As filed with Securities and Exchange Commission on
May 1, 2002
Registration No. 333-73672
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM S-6
PRE-EFFECTIVE AMENDMENT No.1 to the
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------------
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
(Exact Name of Trust)
GENERAL AMERICAN LIFE INSURANCE COMPANY
(Name of Depositor)
700 Market Street
St. Louis, MO 63101
(Address of depositor's principal executive offices)
---------------------
MARIE C. SWIFT
Associate General Counsel
Metropolitan Life Insurance Company
501 Boylston Street
Boston, Massachusetts 02117
(Name and address of agent for service)
Copies to:
STEPHEN E. ROTH
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
---------------------------
Title of Securities Being Registered: Units of Interest in Flexible Premium
Variable Life Insurance Policies.
As soon as practicable after the effective date of this
Registration Statement
(Approximate date of proposed public offering)
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
REGISTRATION STATEMENT ON FORM S-6
CROSS-REFERENCE SHEET
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
1 Cover Page
2 Cover Page
3 Inapplicable
4 Distribution of the Policies
5 General American
6 The Separate Account
9 Inapplicable
10(a) Other Policy Features
10(b) Policy Values and Benefits
10(c), (d), (e) Death Benefit; Cash Value; 24 Month Conversion Right; Surrender;
Partial Withdrawal; Right to Examine the Policy;
Loan Provision; Transfer Option; Premiums
10(f), (g), (h) Voting Rights; Rights Reserved by General American
10(i) Limits to General American's Right to Challenge the Policy; Payment
of Proceeds; Investment Options
11 The Separate Account
12 Investments of the Separate Account; Distribution of the Policies
13 Charges and Expenses; Distribution of the Policies; General
American's Income Taxes; Appendix A
14 Amount Provided for Investment Under the Policy; Distribution of the
Policies
15 Premiums
16 Investments of the Separate Account
17 Captions referenced under Items 10(c), (d), (e) and (i) above
18 The Separate Account
19 Reports; Distribution of the Policies
20 Captions referenced under Items 6 and 10(g) above
21 Loan Provision
22 Inapplicable
23 Distribution of the Policies
24 Limits to General American's Right to Challenge the Policy
25 General American
26 Distribution of the Policies
27 General American
28 Management
FORM N-8B-2
ITEM NO. CAPTION IN PROSPECTUS
- -------- ---------------------
29 General American
30 Inapplicable
31 Inapplicable
32 Inapplicable
33 Inapplicable
34 Distribution of the Policies
35 General American
36 Inapplicable
37 Inapplicable
38 Distribution of the Policies
39 Distribution of the Policies
40 Distribution of the Policies
41(a) Distribution of the Policies
42 Inapplicable
43 Inapplicable
44(a) Investments of the Separate Account; Amount Provided for Investment
Under the Policy; Deductions from Premiums;
Flexible Premiums
44(b) Charges and Expenses
44(c) Flexible Premiums; Deductions from Premiums
45 Inapplicable
46 Investments of the Separate Account; Captions referenced under Items
10(c), (d) and (e) above
47 Inapplicable
48 Inapplicable
49 Inapplicable
50 Inapplicable
51 Cover Page; Death Benefit; Lapse and Reinstatement; Charges and
Expenses; Additional Benefits by Rider; 24 Month Conversion Right;
Payment Options; Policy Owner and Beneficiary; Premiums;
Distribution of the Policies
52 Rights Reserved by General American
53 Tax Considerations
54 Inapplicable
55 Inapplicable
59 Financial Statements
AMERICAN VISION SERIES VUL 2002
Flexible Premium
Variable Life Insurance Policies
Issued by
Separate Account Eleven of
General American Life Insurance Company
700 Market Street
St. Louis, Missouri 63101
(314) 231-1700
This prospectus offers individual flexible premium variable life insurance
policies (the "Policies") issued by General American Life Insurance Company
("General American").
The Policy provides premium flexibility. You may choose between two death
benefit options. One provides a fixed death benefit equal to the Policy's face
amount. The other provides a death benefit that may vary daily with the
investment experience of the Eligible Funds. Cash value allocated to the
Eligible Funds is not guaranteed, and fluctuates daily with the investment
results of the Eligible Funds.
You allocate net premiums among the investment Divisions of General
American's Separate Account Eleven (the "Separate Account"). Each Division of
the Separate Account invests in shares of an Eligible Fund. The Eligible Funds
are:
NEW ENGLAND ZENITH FUND
State Street Research Money Market Series
State Street Research Bond Income Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Focused Value Series
METROPOLITAN SERIES FUND, INC.
Janus Mid Cap Portfolio
Russell 2000(R) Index Portfolio
Putnam International Stock Portfolio
MetLife Stock Index Portfolio
MetLife Mid Cap Stock Index Portfolio
Morgan Stanley EAFE(R) Index Portfolio
Lehman Brothers(R) Aggregate Bond Index Portfolio
State Street Research Aurora Portfolio
Janus Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Small Cap Growth Portfolio
State Street Research Large Cap Value Portfolio
State Street Research Diversified Portfolio
MET INVESTORS SERIES TRUST
MFS Mid Cap Growth Portfolio
PIMCO Innovation Portfolio
Met/AIM Mid Cap Core Equity Portfolio
Met/AIM Small Cap Growth Portfolio
PIMCO Total Return Portfolio
State Street Research Concentrated International Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
Overseas Portfolio
Equity-Income Portfolio
Growth Portfolio
High Income Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ("VIP II")
Asset Manager Portfolio
AMERICAN FUNDS INSURANCE SERIES
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds Global Small Capitalization Fund
SEI INSURANCE PRODUCTS TRUST
VP Large Cap Value Fund
VP Large Cap Growth Fund
VP Small Cap Value Fund
VP Small Cap Growth Fund
VP International Equity Fund
VP Emerging Markets Equity Fund
VP Core Fixed Income Fund
VP High Yield Bond Fund
VP Emerging Markets Debt Fund
You receive State Street Research Money Market Division performance until 15
days (less in some states) after we apply your initial premium payment to the
Policy. Thereafter, we invest the Policy's cash value according to your
instructions.
