texas Optional Retirement
Program . . . . . . . . . . . N/A
(c) Check Delay . . . . . . . . . Deferment of Payment
(d) Lapse . . . . . . . . . . . . Account Continuation
(e) Free Look . . . . . . . . . . Can the Contract be Canceled After It Is
Delivered?; Right to Examine
12. Taxes . . . . . . . . . . . . . . Federal Tax Matters
13. Legal Proceedings . . . . . . . . Part B: Legal Proceedings
14. Table of Contents for the
Statement of Additional
Information . . . . . . . . . . . Statement of Additional Information
iv
<PAGE>
PART B
Item of Form N-4 Part B Caption
15. Cover Page. . . . . . . . . . . . Cover Page
16. Table of Contents . . . . . . . . Table of Contents
17. General Information Part A: General American
and History . . . . . . . . . . . Life Insurance Company and The Separate
Account
18. Services
(a) Fees and Expenses of
Registrant. . . . . . . . . . N/A
(b) Management Contracts. . . . . N/A
(c) Custodian . . . . . . . . . . N/A
Independent Public
Accountant. . . . . . . . . Financial Statements
(d) Assets of Registrant. . . . . Safekeeping of Account Assets
(e) Affiliated Persons. . . . . . N/A
(f) Principal Underwriter . . . . Distribution of the Contracts
19. Purchase of Securities Being
Offered . . . . . . . . . . . . . Distribution of the Contracts
20. Underwriters . . . . . . . . . . Distribution of the Contracts
21. Money Market Yield. . . . . . . . Money Market Yield
22. Annuity Payments. . . . . . . . . Computation of Variable Annuity Income
Payments
23. Financial Statements. . . . . . . Financial Statements
PART C - OTHER INFORMATION
Item of Form N-4
24. Financial Statements and
Exhibits. . . . . . . . . . . . . Financial Statements and Exhibits
(a) Financial Statements. . . . . (a) Financial Statements
(b) Exhibits. . . . . . . . . . . (b) Exhibits
25. Directors and Officers
of the Depositor. . . . . . . . . Directors and officers of the Depositor
26. Persons Controlled by or Under
Common Control with the Depositor
or Registrant . . . . . . . . . . Persons Controlled by or In Common
Control with the Depositor Registrant
v
<PAGE>
27. Number of Contract Owners . . . . Number of Contract Owners
28. Indemnification . . . . . . . . . Indemnification
29. Principal Underwriters. . . . . . Principal Underwriters
30. Location of Accounts and
Records . . . . . . . . . . . . . Location of Accounts and Records
31. Management Services . . . . . . . Management Services
32. Undertakings. . . . . . . . . . . Undertakings
Signature Pages . . . . . . . . . Signatures
vi
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNTS
TWENTY-EIGHT & TWENTY-NINE
PROSPECTUS
FOR THE
INDIVIDUAL VARIABLE ANNUITY CONTRACT
OFFERED BY
GENERAL AMERICAN LIFE INSURANCE COMPANY
(A MISSOURI COMPANY)
700 MARKET STREET
ST. LOUIS, MISSOURI 63101
1-800-237-6580
- --------------------------------------------------------------------------------
This Prospectus describes individual variable annuity contracts offered by
General American Life Insurance Company ("General American"). These contracts,
collectively referred to as the "Contract" or the "Contracts" in this
Prospectus, are designed to aid individuals in long-term financial planning and
provide for the accumulation of capital on a tax-favored basis for retirement or
other long-term purposes. The Contracts may be purchased with a single minimum
Initial Purchase Payment of $2,000.
Prior to the Annuity Date, the Contract Owner may direct that Purchase Payments
accumulate on a completely variable basis, a completely fixed basis, or a
combination variable and fixed basis. The Contract Owner has significant
flexibility in determining the frequency and amount of each Purchase Payment.
The Contract Owner may elect to receive Annuity Payments on a variable basis,
fixed basis, or a combination of both. The Contract Owner also has significant
flexibility in determining the Annuity Date on which Annuity Payments are
scheduled to commence. Full surrenders or partial withdrawals may be made at any
time prior to the Annuity Date, although in many circumstances they may be
subject to a surrender charge and a Federal penalty tax. Any amount surrendered
or withdrawn will be paid in a lump sum, or upon annuitization, the Contract
will be paid out under one of the available Annuity Options. The Contracts
provide the flexibility necessary to permit a Contract Owner to devise an
annuity that best fits his or her needs.
Purchase Payments may be allocated all or in part to General American Separate
Accounts Twenty-Eight and Twenty-Nine. Assets of the Separate Accounts are
invested in Divisions which invest in Funds of GT Global Variable Investment
Funds. A list of the Funds can be found in the accompanying Prospectus for the
GT Global Variable Investment Funds. In most states, the Contract Owner may also
allocate all or part of the Purchase Payments to the Fixed Account of General
American which provides a guaranteed rate of return for a specified period.
This Prospectus sets forth the information that a prospective investor should
know before investing. A Statement of Additional Information about the Contracts
and the Divisions is available free if you write General American at the address
above or by calling (800) 237-6580. The Statement of Additional Information,
which has the same date as this Prospectus, has been filed with the Securities
and Exchange Commission and as amended or supplemented from time to time, is
incorporated herein by reference. The table of contents of the Statement of
Additional Information can be found at the end of this Prospectus.
- --------------------------------------------------------------------------------
This Prospectus Must Be Accompanied By A Current Prospectus For the
GT Global Variable Investment Funds.
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 April 1, 1998.
The Contract is available in all states except New York. Certain investment
options
may not be available in all States.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE 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.
Prospectus Page 1
<PAGE>
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
DEFINITIONS............................................................................... 4
SUMMARY OF CONTRACT FEES AND EXPENSES..................................................... 6
HISTORICAL CHARTS OF UNITS AND UNIT VALUES................................................ 8
QUESTIONS AND ANSWERS ABOUT THE CONTRACT.................................................. 10
GENERAL AMERICAN LIFE INSURANCE COMPANY AND THE SEPARATE ACCOUNTS......................... 12
General American........................................................................ 12
The Separate Accounts................................................................... 12
GT GLOBAL VARIABLE INVESTMENT FUNDS....................................................... 13
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS...................................... 13
THE CONTRACTS............................................................................. 14
Right to Examine........................................................................ 14
Contract Application and Purchase Payments.............................................. 14
Place, Amount and Frequency........................................................... 14
Account Continuation.................................................................. 15
Allocation of Net Purchase Payments................................................... 16
VARIABLE ACCOUNT.......................................................................... 16
Accumulation Units...................................................................... 16
Value of Accumulation Units............................................................. 16
Net Investment Factor................................................................... 16
GUARANTEED INTEREST OPTIONS............................................................... 17
Guarantee Periods....................................................................... 17
Guaranteed Interest Rates............................................................... 17
TRANSFER PRIVILEGE........................................................................ 18
DOLLAR COST AVERAGING..................................................................... 18
PERSONAL PORTFOLIO REBALANCING............................................................ 19
INTEREST SWEEP............................................................................ 19
CONTRACT OWNER INQUIRIES.................................................................. 20
CHARGES AND DEDUCTIONS.................................................................... 20
Administrative Charges.................................................................. 20
Annual Contract Fee................................................................... 20
Transfer Fee.......................................................................... 20
Special Handling Fees................................................................. 21
Surrender Charge........................................................................ 21
Mortality and Expense Risk Charge....................................................... 22
Premium Tax............................................................................. 22
Other Taxes............................................................................. 23
Fees and Expenses of the Funds.......................................................... 23
YIELDS AND TOTAL RETURNS.................................................................. 23
DISTRIBUTIONS UNDER THE CONTRACT.......................................................... 25
Cash Withdrawals........................................................................ 25
Systematic Withdrawal Plan.............................................................. 26
Interest Change Adjustment.............................................................. 26
Annuity Provisions...................................................................... 27
Annuity Date............................................................................ 27
</TABLE>
Prospectus Page 2
<PAGE>
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Annuity Options......................................................................... 27
Election of Annuity Options........................................................... 27
The Options Available................................................................. 27
Calculation of Payments............................................................... 28
Value of Variable Annuity Payments.................................................... 28
Deferment of Payment.................................................................... 28
The Beneficiary......................................................................... 29
Death Benefits.......................................................................... 29
Death of a Contract Owner who is the Annuitant........................................ 29
Death of a Contract Owner who is not the Annuitant.................................... 29
Death of the Annuitant who is not a Contract Owner.................................... 29
Other Provisions...................................................................... 29
Amount of Death Benefit................................................................. 30
Death Benefit Reset Amount.............................................................. 30
Assignments and Changes of Ownership.................................................... 30
FEDERAL TAX MATTERS....................................................................... 31
Introduction............................................................................ 31
Taxation of General American............................................................ 31
Tax Status of the Contracts............................................................. 31
Diversification....................................................................... 31
Investor Control...................................................................... 31
Required Distributions................................................................ 32
Taxation of Annuities................................................................... 32
In General............................................................................ 32
Withdrawals and Surrenders............................................................ 32
Annuity Payments...................................................................... 33
Penalty Tax........................................................................... 33
Taxation of Death Benefit Proceeds.................................................... 33
Transfers, Assignments or Exchanges of the Contract................................... 33
Multiple Contracts.................................................................... 34
Withholding........................................................................... 34
Possible Changes in Taxation.......................................................... 34
Other Tax Consequences................................................................ 34
Qualified Contracts................................................................... 34
Individual Retirement Annuities and Accounts............................................ 34
Code Section 403(b) Plans............................................................... 35
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans............................ 35
Deferred Compensation Plans............................................................. 35
Restrictions under Qualified Contracts.................................................. 35
VOTING RIGHTS............................................................................. 36
PRINCIPAL UNDERWRITER..................................................................... 37
FINANCIAL STATEMENTS...................................................................... 37
STATEMENT OF ADDITIONAL INFORMATION....................................................... 38
APPENDIX A -- Surrender Charge Calculations............................................... 39
APPENDIX B -- Interest Change Adjustment Calculations..................................... 40
</TABLE>
Prospectus Page 3
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
ACCUMULATED VALUE -- The value under the Contract prior to the Annuity Date of
all Net Purchase Payments, plus all interest credits or all gains and losses,
less any past charges deducted or amounts previously withdrawn.
ACCUMULATION UNIT -- An accounting unit of measure used to determine the value
of a Division prior to the Annuity Date.
ANNUITANT -- The individual upon whose life Annuity Payments are based and who
may receive payments from the Contract under an Annuity Option.
ANNUITY DATE -- The date on which Annuity Payments begin.
ANNUITY OPTION -- One of several ways in which Annuity Payments may be made.
ANNUITY PAYMENT -- One of a series of payments made under an Annuity Option.
ANNUITY SERVICE OFFICE -- The service office of the Company is General American,
GT Global Department, P.O. Box 66821, St. Louis, Missouri 63166-6821.
ANNUITY UNIT -- An accounting unit of measure used to calculate variable Annuity
Payments.
BENEFICIARY -- The person or legal entity that may receive any benefits due
under the Contract in the event of the Annuitant's or Contract Owner's death.
BUSINESS DAY -- A day on which both General American and the New York Stock
Exchange ("NYSE") are open for business. The following days are not business
days for General American: New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Friday after Thanksgiving, and Christmas Day.
CODE -- The Internal Revenue Code of 1986, as amended.
CONTRACT -- The document for each Contract Owner which evidences the coverage of
the Contract Owner. The Contract, any of its riders, endorsements, amendments,
and the Contract Application (if any), a copy of which is attached to and made a
part hereof, are the entire Contract.
CONTRACT APPLICATION -- The document signed by the Contract Owner that evidences
the Contract Owner's application for the Contract.
CONTRACT OWNER ("YOU", "YOUR") -- The person, persons or entity entitled to
exercise all rights and privileges or ownership as stated in the Contract and in
whose name the Contract is issued.
CONTRACT OWNER'S ACCOUNT -- An account established for each Contract Owner.
CONTRACT YEAR -- A continuous twelve month period commencing on the Date of
Issue and each anniversary, thereof.
DATE OF ISSUE -- The date the Initial Purchase Payment is invested in the
Contract.
DIVISION -- A Division of Separate Account Twenty-Eight or Twenty-Nine. Each
Division invests solely in its corresponding GT Global Variable Investment Fund
and takes the name of the Fund in which it invests.
EXPIRATION DATE -- The expiration date of the Guarantee Period of the Fixed
Account. This date will be the day before the date that a Net Purchase Payment
or transfer occurred, plus the number of calendar years in the Guarantee Period.
FIXED ACCOUNT -- An account that consists of all of our assets other than those
in the Separate Accounts or any other of our segregated investment accounts. The
Fixed Account may not be available in all jurisdictions.
FUND (OR FUNDS) -- The separate investment portfolios of GT Global Variable
Investment Funds.
GENERAL AMERICAN ("COMPANY", "WE", "US", "OUR") -- General American Life
Insurance Company, a Missouri company.
GT GLOBAL VARIABLE INVESTMENT FUNDS -- Refers to a portfolio of either G.T.
Global Variable Investment Series or G.T. Global Variable Investment Trust or
the two together.
GUARANTEED INTEREST OPTIONS -- One of several investment options in which
General American guarantees the repayment of the principal amount and payment of
a fixed rate of interest, less charges, for a specified Guarantee Period.
Amounts
Prospectus Page 4
<PAGE>
allocated by Contract Owners to a Guaranteed Interest Option will be invested in
General American's Fixed Account.
GUARANTEE PERIOD -- A period of time during which a specified rate of return is
promised by the Company under a Guaranteed Interest Option.
INITIAL PURCHASE PAYMENT -- The first payment which the Contract Owner makes.
NET PURCHASE PAYMENT -- A Purchase Payment, less any applicable deduction for
premium or other tax.
NONQUALIFIED CONTRACTS -- Contracts that do not receive favorable tax treatment
under Sections 401, 403, 408, 408A or 457 of the Code. Earnings on these
Contracts currently receive special Federal income tax treatment.
PAYEE -- The Contract Owner, Annuitant, Beneficiary, or any other person, estate
or legal entity to whom benefits are to be paid.
PURCHASE PAYMENT -- Any payment or sum received by the Company from the Contract
Owner.
QUALIFIED CONTRACTS -- Contracts purchased in connection with a retirement plan
that receives favorable tax treatment under Sections 401, 403, 408, 408A or 457
of the Code.
RIGHT TO EXAMINE PERIOD -- The period during which the Contract can be cancelled
and treated as void from the Date of Issue.
SEPARATE ACCOUNT -- A segregated investment account created by General American.
The Separate Accounts for this Contract are numbers Twenty-Eight and
Twenty-Nine. Each is registered with the Securities and Exchange Commission as a
unit investment trust and meets the definition of a "separate account" under the
Federal securities laws.
VALUATION PERIOD -- A period commencing at the close of business each Business
Day and ending at the close of business of the following Business Day.
WRITTEN NOTICE (OR WRITTEN REQUEST) -- A notice or request in writing signed by
the Contract Owner and received by our Annuity Service Office. Such a request
must be in a format and have content acceptable to General American.
Prospectus Page 5
<PAGE>
SUMMARY OF CONTRACT FEES AND
EXPENSES
- --------------------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES
<TABLE>
<S> <C>
SALES LOAD imposed on Purchase:........ None
</TABLE>
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE):
Ten percent (10%) of the Accumulated Value may be withdrawn without surrender
charge each Contract Year. Twenty percent (20%) of the Accumulated Value may be
withdrawn without surrender charge if no withdrawals were made in the prior
Contract Year. The annual free withdrawal amount will equal the appropriate
percentage of the Accumulated Value on the date that the first partial
withdrawal is made in the Contract Year. The free withdrawal amount does not
apply upon full surrender. After a Net Purchase Payment has been held by the
Company for six complete years it may be withdrawn free of any surrender charge.
For Net Purchase Payments held by the Company for less than six complete years,
surrender charges are as follows (expressed as a percentage of Net Purchase
Payments withdrawn):
<TABLE>
<CAPTION>
YEARS SINCE RECEIPT OF SURRENDER CHARGE
NET PURCHASE PAYMENT PERCENTAGE
- --------------------------- ---------------------
<S> <C>
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6 0%
</TABLE>
TRANSFER FEE: The lesser of $25.00 or 2% of the amount transferred. The fee
applies to each transfer in excess of twelve during the Contract Year, excluding
transfers made under the dollar cost averaging, personal portfolio rebalancing
or interest sweep programs.
ANNUAL CONTRACT FEE: The lesser of $30.00 or 2% of Accumulated Value if the
Accumulated Value is less than $20,000. If the Accumulated Value is $20,000 or
greater, or if all assets are invested in the Fixed Account, the contract fee is
waived.
SEPARATE ACCOUNT ANNUAL EXPENSES:
<TABLE>
<S> <C>
Mortality and expense risk charge 1.25%
Administrative expense charge .15%
Other fees and expenses .00%
---------
Total Separate Account annual expenses 1.40%
---------
---------
</TABLE>
COMBINED ANNUAL EXPENSES OF FUNDS
UNDERLYING EACH DIVISION:
(expressed as a percentage of net assets)
<TABLE>
<CAPTION>
INVESTMENT
MANAGEMENT OTHER EXPENSES TOTAL EXPENSES
AND ADMINIS- AFTER REIM- AFTER REIM-
GT GLOBAL TRATION FEES BURSEMENT* BURSEMENT*
- -------------------------- ----------------- --------------- ---------------
<S> <C> <C> <C>
Variable New Pacific Fund 1.00% 0.25% 1.25%
Variable Europe Fund 1.00% 0.25% 1.25%
Variable Latin America
Fund 1.00% 0.25% 1.25%
Variable America Fund** 0.75% 0.23% 0.98%
Variable International
Fund 1.00% 0.25% 1.25%
Variable Infrastructure
Fund 1.00% 0.25% 1.25%
Variable Natural Resources
Fund 1.00% 0.25% 1.25%
Variable Emerging Markets
Fund 1.00% 0.25% 1.25%
Variable Telecom-
munications Fund** 1.00% 0.17% 1.17%
Variable Growth & Income
Fund 1.00% 0.25% 1.25%
Variable Strategic Income
Fund 0.75% 0.25% 1.00%
Variable Global Govern-
ment Income Fund 0.75% 0.25% 1.00%
Variable U.S. Govern-
ment Income Fund 0.75% 0.25% 1.00%
Money Market Fund 0.50% 0.25% 0.75%
</TABLE>
- ------------------
* Figures in the "Other Expenses After Reimbursement" and "Total Expenses
After Reimbursement" columns are restated from the amounts you would have
incurred in 1997 to reflect the fees and reimbursement or waiver
arrangements for 1998. If there had been no reimbursement of expenses and no
expense reductions during 1997, the actual expenses of each Fund, expressed
as a percentage of net assets, with Investment Management and Administration
Fees stated first, then Other Expenses, followed by Total Expenses, would
have been as follows: Variable New Pacific Fund, 1.00%, 0.43%, 1.43%;
Variable Europe Fund, 1.00%, 0.41%, 1.41%; Variable Latin America Fund,
1.00%, 0.40%, 1.40%; Variable International Fund, 1.00%, 1.31%, 2.31%;
Variable Infrastructure Fund, 1.00%, 0.49%, 1.49%; Variable Natural
Resources Fund, 1.00%, 0.42%, 1.42%; Variable Emerging Markets Fund, 1.00%,
0.49%, 1.49%; Variable Growth & Income Fund, 1.00%, 0.27%, 1.27%; Variable
Global Government Income Fund, 0.75%, 0.79%, 1.54%; Variable Strategic
Income Fund, 0.75%, 0.32%, 1.07%; Variable U.S. Government Income Fund,
0.75%, 0.87%, 1.62%; Money Market Fund, 0.50%, 0.29%, 0.79%.
** No reimbursements were paid to the Variable America Fund and the Variable
Telecommunications Fund as the total operating expenses were below the
voluntary limit.
EXAMPLES
If you surrender your contract at the end of the applicable time period, you
would pay the following
Prospectus Page 6
<PAGE>
aggregate expenses per Division on a $1,000 investment, assuming 5% annual
return and reimbursement of expenses, as described below:
<TABLE>
<CAPTION>
GT GLOBAL 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Variable New Pacific Division $ 88 $ 124 $ 164 $ 305
Variable Europe Division 88 124 164 305
Variable Latin America Division 88 124 164 305
Variable America Division 85 116 151 279
Variable International Division 88 124 164 305
Variable Infrastructure Division 88 124 164 305
Variable Natural Resources
Division 88 124 164 305
Variable Emerging Markets
Division 88 124 164 305
Variable Telecommunications
Division 87 122 160 297
Variable Growth & Income Division 88 124 164 305
Variable Strategic Income
Division 85 117 152 281
Variable Global Government Income
Division 85 117 152 281
Variable U.S. Government Income
Division 85 117 152 281
Money Market Division 83 109 139 255
</TABLE>
If you do not surrender your contract at the end of the applicable time period,
you would pay the following aggregate expenses per Division on the same
investment:
<TABLE>
<CAPTION>
GT GLOBAL 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Variable New Pacific Division $ 28 $ 84 $ 144 $ 305
Variable Europe Division 28 84 144 305
Variable Latin America Division 28 84 144 305
Variable America Division 25 76 131 279
Variable International Division 28 84 144 305
Variable Infrastructure Division 28 84 144 305
Variable Natural Resources
Division 28 84 144 305
Variable Emerging Markets
Division 28 84 144 305
Variable Telecommunications
Division 27 82 140 297
Variable Growth & Income Division 28 84 144 305
Variable Strategic Income
Division 25 77 132 281
Variable Global Government Income
Division 25 77 132 281
Variable U.S. Government Income
Division 25 77 132 281
Money Market Division 23 69 119 255
</TABLE>
If you annuitize at the end of the applicable time period, you would pay the
following aggregate expenses per Division:
<TABLE>
<CAPTION>
GT GLOBAL 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
Variable New Pacific Division $ 88 $ 124 $ 144 $ 305
Variable Europe Division 88 124 144 305
Variable Latin America Division 88 124 144 305
Variable America Division 85 116 131 279
Variable International Division 88 124 144 305
Variable Infrastructure Division 88 124 144 305
Variable Natural Resources
Division 88 124 144 305
Variable Emerging Markets
Division 88 124 144 305
Variable Telecommunications
Division 87 122 140 297
Variable Growth & Income Division 88 124 144 305
Variable Strategic Income
Division 85 117 132 281
Variable Global Government Income
Division 85 117 132 281
Variable U.S. Government Income
Division 85 117 132 281
Money Market Division 83 109 119 255
</TABLE>
For the purposes of calculating the values in the above examples, the Company
has translated the administration fees into an annual asset charge of 0.070%,
based on the total annual administrative charges collected in 1997 divided by
the average total assets held under the Contracts offered by this Prospectus.
The purpose of the table above is to help you understand the costs and expenses
that a variable annuity Contract Owner will bear directly or indirectly. Note
that the expense amounts in the examples are aggregate amounts for the Divisions
and the Funds for the number of years indicated. For a more complete description
of the GT Global Variable Investment Funds' fees and expenses, see the Funds'
Prospectus. For all GT Global Variable Investment Funds, the expenses shown
under "Other Expenses After Reimbursement" and "Total Expenses After
Reimbursement" reflect reimbursement by Chancellor LGT Asset Management, Inc.
("the Manager") of certain expenses incurred by each Fund. From time to time,
the Manager in its sole discretion may waive receipt of its fees and voluntarily
assume certain Fund expenses. The Manager currently has undertaken to assume the
expenses (other than taxes, brokerage fees, interest, and extraordinary
expenses) incurred by each Fund, to the extent such expenses exceed the
Investment Management and Administration fees, as set forth above, by more than
0.25%. The examples above are not a representation of past or future expenses,
and the Funds' actual expenses may be higher or lower than those shown. Neither
the table nor the examples reflect any premium tax that may be applicable to a
contract; such taxes currently range from 0% to 3.5%. For a complete description
of Contract costs and expenses, see the section titled "Charges and Deductions,"
in this Prospectus.
Prospectus Page 7
<PAGE>
HISTORICAL CHARTS OF UNITS AND
UNIT VALUES
- --------------------------------------------------------------------------------
The initial value of an accumulation unit in Separate Account Twenty-Eight and
Separate Account Twenty-Nine was set as $12.00. The charts below show
accumulation unit values and the numbers of units outstanding from inception of
each Division through December 31, 1997. There can be no assurance that the
future investment performance of these Separate Account Divisions will be
comparable to past performance.
CHART 1 -- SEPARATE ACCOUNT TWENTY-EIGHT
<TABLE>
<CAPTION>
ACCUMULATION TOTAL UNITS
UNIT VALUE: ACCUMULATION OUTSTANDING,
BEGINNING OF UNIT VALUE: END OF PERIOD
YEAR PERIOD END OF PERIOD (IN THOUSANDS)
--------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Money Market
Division 1997 13.30 13.75 1,943
1996 12.87 13.30 1,490
1995 12.40 12.87 1,158
1994 12.15 12.40 1,572
1993 12.00* 12.15 303
Variable
Strategic Income
Division 1997 17.46 18.45 1,505
1996 14.56 17.46 1,807
1995 12.36 14.56 1,737
1994 15.11 12.36 1,886
1993 12.00* 15.11 1,187
Variable Global
Government
Income Division 1997 13.95 14.36 571
1996 13.33 13.95 743
1995 11.66 13.33 893
1994 12.95 11.66 825
1993 12.00* 12.95 464
Variable U.S.
Government
Income Division 1997 13.29 14.19 515
1996 13.18 13.29 410
1995 11.65 13.18 452
1994 12.61 11.65 205
1993 12.00* 12.61 69
</TABLE>
- ------------------
* At inception on February 10, 1993.
<TABLE>
<CAPTION>
CHART 2 -- SEPARATE ACCOUNT TWENTY-NINE
ACCUMULATION ACCUMULATION TOTAL UNITS
UNIT VALUE: UNIT VALUE: OUTSTANDING,
BEGINNING OF END OF END OF PERIOD
YEAR PERIOD PERIOD (IN THOUSANDS)
---- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Variable New Pacific Division 1997 17.41 10.11 1,518
1996 13.48 17.41 1,776
1995 13.70 13.48 1,687
1994 15.87 13.70 1,410
1993 12.00* 15.87 492
Variable Europe Division 1997 20.62 23.41 1,166
1996 16.05 20.62 1,182
1995 14.84 16.05 970
1994 15.14 14.84 1,007
1993 12.00* 15.14 349
Variable America Division 1997 23.02 26.08 1,679
1996 19.69 23.02 1,802
1995 15.93 19.69 1,906
1994 13.59 15.93 953
1993 12.00* 13.59 117
Variable Growth & Income Division 1997 17.47 20.02 2,506
1996 15.23 17.47 2,080
1995 13.37 15.23 2,002
1994 13.96 13.37 1,908
1993 12.00* 13.96 827
Variable Latin America Division 1997 16.98 19.18 1,429
1996 14.06 16.98 1,292
1995 18.79 14.06 1,380
1994 17.46 18.79 1,412
1993 12.00* 17.46 463
Variable Telecom-
munications Division 1997 19.76 22.33 3,030
1996 16.79 19.76 3,177
1995 13.77 16.79 3,019
1994 13.03 13.77 2,612
1993 12.00* 13.03 605
Variable International Division 1997 11.70 12.34 454
1996 10.94 11.70 384
1995 11.22 10.94 314
1994 12.00 11.22 172
Variable Emerging Markets Division 1997 14.06 11.96 1,361
1996 10.88 14.06 1,234
1995 11.93 10.88 809
1994 12.00 11.93 574
</TABLE>
Prospectus Page 8
<PAGE>
<TABLE>
<CAPTION>
CHART 2 -- SEPARATE ACCOUNT TWENTY-NINE (CONT.)