You may also allocate net premiums to our General Account in most states.
Special limits apply to General Account transfers, premium allocations and
withdrawals.
You may cancel the Policy during the "Right to Examine Policy" period.
Replacing existing insurance with the Policy might not be to your advantage.
Before you buy a Policy, ask your registered representative if changing, or
adding to, current insurance coverage would be advantageous.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
POLICIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS
MATERIAL INCORPORATED BY REFERENCE AND OTHER INFORMATION REGARDING REGISTRANTS
THAT FILE ELECTRONICALLY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE
ADDRESS OF THE SITE IS http://www.sec.gov.
THE ELIGIBLE FUND PROSPECTUSES ARE ATTACHED. PLEASE READ THEM AND KEEP THEM
FOR REFERENCE.
WE DO NOT GUARANTEE HOW ANY OF THE DIVISIONS OR ELIGIBLE FUNDS WILL PERFORM.
THE POLICIES AND THE ELIGIBLE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER GOVERNMENT AGENCY.
MAY , 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
-----
GLOSSARY.................................................... A-4
INTRODUCTION TO THE POLICIES................................ A-5
The Policies........................................... A-5
Availability of the Policy............................. A-6
Policy Charges......................................... A-7
How the Policy Works................................... A-12
Receipt of Communications and Payments at General
American's Administrative Office...................... A-13
General American....................................... A-13
POLICY VALUES AND BENEFITS.................................. A-15
Death Benefit.......................................... A-15
Death Proceeds Payable................................. A-16
Change in Death Benefit Option......................... A-16
Cash Value............................................. A-17
Allocation of Net Premiums............................. A-17
Amount Provided for Investment under the Policy........ A-18
Right to Examine Policy................................ A-18
CHARGES AND EXPENSES........................................ A-19
Deductions from Premiums............................... A-19
Surrender Charge....................................... A-19
Monthly Deduction from Cash Value...................... A-20
Charges Against the Eligible Funds and the Divisions of
the Separate Account.................................. A-23
Group, Sponsored and Other Special Arrangements........ A-23
PREMIUMS.................................................... A-23
Flexible Premiums...................................... A-23
Lapse and Reinstatement................................ A-25
OTHER POLICY FEATURES....................................... A-25
Increase in Face Amount................................ A-25
Loan Provision......................................... A-25
Surrender.............................................. A-27
Partial Withdrawal..................................... A-27
Reduction in Face Amount............................... A-28
Investment Options..................................... A-29
Transfer Option........................................ A-29
Dollar Cost Averaging.................................. A-30
Portfolio Rebalancing.................................. A-30
Change of Insured Person............................... A-31
Payment of Proceeds.................................... A-31
24 Month Conversion Right.............................. A-32
Payment Options........................................ A-32
Additional Benefits by Rider........................... A-33
Policy Owner and Beneficiary........................... A-34
</Table>
A-2
<Table>
<Caption>
PAGE
-----
THE SEPARATE ACCOUNT........................................ A-34
Investments of the Separate Account.................... A-35
Investment Management.................................. A-37
Substitution of Investments............................ A-39
Other Funds and Share Classes.......................... A-39
THE GENERAL ACCOUNT......................................... A-39
General Description.................................... A-39
Values and Benefits.................................... A-39
Policy Transactions.................................... A-39
DISTRIBUTION OF THE POLICIES................................ A-40
LIMITS TO GENERAL AMERICAN'S RIGHT TO CHALLENGE THE
POLICY.................................................... A-41
Misstatement of Age or Sex............................. A-42
Suicide................................................ A-42
TAX CONSIDERATIONS.......................................... A-42
Introduction........................................... A-42
Tax Status of the Policy............................... A-42
Tax Treatment of Policy Benefits....................... A-43
General American's Income Taxes........................ A-45
MANAGEMENT.................................................. A-45
VOTING RIGHTS............................................... A-48
RIGHTS RESERVED BY GENERAL AMERICAN......................... A-48
RESTRICTIONS ON FINANCIAL TRANSACTIONS...................... A-48
TOLL-FREE NUMBERS........................................... A-49
REPORTS..................................................... A-49
ADVERTISING PRACTICES....................................... A-49
LEGAL MATTERS............................................... A-49
REGISTRATION STATEMENT...................................... A-49
LEGAL PROCEEDINGS........................................... A-50
EXPERTS..................................................... A-50
APPENDIX A: ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS............ A-51
APPENDIX B: LONG TERM MARKET TRENDS......................... A-56
APPENDIX C: USES OF LIFE INSURANCE.......................... A-57
APPENDIX D: TAX INFORMATION................................. A-59
APPENDIX E: GUIDELINE PREMIUM TEST AND CASH VALUE
ACCUMULATION TEST......................................... A-60
FINANCIAL STATEMENTS........................................ AA-1
</Table>
A-3
GLOSSARY
ACCOUNT. A Division of the Separate Account or the General Account.
AGE. The age of an insured refers to the insured's age at his or her
nearest birthday.
BASE POLICY. The Policy without riders.
CASH SURRENDER VALUE. The amount you receive if you surrender the Policy.
It is equal to the Policy's cash value reduced by any Surrender Charge that
would apply on surrender and by any outstanding Policy loan and accrued
interest.
CASH VALUE. A Policy's cash value includes the amount of its cash value
held in the Separate Account, the amount held in the General Account and, if
there is an outstanding Policy loan, the amount of its cash value held in the
Loan Account.
GENERAL ACCOUNT. The General Account is the account that holds all of our
assets other than those allocated to the Loan Account or the Separate Account
(or any other separate account) and to which you may allocate net premiums. It
provides guarantees of principal and interest.
INVESTMENT START DATE. This is the later of the date we first receive a
premium payment for the Policy and the Policy Date.
LOAN ACCOUNT. The account to which cash value from the Separate and/or
General Accounts is transferred when a Policy loan is taken.
PLANNED PREMIUM. The Planned Premium is the premium payment schedule you
choose to help meet your future goals under the Policy. The Planned Premium is a
level amount that is subject to certain limits under the Policy.
PREMIUMS. Premiums include all payments under the Policy, whether a
Planned Premium or an unscheduled payment.
POLICY DATE. If you make a premium payment with the application, the
Policy Date is generally the later of the date Part II of the application (if
any) was signed and receipt of the premium payment. If you choose to pay the
initial premium upon delivery of the Policy, we issue the Policy with a Policy
Date which is generally up to 21 days after issue. When you receive the Policy,
you will have an opportunity to redate it to a current date.
TARGET PREMIUM. We use the Target Premium to determine the amount of
Surrender Charge that may apply on a surrender, lapse, face amount reduction, or
a partial withdrawal or change in death benefit option that results in a face
amount reduction. The Target Premium varies by issue age, sex, smoking status
and any substandard rating of the insured and the Policy's base face amount.
YOU. "You" refers to the Policy Owner.
A-4
INTRODUCTION TO THE POLICIES
THE POLICIES
The Policies are designed to provide lifetime insurance coverage. They are
not offered primarily as an investment.
Here is a summary of the Policy's basic features. You should read the
entire prospectus for more complete information.
-- You can make premium payments under the Policy based on a schedule you
determine, subject to some limits. Your policy also provides
flexibility to change your schedule at any time or make a payment that
does not correspond with your schedule. We can limit or prohibit
payments in some situations. (See "Premiums".)
-- You can allocate net premiums to one or more of the Divisions of the
Separate Account corresponding to mutual fund portfolios, in some
states after an initial period in the State Street Research Money
Market Division. (See "Allocation of Net Premiums" and "Investment
Options".)
-- The mutual fund portfolios available under the Policy include several
common stock funds, including funds which invest primarily in foreign
securities, as well as bond funds, balanced funds, and a money market
fund. You may allocate your Policy's cash value to a cumulative maximum
of 49 accounts (including the General Account) over the life of the
Policy. (See "Investments of the Separate Account".)
-- You may also allocate cash value to the General Account. We provide
guarantees of General Account principal and interest. SPECIAL LIMITS
--------------
APPLY TO GENERAL ACCOUNT TRANSFERS, PREMIUM ALLOCATIONS AND
-----------------------------------------------------------
WITHDRAWALS. We have the right to restrict withdrawals from, and
------------
transfers of cash value and allocations of premiums into, the General
Account. (See "The General Account".)
-- The cash value of the Policy will vary daily based on the net
investment experience of your Policy's Divisions and the amount of
interest credited to your Policy's cash value in the General Account.
(See "Cash Value", "Charges and Expenses", "Premiums", "Loan Provision"
and "Partial Withdrawal".)
-- The portion of the cash value in the Divisions is not guaranteed. You
bear the investment risk on this portion of the cash value. (See "Cash
Value".)
-- You may choose between two death benefit options and two definitions of
life insurance under the Policy. The level option death benefit equals
the Policy's face amount. The variable option death benefit equals the
face amount plus any cash value, which varies with the net investment
experience of your Policy's Divisions and the rate of interest credited
on your cash value in the General Account. The death benefit in either
case could increase to satisfy tax law requirements if the cash value
reaches certain levels. (See "Death Benefit".)
-- You may change your allocation of future net premiums at any time. (See
"Allocation of Net Premiums" and "Investment Options".)
-- A loan privilege and partial withdrawal feature are available. (See
"Loan Provision" and "Partial Withdrawal".)
-- The Policy allows you to withdraw cash value from the Policy or
transfer cash value among the Divisions and the General Account up to
twelve times in a Policy year without our consent. Currently, we do not
limit the number of Division transfers or withdrawals you may make in a
Policy year. We reserve the right to impose a charge of $25 for each
transfer or each withdrawal in excess of twelve. Transfers, withdrawals
and allocations involving the General Account are subject to special
limits. (See "Partial Withdrawal", "Transfer Option" and "The General
Account--Policy Transactions".)
-- Death benefits paid to the beneficiary generally are not subject to
Federal income tax. Under current law, undistributed increases in cash
value generally are not taxable to you. (See "Tax Considerations".)
A-5
-- Loans, assignments and other pre-death distributions may have tax
consequences depending primarily on the amount which you have paid into
the Policy but also on any "material change" in the terms or benefits
of the Policy or any death benefit reduction. If premium payments, a
death benefit reduction, or a material change cause the Policy to
become a "Modified Endowment Contract," then pre-death distributions
(including loans) will be included in income on an income first basis,
and a 10% penalty tax may be imposed on income distributed before the
Policy Owner attains age 59 1/2. Tax considerations may therefore
influence the amount and timing of premium payments and certain Policy
transactions which you choose to make. (See "Tax Considerations".)
-- If the Policy is not a Modified Endowment Contract, we believe that
loans under the Policy will generally not be taxable to you as long as
the Policy has not lapsed, been surrendered or terminated. However, the
tax consequences associated with loans outstanding after the tenth
policy year are uncertain. With some exceptions, other pre-death
distributions under a Policy that is not a Modified Endowment Contract
are includible in income only to the extent they exceed your investment
in the Policy. (See "Tax Considerations".)
-- During the "Right to Examine Policy" period you can return the Policy
for a refund. (See "Right to Examine Policy".)