ACCUMULATION ACCUMULATION TOTAL UNITS
UNIT VALUE: UNIT VALUE: OUTSTANDING,
BEGINNING OF END OF END OF PERIOD
YEAR PERIOD PERIOD (IN THOUSANDS)
---- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Variable Natural Resources Division 1997 21.57 21.54 763
1996 14.47 21.57 746
1995 12.00 14.47 86
Variable Infrastructure Division 1997 16.13 16.71 518
1996 13.10 16.13 366
1995 12.00 13.10 113
</TABLE>
- ------------------
* At inception on February 10, 1993, except for the Variable
Telecommunications Division, which commenced operations on October 18, 1993;
the Variable International Division which commenced operations on July 12,
1994; the Variable Emerging Markets Division, which commenced operations on
July 6, 1994; and the Variable Natural Resources Division and the Variable
Infrastructure Division, which both commenced operations on January 31,
1995.
Prospectus Page 9
<PAGE>
QUESTIONS AND ANSWERS ABOUT
THE CONTRACT
- --------------------------------------------------------------------------------
The following section contains brief questions and answers about the Contract.
Reference should be made to the body of this Prospectus for more detailed
information. With respect to the Contract, it should be noted that the
requirements of a Qualified Contract, an endorsement to the Contract, or
limitations or penalties imposed by the Code may impose limits or restrictions
on payments, surrenders, distributions, or benefits, or on other provisions of
the Contracts, and these short questions do not describe any such limitations or
restrictions. (See "Federal Tax Matters")
1. WHAT IS THE PURPOSE OF THE CONTRACT?
The Contract allows you to accumulate funds on a tax-favored basis and to
receive Annuity Payments when desired, based on the investment experience of the
assets underlying the Contracts. The Contracts are designed for use in
connection with nonqualified and certain qualified retirement plans.
A Contract may be purchased with proceeds from sources that do not qualify for
special tax treatment. The source of the proceeds affects the way Annuity
Payments are taxed, but not the operation of the Contracts. (See "Federal Tax
Matters" )
You can allocate Purchase Payments to the Separate Accounts and the Fixed
Account. The Division of the Separate Accounts will invest in the Funds of GT
Global Variable Investment Funds in accordance with your instructions. Because
Annuity Payments and Accumulated Values depend on the investment experience of
the selected Divisions, you bear the entire investment risk under these
Contracts for amounts allocated to the Divisions of the Separate Accounts.
Purchase Payments may also be allocated, in whole or in part, to the Guaranteed
Interest Options of the Fixed Account.
2. WHAT IS AN ANNUITY AND WHY MAY BENEFITS VARY?
An annuity provides for a series of Annuity Payments beginning on the Annuity
Date. You may select from a number of Annuity Options, including Annuity
Payments for the life of the Annuitant (or the Annuitant and another person, the
"Joint Annuitant") with or without a guaranteed number of Annuity Payments, or
for a designated period. Annuity Payments which are guaranteed throughout the
payment period are referred to in this Prospectus as "Guaranteed Annuity
Payments." Annuity Payments which vary in accordance with the investment
experience of the Divisions selected by you are referred to in this Prospectus
as "variable Annuity Payments."
3. WHAT TYPES OF INVESTMENTS UNDERLIE THE SEPARATE ACCOUNTS?
Currently, the Separate Accounts invest in shares of G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust (together, "GT
Global Variable Investment Funds"). Both are management investment companies
offering access to investments managed by the Manager. A list of the Funds
currently offered is given in the prospectus for the GT Global Variable
Investment Funds, which must accompany this Prospectus.
4. HOW DO I PURCHASE A CONTRACT?
You may purchase a Contract with a single minimum Initial Purchase Payment of
$2,000. Subsequent Purchase Payments generally may be made at any time prior to
the Annuity Date as long as the Annuitant is living. (See "Contract Application
and Purchase Payments")
5. HOW DO I ALLOCATE NET PURCHASE PAYMENTS?
Net Purchase Payments may be allocated among one or more of the Divisions,
and/or Guaranteed Interest Options in accordance with the allocation percentages
selected by you in your Contract Application. The initial allocations must be in
whole percents totaling 100% and involve amounts of at least $500 per Division
or Guaranteed Interest Option. Allocations for additional Net Purchase Payments
may be changed by sending Written Notice to us. (See "Allocation of Net Purchase
Payments")
Net Purchase Payments or portions of Net Purchase Payments allocated to the
Guaranteed Interest Options will accrue interest at a rate of at least 3%
compounded annually and may also be subject to an interest change adjustment.
(See "Guaranteed Interest Options")
Prospectus Page 10
<PAGE>
6. CAN I TRANSFER AMOUNTS AMONG THE DIVISIONS?
Transfers among the Divisions or to and from the Guaranteed Interest Options can
be made subject to certain limitations. (See "Transfer Privilege")
7. CAN I GET TO MY MONEY IF I NEED IT?
All or part of the Accumulated Value of the Contract may be withdrawn before the
earlier of the Annuitant's death or the Annuity Date. However, amounts withdrawn
may be subject to a surrender charge depending on how long the withdrawn Net
Purchase Payments have been invested in the Contract. In addition, withdrawals
of Accumulated Value from the Fixed Account will, except within 30 days of the
expiration of the Guarantee Period, be subject to an interest change adjustment
and certain surrenders may be subject to a Federal penalty tax. (See
"Distributions under the Contract", "Interest Change Adjustment", and "Federal
Tax Matters")
8. WHAT ARE THE CHARGES AND DEDUCTIONS UNDER THE CONTRACTS?
We deduct a daily charge equal to a percentage of the value of the net assets in
the Divisions for the mortality and expense risks assumed by us and for the cost
of administering these Contracts. The annual rate of this charge is 1.40% (1.25%
for mortality and expense risk and .15% for administrative expenses). In
addition, Contracts with Accumulated Values of less than $20,000 on the Contract
Anniversary may be assessed an annual contract fee equal to the lesser of $30 or
2% of Accumulated Value in Contract Years ending prior to December 31, 1999.
Thereafter, the contract fee may be adjusted annually, subject to limitations.
(See "Administrative Charges")
In order to permit investment of the entire Net Purchase Payment, we currently
do not deduct a sales load at the time of investment. However, a surrender
charge is imposed on certain full or partial withdrawals from the Contracts to
cover expenses relating to the sale of the Contracts, including commissions to
registered representatives and other promotional expenses. The surrender charge,
calculated as a percentage of each Net Purchase Payment, will apply to Net
Purchase Payments for six years from the date each such Net Purchase Payment is
received. The surrender charge ranges from 6% during the first Contract Year
after a Net Purchase Payment is received, to 1% during the sixth year after such
a Net Purchase Payment is received. (See "Surrender Charge") Also, premium tax
may be deducted, if applicable. Certain states impose a premium tax, currently
ranging up to 3.5% (See "Premium Tax")
9. WHAT ANNUITY OPTIONS ARE AVAILABLE UNDER THE CONTRACTS?
You may receive Annuity Payments on a variable basis or a fixed basis or both.
You also have flexibility in choosing the Annuity Date, subject to current laws.
Four Annuity Options are included in the Contract: (1) Life Annuity; (2) Life
Annuity, with 60, 120, 180, or 240 Monthly Payments Guaranteed; (3) Joint and
Survivor Income for Life; and (4) Income for a Fixed Period which may range from
five to thirty years. (See "Annuity Options")
10. CAN THE CONTRACT BE CANCELLED AFTER IT IS DELIVERED?
The Contract contains a provision for a Right to Examine Period which permits
you to cancel the Contract by returning it to us at our Annuity Service Office,
or to the registered representative through whom it was purchased, within ten
days of receipt of the Contract. (This period is normally ten days, but some
states require a different time for the Right to Examine.) You will then receive
from us the refund made on the Contract. The amount of the refund will depend
upon the state in which the Contract is issued. Usually it will be an amount
equal to the Accumulated Value in any Separate Account Division and any Purchase
Payments allocated to the Fixed Account, without any deduction for premium tax,
surrender charge, or administrative charges. Some states require that we return
the Purchase Payments made on the Contract.
11. WHOM DO I CALL IF I HAVE QUESTIONS ABOUT MY CONTRACT?
Any questions about privileges or your Contract will be answered by our Annuity
Service Office, General American, GT Global Department, P.O. Box 66821, St.
Louis, Missouri, 63166-6821, (800) 237-6580. All inquiries should include the
Contract number and the Contract Owner's name.
12. WHAT CAN I EXPECT TO RECEIVE FROM GENERAL AMERICAN?
Confirmations will be mailed to you for any financial transactions that take
place, and quarterly statements will be sent showing the Accumulated Value in
each Division, the Accumulated Value in the Guaranteed Interest Options, and any
Purchase Payments, charges, transfers, partial withdrawals, or surrenders during
the time period covered. In addition, we will send you financial reports of the
Separate Accounts and for the GT Global Variable Investment Funds.
Prospectus Page 11
<PAGE>
GENERAL AMERICAN LIFE INSURANCE
COMPANY AND THE SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------
GENERAL AMERICAN
General American Life Insurance Company ("General American") is a stock life
insurance company wholly-owned by GenAmerica Corporation. GenAmerica Corporation
is wholly-owned by General American Mutual Holding Company, a mutual holding
company organized under Missouri law. General American was chartered in 1933 and
since then has continuously engaged in the business of life insurance,
annuities, and accident and health insurance. General American's National
Headquarters (Home Office) is located at 700 Market Street, St. Louis, Missouri
63101. The telephone number is (314) 231-1700. It is licensed to do business in
49 states of the United States, the District of Columbia, Puerto Rico, and is
registered in Canada and licensed in the Provinces of Alberta, British Columbia,
Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward
Island, Quebec, and Saskatchewan.
General American conducts a conventional life insurance business. Assets derived
from such business should be considered by purchasers of variable annuity
contracts only as bearing upon the ability of General American to meet its
obligations under the variable annuity contracts and should not be considered as
bearing on the investment performance of the Separate Accounts.
THE SEPARATE ACCOUNTS
The Separate Accounts were established on May 28, 1992, pursuant to
authorization by the Board of Directors of General American. Although they are
an integral part of General American and not separate corporations, the Separate
Accounts are registered as unit investment trusts with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940, as
amended (the "1940 Act"). Such registration does not involve supervision of the
management, investment practices, policies of the Separate Accounts, or of
General American by the SEC.
Purchase Payments may be received by the Separate Accounts from individual
variable annuity contracts that are Qualified Contracts entitled to favorable
tax treatments under the Code and also from individual variable annuity
contracts not entitled to any special tax benefits. Any such Purchase Payments
are pooled together and invested separately from the General Account of General
American (the general assets of the insurance company other than separate
account assets). The persons participating in the variable portion of these
Contracts look to the investment experience of the assets in the Separate
Accounts.
Under Missouri law, the net assets of the Separate Accounts are held for the
exclusive benefit of the owners of the Contracts and for the persons entitled to
Annuity Payments which reflect the investment results of the Separate Accounts.
That portion of the assets of each Separate Account equal to the reserves and
other liabilities under the Contracts participating in it is not chargeable with
liabilities arising out of any other business that General American may conduct.
The income, gains, and losses, whether or not realized, from the assets of each
Division of a Separate Account are credited to or charged against that Division
without regard to any other income, gains, or losses.
Separate Account Twenty-Eight currently has four Divisions, each of which
invests solely in a corresponding GT Global Variable Investment Fund. These are:
<TABLE>
<S> <C>
GT Global Variable Strategic Income Division
GT Global Variable Global Government Income
Division
GT Global Variable U.S. Government Income
Division
GT Global Money Market Division
</TABLE>
Separate Account Twenty-Nine currently has ten Divisions, each of which invests
solely in a corresponding GT Global Variable Investment Fund. These are:
<TABLE>
<S> <C>
GT Global Variable New Pacific Division
GT Global Variable Europe Division
GT Global Variable Latin America Division
GT Global Variable America Division
GT Global Variable International Division
GT Global Variable Infrastructure Division
GT Global Variable Natural Resources
Division
GT Global Variable Emerging Markets Division
GT Global Variable Telecommunications
Division
GT Global Variable Growth & Income Division
</TABLE>
Prospectus Page 12
<PAGE>
GT GLOBAL
VARIABLE INVESTMENT FUNDS
- --------------------------------------------------------------------------------
Each of the GT Global Variable Investment Funds (each, a "Fund", collectively,
the "Funds") described above is a separate investment portfolio of either G.T.
Global Variable Investment Series ("Series") or G.T. Global Variable Investment
Trust ("Trust"). Each Fund has its own investment objectives, policies, and
limitations and invests directly in a portfolio of securities or other
investments. The Series and Trust are each organized as a Massachusetts business
trust and each is registered under the 1940 Act as an open-end management
investment company of the series type. Variable New Pacific Fund, Variable
Europe Fund, Variable America Fund, Variable International Fund and Money Market
Fund are part of the Series. Variable Latin America Fund, Variable
Infrastructure Fund, Variable Natural Resources Fund, Variable
Telecommunications Fund, Variable Emerging Markets Fund, Variable Growth &
Income Fund, Variable Global Government Income Fund, Variable Strategic Income
Fund, and Variable U.S. Government Income Fund are part of the Trust.
Chancellor LGT Asset Managements, Inc. ("the Manager") is the investment manager
and administrator of each Fund. On January 30, 1998, Liechtenstein Global Trust,
AG ("LGT"), the indirect parent organization of GT Global Inc. and Chancellor
LGT, entered into an agreement with AMVESCAP PLC ("AMVESCAP") pursuant to which
AMVESCAP will acquire LGT's Asset Management Division, which includes Chancellor
LGT (the "Purchaser"). AMVESCAP is a holding company formed in 1997 by the
merger of INVESCO PLC and A I M Management Group Inc. Consummation of the
purchase is subject to a number of contingencies, including regulatory
approvals. The transaction would constitute an assignment of, and thereby result
in the termination of, the Companies' investment management agreements with
Chancellor LGT. Accordingly, the Companies' Board of Trustees have approved,
subject to shareholder approval, new investment management and administration
agreements between A I M Advisors, Inc. ("A I M"), a wholly-owned subsidiary of
AMVESCAP, and the Companies, and sub-advisory and sub-administration agreements
between A I M and Chancellor LGT, which will become a separate, indirect
wholly-owned subsidiary of AMVESCAP. Under the new agreements, A I M would serve
as investment manager and administrator and Chancellor LGT would serve as
investment sub-adviser and sub-administrator of the Companies. In addition to
shareholder approval, implementation of the new investment advisory arrangements
is contingent upon the consummation of the Purchase.
The Board of Trustees of the Companies have also approved the following matters,
subject to shareholder approval:
1. Amendments to the fundamental investment restrictions of each Fund.
2. The reorganization of the Companies from Massachusetts business trusts into
Delaware business trusts.
A special meeting of shareholders of the Companies will be held on May 20, 1998
to consider and vote on, among other proposals, the matters noted above that
require shareholder approvals. If the matters are approved by shareholders and
the Purchase consummated, it is anticipated that the changes described above
will become effective on or about June 1, 1998.
Detailed information concerning the Funds, their investment objectives and
policies, and the charges levied upon them can be found in the current
Prospectus for the GT Global Variable Investment Funds, which accompanies this
Prospectus. General American assumes no responsibility for the Prospectus of the
GT Global Variable Investment Funds. Each Prospectus should be read carefully
before any decision is made concerning the allocation of Purchase Payments to a
Division that corresponds to a particular Fund.
THERE IS NO ASSURANCE THAT ANY OF THE FUNDS WILL ATTAIN THEIR RESPECTIVE STATED
OBJECTIVES, OR THAT ATTAINMENT CAN BE SUSTAINED.
Prospectus Page 13
<PAGE>
ADDITIONS, DELETIONS OR
SUBSTITUTIONS OF INVESTMENTS
- --------------------------------------------------------------------------------
General American reserves the right, subject to applicable law and to the plans
of Operations for the Separate Accounts, to make additions to, deletions from,
or substitutions for the shares of a Fund that are held or purchased by the
Separate Accounts for the Divisions. General American reserves the right to
eliminate the shares of any of the Funds and to substitute shares of another
Fund of GT Global Variable Investment Funds 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 Accounts. General American
will not replace any shares attributable to a Contract Owner's interest in a
Division of the Separate Accounts without at least thirty days Written Notice to
the Contract 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 Accounts 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 Contract Owners.
General American also reserves the right to establish additional Divisions of
the Separate Accounts, each of which would invest in a new Fund of G.T. Global
Variable Investment Series or G.T. Global Variable Investment Trust, or in
shares of another investment company, with a specified investment objective. New
Divisions may be established when, in the sole discretion of General American,
marketing needs or investment conditions warrant, and any new Division will be
made available to existing Contract Owners on a basis to be determined by
General American. To the extent approved by the SEC, General American 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, General American may make such changes
it considers necessary in the Contracts by appropriate endorsement. General
American will notify all Contract Owners of any such changes.
If it is deemed by General American to be in the best interests of persons
having voting rights under the Contracts, and to the extent any necessary SEC
approvals or Contract Owner votes are obtained, the Separate Accounts may be:
(a) operated as management companies under the 1940 Act; (b) deregistered under
the 1940 Act in the event such registration is no longer required; or (c)
combined with other separate accounts of General American. To the extent
permitted by applicable law, General American may also transfer the assets of
the Separate Account associated with the Contracts to another separate account.
- --------------------------------------------------------------------------------
THE CONTRACTS
- --------------------------------------------------------------------------------
The Contract is available to individuals seeking annuity contracts entitled to
favorable tax treatment under the Code as traditional Individual Retirement
Annuity (IRA) plans and qualified plans under Sections 401 and 457. The Contract
is also available to individuals not entitled to any special tax benefits under
the Code. The rights and benefits of the Contracts are described below and in
the Contract; however, General American reserves the right to make any
modification to conform the Contract to, or to give the Contract Owner the
benefit of, any Federal or state statute or any rule or regulation of the United
States Treasury Department.
RIGHT TO EXAMINE
The Contract Owner may cancel the Contract during the Right to Examine Period
starting after
Prospectus Page 14
<PAGE>
the Contract Owner receives the Contract. This period is normally ten days, but
some states require a different time for the Right to Examine. Upon receipt of a
Written Request for cancellation by General American's Annuity Service Office or
by the registered representative through whom it was purchased, the Contract
will be cancelled and a refund will be made. The amount of the refund will
depend on the state in which the Contract is issued; however, it will usually be
an amount equal to the Accumulated Value in any Separate Account Division and
any Purchase Payments allocated to the Fixed Account, without any deduction for
premium tax, surrender charge, interest change adjustment, or administrative
charges. As to Accumulated Value in a Division, the daily charge for mortality
and expense risks and certain operating expenses of the corresponding Funds will
not be returned. In some states applicable law requires that the amount of the
Purchase Payment be returned.
CONTRACT APPLICATION AND PURCHASE PAYMENTS
(A) PLACE, AMOUNT AND FREQUENCY
Purchase Payments are to be paid to the Company at its Annuity Service Office or
to a broker/dealer where such broker/dealer has made special arrangements with
the Company for collection of Purchase Payments. All Purchase Payments received
at the Annuity Service Office before the close of the NYSE (3:00 p.m. St. Louis
Time) on any Business Day will be considered received on that Business Day.
Payment by electronic funds transfer from broker/dealers with whom an
arrangement has been entered into will be considered received on the Business
Day Written Notice of such payment is received by the Annuity Service Office,
provided that such Written Notice is received before the close of the NYSE on
that Business Day, and the funds transferred are actually received at the
Annuity Service Office by 9:00 a.m. St. Louis time on the next Business Day.
The amount of Purchase Payments may vary; however, the Company will not accept
an Initial Purchase Payment which is less than $2,000, and each additional
Purchase Payment must be at least $100.
In lieu of the initial purchase payment of $2,000, a Contract Owner may elect to
deposit his or her Initial Purchase Payment in monthly installments by means of
a pre-authorized check ("PAC") process. The PAC process may also be used to
deposit additional Purchase Payments to an established Contract. Under the PAC
process, amounts will be deducted each month from the Contract Owner's bank
account and applied as Purchase Payments under a Contract. Deductions may be
made on the 5th or 20th of each month as selected by the Contract Owner. The
minimum monthly PAC deduction must be at least $100. PAC deposits may be made to
any Division or Guaranteed Period. A Written Request must be received by the
Annuity Service Office from the Contract Owner authorizing General American to
debit his or her bank account.
The Contract Owner may cancel PAC at any time by sending a Written Request to
the Annuity Service Office at least five business days prior to the next
scheduled withdrawal. General American is not responsible for any debits made to
a bank account prior to the time the Written Request for termination is received
at the Annuity Service Office.
In any Contract Year after the first, General American reserves the right not to
accept Purchase Payments in excess of double the amount paid in the initial
Contract Year. In the first Contract Year, Purchase Payments may be limited to
the greater of double the total initial premium or $25,000. The Company will
notify the Contract Owner in writing, at his or her address last known to us, at
least sixty days prior to exercising these rights. In addition, the prior
approval of the Company is required before it will accept a Purchase Payment
which would cause the value of a Contract Owner's Account to exceed $1,000,000.
If the value of a Contract Owner's Account exceeds $1,000,000, no additional
Purchase Payments will be accepted without the prior approval of the Company. In
addition, the Date of Issue for the Contract can be no later than the first day
of the first month following the Annuitant's 90th birthday.
A completed Contract Application and the Initial Purchase Payment are forwarded
to the Company for acceptance. Upon acceptance, the Contract is issued to the
Contract Owner and the Initial Purchase Payment is credited to the Contract
Owner's Account. The Date of Issue will be the date the Initial Purchase Payment
is invested. The Initial Purchase Payment must be invested within two Business
Days of receipt by the Company of a Contract Application in good order. The
Company may retain the Initial Purchase Payment for up to five Business Days
while attempting to complete an incomplete Contract Application. If the Contract
Application cannot be made complete within five Business Days, the prospective
Contract Owner will be informed of the reasons for the delay. The
Prospectus Page 15
<PAGE>
Initial Purchase Payment will be returned immediately unless the prospective
Contract Owner consents in writing to the Company's retaining the Initial
Purchase Payment until the Contract Application is made in good order.
Thereafter, the Initial Purchase Payment must be invested within two Business
Days. Subsequent Net Purchase Payments are invested at the end of the Business
Day during which they are received by the Company at the Annuity Service Office.
Purchase Payments may be made at any time prior to the Annuity Date, full
surrender of the Contract, or death of the Annuitant or Contract Owner.
(B) ACCOUNT CONTINUATION
The Contract does not require continuing Purchase Payments and will continue in
force until the earlier of the Annuity Date, surrender of the Contract, or death
of the Annuitant or Contract Owner. Notwithstanding the foregoing, the Company
may, after sixty days grace period following Written Notice to the Contract
Owner, at its option, cancel a Contract at the end of any two consecutive
Contract Years in which no Purchase Payments have been made, if both (i) the
total Purchase Payments made over the life of the Contract, less any
withdrawals, are less than $2,000, and (ii) the Accumulated Value at the end of
such two year period is less than $2,000. Upon cancellation, the Company will
pay the Contract Owner the Accumulated Value computed as of the Valuation Period
during which the cancellation occurs less administrative charges, if applicable.
Such cancellation could have adverse tax consequences. (See "Federal Tax
Matters")
(C) ALLOCATION OF NET PURCHASE PAYMENTS
The Net Purchase Payment is that portion of a Purchase Payment which remains
after deduction of any applicable premium or other tax. The initial Net Purchase
Payment will be allocated among the Divisions of the Separate Accounts and
Guarantee Periods of the Fixed Account in accordance with the allocation
percentage specified in the particular Contract Application. The initial
percentages specified in the Contract Application must be in whole percents
totaling 100% and allocate amounts of at least $500 per Division or Guarantee
Period.
The allocations for additional Net Purchase Payments among the Guarantee Periods
and Divisions may be changed by the Contract Owner at any time by Written
Request. Any allocation change will take effect with the first Purchase Payment
received with or after receipt of a Written Request for change by the Company
and will continue in effect until subsequently changed. If any portions of the
Net Purchase Payments are received for allocation to a Guarantee Period or
Division no longer offered by the Company, the Company will contact the Contract
Owner to secure new allocations. Subsequent Net Purchase Payments should be at
least $100. If the subsequent payment specifies allocation percentages different
from the initial percentages specified in the Contract application, they must be
in whole percents, and total 100%.
VARIABLE ACCOUNT
ACCUMULATION UNITS
The Company will establish an account in the Contract Owner's name for each
Division to which the Contract Owner allocates Net Purchase Payments or transfer
amounts. Net Purchase Payments and transfer amounts are allocated to Divisions
and credited to such accounts in the form of Accumulation Units. The following
discussion of Accumulation Units, the value of Accumulation Units and the net
investment factor formula pertains only to the Divisions. The parallel
discussion regarding accumulations in the Fixed Account appears elsewhere in
this Prospectus. (See "Guaranteed Interest Options")
The number of Accumulation Units to be credited to each account is determined by
dividing the Net Purchase Payment or transfer amount for the account by the
value of an Accumulation Unit for that Division for the Valuation Period during
which the Net Purchase Payment or transfer request is credited. The number of
Accumulation Units in any account will be increased at the end of a Valuation
Period by any Net Purchase Payments allocated to the corresponding Division
during that Valuation Period and by any Accumulated Value transferred to that
Division from another Division or from a Guarantee Period during that Valuation
Period. The number of Accumulation Units in any account will be decreased at the
end of a Valuation Period by any transfers of Accumulated Value out of the
corresponding Division, by any partial withdrawals or surrenders from that
Division, and by any administrative charges or surrender charge deducted from
that Division during that Valuation Period.
VALUE OF ACCUMULATION UNITS
The value of Accumulation Units in each Division will vary from one Valuation
Period to the next depending upon the investment results of that particular
Division. The value of an Accumulation
Prospectus Page 16
<PAGE>
Unit for each Division was arbitrarily set at $12 for the first Valuation
Period. The value of an Accumulation Unit for any subsequent Valuation Period is
determined by multiplying the value of an Accumulation Unit for the immediately
preceding Valuation Period by the net investment factor for such Division for
the Valuation Period for which the value is being determined.
NET INVESTMENT FACTOR
Each Business Day we will calculate each Division's net investment factor. A
Division's net investment factor measures its investment performance during a
Valuation Period. The net investment factor for each Division for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result:
Where (a) is: (1) the net asset value per share of a Fund share held in the
Division determined at the end of the current Valuation Period, plus (2) the per
share amount of any dividend or capital gain distribution made by a Fund on
shares held in the Division if the "ex-dividend" date occurs during the current
Valuation Period.
Where (b) is: the net asset value per share of a Fund share held in the Division
determined as of the end of the immediately preceding Valuation Period.
Where (c) is: a factor representing the charges deducted from the Division on a
daily basis for mortality and expense risks and administrative expenses. Such
factor is equal, on an annual basis, to 1.40% (1.25% for mortality and expense
risk and 0.15% for administrative expenses).
The net investment factor may be greater or less than or equal to one;
therefore, the value of an Accumulation Unit may increase, decrease, or remain
the same. The value of an Annuity Unit, described in the Statement of Additional
Information, is also affected by the net investment factor.
GUARANTEED INTEREST OPTIONS
Net Purchase Payments applied to one of the Guaranteed Interest Options will be
invested in the Fixed Account. Interests in the Fixed Account have not, and are
not required to be, registered with the SEC under the 1933 Act, and neither the
Fixed Account nor General American has been registered as an investment company
under the 1940 Act. Therefore, the Fixed Account and interests therein are not
generally subject to regulation under the 1933 Act or the 1940 Act. The
following disclosure relating to the Fixed Account and related Guarantee Periods
is for your information and has not been reviewed by the SEC. Nevertheless, such
disclosure may be subject to certain generally applicable provisions of Federal
securities laws relating to the accuracy and completeness of statements made in
this Prospectus. The Fixed Account may not be available in all jurisdictions.
You should ask your registered representative whether it is an option for you.