-- Within 24 months after a Policy's date of issue, you may exercise the
Policy's 24 Month Conversion Right. If you do, we allocate all of your
Policy's cash value and future premiums to the General Account. The
purpose of the 24 Month Conversion Right is to provide you with fixed
Policy values and benefits. (See "24 Month Conversion Right" for a
description of this provision and for a description of the variation
which applies to Policies issued in Maryland and Connecticut.)
In many respects the Policies are similar to fixed-benefit universal life
insurance. Like universal life insurance, the Policies offer death benefits and
provide flexible premiums, a cash value, and loan privileges.
The Policies are different from fixed-benefit universal life insurance in
that the death benefit may, and the cash value will, vary to reflect the
investment experience of the selected Divisions.
The Policies are designed to provide insurance protection. Although the
underlying mutual fund portfolios invest in securities similar to those in which
mutual funds available directly to the public invest, in many ways the Policies
differ from mutual fund investments. The main differences are:
-- The Policy provides a death benefit based on our assumption of an
actuarially calculated risk.
-- If the cash surrender value is not sufficient to pay a Monthly
Deduction, the Policy may lapse with no value unless you pay additional
premiums. If the Policy lapses when Policy loans are outstanding,
adverse tax consequences may result.
-- In addition to sales charges, insurance-related charges not associated
with mutual fund investments are deducted from the premiums and values
of the Policy. These charges include various insurance, risk,
administrative and premium tax charges. (See "Charges and Expenses".)
-- The Separate Account, not the Policy Owner, owns the mutual fund
shares.
-- Federal income tax liability on any earnings is generally deferred
until you receive a distribution from the Policy. Transfers from one
underlying fund portfolio to another do not incur tax liability under
current law.
-- Dividends and capital gains are automatically reinvested.
For a discussion of some of the uses of the Policies, see "Appendix C: Uses
of Life Insurance".
AVAILABILITY OF THE POLICY
The Policies are available for insureds age 85 or younger on an
underwritten basis and from the age of 20 to 70 on a guaranteed issue basis. (We
issue guaranteed issue Policies based on very limited underwriting information.)
We may consent to issue the Policies on insureds up to age 90. All persons must
meet our underwriting and other requirements.
A-6
The minimum face amount for the base Policy is $50,000 unless we consent to
a lower amount.
We offer other variable life insurance policies that have different death
benefits, policy features, and optional programs. However, these other policies
also have different charges that would affect your Division performance and cash
values. The Policies may also be available with term riders that provide death
benefit coverage at a lower overall current cost than coverage under the base
Policy; however, term riders have no surrenderable cash value and terminate at
the insured's age 100. (See "Other Policy Features--Additional Benefits by
Rider".) To obtain more information about these other policies and term riders,
contact our Home Office or your registered representative.
For information concerning compensation paid for the sale of the Policies,
see "Distribution of the Policies".
POLICY CHARGES
PREMIUM-BASED CHARGES. We deduct the following charges from premiums:
-- A maximum sales charge of 5% (currently 2% in Policy year 11 and
thereafter);
-- A premium tax charge of 2.5%;
-- A charge for federal taxes of 1.25%.
In North Carolina, the maximum sales charge is 5.6% and the maximum
premium tax charge is 1.9%.
SURRENDER CHARGE. A Surrender Charge applies to a lapse, surrender, face
amount reduction, or a partial withdrawal or change in death benefit option that
results in a face amount reduction during the first ten Policy years, or during
the first ten years following a face amount increase (nine years for issue age
90). For the first partial withdrawal in each Policy year, no Surrender Charge
will apply on up to 10% of the cash surrender value at the time of withdrawal.
The maximum Surrender Charge equals 45% of the Target Premium. After the first
Policy year (or after the first year following a face amount increase), the
Surrender Charge declines ratably on a monthly basis over the remaining nine
years of the Surrender Charge period until it reaches $0 in the last month of
the tenth Policy year (or the tenth year following the face amount increase).
We deduct the Surrender Charge from the Policy's available cash value,
regardless of whether that cash value comes from premiums or investment
experience.
PROCESSING CHARGE. We reserve the right to impose a processing charge of
$25 on each partial withdrawal in excess of 12 per Policy year. We also reserve
the right to impose a $25 processing charge on each transfer between Divisions
or between a Division and the General Account in excess of 12 per Policy year.
MONTHLY DEDUCTION FROM CASH VALUE. We deduct certain charges from the cash
value:
-- Monthly charge for the cost of insurance and for any benefits provided
by rider;
-- Monthly Administration and Issue Expense Charge during the first ten
Policy years (and during the first ten Policy years following a face
amount increase), that varies by issue age, risk class and, except for
unisex Policies, sex of the insured. The monthly charge per $1000 of
base Policy and Supplemental Coverage Term Rider face amount ranges
from approximately 3 cents to 38 cents. Currently, the charge is
applied only to the base Policy face amount;
-- A Face Amount Increase Administration Charge of $100 that applies to
each underwritten face amount increase and is deducted from the
Policy's cash value on the monthly anniversary when the increase takes
place;
-- Monthly Policy Charge, currently equal to $25.00 per month in the first
Policy year and $6.00 per month thereafter (guaranteed not to exceed
these amounts in any year);
-- Monthly Asset Charge against the cash value in the Separate Account for
our mortality and expense risk, currently equal to an annual rate of
.60% in Policy years 1 -10; .25% in Policy years 11-20; and .15%
thereafter (guaranteed not to exceed .70% in Policy years 1 -10; .35%
in Policy years 11 -20; and .25% thereafter).
A-7
CHARGES DEDUCTED FROM THE ELIGIBLE FUNDS. There are daily charges against
the Eligible Fund assets for investment advisory services and fund operating
expenses.
NEW ENGLAND ZENITH FUND (CLASS A SHARES). Our affiliate, MetLife Advisers,
LLC (formerly New England Investment Management, LLC) advises the series of the
New England Zenith Fund. The following table shows the annual operating expenses
for each New England Zenith Fund series, based on actual expenses for the year
ended December 31, 2001:
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
SERIES FEES EXPENSES EXPENSES
- ------ ---------- -------- ------------
State Street Research Bond Income........................... .40% .09% .49%
State Street Research Money Market.......................... .35% .07% .42%
Harris Oakmark Focused Value................................ .75% .12% .87%*
Davis Venture Value......................................... .75% .08% .83%*
Alger Equity Growth......................................... .75% .09% .84%
</Table>
- ------------
* Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Total Annual
Expenses would have been .84% for the Harris Oakmark Focused Value Series and
.82% for the Davis Venture Value Series.
METROPOLITAN SERIES FUND. MetLife Advisers is the investment manager for
the Portfolios of the Metropolitan Series Fund, Inc. The Portfolios pay
investment management fees to MetLife Advisers and also bear other expenses. The
chart below shows the total operating expenses of the Portfolios for the year
ended December 31, 2001 (in the case of the State Street Research Large Cap
Value Portfolio, anticipated expenses for 2002) after any applicable expense
subsidy, as a percentage of Portfolio net assets.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE
SUBSIDY)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO (CLASS A SHARES) FEES EXPENSES EXPENSES
- -------------------------- ---------- -------- ------------
Janus Mid Cap............................................... .67% .07% .74%
Russell 2000 Index.......................................... .25% .30% .55%*
Putnam International Stock.................................. .90% .26% 1.16%**
MetLife Stock Index......................................... .25% .06% .31%
MetLife Mid Cap Stock Index................................. .25% .20% .45%*
Morgan Stanley EAFE Index................................... .30% .45% .75%*
Lehman Brothers Aggregate Bond Index........................ .25% .13% .38%
State Street Research Aurora................................ .85% .13% 98%
Janus Growth................................................ .80% .15% .95%*
Neuberger Berman Partners Mid Cap Value..................... .69% .12% .81%**
T. Rowe Price Large Cap Growth.............................. .63% .13% .76%**
Harris Oakmark Large Cap Value.............................. .75% .11% .86%**
T. Rowe Price Small Cap Growth.............................. .52% .09% .61%
State Street Research Large Cap Value....................... .70% .15% .85%*
</Table>
<Table>
<Caption>
TOTAL
MANAGEMENT 12b-1 OTHER ANNUAL
PORTFOLIO (CLASS E SHARES) FEES FEES EXPENSES EXPENSES
- -------------------------- ---------- ----- -------- --------
State Street Research Diversified.......................... .43% .15% .06% .64%**
</Table>
- ------------
* Without the applicable expense arrangement (similar to that described below),
Total Annual Expenses for the year ended December 31, 2001 would have been
.56% for the Russell 2000 Index Portfolio, .52% for the MetLife Mid Cap Stock
Index Portfolio, .82% for the Morgan Stanley EAFE Index Portfolio and 2.26%
for the Janus Growth Portfolio. Anticipated Total Annual Expenses for the
State Street Research Large Cap Value Portfolio
A-8
would be 1.56% (annualized from the Portfolio's start date of May 1, 2002).
Expenses for the Morgan Stanley EAFE Index Portfolio have been restated to
reflect the terms of the expense arrangement described below.
** Total Annual Expenses do not reflect certain expense reductions due to
directed brokerage arrangements. If we included these reductions, Total
Annual Expenses would have been 1.14% for the Putnam International Stock
Portfolio, .69% for the Neuberger Berman Partners Mid Cap Value Portfolio,
.75% for the T. Rowe Price Large Cap Growth Portfolio, .84% for the Harris
Oakmark Large Cap Value Portfolio, and .62% for the State Street Research
Diversified Portfolio.
MetLife Advisers and the Metropolitan Series Fund have entered into an Expense
Agreement under which MetLife Advisers will waive management fees and/or pay
expenses (other than brokerage costs, interest, taxes or extraordinary expenses)
("Expenses") attributable to the Class A shares of certain Portfolios of the
Metropolitan Series Fund, so that Total Annual Expenses of these Portfolios will
not exceed, at any time prior to April 30, 2003, the following percentages: .55%
for the Russell 2000 Index Portfolio; .45% for the MetLife Mid Cap Stock Index
Portfolio; .75% for the Morgan Stanley EAFE Index Portfolio; .95% for the Janus
Growth Portfolio; and .85% for the State Street Research Large Cap Value
Portfolio. Under the agreement, if certain conditions are met, MetLife Advisers
may be reimbursed for fees waived and Expenses paid with respect to the Janus
Growth Portfolio and the State Street Research Large Cap Value Portfolio if, in
the future, actual Expenses of these Portfolios are less than these expense
limits.