GUARANTEE PERIODS
The Company will establish an account for the Contract Owner for each Guarantee
Period to which such Contract Owner allocates Net Purchase Payments or
transfers. The Company has established dollar cost averaging, interest sweep,
and personal portfolio rebalancing Guarantee Periods for the purpose of
facilitating the dollar cost averaging, interest sweep, and personal portfolio
rebalancing programs. The Contract Owners may select one or more Guarantee
Period(s) from among those we make available. Each Guarantee Period will have a
duration of at least one year. The period(s) selected will determine the
guaranteed interest rate(s). A Net Purchase Payment, or the portion thereof, or
the amount transferred in accordance with the transfer privilege, allocated to a
particular Guarantee Period, less any amounts or charges subsequently withdrawn,
will earn interest at the Guaranteed Interest Rate during the Guarantee Period.
Initial Guarantee Periods begin on the date of allocation or transfer, and end
on the Expiration Date. Subsequent Guarantee Periods begin on the first day
following the Expiration Date.
Any portion of a Contract Owner's Accumulated Value allocated or transferred to
a particular Guarantee Period with a particular Expiration Date (including
interest earned thereon) will be referred to herein as a "Guarantee Period
Amount." Interest will be credited daily at a rate equivalent to the compound
annual rate. We cannot predict or guarantee the level of future Guaranteed
Interest Rates, except that we guarantee that future Guaranteed Interest Rates
will not be below 3%, per year compounded annually. As a result of additional
Net Purchase Payments, renewals, and transfers of portions of the Contract
Owner's Accumulated Value described under "See Transfer Privilege" which begin
new Guarantee Periods, Guarantee Period Amounts allocated to Guarantee Periods
of the same duration may have different Expiration Dates. Thus, each Guarantee
Period Amount will be treated separately for purposes of determining any
interest change adjustment. (See "Interest Change Adjustment")
Prospectus Page 17
<PAGE>
The Company will notify the Contract Owner in writing, at his or her last known
address to us, at least 30 and no more than 75 days prior to the Expiration Date
of each Guarantee Period Amount. The Guarantee Period Amount will renew for a
new Guarantee Period of the same duration as the previous Guarantee Period,
unless the Company receives, prior to the end of the expiring Guarantee Period,
written election by the Contract Owner of a different Guarantee Period from
among those being offered by the Company at such time, instructions to transfer
all or a portion of the Guarantee Period Amount to one or more Divisions in
accordance with the transfer privilege, (see "Transfer Privilege") or
instructions to withdraw all or a portion of the Guarantee Period Amount. If the
previous Guarantee Period is no longer being offered by the Company, such amount
will be placed in the GT Global Money Market Division, unless the Contract Owner
gives us other instructions. Each new Guarantee Period Amount must be at least
$500.
GUARANTEED INTEREST RATES
The Company periodically will establish an applicable guaranteed interest rate
for each Guarantee Period offered by the Company. Guaranteed interest rates for
the dollar cost averaging, interest sweep, and personal portfolio rebalancing
Guaranteed Interest Options may be different than for other Guaranteed Interest
Options with the same duration. Current Guaranteed Interest Rates may be changed
by the Company at any time depending on investment interest rates available to
the Company and other factors as described below. Once established, however, the
rate applicable to a particular Guarantee Period Amount is guaranteed for the
duration of the applicable Guarantee Period. If, however, all or part of the
Accumulated Value is withdrawn from the Guaranteed Interest Options, it will be
subject to any applicable surrender charge and may be subject to an interest
change adjustment. (See "Interest Change Adjustment")
General American has no specific formula for establishing the Guaranteed
Interest Rates for the Guarantee Periods. The determination may be influenced
by, but not necessarily correspond to, interest rates generally available on the
type of investments to be acquired with the Guarantee Period Amounts. General
American, in determining Guaranteed Interest Rates, may also consider, among
other factors, the duration of a Guarantee Period, regulatory and tax
requirements, sales commissions and administrative expenses borne by General
American, and general economic trends.
GENERAL AMERICAN'S MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. GENERAL AMERICAN CANNOT PREDICT OR GUARANTEE THE
LEVEL OF FUTURE GUARANTEED INTEREST RATES, EXCEPT THAT GENERAL AMERICAN
GUARANTEES THAT FUTURE GUARANTEED INTEREST RATES WILL NOT BE BELOW 3% PER YEAR
COMPOUNDED ANNUALLY.
TRANSFER PRIVILEGE
At any time during the accumulation period the Contract Owner may transfer all
or part of the Contract Owner's Accumulated Value to one or more Divisions of
the Separate Accounts and the Guarantee Periods of the Fixed Account, subject to
the following conditions: (1) transfers from the Fixed Account are not allowed
during the first twelve months of that Guarantee Period; (2) transfers must be
made by Written Request or by telephone, provided we have a telephone
authorization in good order completed by the Contract Owner; (3) transfers from
a Division or a Guarantee Period must be at least $500, or the entire amount
remaining in the Division or Guarantee Period, if less than $500; (4) any
Contract Owner's Accumulated Value remaining in a Division or Guarantee Period
may not be less than $500, or the request may be treated as a request to
transfer the entire amount in that Division; and (5) there is no limit to the
number of transfers that the Contract Owner may request. However, for each
transfer in excess of twelve during the Contract Year, the Company charges an
amount equal to the lesser of $25 or 2% of the amount transferred, excluding
transfers made under the dollar cost averaging ("DCA") program, the personal
portfolio rebalancing ("PPR") program, or the interest sweep ("IS") program.
In addition, transfers from the Fixed Account will be subject to the Interest
Change Adjustment unless the transfer is effective within thirty days prior to
the Expiration Date applicable to the Guarantee Period Amount. Transfers
involving a Division will be subject to the additional terms and conditions as
may be imposed by each Division's corresponding Fund. The Contract Owner must
instruct the Company as to what amounts should be transferred from each Division
and Guarantee Period. Transfers made from a Guarantee Period will be made on a
first-in-first-out basis (FIFO) when
Prospectus Page 18
<PAGE>
more than one Guarantee Period amount exists within a Guarantee Period. A
transfer will be effective on the date the request for transfer is received by
the Company. Under current law, there will not be any tax liability to the
Contract Owner if a Contract Owner makes a transfer. We may revoke or modify the
transfer privilege at any time, including the minimum amount for a transfer and
the transfer charge, if any.
DOLLAR COST AVERAGING
The Company offers a dollar cost averaging ("DCA") program which enables a
Contract Owner to pre-authorize a periodic exercise of the contractual transfer
privilege described above. Contract Owners entering into a DCA agreement
instruct the Company to transfer on the Business Day coincident with or
subsequent to the 15th of each month a predetermined dollar amount of at least
$100 per month. Transfers from the GT Global Money Market Division, GT Global
Variable Growth & Income Division, GT Global Variable Strategic Income Division,
GT Global Variable Global Government Income Division , the GT Global Variable
U.S. Government Income Division, or the DCA Guarantee Periods will continue
until the dollar amount requested has been transferred or the Accumulated Value
in the Division or Guarantee Period is exhausted, whichever is sooner. The
Interest Change Adjustment and waiting period are waived for DCA transfers from
the Guarantee Periods. DCA transfer allocations for a Guarantee Period or
Division which is no longer offered will remain in that Division until the
allocation instructions are changed by the Contract Owner.
Contract Owners entering the DCA program must designate at least $2,000 for
investment through DCA. Contract Owners interested in the DCA program may elect
to participate in the program through a Written Request to the Company.
The DCA program is intended to permit Contract Owners to utilize "dollar cost
averaging," a long-term investment method which provides for investments to be
made in regular equal installments over time to control the risk of investing at
the top of a market cycle. The Company makes no guarantees that DCA will result
in a profit or protect against loss. Because the DCA program involves continuous
investments in the Divisions regardless of fluctuating unit values of such
Divisions, Contract Owners should consider their financial ability to continue
to purchase through periods of fluctuating unit values. Transfers made under the
DCA program are not taken into account in determining any applicable transfer
fee. The Company reserves the right to modify, suspend, or terminate the DCA
program at any time.
PERSONAL PORTFOLIO REBALANCING
Contract Owners may participate in the personal portfolio rebalancing ("PPR")
program. This program enables a Contract Owner to authorize the Company to
transfer all or a portion of assets of the Accumulated Value on a periodic basis
in order to maintain a designated allocation among the Divisions or the PPR
Guarantee Periods as selected by the Contract Owner. The Contract Owner may
choose what specific investment options are included in his or her personal
portfolio. The personal portfolio must contain at least two investment options
and may include all available investment options. The Accumulated Value
allocated to each Division increases or decreases at different rates depending
on the investment performance of the Division. Personal portfolio rebalancing
automatically reallocates the Accumulated Value in the Divisions and Guarantee
Periods to maintain the allocation selected by the Contract Owner. The personal
portfolio will automatically reallocate on the day of the month determined by
the Date of Issue. If the Date of Issue is on the 29th, 30th, or 31st of any
month, reallocation will take place on the 28th of each subsequent rebalancing
period.
The goal of the PPR program is to assist the Contract Owners by selling the
accumulation units that have appreciated most, and purchasing additional units
in the Divisions or Guarantee Periods that have appreciated least. Participation
in PPR does not assure the Contract Owner profit from purchases under the
program nor will it prevent or lessen losses in a declining market.
A Contract Owner may select rebalancing on a monthly, quarterly, semiannual , or
annual basis. The minimum amount that will be transferred from any Division or
Guarantee Period under this program is the greater of $50 or 0.5% of the
Accumulated Value of that Division or Guarantee Period. Currently, all Divisions
and the PPR Guarantee Periods are available investment options under this
program. The number of available investment options may change. The Interest
Change Adjustment and waiting period are waived for personal portfolio
rebalancing transfers from Guarantee Periods. The designated allocation can be
changed at any time upon Written Request from the Contract Owner. Transfers made
under the PPR program are not taken into account in determining
Prospectus Page 19
<PAGE>
any applicable transfer fee. The Company reserves the right to modify, suspend,
or terminate the PPR program at any time.
INTEREST SWEEP
Contract Owners may participate in the interest sweep ("IS") program. This
program enables a Contract Owner to authorize transfers of accrued interest from
the IS Guarantee Periods to one or more Divisions. If the Contract Owner has
allocated Net Purchase Payments or transfers to more than one IS Guarantee
Period, the IS transfer will occur from the oldest IS Guarantee Period. A
minimum of at least $25 from the IS Guarantee Periods will transfer to
designated Divisions on the day of the month determined by the date the Written
Request is received in the Annuity Service Office. If the Written Request is
received on the 29th, 30th, or 31st of any month, the IS transfer will take
place on the 1st of each subsequent IS period. Contract Owners may select the IS
transfer on a monthly, quarterly, semiannual, or annual basis. The Interest
Change Adjustment and waiting period are waived for IS transfers from Guarantee
Periods. Transfers made under the IS program are not taken into account in
determining any applicable transfer fee. The Company reserves the right to
modify, suspend, or terminate the IS program at any time.
CONTRACT OWNER INQUIRIES
General American performs all administrative functions in connection with the
Contracts, such as underwriting, record keeping, Contract Owner servicing, and
reporting. Contract Owner inquiries should be addressed to General American Life
Insurance Company, Annuity Service Office, P.O. Box 66821, St. Louis, Missouri
63166-6821, or made by calling (800) 237-6580. All inquiries should include the
Contract number, Contract Owner's name, and Social Security Number.
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
No deductions are made from the Initial Purchase Payment unless a state premium
tax or other tax is due. (See "Premium Tax") Therefore, the full amount of the
Initial Purchase Payment, less any applicable tax, is invested in one or more
Divisions of the Separate Accounts and/or the Fixed Account.
ADMINISTRATIVE CHARGES
A) ANNUAL CONTRACT FEE
On the last day of each Contract Year, the Company may deduct a contract fee
(referred to in the Contract as "Account Fee") as partial compensation for
expenses relating to the issue and maintenance of the Contract and the Contract
Owner's account. For Contracts with Accumulated Values of less than $20,000, the
contract fee is equal to the lesser of $30 or 2% of the Accumulated Value for
Contract Years ending prior to December 31, 1999. Thereafter, the contract fee
may be adjusted annually, but in no event may it be adjusted by more than the
amount that reflects the change in the Consumer Price Index since December 31,
1992, and in no event will it exceed $50. The annual contract fee will be waived
for Contracts with Accumulated Values of $20,000 or more.
The annual contract fee will be deducted from the GT Global Money Market
Division or from the Division with the largest portion of Accumulated Value if
no GT Global Money Market Division investment exists on the Contract
Anniversary, or from the Fixed Account if no Separate Account investments exist
on the Contract Anniversary. If a Contract Owner's Accumulated Value has been
allocated solely to the Fixed Account during the entire previous Contract Year,
no account fee will be assessed. To the extent that the contract fee is deducted
from a Division, Accumulation Units will be cancelled to effect the deduction.
Upon full surrender of the Contract or upon the death of the contract Owner or
Annuitant, the entire annual contract fee, if applicable, will be assessed.
On occasion, the last day of a Contract Year will not fall on a Business Day. In
this case, the last day of a Contract Year and the next Business Day fall in the
same calendar month, administrative charges will be taken on the next Business
Day. If the last day of a Contract Year and the next Business Day do not fall in
the same calendar month, administrative charges will be taken on the Business
Day
Prospectus Page 20
<PAGE>
immediately preceding the last day of the Contract Year.
After the Annuity Date, the annual contract fee will be deducted in equal
amounts from each variable Annuity Payment made during the year. No such
deduction will be made from fixed Annuity Payments.
The net investment factor incorporates a charge at the end of each Valuation
Period (during both the accumulation period and after Annuity Payments begin) at
an annual rate of 0.15% to reimburse the Company for those administrative
expenses attributable to the Contracts, the Contract Owner's Accounts, and the
Separate Accounts which exceed the revenues received from the contract fee. The
Company believes the administrative expense charge and the contract fee have
been set at a level that will recover no more than the actual costs associated
with administering the Contract. (See "Net Investment Factor")
B) TRANSFER FEE
The Company charges an amount equal to the lesser of $25 or 2% of the amount
transferred, for each transfer in excess of twelve during the Contract Year,
excluding transfers made under the dollar cost averaging, personal portfolio
rebalancing, or interest sweep program. This fee will be deducted from a
division to which the transfer is being made.
C) SPECIAL HANDLING FEES
The Contract provides that the Company reserves the right to charge a fee to
cover the Company's expenses for special handling. Items currently considered as
special handling (and the current charges assessed) include: wire transfer
charges ($11.50), checks returned to us for insufficient funds ($15), Interest
Change Adjustment estimations in excess of four annually ($10), minimum
distribution calculations ($10), annuitization calculations in excess of four
annually ($10), duplicate contracts ($25), and additional copies of confirmation
notices or quarterly statements (currently no charge). This fee will be deducted
from the first available option in this list: (a) Money Market Division, (b)
Variable Division with the largest Accumulated Value, (c) Guaranteed Interest
Option. The fee for special handling will not exceed $50 per request. The
Company does not expect to make a profit from these charges.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
No deduction for a sales load is made from Purchase Payments. A surrender charge
is imposed on certain surrenders and withdrawals to cover certain expenses
relating to the sale of the Contracts, including commissions to registered
representatives and other promotional expenses.
Upon full surrender of the Contract or partial withdrawal of Accumulated Value,
General American will apply a surrender charge to the gross withdrawal amount,
excluding any applicable interest change adjustment or administrative charges.
This surrender charge, expressed as a percentage of each Net Purchase Payment,
will apply to Net Purchase Payments for six complete years measured from the
date the Net Purchase Payment is received. The surrender charge schedule is as
follows:
<TABLE>
<CAPTION>
COMPLETE YEARS SINCE RECEIPT OF NET SURRENDER CHARGE
PURCHASE PAYMENT PERCENTAGE
- ----------------------------------- -----------------------
<S> <C>
0 6%
1 5%
2 4%
3 3%
4 2%
5 1%
6+ 0%
</TABLE>
General American offers to its officers and full-time employees (including
employees of its subsidiary companies) individual variable annuity contracts
with a surrender charge of 2% in the first year after receipt of the Net
Purchase Payment, 1% in the second year after receipt of the Net Purchase
Payment, and 0% thereafter.
A Contract Owner may make partial withdrawals up to the level of the free amount
each Contract Year without incurring a surrender charge. The annual free amount
will equal the appropriate percentage of the Accumulated Value on the date that
the first partial withdrawal is made in the Contract Year. During the first
Contract Year, the free amount will equal 10% of the Accumulated Value.
Beginning with the later of the first Contract Anniversary or the 1997 Contract
Anniversary, the free amount will equal 20% of the Accumulated Value if no free
amounts were withdrawn in the prior Contract Year. If free amounts were
withdrawn in the prior Contract Year, the free amount will equal 10% of the
Accumulated Value.
The free amounts withdrawn will not reduce the Net Purchase Payments still
subject to a surrender charge. The free amount does not apply upon full
surrender.
After the free amount has been withdrawn, additional amounts will be withdrawn
from Net Purchase Payments on a "first in first out" (FIFO) basis and
Prospectus Page 21
<PAGE>
will be subject to the surrender charge noted in the above table. Net Purchase
Payments which were received more than six years prior to the date of withdrawal
may be withdrawn without incurring a surrender charge. After all Net Purchase
Payments have been withdrawn, further withdrawals will be made from earnings
without incurring a surrender charge. If the Accumulated Value is less than the
Net Purchase Payments subject to a surrender charge, the surrender charge will
only be applied to the Accumulated Value.
The surrender charge is not applied in the event of annuitization with General
American after three Contract Years, or on death of the Annuitant if the Date of
Issue is prior to the Annuitant's 80th birthday. Currently, however, General
American assesses surrender charges upon annuitization within three Contract
Years only if Annuity Option 4 (Income for a Fixed Period) is chosen with
Annuity Payments for a period of less than ten years.
In the event that revenues from surrender charges are not sufficient to cover
certain sales-related expenses, the Company will bear the shortfall; conversely,
if the revenues from surrender charges exceed such expenses, the Company will
retain the excess. General American does not currently believe that the
surrender charge revenues will cover the expected sales-related expenses. Any
shortfall will be made up from the Company's General Account which may include
amounts derived from the mortality and expense risk charge described below.
See Appendix A for examples of the surrender charge calculation.
REDUCTION OF SURRENDER CHARGE FOR CONTRACTS ISSUED UNDER GROUP OR SPONSORED
ARRANGEMENTS
Contracts may be sold to members of a class of associated individuals or to a
trustee, an employer, or some other entity representing such a class. The
Company may waive or reduce the surrender charge on such policies in recognition
of the fact that sales efforts and administrative costs are generally lower for
such classes, and sales compensation may be adjusted. The amount of any
reduction will depend upon factors such as: the expected number of participants
and the amount of premium payments anticipated; the nature of the group,
association or class; the expected persistency and the possibility of favorable
mortality; and the amount and timing of the premium payment; and any selling
cost.
General American will determine the amount of reduction which is appropriate and
may change the surrender charge attributable to future premiums if it does so on
a basis which is uniform with respect to all similar Contract Owners. The
Company may also modify the criteria for qualification for sales charge
reductions as experience is gained, subject to the limit that such reductions
will not be unfavorably discriminatory against the interest of any Contract
Owner.
MORTALITY AND EXPENSE RISK CHARGE
During the accumulation period and after Annuity Payments begin, the net
investment factor incorporates charges to cover mortality and expense risk at
the end of each Valuation Period as a percentage of the Accumulated Value in the
Divisions. The charge for mortality and expense risk is 1.25% annually (1.00%
for mortality risk and .25% for expense risk).
The mortality risk that General American assumes is that Annuitants may live for
a longer period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Payee is assured that longevity
will not have an adverse effect on the Annuity Payments received. The mortality
risk that General American assumes also includes a guarantee to pay a death
benefit if the Annuitant dies before the Annuity Date. The expense risk that
General American assumes is the risk that the surrender charge and
administrative charges will be insufficient to cover actual future expenses.
PREMIUM TAX
Under the laws of certain jurisdictions, taxes are payable in respect of
so-called "annuity considerations," which term in the case of applicable
Contracts could include the Purchase Payment or the Accumulated Value of such
Contracts. The tax rates range from 0% to 3.50%. The list of jurisdictions
imposing annuity taxes follows:
STATE ANNUITY PREMIUM TAX RATES
<TABLE>
<CAPTION>
QUALIFIED NONQUALIFIED
STATE CONTRACTS CONTRACTS
- ---------------------------------- ------------- -----------------
<S> <C> <C>
California .50% 2.35%
District of Columbia 2.25% 2.25%
Kentucky 2.00% 2.00%
Maine 0% 2.00%
Nevada 0% 3.50%
South Dakota 0% 1.25%
West Virginia 1.00% 1.00%
Wyoming 0% 1.00%
</TABLE>
Note: The above annuity premium tax rates are in effect as of January 1, 1998.
States not listed above currently have no premium tax on the purchase of
individual variable annuity
Prospectus Page 22
<PAGE>
contracts for use with nonqualified or qualified plans. However, premium tax
statutes are subject to amendment by legislative act and to judicial and
administrative interpretations, both of which may affect the above list of
states levying such taxes and the applicable tax rates. Particularly because a
portion of the premium tax charge may be made at the time Annuity Payments
commence, the above list of tax rates may not be those in effect at the time the
premium tax charge is made.
General American reserves the right to defer or waive the charge assessed for
premium tax in certain jurisdictions until the Contract is surrendered or until
the Contract Owner's death. The Company will notify the Contract Owner in
writing before exercising its right to collect deferred premium tax from the
Accumulated Value.
Laws relating to premium tax and the interpretations of such laws are subject to
change which may affect the deductions, if any, made under Contracts for premium
tax. Some jurisdictions permit payment of premium tax on the Accumulated Value
which is applied to provide an annuity. In those places, General American does
not make any separate deductions for premium tax from Purchase Payments, as it
is permitted to do under the Contracts, but defers any separate deductions for
premium tax until the Accumulated Value is applied to provide Annuity Payments.
(Although General American may be required in some of these jurisdictions to pay
premium tax currently on surrender charges, it presently intends to pay the
taxes out of the deductions and charges made against all Contracts.) General
American plans, where permissible, to defer any separate deductions for premium
tax until the Accumulated Value is applied to provide Annuity Payments, at which
time the amount of any applicable premium tax will be measured by the
Accumulated Value. However, in many jurisdictions the premium tax are applied to
Purchase Payments, and in those cases the deductions for such taxes will be made
when the Purchase Payments are received. Thus, General American reserves the
right to make a separate deduction from each Purchase Payment, or from the
Accumulated Value, depending on which method or combination of methods results
in the appropriate deduction for applicable premium tax.
OTHER TAXES
Currently, no charge is made against the Separate Accounts for any Federal,
state, or local taxes (other than premium tax) that the Company incurs that may
be attributable to the Separate Accounts or the Contracts. The Company may,
however, make a charge in the future for any such tax or economic burden on the
Company resulting from the application of the tax laws that it determines to be
properly attributable to the Separate Accounts or to the Contracts.
FEES AND EXPENSES OF THE FUNDS
Because the Separate Accounts purchase shares of the GT Global Variable
Investment Funds, the net asset value of each Division will normally reflect the
operating expenses incurred by its corresponding GT Global Variable Investment
Fund. The operating expenses of the Funds, include the Investment Management and
Administration Fees and Expenses paid to the Manager. The annualized rates at
which the various Funds pay such fees and expenses to the Manager range from
0.75% to 1.25% of a Fund's average daily net assets. The Manager has undertaken
to assume those expenses (other than taxes, brokerage fees, interest, and
extraordinary expenses) incurred by each Fund, to the extent such expenses
exceed the Investment Management and Administration Fees by more than .25%. (See
the accompanying prospectus of the GT Global Variable Investment Funds.)
- --------------------------------------------------------------------------------
YIELDS AND TOTAL RETURNS
- --------------------------------------------------------------------------------
General American may advertise the yields, effective yields, and total return
for the Divisions of the Separate Accounts. Of course, such figures will be
based upon past performance and do not indicate what investment returns or unit
values will be in the future. Detailed information on the calculation of
performance information appears in the Statement of Additional Information, but
a summary is given here.
The effective yield and total return of a Division are based upon the investment
performance of the GT Global Variable Investment Fund corresponding
Prospectus Page 23
<PAGE>
to the Division. (See "GT Global Variable Investment Funds") The investment
performance of a Division will reflect the expenses of the Fund and the
Division.
The yield of the GT Global Money Market Division refers to the annual rate of
interest generated by an investment in the Division over a specified seven-day
period. The yield is calculated by assuming that the income earned for that
seven-day period is the same for every other seven-day period in a year and can
be expressed as a percentage of the investment. The effective yield is
calculated in the same way but income earned is assumed to be reinvested
continuously. This compounding causes the effective yield to be slightly higher
than the yield.
The yield of the other Divisions refers to the annualized rate of return for an
investment in the Division over a specified thirty-day or one-month period. The
thirty-day income is shown as a percentage of the investment and annualized by
assuming that income is earned at the same rate for each month during the year.
The average annual total return of a Division is a quotation assuming that an
investment in the Division has been held in the Division for various time
periods, including a period measured from the date operations of the Division
began up to a maximum period of ten years. In the future, average annual total
returns will be reported for each Division for one, five, and ten years when the
Division has been in operation for those periods of time.
Average annual total return quotations represent the average compounded rates of
return on an initial investment of $1,000 as of the last day of the period for
which the quotations are provided. The report on average annual total return
will show the average percentage change in the value of an investment in the
Division, including any surrender charge that would apply if the Contract is
surrendered at the end of the period, but excluding any deductions for premium
tax.
Advertising and sales literature for the Contract may compute yield or total
return on different bases. Total return may be reported without a deduction for
the surrender charge on the assumption that an investment will persist beyond
the six year period during which a surrender charge is applicable. Such
persistency would be consistent with the idea that the Contract is a long-term
investment suitable for retirement income. Total return for the Funds may be
advertised, but such information will always be accompanied by the total return
for the corresponding Divisions. General American may present illustrations
showing total return performance for a hypothetical Contract based on an
assumption such as allocation of an amount to one or more Divisions, or monthly
transfers to a selected Division under the dollar cost averaging program. Such
illustrations will reflect the performance of the selected Divisions, including
all charges except the surrender charge, over various time periods in the past.
Advertising and sales literature for the Contracts may also compare the
performance of one or more Divisions to various relevant indices or to the
performance of other variable annuity investment choices, either generally or
with reference to choices with investment objectives similar to those of the
Fund and the Division. Performance information based on rankings by independent
services may also be included in sales literature and advertising.
Prospectus Page 24
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DISTRIBUTIONS UNDER THE CONTRACT
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CASH WITHDRAWALS
At any time before the Annuity Date and during the lifetime of the Annuitant,
the Contract Owner may elect to receive a cash withdrawal payment from the
Company. Any such election must be in the form of a Written Request and specify
the amount of the withdrawal. It will be effective on the date that it is
received by the Company. Any Written Request received at the Annuity Service
Office before the close of the NYSE (3:00 p.m. St. Louis time) on any Business
Day will be considered received on that Business Day.
The Contract Owner may request a full surrender or a partial withdrawal. A full
surrender will result in a cash withdrawal payment equal to the value of the
Contract Owner's Account at the end of the Valuation Period during which the
election becomes effective, less any applicable administrative charges, interest
change adjustment, and surrender charge. A request for a partial withdrawal will
result in a reduction in the Contract Owner's Accumulated Value equal to the
amount you receive plus any applicable administrative charges, interest change
adjustment and surrender charge. The amount you receive can be less than the
amount requested if the Accumulated Value is insufficient to cover applicable
charges and produce the requested amount. Any withdrawal request cannot exceed
the Accumulated Value of the Contract. Any applicable interest change adjustment
and surrender charge will be calculated based upon the gross amount of
withdrawal. If a partial withdrawal would result in a remaining Accumulated
Value lower than the surrender charges due under the Contract, the partial
withdrawal request will be treated as a full surrender.
There is no limit on the frequency of partial withdrawals. However, the amount
withdrawn must be at least $500 or, if less, the entire balance in the Division
or Guarantee Period. If after the withdrawal (and deduction of any applicable
administrative charges, interest change adjustment and surrender charge) the
amount remaining in the Division or Guarantee Period would be less than $500,
the Company may treat the partial withdrawal as a withdrawal of the entire
amount held in the Division or Guarantee Period. If a partial withdrawal plus
any applicable administrative charges, interest change adjustment and surrender
charge would reduce the Accumulated Value to less than $500, the Company may
treat the partial withdrawal as a full surrender of the Contract.