MET INVESTORS SERIES TRUST (CLASS A SHARES). The investment adviser for
Met Investors Series Trust is Met Investors Advisory LLC ("Met Investors
Advisory") (formerly known as Met Investors Advisory Corp.). The Portfolios of
Met Investors Series Trust pay investment management fees to Met Investors
Advisory and also bear certain other expenses. The total operating expenses of
the Portfolios for the year ended December 31, 2001, after any applicable
expense subsidy, as a percentage of Portfolio average net assets, were:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE
SUBSIDY)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES*
- --------- ---------- -------- ------------
MFS Mid Cap Growth.......................................... .00% .80% .80%
PIMCO Innovation............................................ .00% 1.10% 1.10%
Met/AIM Mid Cap Core Equity................................. .00% .90% .90%
Met/AIM Small Cap Growth.................................... .00% 1.05% 1.05%
PIMCO Total Return.......................................... .00% .65% .65%
State Street Research Concentrated International............ .00% 1.10% 1.10%
</Table>
- ------------
* Met Investors Advisory and Met Investors Series Trust have entered into an
Expense Limitation Agreement under which Met Investors Advisory has agreed to
waive or limit its fees and to assume other expenses so that the Total Annual
Expenses of each Portfolio (other than interest, taxes, brokerage commissions,
other expenditures which are capitalized in accordance with generally accepted
accounting principles, and other extraordinary expenses not incurred in the
ordinary course of each Portfolio's business) will not exceed, at any time
prior to April 30, 2003, the following percentages; .80% for the MFS Mid Cap
Growth Portfolio, 1.10% for the PIMCO Innovation Portfolio, .90% for the
Met/AIM Mid Cap Core Equity Portfolio, 1.05% for the Met/AIM Small Cap Growth
Portfolio, .65% for the PIMCO Total Return Portfolio and 1.10% for the State
Street Research Concentrated International Portfolio. Absent this Agreement,
Total Annual Expenses (and Management Fees) for the period ended December 31,
2001 would have been 2.35% (.65%) for the MFS Mid Cap Growth Portfolio, 3.97%
(1.05%) for the PIMCO Innovation Portfolio and 1.15% (.50%) for the PIMCO
Total Return Portfolio (annualized from the February 12, 2001 start date for
these Portfolios); and 6.93% (.75%) for the Met/AIM Mid Cap Core Equity
Portfolio, 4.97% (.90%) for the Met/AIM Small Cap Growth Portfolio and 5.44%
(.85%) for the State Street Research Concentrated International Portfolio
(annualized from the October 9, 2001 start date for these Portfolios). Under
certain circumstances, any fees waived or expenses reimbursed by Met Investors
Advisory may, with the approval of the Trust's Board of Trustees, be repaid to
Met Investors Advisory.
A-9
FIDELITY VIP AND VIP II (INITIAL CLASS SHARES). The investment adviser for
VIP and VIP II is Fidelity Management & Research Company ("FMR"). The Portfolios
of VIP and VIP II pay investment management fees to FMR and also bear other
expenses. For the year ended December 31, 2001, the total operating expenses of
the Portfolios, as a percentage of Portfolio average net assets, were:
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
PORTFOLIO FEES EXPENSES EXPENSES*
- --------- ---------- -------- ------------
VIP Equity-Income........................................... .48% .10% .58%
VIP Growth.................................................. .58% .10% .68%
VIP Overseas................................................ .73% .19% .92%
VIP High Income............................................. .58% .13% .71%
VIP II Asset Manager........................................ .53% .11% .64%
</Table>
- ------------
* Total annual expenses do not reflect certain expense reductions due to
directed brokerage arrangements and custodian interest credits. If we included
these reductions, total annual expenses would have been .57% for VIP
Equity-Income Portfolio, .65% for VIP Growth, .87% for VIP Overseas Portfolio,
.70% for VIP High Income Portfolio and .63% for VIP II Asset Manager
Portfolio.
SEI INSURANCE PRODUCTS TRUST (CLASS A SHARES). The investment adviser for
SEI Insurance Products Trust is SEI Investments Management Corporation ("SEI").
The Funds of the SEI Insurance Products Trust pay investment management fees to
SEI and also bear other expenses. For the year ended December 31, 2001, the
total operating expenses of each Fund, as a percentage of Fund average net
assets, were:
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS AFTER ANY APPLICABLE EXPENSE
SUBSIDY)
<Table>
<Caption>
MANAGEMENT OTHER TOTAL ANNUAL
FUND FEES EXPENSES EXPENSES*
- ---- ---------- -------- ------------
VP Large Cap Value.......................................... .23% .62% .85%
VP Large Cap Growth......................................... .32% .53% .85%
VP Small Cap Value.......................................... .61% .49% 1.10%
VP Small Cap Growth......................................... .62% .48% 1.10%
VP International Equity..................................... .47% .81% 1.28%
VP Emerging Markets Equity.................................. .73% 1.22% 1.95%
VP Core Fixed Income........................................ .20% .40% .60%
VP High Yield Bond.......................................... .46% .39% .85%
VP Emerging Markets Debt.................................... .53% .82% 1.35%
</Table>
- ------------
* SEI has voluntarily waived a portion of its management fee in order to keep
total operating expenses at a specified level. Absent the fee waiver, the
total operating expenses of the Funds would have been 1.14% for the VP Large
Cap Value Fund, 1.19% for the VP Large Cap Growth Fund, 1.45% for the VP Small
Cap Value Fund, 1.46% for the VP Small Cap Growth Fund, 2.04% for the VP
International Equity Fund, 3.70% for the VP Emerging Markets Equity Fund,
1.00% for the VP Core Fixed Income Fund, 1.31% for the VP High Yield Bond Fund
and 2.07% for the VP Emerging Markets Debt Fund. SEI may discontinue all or
part of its waiver at any time.
AMERICAN FUNDS INSURANCE SERIES (CLASS 2 SHARES). The investment adviser
for American Funds Insurance Series is Capital Research and Management Company
("Capital Research"). The Funds of American Funds Insurance Series pay
investment management fees to Capital Research and also bear certain other
expenses. For the year ended December 31, 2001, the total operating expenses of
each Fund, as a percentage of Fund average net assets, were:
<Table>
<Caption>
MANAGEMENT 12b-1 OTHER TOTAL ANNUAL
FUND FEES FEES EXPENSES EXPENSES
- ---- ---------- ----- -------- ------------
American Funds Growth................................. .37% .25% .01% .63%
American Funds Growth-Income.......................... .33% .25% .02% .60%
American Funds Global Small Capitalization............ .80% .25% .03% 1.08%
</Table>
A-10
An investment adviser or affiliates thereof may compensate General American
and/or certain affiliates for administrative, distribution, or other services
relating to the Eligible Funds. We (or our affiliates) may also be compensated
with 12b-1 fees from the Eligible Funds. This compensation is based on assets of
the Eligible Funds attributable to the Policies and certain other variable
insurance products that we and our affiliates issue. Some funds or their
advisers (or other affiliates) may pay us more than others, and the amounts paid
may be significant. An affiliate of General American may also receive brokerage
commissions on securities transactions initiated by an investment adviser.
See "Charges and Expenses".
A-11
HOW THE POLICY WORKS
PREMIUM PAYMENTS [FLOW CHART]
* Flexible
* Planned premium options
* No Lapse Premium (in first five Policy years)
* Secondary Guarantee Premium (to age 100)
CHARGES FROM PREMIUM PAYMENTS
* Sales Load: 5% (currently 2% in Policy years 11 and thereafter)
* Premium Tax Charge: 2.5%
* Charge for Federal Taxes: 1.25%
LOANS
* You may borrow your cash value
* Loan interest charge is 3.5%. (Currently we intend to charge 3.25% interest in
Policy years 11-20 and 3.00% thereafter.) We transfer loaned funds out of the
General Account and the Eligible Funds into the Loan Account where we credit
them with not less than 3.0% interest.
RETIREMENT BENEFITS
* Fixed settlement options are available for policy proceeds
CASH VALUES
* Net premium payments invested in your choice of Eligible Fund investments or
the General Account (generally after an initial period in the State Street
Research Money Market Division)
* The cash value reflects investment experience, interest, premium payments,
policy charges and any distributions from the Policy
* We do not guarantee the cash value invested in the Eligible Funds
* Any earnings you accumulate are generally free of any current income taxes
* You may change the allocation of future net premiums at any time. You may
transfer funds among investment options (and to the General Account).
Currently we do not limit the number of Division transfers you can make in a
Policy year.
*We reserve the right to impose a $25 charge on each partial withdrawal in
excess of 12 per Policy year and on each Division transfer (including a
transfer between a Division and the General Account) in excess of 12 per Policy
year.
* We limit the amount of transfers from (and in some cases to) the General
Account
* You may allocate your cash value among a maximum of 49 accounts over the life
of the Policy.
DEATH BENEFIT
* Level or Variable Death Benefit Options
* Guaranteed not to be less than face amount (less any loan and loan interest)
during first five Policy years if the five-year No Lapse Premium guarantee is
in effect, or until age 100 if the Secondary Guarantee Rider is in effect.
* On or after age 100, equal to cash value for insureds over age 80 at issue.
For insureds age 80 or younger at issue, equal to the greater of (1) cash
value and (2) the lesser of the face amount on the Policy anniversary at age
80 and at age 100.
* Income tax free to named beneficiary (generally)
DAILY DEDUCTIONS FROM ASSETS
* Investment advisory fees and other expenses are deducted from the Eligible
Fund values
BEGINNING OF MONTH CHARGES
* We deduct the cost of insurance protection (reflecting any substandard risk or
guaranteed issue rating) from the cash value each month
* Any Rider Charges
* Policy Charge: $25.00 per month (first year) and $6.00 per month thereafter
* Administration and Issue Expense Charge: Monthly charge ranging from
approximately $.03 to $.38 per $1,000 of base Policy face amount that applies
during the first ten Policy years or during the first ten Policy years
following a face amount increase.
* Face Amount Increase Administration Charge: maximum one-time charge of $100
levied on each underwritten increase in the base Policy's face amount.
* Asset Charge applied against the cash value in the Separate Account at an
annual rate of .60% in Policy years 1-10; .25% in Policy years 11-20; and .15%
thereafter (guaranteed not to exceed .70% in Policy years 1-10; .35% in Policy
years 11-20; and .25% thereafter)
SURRENDER CHARGE
* Applies on lapse, surrender, face amount reduction, or partial withdrawal or
change in death benefit option that results in face reduction in first ten
Policy years (or in first ten Policy years following a face amount increase).
Maximum charge is 45% of Target Premium in first Policy year. After first
Policy year, charge reduces ratably on a monthly basis over the remaining nine
years of the surrender charge period.
LIVING BENEFITS
* If policyholder has elected and qualified for benefits for disability and
becomes totally disabled, we will waive monthly charges during the period of
disability up to certain limits.
* You may surrender the Policy at any time for its cash surrender value
* Deferred income taxes, including taxes on certain amounts borrowed, become
payable upon surrender
* Grace period for lapsing with no value is 62 days from the first date in which
Monthly Deduction was not paid due to insufficient cash value
* Subject to our rules, you may reinstate a lapsed Policy within three years of
date of lapse if it has not been surrendered
A-12
RECEIPT OF COMMUNICATIONS AND PAYMENTS AT GENERAL AMERICAN'S ADMINISTRATIVE
OFFICE
We will treat your request for a Policy transaction, or your submission of
a payment, as received by us if we receive a request conforming to our
administrative procedures or a payment at our Administrative Office before the
close of regular trading on the New York Stock Exchange on that day. If we
receive it after that time, or if the New York Stock Exchange is not open that
day, then we will treat it as received on the next day when the New York Stock
Exchange is open.