In requesting a partial withdrawal, the Contract Owner must specify the amounts
to be withdrawn from each Division and Guarantee Period, if any. If the Contract
Owner does not specify, the total amount including any applicable surrender
charges will be deducted from all Divisions in the ratio that the value of each
Division bears to the Accumulated Value ("pro-rata"). If a partial withdrawal is
to be made from the Fixed Account, the Contract Owner must instruct the Company
from which Guarantee Period the withdrawal is to be made. Withdrawal will be
made on a first-in- first-out basis when more than one Guarantee Period Amount
exists within a Guarantee Period.
ALL CASH WITHDRAWALS FROM ANY GUARANTEE PERIOD AMOUNT, EXCEPT THOSE EFFECTIVE
WITHIN THIRTY DAYS PRIOR TO THE EXPIRATION DATE OF SUCH GUARANTEE PERIOD AMOUNT,
WILL BE SUBJECT TO THE INTEREST CHANGE ADJUSTMENT.
Cash withdrawals from a Division will result in the cancellation of Accumulation
Units attributable to the Contract Owner's Account with an aggregate value on
the effective date of the withdrawal equal to the total amount by which the
Accumulated Value in the Division is reduced. The cancellation of such units
will be based on the Accumulation Unit values of the Division at the end of the
Valuation Period during which the cash withdrawal is effective.
If at the time the Contract Owner makes a Written Request for a full surrender
or a partial withdrawal, he or she does not provide us with a written election
not to have Federal income taxes withheld, the Company must by law withhold such
taxes from the taxable portion of any surrender or withdrawal.
The Company, upon request, will provide the Contract Owner with an estimate of
the amounts that would be payable in the event of a full surrender or partial
withdrawal. The Company reserves the right to charge a reasonable fee to recover
the
Prospectus Page 25
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administrative expenses associated with these requests. (See "Special Handling
Fees")
Written requests for cash withdrawal payments to a party, other than the
Contract Owner and/or to an address other than the Contract Owner's address of
record require a signature guarantee. In addition, if the Contract Owner's
address of record has been changed within the preceding thirty days, a signature
guarantee is required. Any cash withdrawal payment will be paid within seven
days from our receipt of the Written Request, subject to postponement under
Deferment of Payment provisions described herein. (See "Deferment of Payments")
Since the Qualified Contracts offered by this Prospectus will be issued in
connection with retirement plans which meet the requirements of the Code,
reference should be made to the terms of the particular retirement plan for any
limitations or restrictions on cash withdrawals. A cash withdrawal under either
a Qualified Contract or a Nonqualified Contract offered by this Prospectus also
may result in a Federal penalty tax. The tax consequences of a cash withdrawal
payment under both Qualified Contracts and Nonqualified Contracts should be
carefully considered. (See "Federal Tax Matters -- Taxation of Annuities")
SYSTEMATIC WITHDRAWAL PLAN
General American administers a systematic withdrawal plan ("SWP") which allows
certain Contract Owners to authorize periodic withdrawals during the
accumulation period. Contract Owners entering into an SWP agreement instruct
General American to withdraw selected amounts from the Contract on a Business
Day coincident with or subsequent to the 25th of a month on a monthly,
quarterly, semiannual or annual basis. In requesting a SWP, the Contract Owner
must specify the amounts to be withdrawn from each Division and Guarantee
Period, if any. If the Contract Owner does not specify, the total amount
including any applicable surrender charges will be deducted from all Divisions
in the ratio that the value of each Division bears to the Accumulated Value
("pro-rata"). If a SWP is to be made from the Fixed Account, the Contract Owner
must instruct the Company from which Guarantee Period the withdrawal is to be
made. Withdrawal will be made on a first-in first-out basis when more than one
Guarantee Period Amount exists within a Guarantee Period. Currently, the SWP is
available to Contract Owners who request a minimum $200 periodic withdrawal.
Amounts withdrawn may be subject to a surrender charge (see "Guaranteed Interest
Options" and "Federal Tax Matters"). Amounts withdrawn from the Fixed Account
will be subject to the interest change adjustment. Withdrawals taken under the
SWP may be subject to the 10% Federal penalty tax on early withdrawals and to
income taxes. (See "Federal Tax Matters") Contract Owners interested in SWP may
obtain an Annuity Service Request Form from their registered representative or
the Annuity Service Office. General American reserves the right to amend the SWP
on thirty days' Written Notice. The SWP may be terminated at any time by the
Contract Owner or General American.
INTEREST CHANGE ADJUSTMENT
Any full surrender or partial withdrawal of a Guarantee Period Amount which is
not effective within thirty days prior to the Expiration Date of the Guarantee
Period Amount will be subject to an interest change adjustment ("ICA"). For this
purpose, transfers, distributions on the death of a Contract Owner,
annuitization, and amounts applied to purchase an annuity are all treated as
cash withdrawals. The ICA will be subtracted from the gross amount being
withdrawn after deduc-
tions of any applicable administrative charges and before deduction of any
applicable surrender charge.
The ICA will reflect the relationship between the Current Rate (defined as J
below) for Guarantee Periods of the same duration as the period from which the
surrender or withdrawal is being made and the Guaranteed Interest Rate
applicable to the amount being withdrawn. It also reflects the time remaining in
the applicable Guarantee Period. The application of the ICA may result in a
lower payment than the Guarantee Period Amount upon surrender or withdrawal.
The interest change adjustment is determined by the application of the following
formula:
ICA = W X .9 X (J-I) X (N/12) where,
W is the gross withdrawal as of the effective date of the application of the
interest change adjustment, prior to the application of the interest change
adjustment, surrender charge, and administrative charges;
J is the Guaranteed Interest Rate declared by the Company, as of the effective
date of the application of the interest change adjustment, for current
allocations to Guarantee Periods equal to the original Guarantee Period from
which the surrender or withdrawal is being made;
Prospectus Page 26
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I is the Guaranteed Interest Rate currently being credited to the Guarantee
Period Amount subject to the interest change adjustment; and
N is the number of complete months remaining in the Guarantee Period of the
Guarantee Period Amount subject to the interest change adjustment.
In the determination of J, if the Company currently does not offer the
applicable Guarantee Period, then the rate will be determined by using the next
shorter Guarantee Period that is currently being offered. Notwithstanding
application of the foregoing formula, (a) in no event will the ICA be less than
zero, and (b) the gross surrender or withdrawal minus the interest change
adjustment will not be less than the part of the Net Purchase Payment or
transfer amount being withdrawn accumulated at three percent interest compounded
annually since the beginning of the Guarantee Period.
See Appendix B for examples of the interest change adjustment calculation.
ANNUITY PROVISIONS
The Accumulated Value on the Annuity Date, less any applicable administration
charges, interest change adjustment, surrender charge and premium tax will be
applied to an Annuity Option. If the Annuity Date of the Contract occurs within
the first three Contract Years, surrender charges may be deducted upon
annuitization. Currently, we assess surrender charges only if Annuity Option 4
(Income for a Fixed Period) is chosen with Annuity Payments lasting for a period
of less than ten years.
ANNUITY DATE
Annuity Payments will begin under the Contract on the Annuity Date, unless the
Contract has been surrendered or the proceeds have been paid to the designated
Beneficiary prior to that date. The Annuity Date will be the later of the first
day of the first month following the Annuitant's 85th birthday or upon
completion of five Contract Years. Under certain qualified arrangements,
distributions may be required before the Annuity Date.
The Contract Owner may change the Annuity Date. An Annuity Date may be changed
only by Written Request during the Annuitant's lifetime, and such a request must
reach the Annuity Service Office at least thirty days before (1) the then
current Annuity Date, and (2) the new Annuity Date. The new Annuity Date must be
no later than the Annuity Date as defined in the paragraph above.
ANNUITY OPTIONS
(A) ELECTION OF ANNUITY OPTIONS
The Annuity Option may be elected or changed if the Annuity Option was not
irrevocable by Written Request, provided the Annuitant is still alive. This
election must be made no later than thirty days prior to the Annuity Date.
The Annuity Options selected may be either variable, fixed, or a combination of
the two. In the absence of an election to the contrary, Annuity Payments will be
made as a Life Annuity with 120 Monthly Payments Guaranteed (Option 2 below);
that portion of Accumulated Value in the Divisions of the Separate Accounts will
be applied to provide variable Annuity Payments and that portion of Accumulated
Value in the Fixed Account will be applied to provide fixed Annuity Payments.
The minimum amount which may be applied under an option will be based upon our
rules at the time the option becomes effective (or as required by law). Our
current rules state that the minimum amount which may be applied under an option
is $5,000 and the minimum Annuity Payment is $50. If the Accumulated Value is
less than $5,000 when the Annuity Date arrives, General American will make a
lump sum payment of such amount to the Contract Owner. If at any time payments
are, or become less than $50, General American has the right to change the
frequency of payments to intervals that will result in payments of at least $50.
(B) THE OPTIONS AVAILABLE
OPTION 1 -- LIFE ANNUITY -- An annuity payable in monthly, quarterly,
semi-annual or annual payments during the lifetime of the Annuitant, ceasing
with the last installment due prior to the death of the Annuitant. SINCE THERE
IS NO PROVISION FOR A MINIMUM NUMBER OF PAYMENTS UNDER THIS ANNUITY OPTION, THE
PAYEE WOULD RECEIVE ONLY ONE PAYMENT IF THE ANNUITANT DIED PRIOR TO THE DUE DATE
OF THE SECOND PAYMENT, TWO PAYMENTS IF THE ANNUITANT DIED PRIOR TO THE DUE DATE
OF THE THIRD PAYMENT, ETC.
OPTION 2 -- LIFE ANNUITY WITH 60, 120, 180, OR 240 MONTHLY PAYMENTS GUARANTEED
- -- An annuity payable monthly, quarterly, semi-annual, or annual payments during
the lifetime of the Annuitant, with the guarantee that if, at the death of the
Annuitant, payments have been made for less than 60 months, 120 months, 180
months, or 240 months, as elected, payments will be continued to the Beneficiary
during the remainder of the elected period.
Prospectus Page 27
<PAGE>
OPTION 3 -- JOINT AND SURVIVOR INCOME FOR LIFE -- An annuity payable monthly,
quarterly, semi-annual, or annual payments while both the Annuitant and a second
person remain alive, and thereafter during the remaining lifetime of the
survivor, ceasing with the last installment due prior to the death of the
survivor. If the primary payee dies after payments begin, full payments or
payments of 1/2 or 2/3, (whichever you elected when applying for this option)
will continue to the other payee during his or her lifetime. SINCE THERE IS NO
PROVISION FOR A MINIMUM NUMBER OF PAYMENTS UNDER ANNUITY OPTION 3, THE PAYEES
WOULD RECEIVE ONLY ONE PAYMENT IF BOTH THE ANNUITANT AND THE SECOND PERSON DIED
PRIOR TO THE DUE DATE OF THE SECOND PAYMENT, TWO PAYMENTS IF THEY DIED PRIOR TO
THE DUE DATE OF THE THIRD PAYMENT, ETC.
OPTION 4 -- INCOME FOR A FIXED PERIOD -- An annuity payable in annual,
semiannual, quarterly, or monthly payments over a specified number of years, not
less than five nor more than thirty. When a variable annuity basis is selected,
a mortality and expense risk charge continues to be assessed, even though
General American incurs no mortality risk under this option.
(C) CALCULATION OF PAYMENTS
Payments under an Annuity Option will be calculated using the effective annual
rate of 4% compounded annually. The mortality table used in determining payments
paid under life income options is the 1983 Individual Annuitant Mortality Table
A. In using this mortality table, ages of Annuitants will be reduced by one year
for Annuity Dates occurring during the 1990s, reduced two years for Annuity
Dates occurring during the decade 2000-2009, and so on.
Life income options are based on the Annuitant's sex and age nearest birthday on
the Annuity Date. We have the right to require satisfactory proof of age and
sex. If age or sex has been incorrectly stated, the proper adjustments in
payments will be made. We may also require proof that the Annuitant is living on
any payment due date.
(D) VALUE OF VARIABLE ANNUITY PAYMENTS
For the variable portion of an Annuity Option, the amounts applied to the
annuity are used to purchase Annuity Units in the selected Divisions. The number
of Annuity Units purchased in each Division is calculated as the dollar amount
of the first Annuity Payment provided by proceeds from that Division divided by
the Annuity Unit value for the Division as of the Annuity Date. On any payment
date, the amount of payment from each Division is calculated as the number of
Annuity Units for the Division times the Annuity Unit value for the Division as
of the payment date, less any applicable administration charges.
Although the value of variable Annuity Payments will reflect the performance of
the Divisions, we guarantee that the dollar amount of variable Annuity Payments
will not be adversely affected by our actual expense and mortality results. The
annuity tables that are contained in the Contract, and are used to calculate the
value of variable Annuity Payments, are based on an assumed annual interest rate
of 4% per year. If the actual net investment experience exactly equals the
assumed interest rate, then the variable Annuity Payments will remain the same
(equal to the first Annuity Payment). However, if actual investment experience
exceeds the assumed interest rate, the variable Annuity Payments will increase;
conversely, they will decrease if the actual experience is lower.
The value of all payments (both fixed and variable) will be greater for shorter
monthly payment guarantee periods than for longer monthly payment guarantee
periods, and greater for life annuities than for joint and survivor annuities,
because they are expected to be made for a shorter period.
The method of computation of variable Annuity Payments is described in more
detail in the Statement of Additional Information.
DEFERMENT OF PAYMENT
Payment of any cash withdrawal or lump sum death benefit due from a Division
will be made within seven days from the date the election becomes effective,
except that General American may be permitted to defer such payment: (1) for any
period (a) during which the NYSE is closed other than customary weekend and
holiday closing or (b) during which trading on the NYSE is restricted (as
determined or required by the SEC); (2) for any period during which an emergency
exists (as determined by the SEC) as a result of which (a) disposal of
securities held by the Fund is not reasonably practicable, or (b) it is not
reasonably practicable to determine the value of the net assets of the Fund; or
(3) for such other periods as the SEC may by order permit for the protection of
investors.
General American may defer payment of any cash withdrawal or lump sum death
benefit due from the Fixed Account for a period not to exceed six months.
Prospectus Page 28
<PAGE>
THE BENEFICIARY
The Beneficiary is the person or legal entity that may receive benefits under
the Contract in the event of the Annuitant's or contract Owner's death. (See
"Death Benefits"). The original Beneficiary is named in the Contract
Application. Subject to any assignment of a Contract, the Beneficiary
designation may be changed by the Contract Owner during the lifetime of the
Annuitant by the filing of a Written Request acceptable to General American at
its Annuity Service Office. If Annuity Option 3 (Joint and Survivor Income for
Life) is selected, the designation of the second Annuitant may not be changed
after Annuity Payments begin. If the beneficiary designation is changed, General
American reserves the right to require that the Contract be returned for
endorsement. A Beneficiary who becomes entitled to receive benefits under the
Contract may also designate, in the same manner, a second Beneficiary to receive
any benefits which may become payable under the Contract to him or her by reason
of the primary Beneficiary's death. If a Beneficiary has not been designated by
the Contract Owner or if a Beneficiary so designated is not living on the date a
lump sum death benefit is payable or on the date any Annuity Payments are to be
made, the Beneficiary shall be the Contract Owner's estate.
DEATH BENEFIT
In every case of death, General American must receive proof of the death of the
Contract Owner or Annuitant before it is obliged to act.
(A) DEATH OF A CONTRACT OWNER WHO IS THE ANNUITANT
If a Contract Owner dies prior to the Annuity Date, and if the Contract Owner's
surviving spouse is the Beneficiary, the spouse may elect to continue the
Contract as the new owner and the death benefit, if more than the Accumulated
Value, will be paid to the surviving spouse by crediting the Contract with an
amount equal to the difference between the death benefit and the Accumulated
Value. If the Contract Owner's surviving spouse is not the Beneficiary, the
death benefit will become payable to the Beneficiary.
If a Contract Owner dies on or after the Annuity Date, no death benefit will be
payable under the Contract except as may be provided under the Annuity Option
elected.
(B) DEATH OF A CONTRACT OWNER WHO IS NOT THE ANNUITANT
If a Contract Owner dies prior to the Annuity Date, and if the Contract Owner's
surviving spouse is the Annuitant, the spouse may elect to continue the Contract
as the new owner. If the Contract Owner's surviving spouse is not the Annuitant,
the Accumulated Value, less any applicable administration fees, interest change
adjustment, or surrender charge, will be distributed to the Beneficiary.
If a Contract Owner dies on or after the Annuity Date, no death benefit will be
payable under the Contract.
(C) DEATH OF THE ANNUITANT WHO IS NOT A CONTRACT OWNER
If the Annuitant dies prior to the Annuity Date and before a Contract Owner, the
death benefit will become payable to the Beneficiary. The Beneficiary may elect
to receive these benefits through one of the Annuity Options available under the
Contract or in a single lump sum. If an election is not made by Written Request
within one year after the death of the Annuitant, the death benefit will be paid
in a single lump sum.
If the Annuitant dies on or after the Annuity Date, no death benefit will be
payable under the Contract except as may be provided under the Annuity Option
elected.
(D) OTHER PROVISIONS
Except as otherwise provided above, payments made under the death benefit
provisions will be made in one lump sum and must be made within five (5) years
after the date of death of the Contract Owner or Annuitant. The death benefit
will be paid or credited within seven days of receipt at the Annuity Service
Office of due proof of death and a Written Request for payment, except as we may
be permitted to defer such payment in accordance with the Investment Company Act
of 1940 and applicable state insurance law.
If, however, the Contract Owner or the Beneficiary makes a written choice of one
of the two options described below, and if such choice is clear to General
American, the Company will treat the proceeds as the Contract Owner or the
Beneficiary has chosen. The two options are:
(i) Leave the proceeds of the Contract with General American. The entire
Accumulated Value must be paid in a lump sum to the Beneficiary before the end
of the fifth year after the Contract Owner's or Annuitant's death.
(ii) Apply the proceeds to create an immediate annuity for the Beneficiary, who
will be the owner and Annuitant. Payments under the annuity, or under any other
method of payment General American makes available, must be for the life of the
Beneficiary, or for a number of years that is not more than the life expectancy
of the Beneficiary (as
Prospectus Page 29
<PAGE>
determined for Federal tax purposes) at the time of the Contract Owner's death,
and must begin within one year after the Contract Owner's or Annuitant's death.
AMOUNT OF DEATH BENEFIT
The death benefit will be the appropriate option as described in either (I) or
(II) below. The death benefit is determined as of the date due proof of death,
Written Request for payment, and all other requirements have been received at
the Company's Annuity Service Office.
(I) If the Date of Issue is prior to the Annuitant's 80th birthday, the death
benefit will be the amount described below, less any applicable interest
change adjustment and administrative charges:
(A) For Contracts with a Date of Issue before January 1, 1996, the death
benefit during the Contract Year ending in 1997 will be the greater of
(a) the sum of all net purchase payments made, less any amounts deducted
through partial withdrawals; or (b) the Accumulated Value. Thereafter,
the death benefit will be the greater of (a) the death benefit reset
amount described hereafter; or (b) the Accumulated Value. The first
death benefit reset will occur on the last day of the Contract Year
ending in 1997.
(B) For Contracts with a Date of Issue on or after January 1, 1996, the
death benefit during the first Contract Year is the greater of (a) the
sum of all net purchase payments made, less any amounts deducted through
partial withdrawals; or (b) the Accumulated Value. Thereafter, the death
benefit will be the greater of (a) the death benefit reset amount; or
(b) the Accumulated Value. The first death benefit reset will occur on
the last day of the first Contract Year.
(II) If the Date of Issue is on or after the Annuitant's 80th birthday, the
death benefit will be the Accumulated Value, less any applicable interest
change adjustment, surrender charge or administrative charges."
DEATH BENEFIT RESET
The first death benefit reset amount will be the greater of (a) the Accumulated
Value on the last day of the Contract Year; or (b) the sum of all net purchase
payments made, less any amounts deducted through partial withdrawals. Each
subsequent death benefit reset amount will be the greater of (a) the Accumulated
Value on the last day of the Contract Year; or (b) the prior death benefit reset
amount, plus any net purchase payments and less any amounts deducted through
partial withdrawals since then. If the Date of Issue is prior to the Annuitant's
75th birthday, the death benefit reset will occur every year until the
Annuitant's 80th birthday. Thereafter the death benefit reset will occur every
six Contract Years, measured from the Date of Issue. If the Date of Issue is on
or after the Annuitant's 75th birthday, the death benefit reset will occur every
year until the Annuitant's 80th birthday. Thereafter the death benefit reset
will no longer occur.
CONTRACTS ISSUED UNDER SECTION 401/457 OF THE CODE
If the Annuitant dies prior to the Annuity Date the death benefit will equal the
accumulated value, less any applicable interest change adjustment, surrender
charge, or administrative charges for Contracts issued under Section 401 or 457
of the Code with multiple participants.
ASSIGNMENTS AND CHANGES OF OWNERSHIP
With respect to nonqualified individual Contracts, an assignment or change in
ownership of the Contract or of any interest in it will not bind General
American unless (1) it is made in a written instrument, (2) the original
instrument or a certified copy is filed at our Annuity Service Office, and (3)
we send the Contract Owner a receipt. General American is not responsible for
the validity of any assignment. If a claim is based on an assignment or change
of ownership, proof of interest of the claimant may be required. A valid
assignment will take precedence over any claim of a Beneficiary. Any amounts due
under a valid assignment will be paid in one lump sum.
With respect to all other Contracts, the Contract Owner may not transfer, sell,
assign, discount, or pledge a Contract for a loan or a security for the
performance of an obligation or any other purpose, to any person other than to
us at our Annuity Service Office.
Any request received by the Company which is not specifically addressed in an
assignment document must be in writing and signed by both the assignor and the
assignee.
Prospectus Page 30
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FEDERAL TAX MATTERS
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
INTRODUCTION
The following discussion is a general description of the Federal income tax
considerations relating to the Contract and is not intended as tax advice. This
discussion is not intended to address the tax consequences resulting from all of
the situations in which a person may be entitled to or may receive a
distribution under the Contract. Any person concerned about these tax
implications should consult a competent tax adviser before initiating any
transaction. The 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 the
continuation of the present Federal income tax laws or of the current
interpretation by the Internal Revenue Service. Moreover, no attempt has been
made to consider any applicable state or other tax laws.
The Contract may be purchased on a nonqualified basis ("Nonqualified Contract")
or purchased and used in connection with plans qualifying for favorable tax
treatment ("Qualified Contract"). Qualified Contracts are intended to be
purchased in connection with plans entitled to special income tax treatment
under Sections 401, 408, 408A, and 457 of the Code or as tax sheltered annuities
under Section 403(b) of the Code. The ultimate effect of Federal income taxes on
the amounts held under a Contract or Annuity payments, and on the economic
benefit to the Contract Owner, the Annuitant, or the Beneficiary depends on the
type of retirement plan, and on the tax and employment status of the individual
concerned. In addition, certain requirements must be satisfied in purchasing a
Qualified Contract and receiving distributions from a Qualified Contract in
order to continue receiving favorable tax treatment. Therefore, purchasers of
Qualified Contracts should seek competent legal and tax advice regarding the
suitability of the Contract for their situation, the applicable requirements,
and the tax treatment of the rights and benefits of the Contract. The following
discussion assumes that a Qualified Contract is purchased with proceeds from
and/or contributions under retirement plans that qualify for the intended
special Federal income tax treatment.
TAXATION OF GENERAL AMERICAN
General American is taxed as a life insurance company under Part I of Subchapter
L of the Code. Since the operations of the Separate Accounts form a part of
General American, they will not be taxed separately as a "regulated investment
company" under Subchapter M of the Code. Investment income and realized capital
gains are automatically applied to increase reserves under the Contract. Under
existing Federal income tax law, General American believes that the investment
income and realized net capital gains of the Separate Accounts will not be taxed
to the extent that such income and gains are applied to increase the reserves
under the Contract.
Accordingly, General American does not anticipate that it will incur any Federal
income tax liability attributable to the Separate Accounts and, therefore,
General American does not intend to make provisions for any such taxes. However,
if changes in the Federal tax laws or interpretations thereof result in General
American being taxed on income or gains attributable to the Separate Accounts,
then General American may impose a charge against the Separate Accounts (with
respect to some or all Contracts) in order to set aside amounts to pay such
taxes.
TAX STATUS OF THE CONTRACTS
(A) DIVERSIFICATION
Section 817(h) of the Code requires that with respect to Nonqualified Contracts,
the investments of the Divisions be "adequately diversified" in accordance with
Treasury Department regulations in order for the Contracts to qualify as annuity
contracts under Federal tax law. The Separate Accounts, through the Funds,
intend to comply with the diversification requirements prescribed by the
Treasury Department in Treas. Reg. Sec. 1.817-5.
(B) INVESTOR CONTROL
The Treasury Department has from time to time suggested that under some
circumstances the owner of a variable contract will be deemed to be in control
over the investments of a separate account supporting the contract, which may
cause the
Prospectus Page 31
<PAGE>
owner, rather than the insurance company, to be treated as the owner of the
assets in the separate account. If a contract owner is considered the owner of
the assets of a separate account, income and gains from that account would be
included in the owner's gross income. The Treasury Department also has stated on
past occasions that it will issue regulations or rulings addressing this issue.
The ownership rights under the Contract are different in certain respects from
those described by the IRS in rulings in which it was determined that Contract
Owners were not owners of separate account assets. For example, a Contract owner
has the choice of more Divisions and narrower investment strategies in which to
allocate net purchase Payments and Accumulation Value, and may be able to
transfer among Divisions more frequently than in such rulings. These differences
could result in a Contract Owner being treated as the owner of the assets of the
Separate Account. In addition, General American does not know what standards
will be set forth, if any, in the additional regulations or rulings which the
Treasury Department has stated it expects to issue. General American therefore
reserves the right to modify the Contract as necessary to attempt to prevent a
Contract Owner from being considered the owner of a pro rata share of the assets
of the Separate Accounts.
(C) REQUIRED DISTRIBUTIONS
In order to be treated as an annuity contract for Federal income tax purposes,
Section 72(s) of the Code requires any Nonqualified Contract to provide that (a)
if any Contract Owner dies on or after the Annuity Date but prior to the time
the entire interest in the Contract has been distributed, the remaining portion
of such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that Contract Owner's death; and (b)
if any Contract Owner dies prior to the Annuity Date, the entire interest in the
Contract will be distributed within five years after the date of that Contract
Owner's death. These requirements will be considered satisfied as to any portion
of the Contract Owner's interest which is payable to or for the benefit of a
"designated beneficiary" and which is distributed over the life of such
"designated beneficiary" or over a period not extending beyond the life
expectancy of that beneficiary, provided that such distributions begin within
one year of that Contract Owner's death. The Contract Owner's "designated
beneficiary" is the person or entity designated by such Owner as a Beneficiary
and to whom ownership of the Contract passes by reason of death. If the Contract
Owner's "designated beneficiary" is the surviving spouse of the Contract Owner,
the Contract may be continued with the surviving spouse as the new Owner.
The Nonqualified Contracts contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. General American intends
to review such provisions and modify them if necessary to assure that they
comply with the requirements of Code Section 72(s) when clarified by regulation
or otherwise. There are other rules that apply to Qualified Contracts.
The following discussion is based on the assumption that the Contract qualifies
as an annuity contract for Federal income tax purposes.
TAXATION OF ANNUITIES
(A) IN GENERAL
Section 72 of the Code governs taxation of annuities in general. General
American believes that a Contract Owner who is a natural person generally is not
taxed on increases in the value of a Contract until distribution occurs by
withdrawing all or part of the account value (e.g., partial withdrawals,
surrenders, or Annuity Payments under the Annuity Option elected). For this
purpose, the assignment, pledge, or agreement to assign or pledge any portion of
the account value (and in the case of a Qualified Contract, any portion of an
interest in the qualified plan) generally will be treated as a distribution. The
taxable portion of a distribution (in the form of a single sum payment or an
annuity) is taxable as ordinary income. Any Contract Owner who is not a natural
person generally must include in income any increase in the excess of the
Contract's account value over the "investment in the Contract" (discussed below)
during the taxable year. There are some exceptions to this rule and a
prospective Contract Owner that is not a natural person may wish to discuss
these with a competent tax adviser.
The following discussion generally applies to a Contract owned by a natural
person.
(B) WITHDRAWALS AND SURRENDERS
In the case of a withdrawal under a Qualified Contract, a ratable portion of the
amount received is taxable, generally based on the ratio of the "investment in
the Contract" to the individual's total accrued benefit or the balance under the
retirement plan. The "investment in the Contract" generally equals the amount of
any premium payments paid by or on behalf of any individual with after-tax
dollars. For a Contract issued in connection with
Prospectus Page 32
<PAGE>
qualified plans, the "investment in the Contract" can be zero. This general rule
does not apply to certain types of individual retirement annuities, and other
special tax rules may be available for certain distributions from a Qualified
Contract.
With respect to Nonqualified Contracts, partial withdrawals, including any
withdrawals under the systematic withdrawal plan, are generally treated as
taxable income to the extent that the account value immediately before the
withdrawal exceeds the "investment in the Contract" at that time. Full
surrenders are treated as taxable income to the extent that the amount received
exceeds the "investment in the Contract".
The account value is subject to an interest change adjustment upon a withdrawal
or surrender. There is no definitive guidance on the proper tax treatment of
such an adjustment, and the Contract Owner should contact a competent tax
adviser with respect to the potential tax consequences of an interest change
adjustment.
(C) ANNUITY PAYMENTS
Although the tax consequences may vary depending on the Annuity Payment elected
under the Contract, in general, only the portion of the Annuity Payment that
represents the amount by which the Accumulated Value exceeds the "investment in
the Contract" will be taxed; after the investment in the Contract is recovered,
the full amount of any additional Annuity Payments is taxable. This general rule
does not apply to certain types of individual retirement annuities, and other
special rules may apply to Qualified Contracts.
For variable Annuity Payments, the taxable portion is generally determined by an
equation that establishes a specific dollar amount of each payment that is not
taxed. The dollar amount is determined by dividing the "investment in the
Contract" by the total number of expected periodic payments. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her "investment in the Contract."
For fixed Annuity Payments, in general, there is no tax on the portion of each
payment which represents the same ratio that the "investment in the Contract"
bears to the total expected value of the Annuity Payments for the term of the
payments; however, the remainder of each Annuity Payment is taxable. In all
cases, after the "investment in the Contract" is recovered, the full amount of
any additional Annuity Payment is taxable.
(D) PENALTY TAX
In the case of a distribution pursuant to a Nonqualified Contract, there may be
imposed a Federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions: (1) made
on or after the date on which the Contract Owner attains age 59 1/2; (2) made as
a result of death or disability of the Contract Owner; (3) received in
substantially equal periodic payments as a life annuity or a joint and survivor
annuity for the lives or life expectancies of the Contract Owner and a
"designated beneficiary;" (4) from a qualified plan* (5) allocable to investment
in the Contract before August 14, 1982; (6) under a qualified funding asset (as
defined in Code Section 130(d)); or (7) under an immediate annuity (as defined
in Code Section (u)(4)).
*Other tax penalties may apply to certain distributions under a Qualified
Contract, including a penalty similar to the penalty for distributions from
Nonqualified Contracts described above.
(E) TAXATION OF DEATH BENEFIT PROCEEDSX
Amounts may be distributed from a Contract because of the death of a Contract
Owner or an Annuitant. Generally, such amounts are includable in the income of
the recipient as follows: (1) if distributed in a lump sum, they are taxed in
the same manner as a full surrender of the Contract, as described above, or (2)
if distributed under an annuity option, they are taxed in the same manner as
annuity payments as described above. For these purposes, the investment in the
contract is not affected by the owner's or annuitant's death. That is, the
investment in the contract remains the amount of any purchase payments paid
which were not excluded from gross income.
(F) TRANSFERS, ASSIGNMENTS OR EXCHANGES OF THE CONTRACT
In general, a transfer of ownership of a Contract, the collateral assignment of
a Contract, the designation of an Annuitant or Beneficiary who is not also the
Contract Owner, or the exchange of a Contract may result in certain tax
consequences to the Contract Owner. For example, when a Contract is assigned as
collateral for a loan, the entire excess of the Contract's account value over
the investment in the contract becomes taxable as ordinary income, and, if the
Contract Owner is under the age of 59 1/2, a penalty tax equal to 10% of the
taxable amount may also be imposed. Increases in the value of a Contract that
has been assigned will continue to be taxable annually to the Contract Owner
until the assignment is released. Any Contract Owner contemplating any such
transfer, assignment, designation, or exchange should
Prospectus Page 33
<PAGE>
contact a competent tax adviser for advice with respect to the potential tax
effects of such a transaction.
(G) MULTIPLE CONTRACTS
All Nonqualified annuity contracts that are issued by General American (or its
affiliates) to the same Contract Owner during any calendar year are treated as
one annuity contract for purposes of determining the amount includable in gross
income under Section 72(e) of the Code. In addition, the Treasury Department has
specific authority to issue regulations that prevent the avoidance of Section
72(e) through the serial purchase of annuity contracts or otherwise.
(H) WITHHOLDING
Pension and annuity distributions generally are subject to withholding from the
recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Recipients, however,
generally are provided the opportunity to elect not to have tax withheld from
distributions. Different rules may apply to United States citizens or
expatriates living abroad and, effective January 1, 1993, to certain
distributions under Qualified Contracts. In addition, some states have enacted
legislation requiring withholding.
(I) POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely modified
the Federal taxation of certain annuities. As of the date of this Prospectus,
the President's budget for fiscal year 1999 includes proposals that would
directly affect variable annuities, and there is always the possibility that the
tax treatment of annuities could change by legislation or other means (such as
the IRS regulations, revenue rulings, judicial decisions, etc.). Moreover, it is
also possible that any change could be effective prior to the date of any such
change.
(J) OTHER TAX CONSEQUENCES
As noted above, the foregoing discussion of the Federal income tax consequences
under the Contract is not exhaustive and special rules are provided with respect
to other tax situations not discussed in the Prospectus. Further, the Federal
income tax consequences discussed here reflect General American's understanding
of current law and the law may change. Federal estate and state and local
estate, inheritance, and other tax consequences of ownership or receipt of
distributions under the Contract depend on the individual circumstances of each
Contract Owner or recipient of the distribution. A competent tax adviser should
be consulted for further information.
(K) QUALIFIED CONTRACTS
The Qualified Contract is designed for use with several types of retirement
plans. The tax rules applicable to participants and beneficiaries in retirement
plans vary according to the type of plan and the terms and conditions of the
plan. Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances. We make no
attempt to provide more than general information about use of the Contracts with
the various types of retirement plans. Owners and participants under retirement
plans, as well as Annuitants and Beneficiaries, are cautioned that the rights of
any person to any benefits under Qualified Contracts may be subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contract issued in connection with such a plan. Some retirement plans are
subject to distribution and other requirements that are not incorporated in the
administration of the Contracts. Contract Owners are responsible for determining
that contributions, distributions and other transactions with respect to the
Contracts satisfy applicable law. Purchasers of Contracts for use with any
retirement plan should consult a competent legal counsel and tax adviser
regarding the suitability of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES AND ACCOUNTS
The Contract is designed for use with individual retirement annuities and
individual retirement accounts. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
individual retirement annuity or individual retirement account (each hereinafter
referred to as "IRA"). Also, distributions from certain other types of qualified
plans may be "rolled over" on a tax-deferred basis into an IRA. The sale of a
Contract for use with an IRA may be subject to special disclosure requirements
of the Internal Revenue Service. Purchasers of the Contract for use with IRAs
will be provided with supplemental information required by the Internal Revenue
Service or other applicable agency. Such purchasers will have the right to
revoke their purchase within seven days of the earlier of the establishment of
the IRA or their purchase. If a Qualified Contract is issued in connection with
an employer's Simplified Employee Pension ("SEP")
Prospectus Page 34
<PAGE>
or Simple Retirement Account ("SIMPLE") plan, Contract Owners, Annuitants and
Beneficiaries are cautioned that the rights of any person to any benefits under
employer plans may be subject to the terms and conditions of the plans
themselves, regardless of the terms and conditions of the Contract. A Qualified
Contract will be amended as necessary to conform to the requirements of the
Code.
Effective January 1, 1998, section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA, although Roth IRA's are not available
as part of this Contract. Contributions to a Roth IRA, which are subject to
certain limitations, are not deductible and must be made in cash or as a
rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax and other special rules
may apply. You should consult a tax adviser before combining any converted
amounts with any other Roth IRA contributions, including any other conversion
amounts from other tax years. Distributions from a Roth IRA generally are not
taxed, except that, once aggregate distributions exceed contributions to the
Roth IRA, income tax and a ten percent (10%) penalty tax may apply to
distributions made (1) before age 59 1/2 (subject to certain exceptions) or (2)
during the five taxable years starting with the year in which the first
contribution is made to the Roth IRA.
CODE SECTION 403(b) PLANS
Under Code Section 403(b), payments made by public school systems and certain
tax exempt organizations to purchase annuity contracts for their employees are
excludable from the gross income of the employee, subject to certain
limitations. However, these payments may be subject to FICA (Social Security)
taxes.
Code Section 403(b)(11) restricts the distribution under Code Section 403(b)
annuity contracts of: (1) elective contributions made in years beginning after
December 31, 1988; (2) earnings on those contributions; and (3) earnings in such
years on amounts held as of the last year beginning before January 1, 1989.
Distribution of those amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. Income attributable to elective contributions may not be distributed
in the case of hardship. Distributions prior to age 59 1/2 due to separation
from service or financial hardship are subject to the nondeductible 10% penalty
tax for premature distributions, in addition to income tax.
The 1940 Act has distribution requirements which differ from the requirements of
Code Section 403(b) set forth above. However, these Contracts are being offered
in reliance upon, and in compliance with, the provisions of no-action letter
number IP-6-88 issued by the Securities and Exchange Commission to the American
Council of Life Insurance. The no action letter allows the Separate Account to
apply the restrictions created by Code Section 403(b)(11) as long as specified
steps, such as this disclosure, are taken to ensure that Contract Owners are
aware of the Code restrictions. General American believes it is in compliance
with the provisions of the no-action letter.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Code Section 401(a) permits employers to establish various types of retirement
plans for employees, and permit self-employed individuals to establish
retirement plans for themselves and their employees. These retirement plans may
permit the purchase of the Contracts to provide benefits under the plans.
Adverse tax consequences to the plan, to the participant or to both may result
if this Contract is assigned or transferred to any individual as a means to
provide benefit payments.
DEFERRED COMPENSATION PLANS
Code Section 457 provides for certain deferred compensation plans. These plans
may be offered with respect to service for state governments, local governments,
political subdivisions, agencies, instrumentalities and certain affiliates of
such entities, and tax exempt organizations. With respect to non-governmental
Section 457 plans, all investments are owned by the sponsoring employer and are
subject to the claims of the general creditors of the employer. Distributions
are taxable in full. Depending on the terms of the particular plan, the employer
may be entitled to draw on deferred amounts for purposes unrelated to its
Section 457 plan obligations. These plans are subject to various restrictions on
contributions and distributions.
RESTRICTIONS UNDER QUALIFIED CONTRACTS
Other restrictions with respect to the election, commencement, or distribution
of benefits may apply under Qualified Contracts or under the terms of the plans
in respect of which Qualified Contracts are issued.
Prospectus Page 35
<PAGE>
VOTING RIGHTS
- --------------------------------------------------------------------------------
To the extent required by law, the GT Global Variable Investment Fund shares
held in the Divisions of the Separate Accounts will be voted by General American
at shareholder meetings of such Funds in accordance with instructions received
from persons having voting interests in the corresponding Divisions of the
Separate Accounts. The Contract Owner holds a voting interest in each Division
to which the Accumulated Value is allocated or from which Annuity Payments are
generated. If, however, the 1940 Act or any regulation thereunder should be
amended, or if the present interpretation thereof should change, and, as a
result, General American determines that it is allowed to vote the Fund shares
in its own right, General American may elect to do so.
The number of votes which are available to a Contract Owner will be calculated
separately for each Division of the Separate Accounts. That number will be
determined by applying the Contract Owner's percentage interest, if any, in a
particular Division to the total number of votes attributable to the Division.
The number of votes is equal to the number of dollars: (a) during the
accumulation period, in the Accumulated Value attributable to a Division divided
by the net asset value of a share of the corresponding Fund; and (b) during the
annuity period, in the reserve credited to the Annuity Units held in the
Division(s) under the variable Annuity Option in effect divided by the net asset
value of a share of the corresponding Fund. Generally, during the annuity period
the number of votes applicable to the Annuitant will decrease.
At most Fund shareholder meetings, votes may be cast in person or by proxy and
fractional votes will be counted.
The number of votes of a Division which are available will be determined as of
the date established by the corresponding Fund for determining shareholders
eligible to vote at the meeting. This determination will include any other
separate accounts investing in the Fund. Voting instructions will be solicited
by written communication from us prior to such meeting in accordance with
procedures established.
Fund shares as to which no timely instructions are received or shares held by
General American as to which Contract Owners have no beneficial interest will be
voted in proportion to the voting instructions which are received with respect
to all Contracts participating in that Fund. Voting instructions to abstain on
any item to be voted upon will be applied on a pro rata basis to reduce the
votes eligible to be cast.
Each person having a voting interest in a Division will receive proxy material,
reports, and other materials relating to the appropriate Fund.
To the extent that General American, as shareholder of the Funds, is entitled to
vote any Fund's interest in the Funds held by the Separate Accounts, it will do
so on the same basis as described above.
Prospectus Page 36
<PAGE>
PRINCIPAL UNDERWRITER
- --------------------------------------------------------------------------------
GT Global, Inc. ("GT Global") is the principal underwriter of the Contracts. GT
Global's address is 50 California Street, 27th Floor, San Francisco, California
94111. GT Global will pay distribution compensation to selling broker/dealers in
varying amounts which under normal circumstances are not expected to exceed
5.25% of Purchase Payments for such Contracts, plus 0.25% of the contract value
in all Divisions per year. As an alternative, GT Global may pay distribution
compensation to selected broker/dealers in amounts which are not expected to
exceed 6.00% of Purchase Payments for such Contracts, with no residual payments.
Any Guarantee Period beginning after December 31, 1995, will not be included in
the contract value upon which the percent of asset commissions are determined.
Any Guaranteed Period that began on or before December 31, 1995, will be
included in the contract value upon which the percent of asset commissions are
determined.
Commissions are reduced for contracts issued when the Annuitant's age at Date of
Issue is greater than or equal to attained age 80. From time to time, additional
sales incentives may be provided to selected broker/dealers. In 1997, General
American paid $3,275,258.73 to GT Global.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements for General American and both Separate Accounts
Twenty-Eight and Twenty-Nine (as well as the auditors' reports thereon) are
included in the Statement of Additional Information.
Prospectus Page 37
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
A Statement of Additional Information is available which contains more details
concerning the subjects discussed in this Prospectus. The following is the Table
of Contents for that Statement:
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
THE CONTRACTS............................................................................. S-3
Computation of Variable Annuity Income Payments......................................... S-3
(a) Value of an Annuity Unit.......................................................... S-3
(b) Amount of First Installment....................................................... S-3
(c) Values of Annuity Installments.................................................... S-4
Yield and Performance Calculations...................................................... S-4
(a) Money Market Yield................................................................ S-4
(b) Yields of Other Divisions......................................................... S-6
(c) Total Return...................................................................... S-7
(d) Effect of the Annual Contract Fee................................................. S-8
GENERAL MATTERS........................................................................... S-9
Participating........................................................................... S-9
Incorrect Age or Sex.................................................................... S-10
Annuity Data............................................................................ S-10
Annual Reports.......................................................................... S-10
Incontestability........................................................................ S-10
Ownership............................................................................... S-10
DISTRIBUTION OF THE CONTRACTS............................................................. S-10
SAFEKEEPING OF ACCOUNT ASSETS............................................................. S-11
STATE REGULATION.......................................................................... S-11
RECORDS AND REPORTS....................................................................... S-11
LEGAL PROCEEDINGS......................................................................... S-12
OTHER INFORMATION......................................................................... S-12
FINANCIAL INFORMATION..................................................................... S-12
</TABLE>
Prospectus Page 38
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
EXAMPLE OF SURRENDER CHARGE CALCULATIONS
This example assumes that the date of the full surrender or partial withdrawal
is during the 10th Contact Year.
<TABLE>
<CAPTION>
1 2 3 4
- ---- --------- ---- ---------
<S> <C> <C> <C>
1 $ 2,000 0% $ 0
2 $ 2,000 0% $ 0
3 $ 2,000 0% $ 0
4 $ 2,000 0% $ 0
5 $ 2,000 1% $ 20.00
6 $ 2,000 2% $ 40.00
7 $ 2,000 3% $ 60.00
8 $ 2,000 4% $ 80.00
9 $ 2,000 5% $ 100.00
10 $ 2,000 6% $ 120.00
--------- ---------
$ 20,000 $ 420.00
--------- ---------
--------- ---------
</TABLE>
EXPLANATION OF COLUMNS IN TABLE
COLUMN 1:
Represents Contract Years
COLUMN 2:
Represents amounts of Net Purchase Payments. Each Net Purchase Payment is made
on the first day of each Contract Year.
COLUMN 3:
Represents the surrender charge percentages imposed on the amounts in Column 2.
COLUMN 4:
Represents the surrender charge imposed on each Net Purchase Payment. It is
determined by multiplying the amount in Column 2 by the percentage in Column 3.
For example, the surrender charge imposed on Net Purchase Payment 7
<TABLE>
<S> <C>
= Net Purchase Payment 7 Column 2 X Net
Purchase Payment 7 Column 3
= $2,000 X 3%
= $60
</TABLE>
FULL SURRENDER
The total of Column 4, $420, represents the total amount of surrender charge
imposed on Net Purchase Payments in this example. No free amount is allowed upon
full surrender. If the Accumulated Value is $30,000, the amount received upon
surrender would be $29,580, less any applicable interest change adjustment or
administrative fees.
PARTIAL WITHDRAWAL
The sum of amounts in Column 4 for as many Net Purchase Payments as are
liquidated reflects the surrender charge imposed in the case of a partial
withdrawal.
If the Accumulated Value is $30,000, $6,000 can be withdrawn without incurring a
surrender charge ("free amount"). This assumes that there have been at least two
Contract Years since January 1, 1996, and no free amounts have been withdrawn in
the prior contract year. The free amount does not reduce premiums still subject
to charge.
For example, if $20,000 were withdrawn, the first $6,000 represents the free
amount. The next $14,000 would be a withdrawal of the first seven Net Purchase
Payments. The amount of surrender charges imposed would be the sum of amounts in
Column 4 for Net Purchase Payments 1, 2, 3, 4, 5, 6, and 7 which is $120.
The amount received would be $19,880, less any applicable interest change
adjustment.
FULL SURRENDER FOLLOWING PARTIAL WITHDRAWAL
The Accumulated Value remaining after the partial withdrawal is $10,000. The
first seven Net Purchase Payments were withdrawn as part of the partial
withdrawal. If the Contract is fully surrendered in the 10th Contract Year after
the partial withdrawal, the remaining three Net Purchase Payments will incur a
surrender charge equal to the sum of the amounts in Column 4 for Net Purchase
Payments 8, 9, and 10, which is $300.
The amount received would be $9,700, less any applicable interest change
adjustment or administrative fees.
Prospectus Page 39
<PAGE>
APPENDIX B
- --------------------------------------------------------------------------------
EXAMPLE OF INTEREST CHANGE ADJUSTMENT (ICA) CALCULATIONS
The ICA factor is:
ICA = W X .9 X (J-I) X (N/12)
These examples assume the following:
1) the Guarantee Period Amount is allocated to a six year Guarantee Period with
a Guaranteed Interest Rate of 6% or .06
2) the date of surrender is two years from the Expiration Date (N = 24)
3) the original amount applied is $10,000
4) the value of the Guarantee Period Amount on the date of surrender is
$12,624.77
5) no transfers or partial withdrawals affecting this Guarantee Period Amount
have been made
6) A surrender charge, if any, is calculated in the same manner as shown in the
examples in Appendix A
The maximum ICA = 12,624.77 - 10,000 X (1.03)(4) = 1,369.68 which reflects the
minimum accumulation at 3% interest.
EXAMPLE OF A POSITIVE ICA THAT IS NOT CAPPED
Assume that on the date of surrender, the current rate (J) is 7% or .07
The ICA factor
<TABLE>
<S> <C>
= W X .9 X (J-I) X (N/12)
= 12,624.77 X .9 X (.07-.06) X (24/12)
= 227.25
</TABLE>
Since the ICA factor of $227.25 is less than the maximum ICA factor, $227.25 is
deducted from the value of the Guarantee Period Amount before the deduction of
any surrender charge.
EXAMPLE OF A POSITIVE ICA THAT IS CAPPED
Assume that on the date of surrender, the current rate (J) is 15% or .15
The ICA factor
<TABLE>
<S> <C>
= W X .9 X (J-I) X (N/12)
= 12,624.77 X .9 X (.15-.06) X (24/12)
= 2,045.21
</TABLE>
Here, since the ICA factor is greater than the maximum ICA, the maximum ICA of
1,369.68 is deducted from the value of the Guarantee Period Amount before the
deduction of any surrender charge.
EXAMPLE OF WHEN THE ICA IS ZERO:
Assume that on the date of surrender the current rate (J) is 5% or .05
The ICA factor
<TABLE>
<S> <C>
= W X .9 X (J-I) X (N/12)
= 12,624.77 X .9 X (.05-.06) X (24/12)
= -227.25
</TABLE>
Since the ICA cannot be less than zero, no ICA is applicable.
Prospectus Page 40
<PAGE>
Part B Registration No. 33-54774
GENERAL AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT TWENTY-NINE
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
GENERAL AMERICAN/GT GLOBAL
INDIVIDUAL VARIABLE ANNUITY CONTRACT
Offered by
General American Life Insurance Company
(An Insurance Company domiciled in Missouri)
700 Market Street
St. Louis, Missouri 63101
This Statement of Additional Information expands upon subjects discussed in the
current Prospectus dated 1 April 1998 for the individual variable annuity
contracts ("Contracts" or "Contract" as syntax requires) offered in conjunction
with GT Global Variable Investment Funds by General American Life Insurance
Company. You may obtain a copy of the Prospectus by calling 1-800-237-6580 or
writing to General American Life Insurance Company, GTG/VA Department, P.O. Box
66821, St. Louis, Missouri 63166-6821. Terms defined in the current Prospectus
for the Contract have the same meanings in this Statement.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ
ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT.
Dated 1 April 1998
S-1
<PAGE>
TABLE OF CONTENTS
Page
THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
Computation of Variable Annuity Income Payments. . . . . . . . . . . . . . S-3
(a) Value of an Annuity Unit . . . . . . . . . . . . . . . . . . . . S-3
(b) Amount of First Installment. . . . . . . . . . . . . . . . . . . S-3
(c) Values of Annuity Installments . . . . . . . . . . . . . . . . . S-4
Yield and Performance Calculations . . . . . . . . . . . . . . . . . . . . S-4
(a) Money Market Yield . . . . . . . . . . . . . . . . . . . . . . . S-4
(b) Yields of other Divisions. . . . . . . . . . . . . . . . . . . . S-6
(c) Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . S-7
(d) Effect of the Annual Contract Fee. . . . . . . . . . . . . . . . S-8
GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Participating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-9
Incorrect Age or Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Annuity Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Annual Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-10
DISTRIBUTION OF THE CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . S-10
SAFEKEEPING OF ACCOUNT ASSETS. . . . . . . . . . . . . . . . . . . . . . . S-11
STATE REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-11
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . S-12
S-2
<PAGE>
THE CONTRACTS
The following provides additional information about the Contracts which
supplements the description in the Prospectus and may be of interest to the
Contract Owners.
COMPUTATION OF VARIABLE ANNUITY INCOME PAYMENTS
(a) COMPUTATION OF THE VALUE OF AN ANNUITY UNIT
The table of contractual guaranteed annuity rates is based on an assumed
interest rate. The assumed interest rate is 4% for all Contracts.
As a starting point, the value of an annuity unit in each Division of Separate
Account Twenty-Eight and Separate Account Twenty-Nine was established at $12.00.
The value of the annuity unit at the end of any subsequent business day is
determined by multiplying such value for the preceding business day by the
product of (a) the daily reduction factor (.99989256) once for each calendar day
expiring between the end of the sixth preceding business day and the end of the
fifth preceding business day and (b) the net investment factor for a Division
for the fifth business day preceding such business day.
These daily reduction factors are necessary to neutralize the assumed net
investment rate built into the annuity tables. Calculations are performed as of
the fifth preceding business day to permit calculation of amounts and the
mailing of checks in advance of their due date.
This may be illustrated by the following hypothetical example. Assuming that
the net investment factor for the fifth preceding business day was 1.00176027,
and assuming that the annuity unit value for the preceding business day was
$12.20, then the annuity unit for the current business day is $12.22, determined
as follows:
1.00176027 $12.200000
x.99989256 x 1.00165264
1.00165264 $12.220162208
(b) DETERMINATION OF THE AMOUNT OF THE FIRST ANNUITY INSTALLMENT
When annuity installments begin, the accumulated value of the Contract is
established. This is the sum of the products of the values of an accumulation
unit in each Division of the fifth business day preceding the annuity
commencement date and the number of accumulation units credited to the Contract
as of the annuity commencement date.
S-3
<PAGE>
The Contract contains tables indicating the dollar amount of the first annuity
installment under each form of variable annuity for each $1,000 of value of the
Contract. The amount of the first annuity installment depends on the option
chosen and the sex (if applicable) and age of the annuitant.
The first annuity installment from a Division is determined by multiplying the
benefit per $1,000 of value shown in the tables in the Contract by the number of
thousands of dollars of Accumulated Value of the Contract allocated to the
division.
If a greater first installment would result, General American will compute the
first installment on the same mortality basis as is used in determining such
installments under individual variable annuity contracts then being issued for a
similar class of annuitants.
(c) DETERMINATION OF THE FLUCTUATING VALUES OF THE ANNUITY INSTALLMENTS
The dollar amount of the first annuity installment from any Division, determined
as described above, is translated into annuity units by dividing that dollar
amount by the value of an annuity unit on the due date of the first annuity
installment. The number of annuity units remains fixed and the amount of each
subsequent annuity installment is determined by multiplying this fixed number of
annuity units by the value of an annuity unit on the date the installment is
due.
If, in any month after the first, the application of the above net investment
factors produces a net investment increment exactly equivalent to the assumed
annualized rate of 4%, then the payment in that month will not change. Since it
is unlikely that the increment will be exactly equivalent, installments will
vary up or down depending upon whether such investment increment is greater or
less than the assumed annualized rate of 4%. A higher assumption would mean a
higher initial annuity payment but a more slowly rising series of subsequent
annuity payments (or a more rapidly falling series of subsequent annuity
payments if the value of an annuity unit is decreasing). A lower assumption
would have the opposite effect.
YIELD AND PERFORMANCE CALCULATIONS
(a) MONEY MARKET YIELD
Advertisements and sales literature concerning the contracts may report the
"current annualized yield" for the Division of the Separate Accounts that
invests in the GT Global: Money Market Fund, without taking into account any
realized or unrealized gains or losses on shares in the Fund. The annualized
yield is computed by:
S-4
<PAGE>
(a) determining the net change after 7 days (exclusive of realized gains and
losses on shares of the underlying Fund or on its respective portfolio
securities and unrealized appreciation and depreciation) in the value of a
hypothetical account having a balance of 1 unit at the beginning of the period;
(b) dividing such net change in account value by the value of the account at the
beginning of the 7-day period to determine the base period return; and (c)
annualizing the result of this division on a 365-day basis.
The net change in account value reflects (1) net income from the Fund
attributable to the hypothetical account; and (2) charges and deductions imposed
under the contract upon the hypothetical account. The charges and deductions
include the per unit charges for mortality and expense risk, the administrative
charge for the Division, and the annual contract fee. For the purpose of
calculating current yields for a Contract, an average per unit contract fee is
used, as described below. Current yield will be calculated according to the
following formula:
Current Yields = (NCF - ES/UV) x (365/7)
Where:
NCF = the net change in the value of one unit in the Division (exclusive of
realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) for the 7-day period specified.
ES = per unit expenses for a hypothetical account having one unit over the
7-day period.
UV = the unit value for the first day of the 7-day period.
General American advertisement and sales literature may also quote the
"effective yield" of the Division investing in the GT Global: Money Market Fund
for the same 7-day period, determined on a compounded basis. The effective
yield is calculated by compounding the unannualized base period return according
to the following formula:
365/7
Effective Yield = (1+((NCF-ES)/UV)) - 1,
Where:
NCF = the net change in the value of one unit in the Division (exclusive of
realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) for the 7-day period specified.
S-5
<PAGE>
ES = per unit expenses for a hypothetical account having one unit over the
7-day period.
UV = the unit value for the first day of the 7-day period.
Because of the charges and deductions imposed on units according to the terms of
the Contract, the yield for the Money Market Division will be lower than the
yield for the Fund or the corresponding Trust which underlie the Division.
Yields on amounts in the Money Market Division will normally fluctuate on a
daily basis. For that reason the yield for any past period is not an indication
nor a representation of future yields. The actual yield for the Division is
affected by changes in interest rates on money market securities, the average
portfolio maturity of the underlying Fund, the types and qualities of portfolio
securities held by the Fund, and the operating expenses of the Fund. Yields on
amounts held in the Money Market Division may also be presented for periods
other than seven days.
(b) YIELDS OF OTHER DIVISIONS
Advertisements and sales literature for the Contract may report the current
annualized yield of one or more of the Divisions (other than the Money Market
Division) for a 30-day or one-month period. The annualized yield of a Division
refers to income generated by the Division during a specified 30-day or one-
month period. Because the yield is annualized, the yield generated by the
Division during the specified period is assumed to be generated every 30-day or
one-month period over a year. The yield is computed by: (1) dividing the net
investment income of the fund corresponding to the Division less expenses for
the Division for the period by (2) the maximum offering price per unit of the
Division on the last day of the period times the daily average number of units
outstanding for the period; then (3) compounding that yield for a 6-month
period; and then (4) multiplying that result by 2. Expenses attributable to the
Division include the mortality and expense risk charge, the administrative
charge for the Division, and the annual contract fee. A contract fee of $2.50
is used to calculate the 30-day or one-month yield as in the following equation:
6
Yield = 2x((((N1-ES)/(UxUV))+1) - 1)
Where:
NI = net investment income of the Fund for the 30-day or one-month period
in question
ES = expenses of the Division for the 30-day or one-month period
S-6
<PAGE>
U = the average number of units outstanding
UV = the unit value at the close of the last day in the 30-day or one-month
period
Because of the charges and deductions imposed under the Contracts (ES in the
equation) the yield for a Division will be lower than the yield for the
corresponding Fund.
The yield on amounts in any Division will normally fluctuate. For that reason
yields for any past periods are not indications nor representations of future
yields. The actual yield for a Division is affected by the type and the quality
of the portfolio securities held in the underlying Fund, and the operating
expenses of the Fund.
Yield calculations do not take surrender charges into account, but such charges
are deducted from amounts greater than ten percent of the Accumulated Value
under a Contract if such amounts are withdrawn within the first six contract
years after they were deposited.
(c) TOTAL RETURN
Advertisement and sales literature for the Contracts may, in addition to or as
an alternative to quoting yield, report "total return," including the average
annual total return for one or more of the Divisions for various periods of
time. General American will include in references to total return a quote for
the Division's total return since inception until the Division has been in
operation for more than 10 years, after which time a ten year return will be
used instead. Reports on total return will also include the average annual
total return for a Division for 1 and 5 years when the Division has been in
operation for those periods. Average annual total return for other lengths of
time may also be disclosed.
Average annual total return represents the average annual compounded rate of
return on an initial investment of $1,000 in a Division as of the last day of
the period used for measurement. Total return quotations will be for periods
ending on the last day of the most recent month possible, given the length of
time it takes to produce advertisements and sales literature. The period for
which total return has been calculated will always be identified.
Average annual total return will be calculated using Division unit values
calculated on each Business Day based on the performance of the corresponding
underlying Fund, with deductions for the mortality and expense risk charge, the
administrative
S-7
<PAGE>
charge, and the annual contract fee at the rate of $2.50 per month. The
calculation will assume the Contract is surrendered at the end of the period in
question, producing a surrender charge for periods of six years or less. All of
this means total return can be calculated according to the following formula:
1/N
TR = ((ERV/P) - 1
Where:
TR = the average annual total return net of recurring Contract charges at
the Division level (such as the mortality and expense risk charge, the
administrative charge, and the annual contract fee).
ERV = the ending redeemable value (net of any applicable surrender charge)
at the end of the period in question for an account with an initial value
of $1,000.
P = a hypothetical initial payment into the Division of $1,000.
N = the number of years in the period.
General American may also quote total returns in its sales literature or
advertisements that do not reflect the surrender charge. These are calculated
in exactly the same way as the average annual total returns described above,
except that the ending redeemable value of the hypothetical account is not net
of a surrender charge.
(d) EFFECT OF THE ANNUAL CONTRACT FEE
The Contract provides for the deduction each year of the lesser of $30 or 2% of
an account's value provided the account value is less than $20,000. If the
account value exceeds $20,000, or if the entire account value is in the Fixed
Account, then no contract fee is charged. So that this charge can be reflected
in yield and total return calculations it is assumed that the annual charge will
be $30 and this charge is converted into a per-dollar, per-day charge based on
the average Accumulated Value in the Separate Accounts of all the Contracts as
of the last day of the period for which quotations are provided. The average
value of Contracts in the Separate Accounts is assumed to be $20,000. The per-
dollar, per-day average charge will be adjusted to reflect the assumptions
underlying a particular performance quotation.
S-8
<PAGE>
Sales literature or advertisements for the contracts may include total return or
other performance information for a hypothetical Contract based on the
assumption that the Initial Purchase Payment is allocated to more than one
Division, or that there are monthly transfers under the Dollar Cost Averaging
program. Such return information will reflect the performance of the Divisions
involved for the amount and the duration of the hypothetical allocation. They
will also reflect the deduction of the charges described above, except the
surrender charge. For example, total return information for a Contract taking
part in Dollar Cost Averaging for a 12-month period will assume that the DCA
program began at the start of the most recently 12-month period for which
average annual total return information is available. Such return information
assumes an initial investment in the Money Market Division at the beginning of
that period and monthly transfers of a portion of the sum in that Division to
the other Divisions designated each month over the 12-month period. The total
return for such a Contract over 12 months will therefore reflect the return on
the part of the Contract invested in the Money Market Division, and the return
on the parts invested in the Divisions receiving funds, only for the period
during which the transferred amounts are assumed to be invested in these
Divisions. The return for a sum invested in a Division will be based on the
performance of that Division for the length of the investment, and will reflect
the charges described above other than the surrender charge. Performance
information for a Dollar Cost Averaging program may also show the return for a
designated Division over various periods assuming monthly transfers into the
Division, and may compare those returns to returns assuming an initial lump-sum
investment in the Division. Performance information may also be compared to
various indices, such as the U.S. Treasury Bills index, and may be illustrated
by graphs, charts, or other means.
GENERAL MATTERS
PARTICIPATING
The Contracts share in General American's divisible surplus while they are in
force prior to the Annuity Date. Each year General American will determine the
share of divisible surplus, if any, accruing to the Contracts. Investment
results are credited directly through the changes in the value of the
accumulation units and annuity units. Also, most mortality and expense savings
are credited directly through decreases in the appropriate charges. Therefore,
the Company expects little or no divisible surplus to be credited to a contract.
If any divisible surplus is credited to a contract, the Contract Owner may
choose to take the distribution in cash, or leave the distribution with General
American to increase the Accumulated Value.
S-9
<PAGE>
INCORRECT AGE OR SEX
If the age at issue or sex of the Annuitant as shown in the Contract is
incorrect, any benefit payable will be such as if the Accumulated Value would
have been purchased using the correct age and sex. If the error is discovered
after General American begins paying Annuity Payments, appropriate adjustment
will be made in any remaining installments.
ANNUITY DATA
General American will not be liable for obligations which depend on receiving
information from a Payee until such information is received in a form
satisfactory to General American.
ANNUAL REPORTS
Quarterly, General American will give the Contract Owner a report of the current
Accumulated Value allocated to each Division; the current Accumulated Value
allocated to the Fixed Account; and any Purchase Payments, charges, transfers,
or surrenders during that period. This report will also give the Contract Owner
any other information required by law or regulation. The Contract Owner may ask
for a report like this at any time. The annual report will be distributed
without charge. General American reserves the right to charge a fee for
additional reports.
INCONTESTABILITY
General American cannot contest this Contract.
OWNERSHIP
The Owner of the Contract on the Contract Date is the Annuitant, unless
otherwise specified in the application. The Owner may specify a new Owner by
Written Notice at any time thereafter. During the Annuitant's lifetime all
rights and privileges under this Contract may be exercised solely by the Owner.
DISTRIBUTION OF THE CONTRACTS
GT Global, Inc. ("GT Global"), the principal underwriter of the Contracts, is
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934 as a broker/dealer and is a member of the National
Association of Securities Dealers, Inc.
S-10
<PAGE>
The Contracts are offered to the public through individuals licensed under the
federal securities laws and state insurance laws. These individuals are sales
agents of General American and registered representatives of broker/dealers
which have entered into selling agreements with GT Global. Included in this
group of broker/dealers is Walnut Street Securities, Inc., a wholly-owned
subsidiary of GenAmerica. The offering of the Contracts is continuous and
General American does not anticipate discontinuing the offering of the
Contracts. However, General American does reserve the right to discontinue the
offering of the Contracts.
SAFEKEEPING OF SEPARATE ACCOUNT ASSETS
Title to assets of the Separate Accounts is held by General American. The
assets are kept in book entry form or physically segregated and held separate
and apart from General American's general account assets. Records are
maintained of all purchases and redemptions of eligible Fund shares held by each
of the Divisions of the Separate Accounts. (See "Reports and Records" below.)
STATE REGULATION
General American is a life insurance company organized under the laws of
Missouri, and is subject to regulation by the Missouri Division of Insurance.
An annual statement is filed with the Missouri Commissioner of Insurance on
or before March 1 of each year covering the operations and reporting on the
financial condition of General American as of December 31 of the preceding
calendar year. Periodically, the Missouri Commissioner of Insurance examines
the financial condition of General American, including the liabilities and
reserves of the Separate Accounts.
In addition, General American is subject to the insurance laws and regulations
of all the states where it is licensed to operate. The availability of certain
contract rights and provisions depends on state approval and filing and review
processes. Where required by state law or regulation, the Contracts will be
modified accordingly.
RECORDS AND REPORTS
All records and accounts relating to the Separate Accounts will be maintain by
General American. As presently required by the Investment Company Act of 1940
and regulations promulgated thereunder, General American will mail to all
Contract Owners at their last known address of record, at least semi-annually,
reports containing such information as may be required under that Act or by any
other applicable law or regulation.
S-11
<PAGE>
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 Accounts.
OTHER INFORMATION
Registration Statements have been filed with the Securities and Exchange
Commission, under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Statement of Additional Information. Not all of the
information set forth in the Registration Statement, amendments, and exhibits
thereto has been included in this Statement of Additional Information.
Statements contained in this Statement of Additional Information concerning the
content of the Contracts and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents, reference
should be made to the instruments filed with the Securities and Exchange
Commission.
FINANCIAL STATEMENTS
The audited financial statements of General American and the Separate Accounts
as of 31 December 1997 have been included in this prospectus in reliance on the
reports of KPMG Peat Marwick LLP, independent certified public accountants, who
serve as independent accountants for General American and for the Separate
Account.
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.
S-12
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
The Board of Directors
General American Life Insurance Company
and Contractholders of General American Life
Insurance Company Separate Account Twenty-eight
and Separate Account Twenty-nine:
We have audited the statements of assets and liabilities, including the schedule
of investments of the Money Market, Variable Strategic Income, Variable Global
Government Income, and Variable U.S. Government Income Divisions of General
American Separate Account Twenty-eight and of the Variable New Pacific, Variable
Europe, Variable America, Variable Growth & Income, Variable Latin America,
Variable Telecommunications, Variable International, Variable Emerging Markets,
Variable Natural Resources, and Variable Infrastructure Divisions of General
American Separate Account Twenty-nine as of December 31, 1997, and the related
statements of operations for the year then ended, changes in net assets for each
of the years in the two-year period then ended, and the condensed financial
information for the periods presented. These financial statements and condensed
financial information are the responsibility of the management of General
American Separate Accounts Twenty-eight and Twenty-nine. Our responsibility is
to express an opinion on these financial statements and condensed financial
information 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 and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of December 31, 1997 by correspondence with GT Global Variable
Investment Funds. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Money Market, Variable Strategic Income, Variable Global
Government Income, and Variable U.S. Government Income Divisions of General
American Separate Account Twenty-eight and of the Variable New Pacific, Variable
Europe, Variable America, Variable Growth & Income, Variable Latin America,
Variable Telecommunications, Variable International, Variable Emerging Markets,
Variable Natural Resources and Variable Infrastructure Divisions of General
American Separate Account Twenty-nine as of December 31, 1997, the results of
their operations for the year then ended, the changes in their net assets for
each of the years in the two-year period then ended, and the condensed financial
information for all periods presented, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
ST. LOUIS, MISSOURI
FEBRUARY 14, 1998
D1
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
D2
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE VARIABLE
VARIABLE GLOBAL U.S.
MONEY STRATEGIC GOVERNMENT GOVERNMENT
MARKET INCOME INCOME INCOME
DIVISION DIVISION DIVISION DIVISION
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Assets:
Investments in GT Global Variable
Investment Funds, at market value
(see Schedule of Investments)........ $17,116,690 $27,756,698 $8,207,535 $7,282,181
Receivable from General American Life
Insurance Company.................... 9,497,119 12,164 0 21,436
Receivable from GT Global Financial
Services, Inc........................ 116,299 0 0 0
---------- ---------- ------------ -----------
Total assets........................ 26,730,108 27,768,862 8,207,535 7,303,617
---------- ---------- ------------ -----------
Liability:
Payable to General American Life
Insurance Company.................... 0 0 582 0
---------- ---------- ------------ -----------
Total net assets.................... $26,730,108 $27,768,862 $8,206,953 $7,303,617
---------- ---------- ------------ -----------
---------- ---------- ------------ -----------
Total net assets represented by:
Individual variable annuity contracts
cash value invested in
Separate Account..................... $26,730,108 $27,725,339 $8,200,055 $7,303,617
Individual variable annuity contracts
cash value in payment period......... 0 43,523 6,898 0
---------- ---------- ------------ -----------
Total net assets.................... $26,730,108 $27,768,862 $8,206,953 $7,303,617
---------- ---------- ------------ -----------
---------- ---------- ------------ -----------
Total individual units held............. 1,943,459 1,504,983 571,399 514,549
Individual unit value................... $ 13.75 $ 18.45 $ 14.36 $ 14.19
Cost of investments..................... $17,116,690 $27,954,617 $8,180,572 $7,135,667
</TABLE>
See accompanying notes to the financial statements.
D3
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT
STATEMENTS OF OPERATIONS
For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE VARIABLE
VARIABLE GLOBAL U.S.
MONEY STRATEGIC GOVERNMENT GOVERNMENT
MARKET INCOME INCOME INCOME
DIVISION DIVISION DIVISION DIVISION
--------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Investment income:
Dividend income....................... $1,027,389 $2,005,819 $ 614,693 $ 302,621
Expenses:
Mortality, expense and administrative
charges.............................. (301,441) (410,377) (129,550) (78,522)
--------- --------- ------------ -----------
Net investment income................. 725,948 1,595,442 485,143 224,099
--------- --------- ------------ -----------
Net realized gain (loss) on investments:
Realized gain from distributions...... 0 0 0 0
Realized gain (loss) on sales......... 0 2,366,466 (55,446) (21,381)
--------- --------- ------------ -----------
Net realized gain (loss) on
investments.......................... 0 2,366,466 (55,446) (21,381)
--------- --------- ------------ -----------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on investments,
beginning of period.................. 0 2,143,553 228,790 (27,288)
Unrealized gain (loss) on investments,
end of period........................ 0 (197,919) 26,963 146,515
--------- --------- ------------ -----------
Net unrealized gain (loss) on
investments.......................... 0 (2,341,472) (201,827) 173,803
--------- --------- ------------ -----------
Net gain (loss) on investments........ 0 24,994 (257,273) 152,422
--------- --------- ------------ -----------
Net increase in net assets resulting
from operations...................... $ 725,948 $1,620,436 $ 227,870 $ 376,521
--------- --------- ------------ -----------
--------- --------- ------------ -----------
</TABLE>
See accompanying notes to the financial statements.
D4
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE
STRATEGIC INCOME
MONEY MARKET DIVISION DIVISION
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income................. $ 725,948 $ 499,806 $1,595,442 $1,617,455
Net realized gain on investments...... 0 0 2,366,466 2,520,865
Net unrealized gain (loss) on
investments.......................... 0 0 (2,341,472) 738,247
---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations.................... 725,948 499,806 1,620,436 4,876,567
---------- ---------- ---------- ----------
Deposits into Separate Account........ 11,693,462 14,414,776 2,322,838 3,955,884
Transfers to (from) Separate
Account.............................. 3,257,598 (6,048,583) (4,271,620) 499,563
Withdrawals from Separate Account..... (8,768,848) (3,951,533) (3,453,930) (3,078,289)
---------- ---------- ---------- ----------
Net deposits into (withdrawals from)
Separate Account................... 6,182,212 4,414,660 (5,402,712) 1,377,158
---------- ---------- ---------- ----------
Increase (decrease) in net assets..... 6,908,160 4,914,466 (3,782,276) 6,253,725
Net assets, beginning of period....... 19,821,948 14,907,482 31,551,138 25,297,413
---------- ---------- ---------- ----------
Net assets, end of period............. $26,730,108 $19,821,948 $27,768,862 $31,551,138
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE VARIABLE
GLOBAL GOVERNMENT U.S. GOVERNMENT
INCOME DIVISION INCOME DIVISION
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operations:
Net investment income................. $ 485,143 $ 554,155 $ 224,099 $ 188,400
Net realized gain on investments...... (55,446) 19,403 (21,381) (6,593)
Net unrealized gain (loss) on
investments.......................... (201,827) (96,777) 173,803 (135,373)
---------- ---------- ---------- ----------
Net increase in net assets resulting
from operations.................... 227,870 476,781 376,521 46,434
---------- ---------- ---------- ----------
Deposits into Separate Account........ 859,739 877,625 1,727,218 1,776,392
Transfers to (from) Separate
Account.............................. (1,767,441) (1,896,264) 818,277 (1,851,071)
Withdrawals from Separate Account..... (1,479,355) (998,792) (1,071,382) (479,299)
---------- ---------- ---------- ----------
Net deposits into (withdrawals from)
Separate Account................... (2,387,057) (2,017,431) 1,474,113 (553,978)
---------- ---------- ---------- ----------
Increase (decrease) in net assets..... (2,159,187) (1,540,650) 1,850,634 (507,544)
Net assets, beginning of period....... 10,366,140 11,906,790 5,452,983 5,960,527
---------- ---------- ---------- ----------
Net assets, end of period............. $8,206,953 $10,366,140 $7,303,617 $5,452,983
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to the financial statements.
D5
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF ASSETS
AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE
NEW VARIABLE VARIABLE
PACIFIC EUROPE AMERICA
DIVISION DIVISION DIVISION
---------- ---------- ----------
<S> <C> <C> <C>
Assets:
Investments in GT Global Variable
Investment Funds, at market value
(see Schedule of Investments)........ $17,917,927 $30,687,103 $44,606,691
Receivable from General American Life
Insurance Company.................... 0 0 0
---------- ---------- ----------
Total assets........................ 17,917,927 30,687,103 44,606,691
---------- ---------- ----------
Liability:
Payable to General American Life
Insurance Company.................... 2,573,184 3,393,603 824,626
---------- ---------- ----------
Total net assets.................... $15,344,743 $27,293,500 $43,782,065
---------- ---------- ----------
---------- ---------- ----------
Total net assets represented by:
Individual variable annuity contracts
cash value invested in Separate
Account.............................. $15,328,678 $27,257,324 $43,704,960
Individual variable annuity contracts
cash value in payment period......... 16,065 36,176 77,105
---------- ---------- ----------
Total net assets.................... $15,344,743 $27,293,500 $43,782,065
---------- ---------- ----------
---------- ---------- ----------
Total individual units held............. 1,517,608 1,165,771 1,678,633
Individual unit value................... $ 10.11 $ 23.41 $ 26.08
Cost of investments..................... $18,273,630 $29,926,787 $41,107,234
</TABLE>
See accompanying notes to the financial statements.
D6
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF ASSETS
AND LIABILITIES (cont'd)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & VARIABLE TELECOM- VARIABLE EMERGING NATURAL VARIABLE
INCOME LATIN AMERICA MUNICATION INTERNATIONAL MARKETS RESOURCES INFRASTRUCTURE
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ------------- ------------ ------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments in GT
Global Variable
Investment Funds,
at market value
(see Schedule of
Investments)..... $ 51,914,308 $ 27,496,881 $ 67,703,571 $ 5,772,006 $ 16,987,937 $ 16,571,734 $ 8,613,703
Receivable from
General American
Life Insurance
Company.......... 0 0 0 0 0 0 32,068
------------ ------------- ------------ ------------- ------------ ------------ --------------
Total assets.... 51,914,308 27,496,881 67,703,571 5,772,006 16,987,937 16,571,734 8,645,771
------------ ------------- ------------ ------------- ------------ ------------ --------------
Liability:
Payable to General
American Life
Insurance
Company.......... 1,735,483 96,706 44,729 164,665 714,943 125,471 0
------------ ------------- ------------ ------------- ------------ ------------ --------------
Total net
assets......... $ 50,178,825 $ 27,400,175 $ 67,658,842 $ 5,607,341 $ 16,272,994 $ 16,446,263 $ 8,645,771
------------ ------------- ------------ ------------- ------------ ------------ --------------
------------ ------------- ------------ ------------- ------------ ------------ --------------
Total net assets
represented by:
Individual
variable annuity
contracts cash
value invested in
Separate
Account.......... $ 50,101,518 $ 27,395,400 $ 67,581,896 $ 5,590,108 $ 16,258,049 $ 16,403,198 $ 8,634,858
Individual
variable annuity
contracts cash
value in payment
period........... 77,307 4,775 76,946 17,233 14,945 43,065 10,913
------------ ------------- ------------ ------------- ------------ ------------ --------------
Total net
assets......... $ 50,178,825 $ 27,400,175 $ 67,658,842 $ 5,607,341 $ 16,272,994 $ 16,446,263 $ 8,645,771
------------ ------------- ------------ ------------- ------------ ------------ --------------
------------ ------------- ------------ ------------- ------------ ------------ --------------
Total individual
units held......... 2,506,403 1,428,569 3,029,688 454,338 1,360,716 763,356 517,518
Individual unit
value.............. $ 20.02 $ 19.18 $ 22.33 $ 12.34 $ 11.96 $ 21.54 $ 16.71
Cost of
investments........ $ 50,306,563 $ 27,940,374 $ 67,951,742 $ 5,653,455 $ 19,823,670 $ 18,258,954 $ 8,636,151
</TABLE>
See accompanying notes to the financial statements.
D7
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF OPERATIONS
For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE
NEW VARIABLE VARIABLE
PACIFIC EUROPE AMERICA
DIVISION DIVISION DIVISION
--------- --------- ---------
<S> <C> <C> <C>
Investment income:
Dividend income....................................................... $ 162,217 $ 68,542 $ 209,060
Expenses:
Mortality, expense and administrative charges......................... (344,898) (387,561) (566,842)
--------- --------- ---------
Net investment income (loss)............................................ (182,681) (319,019) (357,782)
--------- --------- ---------
Net realized gain (loss) on investments:
Realized gain from distributions...................................... 128,066 2,386,527 1,536,594
Realized gain (loss) on sales......................................... (8,368,992) 2,312,712 1,745,314
--------- --------- ---------
Net realized gain (loss) on investments............................. (8,240,926) 4,699,239 3,281,908
--------- --------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain on investments, beginning of period................... 1,057,319 1,010,118 1,241,726
Unrealized gain (loss) on investments, end of period.................. (355,703) 760,316 3,499,457
--------- --------- ---------
Net unrealized gain (loss) on investments........................... (1,413,022) (249,802) 2,257,731
--------- --------- ---------
Net gain (loss) on investments...................................... (9,653,948) 4,449,437 5,539,639
--------- --------- ---------
Net increase (decrease) in net assets resulting from operations......... $(9,836,629) $4,130,418 $5,181,857
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to the financial statements.
D8
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF OPERATIONS (cont'd)
For the year ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE VARIABLE VARIABLE VARIABLE
GROWTH & VARIABLE TELECOM- VARIABLE EMERGING NATURAL
INCOME LATIN AMERICA MUNICATIONS INTERNATIONAL MARKETS RESOURCES
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividend income............... $ 1,298,733 $ 0 $ 0 $ 7,510 $ 80,918 $ 0
Expenses:
Mortality, expense and
administrative charges....... (593,308) (392,175) (948,489 ) (74,751) (280,930) (246,069)
------------ ------------- ----------- ------------- ----------- ------------
Net investment income (loss).... 705,425 (392,175) (948,489 ) (67,241) (200,012) (246,069)
------------ ------------- ----------- ------------- ----------- ------------
Net realized gain (loss) on
investments:
Realized gain from
distributions................ 90,377 0 7,715,204 0 1,270,332 750,310
Realized gain (loss) on
sales........................ 7,866,492 5,652,203 8,428,937 569,720 457,869 2,081,839
------------ ------------- ----------- ------------- ----------- ------------
Net realized gain (loss) on
investments................ 7,956,869 5,652,203 16,144,141 569,720 1,728,201 2,832,149
------------ ------------- ----------- ------------- ----------- ------------
Net unrealized gain (loss) on
investments:
Unrealized gain on
investments, beginning of
period....................... 4,217,054 1,603,175 7,082,895 178,321 930,369 1,074,722
Unrealized gain (loss) on
investments, end of period... 1,607,745 (443,493) (248,171 ) 118,551 (2,835,733) (1,687,220)
------------ ------------- ----------- ------------- ----------- ------------
Net unrealized gain (loss)
on investments............. (2,609,309) (2,046,668) (7,331,066 ) (59,770) (3,766,102) (2,761,942)
------------ ------------- ----------- ------------- ----------- ------------
Net gain (loss) on
investments................ 5,347,560 3,605,535 8,813,075 509,950 (2,037,901) 70,207
------------ ------------- ----------- ------------- ----------- ------------
Net increase (decrease) in net
assets resulting from
operations..................... $ 6,052,985 $ 3,213,360 $7,864,586 $ 442,709 $(2,237,913) $ (175,862)
------------ ------------- ----------- ------------- ----------- ------------
------------ ------------- ----------- ------------- ----------- ------------
<CAPTION>
VARIABLE
INFRASTRUCTURE
DIVISION
--------------
<S> <C>
Investment income:
Dividend income............... $ 46,066
Expenses:
Mortality, expense and
administrative charges....... (114,291)
--------------
Net investment income (loss).... (68,225)
--------------
Net realized gain (loss) on
investments:
Realized gain from
distributions................ 424,291
Realized gain (loss) on
sales........................ 289,679
--------------
Net realized gain (loss) on
investments................ 713,970
--------------
Net unrealized gain (loss) on
investments:
Unrealized gain on
investments, beginning of
period....................... 425,131
Unrealized gain (loss) on
investments, end of period... (22,448)
--------------
Net unrealized gain (loss)
on investments............. (447,579)
--------------
Net gain (loss) on
investments................ 266,391
--------------
Net increase (decrease) in net
assets resulting from
operations..................... $ 198,166
--------------
--------------
</TABLE>
See accompanying notes to the financial statements.
D9
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE VARIABLE VARIABLE
NEW PACIFIC DIVISION EUROPE DIVISION AMERICA DIVISION
---------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss).......... $ (182,681) $ (88,871) $ (319,019) $ (130,366) $ (357,782) $ (4,196)
Net realized gain (loss) on
investments.......................... (8,240,926) 7,828,491 4,699,239 4,326,709 3,281,908 3,898,054
Net unrealized gain (loss) on
investments.......................... (1,413,022) 328,933 (249,802) 721,983 2,257,731 1,987,087
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations... (9,836,629) 8,068,553 4,130,418 4,918,326 5,181,857 5,880,945
Deposits into Separate Account........ 2,938,675 3,830,544 2,784,903 2,410,618 2,899,511 5,680,228
Transfers to (from) Separate
Account.............................. (5,841,440) (1,319,905) (1,364,288) 2,917,523 (7,332) (3,361,891)
Withdrawals from Separate Account..... (2,847,511) (2,387,202) (2,631,950) (1,437,759) (5,773,807) (4,243,739)
---------- ---------- ---------- ---------- ---------- ----------
Net deposits into Separate
Account............................ (5,750,276) 123,437 (1,211,335) 3,890,382 (2,881,628) (1,925,402)
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets..... (15,586,905) 8,191,990 2,919,083 8,808,708 2,300,229 3,955,543
Net assets, beginning of period....... 30,931,648 22,739,658 24,374,417 15,565,709 41,481,836 37,526,293
---------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period............. $15,344,743 $30,931,648 $27,293,500 $24,374,417 $43,782,065 $41,481,836
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE VARIABLE VARIABLE
EMERGING MARKETS NATURAL RESOURCES INFRASTRUCTURE
DIVISION DIVISION DIVISION
---------------------- ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss).......... $ (200,012) $ (210,729) $ (246,069) $ (107,139) $ (68,225) $ (22,538)
Net realized gain (loss) on
investments.......................... 1,728,201 2,569,947 2,832,149 1,296,927 713,970 200,704
Net unrealized gain (loss) on
investments.......................... (3,766,102) 919,973 (2,761,942) 1,085,845 (447,579) 436,912
---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from operations... (2,237,913) 3,279,191 (175,862) 2,275,633 198,166 615,078
Deposits into Separate Account........ 2,609,384 3,819,231 4,014,997 3,910,507 2,336,821 1,855,866
Transfers to (from) Separate
Account.............................. 523,758 2,368,261 (2,016,970) 9,030,189 822,498 2,122,405
Withdrawals from Separate Account..... (1,972,242) (921,653) (1,475,571) (357,938) (619,227) (167,696)
---------- ---------- ---------- ---------- ---------- ----------
Net deposits into Separate
Account............................ 1,160,900 5,265,839 522,456 12,582,758 2,540,092 3,810,575
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets..... (1,077,013) 8,545,030 346,594 14,858,391 2,738,258 4,425,653
Net assets, beginning of period....... 17,350,007 8,804,977 16,099,669 1,241,278 5,907,513 1,481,860
---------- ---------- ---------- ---------- ---------- ----------
Net assets, end of period............. $16,272,994 $17,350,007 $16,446,263 $16,099,669 $8,645,771 $5,907,513
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to the financial statements.
D10
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
STATEMENTS OF CHANGES IN NET ASSETS (cont'd)
For the years ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VARIABLE
VARIABLE VARIABLE TELECOMMUNICATIONS
GROWTH & INCOME DIVISION LATIN AMERICA DIVISION DIVISION
-------------------------- -------------------------- --------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income
(loss)................ $ 705,425 $ 388,762 $ (392,175) $ 295,291 $ (948,489) $ (772,331)
Net realized gain
(loss) on
investments........... 7,956,869 2,170,219 5,652,203 936,972 16,144,141 11,322,043
Net unrealized gain
(loss) on
investments........... (2,609,309) 1,946,106 (2,046,668) 2,819,081 (7,331,066) (1,683,047)
------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... 6,052,985 4,505,087 3,213,360 4,051,344 7,864,586 8,866,665
Deposits into Separate
Account............... 4,320,103 4,430,985 2,589,354 2,380,136 4,817,136 9,584,291
Transfers to (from)
Separate Account...... 8,674,747 850,032 2,508,321 (2,174,243) (919,250) (819,084)
Withdrawals from
Separate Account...... (5,205,730) (3,936,966) (2,847,642) (1,721,962) (6,885,267) (5,542,852)
------------ ------------ ------------ ------------ ------------ ------------
Net deposits into
Separate Account.... 7,789,120 1,344,051 2,250,033 (1,516,069) (2,987,381) 3,222,355
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in
net assets............ 13,842,105 5,849,138 5,463,393 2,535,275 4,877,205 12,089,020
Net assets, beginning
of period............. 36,336,720 30,487,582 21,936,782 19,401,507 62,781,637 50,692,617
------------ ------------ ------------ ------------ ------------ ------------
Net assets, end of
period................ $ 50,178,825 $ 36,336,720 $ 27,400,175 $ 21,936,782 $ 67,658,842 $ 62,781,637
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
<CAPTION>
VARIABLE
INTERNATIONAL DIVISION
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Net investment income
(loss)................ $ (67,241) $ (60,474)
Net realized gain
(loss) on
investments........... 569,720 159,406
Net unrealized gain
(loss) on
investments........... (59,770) 195,612
------------ ------------
Net increase
(decrease) in net
assets resulting
from operations..... 442,709 294,544
Deposits into Separate
Account............... 930,625 811,961
Transfers to (from)
Separate Account...... 322,481 176,650
Withdrawals from
Separate Account...... (578,830) (222,037)
------------ ------------
Net deposits into
Separate Account.... 674,276 766,574
------------ ------------
Increase (decrease) in
net assets............ 1,116,985 1,061,118
Net assets, beginning
of period............. 4,490,356 3,429,238
------------ ------------
Net assets, end of
period................ $ 5,607,341 $ 4,490,356
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to the financial statements.
D11
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
NOTE 1 -- ORGANIZATION
General American Separate Account Twenty-eight and General American Separate
Account Twenty-nine (the Separate Accounts) commenced operations on February 10,
1993, and are registered under the Investment Company Act of 1940 (1940 Act) as
unit investment trusts. The Separate Accounts receive purchase payments from
individual variable annuity contracts issued by General American Life Insurance
Company (General American) which may be qualified or non-qualified.
Separate Account Twenty-eight is divided into four divisions and Separate
Account Twenty-nine is divided into ten divisions. Each division invests
exclusively in shares of a single fund of GT Global Variable Investment Funds
(the Funds), an open-end diversified management investment company. Separate
Account Twenty-eight invests in the Money Market, Variable Strategic Income,
Variable Global Government Income, and Variable U.S. Government Income Funds.
Separate Account Twenty-nine invests in the Variable New Pacific, Variable
Europe, Variable America, Variable Growth & Income, Variable Latin America,
Variable Telecommunications, Variable International, Variable Emerging Markets,
Variable Natural Resources and Variable Infrastructure Funds.
Contractholders have the option of directing their deposits into one or all of
the Divisions as well as a fixed account of General American, which is not
generally subject to regulation under the Securities Act of 1933 or the 1940
Act. The unit values for the Separate Accounts for all divisions began at $12.00
on February 10, 1993, except the following Divisions of Separate Account
Twenty-nine which began at $12.00: the Variable Telecommunications Division on
October 18, 1993, the Variable International Division on July 12, 1994, the
Variable Emerging Markets Division on July 6, 1994, and the Variable Natural
Resources and Variable Infrastructure Divisions on January 31, 1995.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Separate Accounts in the preparation of financial statements. The policies
followed are in conformity with generally accepted accounting principles.
(A) INVESTMENTS
The Separate Accounts' investments in the GT Global Variable Funds are valued
daily on the respective shares held and based on the net asset values as
reported to General American by the Funds at the close of each business day. The
specific identification method is used in determining the cost of shares sold on
withdrawals by the Separate Accounts. 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, the investment income and capital gains
from sales of investments of the Separate Accounts are not taxable. Therefore,
no Federal income tax expense has been provided.
(C) DIVIDEND REIMBURSEMENT
Dividends received from the underlying mutual funds are recorded on the
ex-dividend date and immediately reinvested on the pay date.
(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 -- CONTRACT CHARGES
MORTALITY AND EXPENSE RISK CHARGE: General American assumes the mortality and
expense risks and provides certain administrative services related to operating
the Separate Accounts, for which the Separate Accounts are charged an annual fee
of 1.25% based on the values at the end of each valuation period. Mortality and
expense charges for Separate Account Twenty-eight totaled $821,330 for the
period ended December 31, 1997. Mortality and expense charges for Separate
Account Twenty-nine totaled $3,526,175 for the period ended December 31, 1997.
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE): Under Separate Account
contractual arrangements, General American is entitled to collect payment for
sales charges. Contracts are subject to a deferred sales charge contingent upon
full surrender of the contract or partial withdrawal of accumulated value. The
sales charge is 6% the first contract year, decreasing by 1% each subsequent
year. The contingent deferred sales charge will be waived in the event of
annuitization after the third year or on death if the date of issue is prior to
the annuitant's 80th birthday. Sales charges as a result of surrenders are
disclosed in Note 6.
ACCOUNT FEE AND ADMINISTRATIVE CHARGES: General American has the responsibility
for the administration of the contract. As reimbursement for account
administrative expenses, on the last day of the contract year, General American
deducts an account fee. For contracts with accumulated values less than $20,000,
the fee is the lesser of $30 or 2% of the accumulated value for contract years
ending prior to December 31, 1999. Thereafter, the account fee may be adjusted
annually. The account fee is waived for contracts with accumulated values of
$20,000 or more. General American charges an amount equal to the lesser of $25
or 2% of the amount transferred, for each transfer in excess of twelve (12)
during the contract year, excluding transfers made under the dollar cost
averaging program, personal portfolio rebalancing, or interest sweep program and
reserves the right to charge a fee to cover the expenses for special handling.
Account fees are disclosed in Note 6. General
D12
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
NOTE 3 -- CONTRACT CHARGES (CONT'D)
American also provides certain administrative services for which it charges an
administrative charge to the Separate Accounts at an annual rate of 0.15%.
Administrative charges for Separate Account Twenty-eight totaled $98,560 for the
period ended December 31, 1997. Administrative charges for Separate Account
Twenty-nine totaled $423,141 for the period ended December 31, 1997.
PREMIUM TAXES: In states which charge premium taxes, the taxes are withdrawn
from the purchase payment or the accumulated value of the contract. Premium
taxes are disclosed in Note 6.
NOTE 4 -- PURCHASES AND SALES OF GT GLOBAL VARIABLE INVESTMENT FUND SHARES
During the year ended December 31, 1997, cost of purchases and proceeds from
sales of GT Global Variable Investment Fund shares were as follows:
<TABLE>
<CAPTION>
SEPARATE ACCOUNT TWENTY-EIGHT PURCHASES SALES
- -------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Money Market Fund............................................................... $398,907,114 $398,555,506
Variable Strategic Income Fund.................................................. 26,524,215 31,587,439
Variable Global Government Income Fund.......................................... 3,690,152 5,603,392
Variable U.S. Government Income Fund............................................ 4,809,477 3,083,933
<CAPTION>
SEPARATE ACCOUNT TWENTY-NINE
- --------------------------------------------------------------------------------
<S> <C> <C>
Variable New Pacific Fund....................................................... $146,181,144 $150,986,132
Variable Europe Fund............................................................ 124,009,001 120,204,583
Variable America Fund........................................................... 33,332,585 34,327,866
Variable Growth & Income Fund................................................... 67,448,716 57,158,630
Variable Latin America Fund..................................................... 36,158,501 33,942,837
Variable Telecommunications Fund................................................ 37,146,607 32,830,027
Variable International Fund..................................................... 31,117,346 30,454,098
Variable Emerging Markets Fund.................................................. 48,522,195 46,113,702
Variable Natural Resources Fund................................................. 31,544,662 30,397,067
Variable Infrastructure Fund.................................................... 4,753,498 1,887,624
</TABLE>
NOTE 5 -- ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity for the years ended
December 31, 1997 and 1996 for Separate Account Twenty-eight (in thousands):
<TABLE>
<CAPTION>
VARIABLE
STRATEGIC
MONEY MARKET INCOME
DIVISION DIVISION
------------- ------------
1997 1996 1997 1996
----- ------ ----- -----
<S> <C> <C> <C> <C>
Individual units held:
Deposits............................................................ 866 1,097 132 253
Transfers........................................................... 236 (462) (241) 15
Withdrawals......................................................... (649) (303) (193) (198)
Outstanding units, beginning of period.............................. 1,490 1,158 1,807 1,737
----- ------ ----- -----
Outstanding units, end of period.................................... 1,943 1,490 1,505 1,807
----- ------ ----- -----
----- ------ ----- -----
General American Life Insurance Company seed money:
Deposits............................................................ 0 0 0 0
Transfers........................................................... 0 0 0 0
Withdrawals......................................................... 0 0 0 0
Outstanding units, beginning of period.............................. 0 0 0 0
----- ------ ----- -----
Outstanding units, end of period.................................... 0 0 0 0
----- ------ ----- -----
----- ------ ----- -----
<CAPTION>
VARIABLE VARIABLE
GLOBAL U.S.
GOVERNMENT GOVERNMENT
INCOME INCOME
DIVISION DIVISION
------------ ------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Individual units held:
Deposits............................................................ 62 67 130 137
Transfers........................................................... (127) (141) 54 (142)
Withdrawals......................................................... (107) (76) (62) (37)
Outstanding units, beginning of period.............................. 743 893 393 435
----- ----- ----- -----
Outstanding units, end of period.................................... 571 743 515 393
----- ----- ----- -----
----- ----- ----- -----
General American Life Insurance Company seed money:
Deposits............................................................ 0 0 0 0
Transfers........................................................... 0 0 0 0
Withdrawals......................................................... 0 0 (17) 0
Outstanding units, beginning of period.............................. 0 0 17 17
----- ----- ----- -----
Outstanding units, end of period.................................... 0 0 0 17
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
D13
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
NOTE 5 -- ACCUMULATION UNIT ACTIVITY (CONT'D)
The following is a summary of the accumulation unit activity for the years ended
December 31, 1997 and 1996 for Separate Account Twenty-nine (in thousands).
There was no activity in Separate Account Twenty-nine relating to General
American Life Insurance Company seed money.
<TABLE>
<CAPTION>
VARIABLE NEW VARIABLE VARIABLE
PACIFIC EUROPE AMERICA
DIVISION DIVISION DIVISION
------------- ------------ ------------
1997 1996 1997 1996 1997 1996
----- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Individual units held:
Deposits........................................ 181 244 129 129 130 268
Transfers....................................... (253) (1) (26) 163 (5) (171)
Withdrawals..................................... (186) (154) (119) (80) (248) (201)
Outstanding units, beginning of period.......... 1,776 1,687 1,182 970 1,802 1,906
----- ------ ----- ----- ----- -----
Outstanding units, end of period................ 1,518 1,776 1,166 1,182 1,679 1,802
----- ------ ----- ----- ----- -----
----- ------ ----- ----- ----- -----
<CAPTION>
VARIABLE VARIABLE
GROWTH & LATIN
INCOME AMERICA
DIVISION DIVISION
------------ ------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Individual units held:
Deposits........................................ 238 282 135 150
Transfers....................................... 469 49 149 (129)
Withdrawals..................................... (281) (253) (147) (109)
Outstanding units, beginning of period.......... 2,080 2,002 1,292 1,380
----- ----- ----- -----
Outstanding units, end of period................ 2,506 2,080 1,429 1,292
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
VARIABLE VARIABLE
TELECOMMUNICA- VARIABLE EMERGING
TIONS INTERNATIONAL MARKETS
DIVISION DIVISION DIVISION
------------- ------------ ------------
1997 1996 1997 1996 1997 1996
----- ------ ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Individual units held:
Deposits........................................ 235 510 73 72 175 291
Transfers....................................... (65) (54) 45 18 86 205
Withdrawals..................................... (317) (298) (48) (20) (134) (71)
Outstanding units, beginning of period.......... 3,177 3,019 384 314 1,234 809
----- ------ ----- ----- ----- -----
Outstanding units, end of period................ 3,030 3,177 454 384 1,361 1,234
----- ------ ----- ----- ----- -----
----- ------ ----- ----- ----- -----
<CAPTION>
VARIABLE
NATURAL VARIABLE
RESOURCES INFRASTRUCTURE
DIVISION DIVISION
------------ ------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Individual units held:
Deposits........................................ 197 203 140 124
Transfers....................................... (109) 476 48 141
Withdrawals..................................... (71) (19) (36) (12)
Outstanding units, beginning of period.......... 746 86 366 113
----- ----- ----- -----
Outstanding units, end of period................ 763 746 518 366
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
NOTE 6 -- SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT
Deposits into the Separate Account are used to purchase shares in GT Global
Variable Investment Funds. Net deposits represent the amounts available for
investment in such shares after deduction of premium taxes, administrative
costs, and surrender charges. Activity for Separate Account Twenty-eight
follows.
<TABLE>
<CAPTION>
VARIABLE STRATEGIC
MONEY MARKET DIVISION INCOME DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 11,762,049 $ 14,452,991 $ 2,330,258 $ 3,968,594
Transfers between fund divisions and General
American......................................... 3,257,598 (6,048,583) (4,271,620) 499,563
Surrenders and withdrawals........................ (8,576,294) (3,849,956) (3,390,198) (3,024,036)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ 6,443,353 4,554,452 (5,331,560) 1,444,121
--------------- --------------- --------------- ---------------
Deductions:
Premium taxes................................... (3,730) (2,014) (51) (546)
Account Fees.................................... (64,857) (36,201) (7,370) (12,164)
Surrender charges............................... (192,554) (101,577) (63,731) (54,253)
--------------- --------------- --------------- ---------------
Total deductions.............................. (261,141) (139,792) (71,152) (66,963)
--------------- --------------- --------------- ---------------
Net deposits into (deductions from) Separate
Account.......................................... $ 6,182,212 $ 4,414,660 $ (5,402,712) $ 1,377,158
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE GLOBAL GOVERNMENT VARIABLE U.S. GOVERNMENT INCOME
INCOME DIVISION DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 861,470 $ 880,325 $ 1,728,413 $ 1,777,642
Transfers between fund divisions and General
American......................................... (1,767,441) (1,896,264) 818,277 (1,851,071)
Surrenders and withdrawals........................ (1,451,204) (985,931) (1,059,973) (471,235)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ (2,357,175) (2,001,870) 1,486,717 (544,664)
--------------- --------------- --------------- ---------------
Deductions:
Premium taxes................................... (81) (40) (40) (40)
Account Fees.................................... (1,650) (2,660) (1,155) (1,210)
Surrender charges............................... (28,151) (12,861) (11,409) (8,064)
--------------- --------------- --------------- ---------------
Total deductions.............................. (29,882) (15,561) (12,604) (9,314)
--------------- --------------- --------------- ---------------
Net deposits into (deductions from) Separate
Account.......................................... $ (2,387,057) $ (2,017,431) $ 1,474,113 $ (553,978)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
D14
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
NOTE 6 -- SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONT'D)
<TABLE>
<CAPTION>
VARIABLE NEW PACIFIC DIVISION VARIABLE EUROPE DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 2,973,353 $ 3,858,542 $ 2,802,922 $ 2,421,423
Transfers between fund divisions and
General American................................. (5,841,440) (1,319,905) (1,364,288) 2,917,523
Surrenders and withdrawals........................ (2,789,649) (2,334,135) (2,584,983) (1,410,434)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ (5,657,736) 204,502 (1,146,349) 3,928,512
--------------- --------------- --------------- ---------------
Deductions:
Premium taxes................................... (510) (75) (627) (708)
Account Fees.................................... (34,169) (27,923) (17,392) (10,097)
Surrender charges............................... (57,861) (53,067) (46,967) (27,325)
--------------- --------------- --------------- ---------------
Total deductions.............................. (92,540) (81,065) (64,986) (38,130)
--------------- --------------- --------------- ---------------
Net deposits into (deductions from)
Separate Account................................. $ (5,750,276) $ 123,437 $ (1,211,335) $ 3,890,382
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
VARIABLE AMERICA DIVISION
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Total gross deposits.............................. $ 2,915,843 $ 5,700,168
Transfers between fund divisions and
General American................................. (7,332) (3,361,891)
Surrenders and withdrawals........................ (5,643,007) (4,149,012)
--------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ (2,734,496) (1,810,735)
--------------- ---------------
Deductions:
Premium taxes................................... (649) (414)
Account Fees.................................... (15,683) (19,526)
Surrender charges............................... (130,800) (94,727)
--------------- ---------------
Total deductions.............................. (147,132) (114,667)
--------------- ---------------
Net deposits into (deductions from)
Separate Account................................. $ (2,881,628) $ (1,925,402)
--------------- ---------------
--------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE EMERGING MARKETS VARIABLE NATURAL RESOURCES
DIVISION DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 2,618,157 $ 3,824,754 $ 4,026,534 $ 3,917,604
Transfers between fund divisions and
General American................................. 523,758 2,368,261 (2,016,970) 9,030,189
Surrenders and withdrawals........................ (1,930,698) (907,826) (1,444,994) (353,717)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ 1,211,217 5,285,189 564,570 12,594,076
Deductions:
Premium taxes................................... (415) 5 (562) 0
Account Fees.................................... (8,358) (5,528) (10,975) (7,097)
Surrender charges............................... (41,544) (13,827) (30,577) (4,221)
--------------- --------------- --------------- ---------------
Total deductions.............................. (50,317) (19,350) (42,114) (11,318)
--------------- --------------- --------------- ---------------
Net deposits into Separate Account................ $ 1,160,900 $ 5,265,839 $ 522,456 $ 12,582,758
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
VARIABLE INFRASTRUCTURE DIVISION
--------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Total gross deposits.............................. $ 2,337,828 $ 1,856,356
Transfers between fund divisions and
General American................................. 822,498 2,122,405
Surrenders and withdrawals........................ (607,136) (165,583)
--------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ 2,553,190 3,813,178
Deductions:
Premium taxes................................... 0 0
Account Fees.................................... (1,007) (490)
Surrender charges............................... (12,091) (2,113)
--------------- ---------------
Total deductions.............................. (13,098) (2,603)
--------------- ---------------
Net deposits into Separate Account................ $ 2,540,092 $ 3,810,575
--------------- ---------------
--------------- ---------------
</TABLE>
D15
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
NOTE 6 -- SUMMARY OF GROSS AND NET DEPOSITS INTO SEPARATE ACCOUNT (CONT'D)
<TABLE>
<CAPTION>
VARIABLE VARIABLE
GROWTH & INCOME DIVISION LATIN AMERICA DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 4,331,413 $ 4,439,621 $ 2,602,831 $ 2,386,980
Transfers between fund divisions and General
American......................................... 8,674,747 850,032 2,508,321 (2,174,243)
Surrenders and withdrawals........................ (5,112,202) (3,875,684) (2,791,244) (1,689,032)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ 7,893,958 1,413,969 2,319,908 (1,476,295)
--------------- --------------- --------------- ---------------
Deductions:
Premium taxes................................... (479) (393) (555) (850)
Account Fees.................................... (10,830) (8,243) (12,923) (5,994)
Surrender charges............................... (93,529) (61,282) (56,397) (32,930)
--------------- --------------- --------------- ---------------
Total deductions.............................. (104,838) (69,918) (69,875) (39,774)
--------------- --------------- --------------- ---------------
Net deposits into (deductions from) Separate
Account.......................................... $ 7,789,120 $ 1,344,051 $ 2,250,033 $ (1,516,069)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE VARIABLE
TELECOMMUNICATIONS DIVISION INTERNATIONAL DIVISION
-------------------------------- --------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total gross deposits.............................. $ 4,855,387 $ 9,624,221 $ 936,339 $ 813,886
Transfers between fund divisions and General
American......................................... (919,250) (819,084) 322,481 176,650
Surrenders and withdrawals........................ (6,748,959) (5,447,592) (565,656) (217,017)
--------------- --------------- --------------- ---------------
Total of gross deposits, transfers, and
surrenders between fund divisions............ (2,812,822) 3,357,545 693,164 773,519
--------------- --------------- --------------- ---------------
Deductions:
Premium taxes................................... (1,705) (1,370) 0 0
Account Fees.................................... (36,546) (38,560) (5,715) (1,925)
Surrender charges............................... (136,308) (95,260) (13,173) (5,020)
--------------- --------------- --------------- ---------------
Total deductions.............................. (174,559) (135,190) (18,888) (6,945)
--------------- --------------- --------------- ---------------
Net deposits into (deductions from) Separate
Account.......................................... $ (2,987,381) $ 3,222,355 $ 674,276 $ 766,574
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
D16
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT AND
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
SCHEDULE OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPARATE ACCOUNT TWENTY-EIGHT: NO. OF SHARES MARKET VALUE
- -------------------------------------------------------------------------------- ------------- ------------
<S> <C> <C>
GT Global: Money Market Fund.................................................. 17,116,690 $ 17,116,690
GT Global: Variable Strategic Income Fund..................................... 2,072,942 27,756,698
GT Global: Variable Global Government Income Fund............................. 734,784 8,207,535
GT Global: Variable U.S. Government Income Fund............................... 622,409 7,282,181
<CAPTION>
SEPARATE ACCOUNT TWENTY-NINE:
- --------------------------------------------------------------------------------
<S> <C> <C>
GT Global: Variable New Pacific Fund.......................................... 1,704,846 17,917,927
GT Global: Variable Europe Fund............................................... 1,362,660 30,687,103
GT Global: Variable America Fund.............................................. 2,057,504 44,606,691
GT Global: Variable Growth & Income Fund...................................... 2,791,092 51,914,308
GT Global: Variable Latin America Fund........................................ 1,622,235 27,496,881
GT Global: Variable Telecommunications Fund................................... 3,679,542 67,703,571
GT Global: Variable International Fund........................................ 453,774 5,772,006
GT Global: Variable Emerging Markets Fund..................................... 1,468,275 16,987,937
GT Global: Variable Natural Resources Fund.................................... 820,383 16,571,734
GT Global: Variable Infrastructure Fund....................................... 526,832 8,613,703
</TABLE>
See accompanying independent auditors' report.
D17
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-EIGHT
CONDENSED FINANCIAL INFORMATION
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATION TOTAL UNITS
ACCUMULATION UNIT VALUE: OUTSTANDING,
UNIT VALUE: END OF END OF PERIOD
BEGINNING OF PERIOD* PERIOD (IN THOUSANDS)
-------------------- ------------ --------------
<S> <C> <C> <C> <C>
Money Market Division................................................. 1997 13.30 13.75 1,943
1996 12.87 13.30 1,490
1995 12.40 12.87 1,158
1994 12.15 12.40 1,572
1993 12.00 12.15 303
Variable Strategic Income Division.................................... 1997 17.46 18.45 1,505
1996 14.56 17.46 1,807
1995 12.36 14.56 1,737
1994 15.11 12.36 1,886
1993 12.00 15.11 1,187
Variable Global Government Income Division............................ 1997 13.95 14.36 571
1996 13.33 13.95 743
1995 11.66 13.33 893
1994 12.95 11.66 825
1993 12.00 12.95 464
Variable U.S. Government Income Division.............................. 1997 13.29 14.19 515
1996 13.18 13.29 410
1995 11.65 13.18 452
1994 12.61 11.65 205
1993 12.00 12.61 69
</TABLE>
- --------------
* At inception of Separate Account on February 10, 1993.
See accompanying independent auditors' report.
D18
<PAGE>
GENERAL AMERICAN SEPARATE ACCOUNT TWENTY-NINE
CONDENSED FINANCIAL INFORMATION
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACCUMULATION TOTAL UNITS
ACCUMULATION UNIT VALUE: OUTSTANDING,
UNIT VALUE: END OF END OF PERIOD
BEGINNING OF PERIOD* PERIOD (IN THOUSANDS)
-------------------- ------------ --------------
<S> <C> <C> <C> <C>
Variable New Pacific Division......................................... 1997 17.41 10.11 1,518
1996 13.48 17.41 1,776
1995 13.70 13.48 1,687
1994 15.87 13.70 1,410
1993 12.00 15.87 492
Varible Europe Division............................................... 1997 20.62 23.41 1,166
1996 16.05 20.62 1,182
1995 14.84 16.05 970
1994 15.14 14.84 1,007
1993 12.00 15.14 349
Variable America Division............................................. 1997 23.02 26.08 1,679
1996 19.69 23.02 1,802
1995 15.93 19.69 1,906
1994 13.59 15.93 953
1993 12.00 13.59 117
Variable Growth & Income Division..................................... 1997 17.47 20.02 2,506
1996 15.23 17.47 2,080
1995 13.37 15.23 2,002
1994 13.96 13.37 1,908
1993 12.00 13.96 827
Variable Latin America Division....................................... 1997 16.98 19.18 1,429
1996 14.06 16.98 1,292
1995 18.79 14.06 1,380
1994 17.46 18.79 1,412
1993 12.00 17.46 463
Variable Telecommunications Division.................................. 1997 19.76 22.33 3,030
1996 16.79 19.76 3,177
1995 13.77 16.79 3,019
1994 13.03 13.77 2,612
1993 12.00 13.03 605
Variable International Division....................................... 1997 11.70 12.34 454
1996 10.94 11.70 384
1995 11.22 10.94 314
1994 12.00 11.22 172
Variable Emerging Markets Division.................................... 1997 14.06 11.96 1,361
1996 10.88 14.06 1,234
1995 11.93 10.88 809
1994 12.00 11.93 574
Variable Natural Resources Division................................... 1997 21.57 21.54 763
1996 14.47 21.57 746
1995 12.00 14.47 86
Variable Infrastructure Division...................................... 1997 16.13 16.71 518
1996 13.10 16.13 366
1995 12.00 13.10 113
</TABLE>
- --------------
* At inception of Separate Account on February 10, 1993, except for the Variable
Telecommunications Division, which commenced operations on October 18, 1993;
the Variable International Growth Division, which commenced operations on July
12, 1994; the Variable Emerging Markets Division, which commenced operations
on July 6, 1994; and the Variable Natural Resources Division and Variable
Infrastructure Division which commenced operations on January 31, 1995.
See accompanying independent auditors' report.
D19
<PAGE>
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>
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>
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>
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>
<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>
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>
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>
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>
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>
(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>
(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>
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>
<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>
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 $2.3 million, respectively, which is not recognized in the accompanying
consolidated balance sheet.
FUTURES: A futures contract is an agreement involving the delivery of a
particular asset on a specified future date at an agreed upon price. The
Company generally invests in futures on U.S. Treasury Bonds, U.S. Treasury
Notes, and the S&P 500 Index and typically closes the contract prior to the
delivery date. These contracts are generally used to manage the portfolio's
effective maturity and duration.
<PAGE>
Futures contracts outstanding as of years ending 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
($ 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>
(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>
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>
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 $.6 million
or 15.5 percent.
<PAGE>
(9) DEBT
The Company's long-term debt and notes payable consists of the following
($ 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>
(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>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this Registration
Statement.
(b) Exhibits
(1) Resolutions of the Board of Directors of General American Life Insurance
Company ("General American") authorizing establishment of the Separate
Account. 2
(2) Not applicable
(3) (a) Distribution Agreement 4
(b) Agency (Selling) Agreement #10079 8
(4) (a) Form of variable annuity contract #10079, filed herewith 7
(b) Form of individual retirement account endorsement 7
(c) Form of endorsement (No. 1099500) relating to attained age and
processing without an application. 7
(d) Form of endorsement (No. 1099542) relating to attained age and
processing without an application for the State of Texas. 7
(e) Form of endorsement (No. 1099400) relating to Section 401 and 457,
Internal Revenue Code. 7
(f) Form of endorsement (No. 1099436) relating to Section 401 and 457,
Internal Revenue Code for the State of Oregon. 7
(g) Form of endorsement (No. 1099460) relating to Section 401 and 457,
Internal Revenue Code for the State of New Jersey. 7
(h) Endorsement relating to enhanced free withdrawal and death benefit,
#1E18 8
(5) Form of Contract Application 1
(6) (a) Certificate of Incorporation of General American 9
(b) By-laws of General American 9
(7) Not applicable
(8) Participation Agreement 4
(9) Opinion and Consent of Counsel 1
(10) Consent of Independent Accountants (with Financial Statements)
(11) No financial statements are omitted from item 23.
(12) Not applicable
(13) Not applicable
(14) Powers of attorney for General American Life Insurance Company Directors
August A. Busch, III, William E. Cornelius, John C. Danforth 6, Bernard A.
Edison, Richard A. Liddy, William E. Maritz, Craig D. Schnuck 5, William
P. Stiritz, Andrew C. Taylor 4, Edwin Trusheim, Robert L. Virgil, Jr.,
Virginia V. Weldon, and Ted C. Wetterau 3
1 Incorporated by reference to Registration Statement on Form N-4 (File No.
33-54774) filed on 15 November 1993.
C-1
<PAGE>
2 Incorporated by reference to Registration Statement on Form S-6 (File No.
33-53098) filed on 8 October 1992.
3 Incorporated by reference to Post-Effective Amendment No. 1 filed on 8
February 1993 (File No. 33-54774).
4 Incorporated by reference to Post-Effective Amendment No. 3 filed on 30
April 1993 (File No. 33-54774).
5 Incorporated by reference to Post-Effective Amendment No. 4 filed on 29
April 1994 (File No. 33-54774)
6 Incorporated by reference to Post-Effective Amendment No. 7 filed on 28
April 1995.
7 Incorporated by reference to Post-Effective Amendment No. 9 filed on 29
April 1996.
8 Incorporated by reference to Post-Effective Amendment No. 10 filed on 28
April 1997
9 Filed herewith
Item 25. Directors and Officers of the Depositor
Officer's Name and Principal Positions and Offices
Business Address* with Depositor
Robert J. Banstetter, Sr. Vice President, General
700 Market Street Counsel & Secretary, Feb.
St. Louis, MO 63101 1991 to present and General Counsel,
Jan. 1983 - Feb. 1991.
John W. Barber Vice President and Controller, Dec. 1984
to present.
Kevin C. Eichner President & Chairman of the Board,
Collaborative Strategies, Inc.
E. Thomas Hughes Corporate Actuary and
700 Market Street Treasurer, Oct. 1994 to
St. Louis, MO 63101 present. Formerly Executive Vice
President - Group Pensions, March 1990 -
Oct. 1994.
Richard A. Liddy Chairman, President and
700 Market Street Chief Executive Officer,
St. Louis, MO 63101 Jan. 1995 to present. Formerly,
President and Chief Executive Officer,
May 1992 - Jan. 1995. President and
Chief Operating Officer, May 1988 - May
1992.
C-2
<PAGE>
Officer's Name and Principal Positions and Offices
Business Address* with Depositor
Warren J. Winer Executive Vice President-Group Life &
Health, Aug. 1995 to present. Formerly
Managing Director for William M. Mercer,
Inc. July 1993 to Aug. 1995 and
President and Chief Operating Officer,
W.F. Corroon, 1986 - July 1993.
Bernard H Wolzenski Executive Vice President- Individual
Insurance, Oct. 1991 - present.
Formerly Vice President, Individual Life
Products, June 1989 - Nov. 1991
A. Greig Woodring President and Chief
660 Mason Ridge Center Drive Executive Officer, Reinsurance
St. Louis, MO 63141 Group of America, Incorporated, Dec.
1992 to present. Executive Vice
President Reinsurance, Mar. 1990 to
Dec. 1992.
Richard A. Liddy, listed as a Principal Officer, is also a Director of the
Company.
* The principal business address of each person listed is General American Life
Insurance Company, 13045 Tesson Ferry Road, St. Louis, MO 63128, unless
otherwise indicated.
C-3
<PAGE>
Positions and Offices
Directors with Depositor
August A. Busch III Director
Anheuser-Busch Companies, Inc.
One Busch Place
St. Louis, Missouri 63118
William E. Cornelius Director
Union Electric Company
1901 Chouteau Street
St. Louis, MO 63103
John C. Danforth Director
Bryan Cave
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102
Bernard A. Edison Director
Edison Brothers Stores, Inc.
P.O. Box 14020
St. Louis, Missouri 63178
William E. Maritz Director
Maritz, Inc.
1375 North Highway Drive
Fenton, Missouri 63099
Craig D. Schnuck Director
Schnuck Markets, Inc.
11420 Lackland Road
P.O. Box 46928
St. Louis, Missouri 63146
William P. Stiritz Director
Ralston Purina Company
Checkerboard Square
St. Louis, Missouri 63164
Andrew C. Taylor Director
Enterprise Rent-A-Car
600 Corporate Park Drive
St. Louis, Missouri 63105
H. Edwin Trusheim Director
General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
C-4
<PAGE>
Positions and Offices
Directors with Depositor
Robert L. Virgil Director
Edward Jones and Company
12555 Manchester Road
St. Louis, Missouri 63131-3729
Virginia V. Weldon, M.D. Director
Monsanto Company
800 North Lindbergh Boulevard
St. Louis, Missouri 63167
Ted C. Wetterau Director
Wetterau Associates
7000 Bonhomme, Suite 750
St. Louis, Missouri 63105
C-5
<PAGE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
The Depositor, General American Life Insurance Company ("General American"),
controls the companies named on the following pages:
GENERAL AMERICAN MUTUAL HOLDING COMPANY: a mutual holding company.
GENAMERICA CORPORATION: formed to hold all of the stock of General American
Life Insurance Company.
WALNUT STREET SECURITIES, INC.: wholly-owned, third-tier subsidiary
engaged in the process of selling variable life insurance and variable
annuities and other securities.
WALNUT STREET ADVISERS, INC.: wholly-owned subsidiary of Walnut
Street Securities engaged in the business of giving investment advice.
WSS INSURANCE AGENCIES (ALABAMA, MASSACHUSETTS, OHIO, TEXAS), INC.:
formed to act as insurance agencies.
COLLABORATIVE STRATEGIES, INC.: wholly-owned business management
consulting company.
GENAMERICA CAPITAL I: Wholly-owned Delaware trust formed for the purpose
of issuing securities as an investment vehicle for GenAmerica Corporation.
MISSOURI REINSURANCE (BARBADOS), INC.: wholly-owned Barbados exempt life,
accident and health reinsurance company.
GENERAL AMERICAN LIFE INSURANCE COMPANY: an insurance company selling life
and health insurance and pensions.
COVA CORPORATION: wholly-owned subsidiary formed to own the former
Xerox Life companies.
COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY: wholly-owned by
Cova Corporation, engaged in the business of selling annuities
and life insurance.
C-6
<PAGE>
FIRST COVA LIFE INSURANCE COMPANY: wholly-owned by Cova
Financial Services Life Insurance Company, engaged in the
sale of life insurance in New York.
COVA FINANCIAL LIFE INSURANCE COMPANY: wholly-owned by Cova
Financial Services Life Insurance Company, engaged in the
sale of life insurance and annuities in California.
COVA LIFE MANAGEMENT COMPANY: wholly-owned by Cova Corporation.
Employer of the individuals operating the Cova companies.
COVA INVESTMENT ADVISORY CORPORATION: wholly-owned by Cova
Life Management Company. Intended to provide investment
advice to Cova Life insureds and annuity owners.
COVA INVESTMENT ALLOCATION CORPORATION: wholly-owned by
Cova Life Management Company. Intended to provide advice on
allocation of premiums to Cova Life insureds and annuity
owners.
COVA LIFE SALES COMPANY: wholly-owned by Cova Life
Management Company. Broker-dealer established to supervise
sales of Cova Life contracts.
COVA LIFE ADMINISTRATION SERVICES COMPANY: 49% owned by
Cova Life Management Company. Provides administrative
services for Cova annuities. (51% owned by Genelco
Incorporated.)
GENERAL LIFE INSURANCE COMPANY: wholly-owned subsidiary, domiciled in
Texas, engaged in the business of selling life insurance and
annuities.
C-7
<PAGE>
GENERAL LIFE INSURANCE COMPANY OF AMERICA: wholly-owned
subsidiary, domiciled in Illinois, engaged in the business of
selling life insurance and annuities.
PARAGON LIFE INSURANCE COMPANY: wholly-owned subsidiary engaged in
employer sponsored sales of life insurance.
EQUITY INTERMEDIARY COMPANY: wholly-owned subsidiary holding company
formed to own stock in subsidiaries.
REINSURANCE GROUP OF AMERICA, INCORPORATED: subsidiary, of which
approximately 64% is owned by Equity Intermediary and the balance
by the public.
RGA SUDAMERICA S.A.: Chilean subsidiary, of which all but
one share is owned by RGA and one share is owned by RGA
Reinsurance Company, existing to hold Chilean reinsurance
operations.
BHIF AMERICA SEQUROS DE VIDA S.A.: Chilean subsidiary,
of which 50% is owned by RGA Sudamerica S.A. and 50% is
owned by Chilean interests, engaged in business as a
life/annuity insurer.
RGA REINSURANCE COMPANY CHILE S.A.: 100% owned by RGA,
engaged in business of reinsuring life and annuity
business of BHIF America.
MANANTIAL SEQUROS DE VIDA S.A.: Argentinean subsidiary 100%
owned by RGA, engaged in business as a life, annuity,
disability and survivorship insurer.
RGA REINSURANCE COMPANY: subsidiary of Reinsurance Group of
America engaged in the reinsurance business.
C-8
<PAGE>
FAIRFIELD MANAGEMENT GROUP, INC. (fka GREAT RIVERS
HOLDING COMPANY): 100% owned subsidiary.
REINSURANCE PARTNERS, INC. (fka ADRIAN BAKER
REINSURANCE INTERMEDIARIES, INC.): wholly-owned
subsidiary of Fairfield Management Group, Inc.,
engaged in business as a reinsurance brokerage
company.
GREAT RIVERS REINSURANCE MANAGEMENT, INC.:
wholly-owned subsidiary of Fairfield Management
Group, Inc., acting as a reinsurance manager.
RGA (U.K.) UNDERWRITING AGENCY LIMITED: 80% owned
by Fairfield Management Group, Inc.
RGA REINSURANCE COMPANY (BARBADOS) LTD.: subsidiary of
Reinsurance Group of America, Incorporated formed to engage
in the exempt insurance business.
RGA/SWISS FINANCIAL GROUP, L.L.C.: 40% owned
subsidiary formed to market and manage financial
reinsurance business to be assumed by RGA Reinsurance
Company.
RGA INTERNATIONAL LTD.: a New Brunswick corporation wholly-
owned by Reinsurance Group of America, existing to hold
Canadian reinsurance operations.
RGA CANADA MANAGEMENT COMPANY, LTD.: a New Brunswick
corporation wholly-owned by G.A. Canadian Holdings,
existing to accommodate Canadian investors.
C-9
<PAGE>
RGA LIFE REINSURANCE COMPANY OF CANADA: wholly-
owned by RGA Canada Management Company, Ltd.
RGA HOLDINGS LIMITED: holding company formed in the United
Kingdom to own two operating companies: RGA Managing Agency
Limited and RGA Capital Limited.
RGA MANAGING AGENCY LIMITED: company has applied to Lloyd's
of London for registration as a managing agent or
underwriter.
RGA CAPITAL LIMITED: company has applied to Lloyd's of
London for admission as the sole corporate member of a new
Lloyd's syndicate which will underwrite accident and health
business.
RGA INSURANCE COMPANY (BERMUDA) LIMITED: subsidiary formed to
engage in insurance business.
RGA AUSTRALIAN HOLDINGS PTY LIMITED: holding company formed to
own RGA Reinsurance Company of Australia Limited.
RGA REINSURANCE COMPANY OF AUSTRALIA LIMITED: formed to
reinsure the life, health and accident business of non-
affiliated Australian insurance companies.
SECURITY EQUITY LIFE INSURANCE COMPANY: wholly-owned subsidiary,
domiciled in New York, engaged in the business of selling life
insurance and annuities.
GENERAL AMERICAN HOLDING COMPANY: wholly-owned subsidiary owning non-
insurance subsidiaries.
CONNING CORPORATION: 63% owned, second-tier subsidiary formed to
own the Conning companies (with the remainder owned by the
public).
CONNING, INC.: a holding company organized under Delaware
law.
C-10
<PAGE>
CONNING & COMPANY: a Connecticut corporation engaged
in providing asset management and investment advisory
services as well as insurance research services.
CONNING ASSET MANAGEMENT COMPANY: a Missouri
corporation engaged in providing investment
advice.
CONSULTEC, INC.: wholly-owned, second-tier subsidiary engaged in
providing data processing services for government entities.
GENELCO INCORPORATED: wholly-owned, second-tier subsidiary
engaged in the sale of computer software and in providing third
party administrative services.
INTERNATIONAL UNDERWRITING SERVICES, INCORPORATED: 88.3%
owned by Genelco. Provides third party underwriting
services to insurance companies.
GENELCO DE MEXICO: 99% owned by Genelco Incorporated,
engaged in licensing of Genelco software products in Latin
America.
GENELCO SOFTWARE, S.A.: 99% owned by Genelco Incorporated,
engaged in licensing of Genelco software products in Spain.
COVA LIFE ADMINISTRATION SERVICES COMPANY: 51% owned.
Provides administrative services for Cova annuities. (49%
owned by Cova Life Management Company.)
RED OAK REALTY COMPANY: wholly-owned, second-tier subsidiary
formed for the purpose of investing in and operating real estate.
GENMARK INCORPORATED: wholly-owned, second-tier subsidiary
company acting as distribution company.
C-11
<PAGE>
STAN MINTZ ASSOCIATES, INC.: wholly-owned subsidiary
purchased to maintain a significant marketing presence in
the Madison, Wisconsin area upon the retirement of General
Agent Stan Mintz.
WHITE OAK ROYALTY COMPANY: wholly-owned, second-tier subsidiary formed to
own mineral interests.
SYMBIENCE, L.L.C.: 60% owned by General American; administers
notification, billing, and collection of insurance premiums for group
employee welfare benefit plans.
Mutual funds associated with General American Life Insurance Company:
General American Capital Company
The Walnut Street Funds, Inc.
C-12
<PAGE>
27. Number of Contract Owners
As of 28 February 1998 there were: 6,957
<TABLE>
<CAPTION>
Title of Class Number of Owners of Record
<S> <C>
Qualified 1,808
Non-Qualified 5,149
</TABLE>
Item 28. Indemnification
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 reasonably believed
to be in or not opposed to the best interests of the corporation. Where 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,
indemnification may not be paid where such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation, unless 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 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
C-13
<PAGE>
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 while 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 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.
Item 29. Principal Underwriters
(a) GT Global, Inc. serves as the principal underwriter and
distributor for the variable annuity contracts using Separate Account Twenty-
Eight and Separate Account Twenty-Nine of General American and funded by the GT
Global Variable Investment Funds.
C-14
<PAGE>
(b) Directors and Officers
Name and Principal Business Positions and Offices
Address * with Underwriter
William J. Guilfoyle President and Chairman of the Board
Raymond R. Cunningham Senior Vice President - Director of
Sales and Director
Helge K. Lee Secretary and Chief Legal and Compliance
Officer
Richard W. Healey Senior Vice President - Director of
Marketing and Director
Stephen A. Maginn Senior Vice President -
519 S. Juanita Regional Sales Manager
Redondo Beach, CA 90277
Robert J. Wolf Senior Vice President -
71 South 20th St., Suite 120 Regional Sales manager
Battlecreek, MI 49015
Donna A. Abrahamson Vice President - Account Management
Hallie L. Baron Vice President - Public Relations
Jon Burke Vice President
31 Darlene Drive
Southboro, MA 01772
Kenneth W. Chancey Senior Vice President - Fund Accounting
Gary M. Castro Assistant Treasurer & Controller
Philip B. Christopher Vice President
Rt. 2, Box 232A
Charlottesville, VA 22902
Kenneth W. Chancey Senior Vice President Fund Accounting
Anthony DiBacco Vice President
30585 Via Lindon
Laguna Niguel, CA 92677
C-15
<PAGE>
Name and Principal Business Positions and Offices
Address * with Underwriter
Stephen Duffy Vice President
1120 Gables Drive
Atlanta, GA 30319
Philip D. Edelstein Senior Vice President -
9 Huntly Circle Regional Sales Manager
Palm Beach Gardens, FL 33418
Glen R. Farinacci Vice President
86 University Place
Staten Island, NY 10301
Ned E. Hammond Vice President
5901 McFarland Ct.
Plano, TX 75093-4317
David P. Hess Assistant Secretary and Director of
Mutual Fund Compliance
Richard Kashnowski Vice President
1368 S. Ridge Dr.
Mandeville, LA 70448
Allen M. Kuhn Vice President
19655 Red Maple Lane
Jupiter, FL 33548
Earle A. Malm II Chief Operating Officer
Christine C. Mangan Vice President - Dealer Marketing
Steven C. Manns Vice President
1941 West Wolfram
Chicago, IL 60657
Wayne F. Meyer Vice President
2617 Sun Meadow Drive
Chesterfield, MO 63005
Christine M. Pallatto Senior Vice President - Director of
Human Resources
C-16
<PAGE>
Name and Principal Business Positions and Offices
Address * with Underwriter
Dean Phillips Vice President
3406 Bishop Park Drive, #428
Winter Park, FL 32792
Dennis W. Reichert Assistant Treasurer & Budget Director
Pamela Ruddock Vice President - Fund Administration
Philip Schertz Vice President
25 Ivy Place
Wayne, NJ 07470
Michael A. Silver Assistant Secretary and Assistant
General Counsel
Peter Sykes Vice President
3490 East Brockbank Drive
Salt Lake City, UT 84124
Margo A. Tammen Vice President - Finance &
Administration
Lance Vetter Vice President
10915 La Sallnas Circle
Boca Raton, FL 33428
Tommy D. Wells Vice President
25 Crane Drive
Sam Anselmo, CA 94960
Todd H. Westby Vice President
3405 Goshen Road
Newtown Square, PA 19073
Claus te Wildt Vice President of Strategy and Business
Planning
Peter J. Wolfert Senior Vice President - Information
Technology
Paul Woznlak Vice President - Fund Accounting
Eric T. Zeigler Vice President
437 30th Street
Manhattan Beach, CA 90266
C-17
<PAGE>
* Unless otherwise indicated, the business address of each person listed is 50
California Street, San Francisco, CA 94111.
(c) Principal Underwriter 1997 Brokerage 1997 Compensation
Commission
GT Global, Inc. $3,275,259 $3,275,259
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a) of the 1940
Act and the rules under it are maintained by General American or its wholly-
owned, second tier subsidiary, Genelco Incorporated, located at 9735 Landmark
Parkway Drive, St. Louis, MO 63127-1690.
Item 31. Management Services
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings and Representations
(a) The Registrant undertakes that it will file post-effective amendments to
this registration statement as frequently as necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for so long as Purchase Payments under the Contracts may be
accepted.
(b) The Registrant undertakes to include, as part of the application to
purchase a Contract offered by the prospectus, a space that an applicant can
check to request Statement of Additional Information.
(c) The Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available under
this Form promptly upon written or oral request to General American at the
address or phone number listed in the prospectus.
(d) The Registrant represents that it is relying upon a "no-action" letter (No.
IP-6-88) issued to the American Council of Life Insurance concerning the
conflict between the redeemability requirements of sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940 and the limits on the redeemability
of variable annuities imposed by section 403(b)(11) of the Internal Revenue
Code. Registrant has included disclosure concerning the 403(b)(11) restrictions
in its prospectus and sales literature, and established a procedure whereby each
plan participant will sign a statement acknowledging these restrictions before
the contract is issued. Sales representatives have been instructed to bring the
restrictions to the attention of potential plan participants.
C-18
<PAGE>
(e) General American, sponsor of Registrant (also known as "Depositor"), hereby
represents that the fees and charges deducted under the terms of the Contracts
are, in the aggregate, reasonable in relationship to the services rendered, the
expenses expected, and the risks assumed by General American
C-19
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, General American Separate Account Twenty-Nine, has duly
caused this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of St. Louis, State of Missouri, on the 25th day of March 1998.
GENERAL AMERICAN
SEPARATE ACCOUNT
TWENTY-NINE (REGISTRANT)
(SEAL) BY: GENERAL AMERICAN LIFE
INSURANCE COMPANY (for
Registrant and as
Depositor)
Attest: By:
----------------------- ------------------------
Robert J. Banstetter, Sr. Richard A. Liddy
Secretary Chairman, President, and
Chief Executive Officer
General American Life
Insurance Company
C-20
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has been
signed below by the following persons in their capacities with General American
Life Insurance Company and on the dates indicated.
Signature Title Date
- ----------------------
Richard A. Liddy Chairman, President, and 3/25/98
Chief Executive Officer
(Principal Executive Officer)
- ----------------------
John W. Barber Vice President and 3/25/98
Controller
(Principal Accounting Officer
and Principal Financial Officer)
*
---------------------
August A. Busch, III Director
*
---------------------
William E. Cornelius Director
*
---------------------
John C. Danforth Director
*
---------------------
Bernard A. Edison Director
- ---------------------- 3/25/98
Richard A. Liddy Director
*
---------------------
William E. Maritz Director
*
---------------------
Craig D. Schnuck Director
C-21
<PAGE>
Signature Title Date
*
---------------------
William P. Stiritz Director
*
---------------------
Andrew C. Taylor Director
*
---------------------
Edwin Trusheim Director
*
---------------------
Robert L. Virgil, Jr. Director
*
---------------------
Virginia V. Weldon Director
*
---------------------
Ted C. Wetterau Director
*By: 3/27/98
-------------------
Matthew P. McCauley
* Original powers of attorney authorizing Matthew P. McCauley to sign the
Registration Statement and Amendments thereto on behalf of the Directors of
General American Life Insurance Company have been filed as Exhibits to this
Registration Statement.
C-22
<PAGE>
The Board of Directors
General American Life Insurance Company
We consent to the use of our reports included herein on General American Life
Insurance Company and on General American Separate Accounts Twenty-Eight and
Twenty-Nine and to the reference of our firm under the heading of "Financial
Statements" in the Registration Statement and Prospectus for General American
Separate Accounts Twenty-Eight and Twenty-Nine. 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 1997.
KPMG PEAT MARWICK LLP
St. Louis, Missouri
March 27, 1998
C-23
<PAGE>
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 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.
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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 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)
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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.
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 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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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 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,
<PAGE>
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
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 the office of the
Company during business hours; and he shall in general perform all the duties
incident to the office of the
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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.
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 post office 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 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.
<PAGE>
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
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> SEP. ACCT. 29 - VAR. LATIN AMERICA
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<S> <C>
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<PERIOD-START> JAN-01-1997
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> SEP. ACCT. 29 - VAR. TELLECOMMUNICATIONS
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> SEP. ACCT. 29 - VAR. INTERNATIONAL
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<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> JAN-01-1997
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> SEP. ACCT. 29 - VAR. EMERGING MARKETS
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<S> <C>
<PERIOD-TYPE> YEAR
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> SEP. ACCT. 29 - VAR. NATURAL RESOURCES
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<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> JAN-01-1997
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> SEP. ACCT. 29 - VAR. INFRASTRUCTURE
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<S> <C>
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</TABLE>