The Administrative Office for various Policy transactions is as follows:
<Table>
Premium Payments General American Financial
P.O. Box 14490
St. Louis, MO 63178-4490
Payment Inquiries and General American Financial
Correspondence Remittance Processing
4100 Boy Scout Blvd.
Tampa, FL 33607
(800) 638-9294
Beneficiary and General American Financial
Ownership P.O. Box 355
Changes Warwick, RI 02887-0355
Surrenders, Loans and (800) 638-9294
Withdrawals
Division Transfers
Death Claims
Cancellations (Free General American Financial
Look Period) 13045 Tesson Ferry Road
St. Louis, MO 63128
Other Inquiries (800) 638-9294
</Table>
GENERAL AMERICAN
General American was originally incorporated as a stock company in 1933. In
1936, General American initiated a program to convert to a mutual life insurance
company. In 1997, General American's policyholders approved a reorganization of
the Company into a mutual holding company structure under which General American
became a stock company wholly owned by GenAmerica Corporation, an intermediate
stock holding company. On January 6, 2000 Metropolitan Life Insurance Company of
New York ("MetLife") acquired GenAmerica Corporation, which became GenAmerica
Financial Corporation. As a result of that transaction, General American became
an indirect, wholly-owned subsidiary of MetLife.
General American is principally engaged in writing individual life
insurance policies and annuity contracts. It is admitted to do business in 49
states, the District of Columbia, Puerto Rico, and in ten Canadian provinces.
The principal offices of General American are located 700 Market Street, St.
Louis, Missouri 63101.
The chart on the next page illustrates the relationship of General
American, the General Account, the Separate Account and the Eligible Funds.
A-13
[FLOW CHART]
- --------------------------------------------------------------------------------
GENERAL AMERICAN
- --------------------------------------------------------------------------------
(Insurance company subsidiary of MetLife)
We deduct charges.
We allocate net premiums and net unscheduled payments to your choice of
Divisions of the Separate Account or to the General Account.
Premiums
General Account
- --------------------------------------------------------------------------------
SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
Zenith State Street Research Bond Income Division
Zenith State Street Research Money Market Division
Zenith Alger Equity Growth Division
Zenith Davis Venture Value Division
Zenith Harris Oakmark Focused Value Division
Metropolitan Janus Mid Cap Division
Metropolitan Russell 2000 Index Division
Metropolitan Putnam International Stock Division
Metropolitan MetLife Stock Index Division
Metropolitan MetLife Mid Cap Stock Index Division
Metropolitan Morgan Stanley EAFE Index Division
Metropolitan Lehman Brothers Aggregate Bond Index Division
Metropolitan State Street Research Aurora Division
Metropolitan Janus Growth Division
Metropolitan Neuberger Berman Partners Mid Cap Value Division
Metropolitan T. Rowe Price Large Cap Growth Division
Metropolitan Harris Oakmark Large Cap Value Division
Metropolitan T. Rowe Price Small Cap Growth Division
Metropolitan State Street Research Large Cap Value Division
Metropolitan State Street Research Diversified Division
Met Investors MFS Mid Cap Growth Division
Met Investors PIMCO Innovation Division
Met Investors Met/AIM Mid Cap Core Equity Division
Met Investors Met/AIM Small Cap Growth Division
Met Investors PIMCO Total Return Division
Met Investors State Street Research Concentrated International Division
VIP Equity-Income Division
VIP Growth Division
VIP Overseas Division
VIP High Income Division
VIP II Asset Manager Division
SEI VP Large Cap Value Division
SEI VP Large Cap Growth Division
SEI VP Small Cap Value Division
SEI VP Small Cap Growth Division
SEI VP International Equity Division
SEI VP Emerging Markets Equity Division
SEI VP Core Fixed Income Division
SEI VP High Yield Bond Division
SEI VP Emerging Markets Debt Division
American Funds Growth Division
American Funds Growth-Income Division
American Funds Global Small Capitalization Division
- --------------------------------------------------------------------------------
Divisions buy shares of the Eligible Funds.
- --------------------------------------------------------------------------------
NEW ENGLAND ZENITH FUND
- --------------------------------------------------------------------------------
State Street Research Bond Income Series
State Street Research Money Market Series
Alger Equity Growth Series
Davis Venture Value Series
Harris Oakmark Focused Value Series
- --------------------------------------------------------------------------------
METROPOLITAN SERIES FUND, INC.
- --------------------------------------------------------------------------------
Janus Mid Cap Portfolio
Russell 2000 Index Portfolio
Putnam International Stock Portfolio
MetLife Stock Index Portfolio
MetLife Mid Cap Stock Index Portfolio
Morgan Stanley EAFE Index Portfolio
Lehman Brothers Aggregate Bond Index Portfolio
State Street Research Aurora Portfolio
Janus Growth Portfolio
Neuberger Berman Partners Mid Cap Value Portfolio
T. Rowe Price Large Cap Growth Portfolio
Harris Oakmark Large Cap Value Portfolio
T. Rowe Price Small Cap Growth Portfolio
State Street Research Large Cap Value Portfolio
State Street Research Diversified Portfolio
- --------------------------------------------------------------------------------
MET INVESTORS SERIES TRUST
- --------------------------------------------------------------------------------
MFS Mid Cap Growth Portfolio
PIMCO Innovation Portfolio
Met/AIM Mid Cap Core Equity Portfolio
Met/AIM Small Cap Growth Portfolio
PIMCO Total Return Portfolio
State Street Research Concentrated International Portfolio
- --------------------------------------------------------------------------------
VIP
- --------------------------------------------------------------------------------
Equity-Income Portfolio
Growth Portfolio
Overseas Portfolio
High Income Portfolio
- --------------------------------------------------------------------------------
VIP II
- --------------------------------------------------------------------------------
Asset Manager Portfolio
- --------------------------------------------------------------------------------
SEI INSURANCE PRODUCTS TRUST
- --------------------------------------------------------------------------------
VP Large Cap Value Fund
VP Large Cap Growth Fund
VP Small Cap Value Fund
VP Small Cap Growth Fund
VP International Equity Fund
VP Emerging Markets Equity Fund
VP Core Fixed Income Fund
VP High Yield Bond Fund
VP Emerging Markets Debt Fund
- --------------------------------------------------------------------------------
AMERICAN FUNDS INSURANCE SERIES
- --------------------------------------------------------------------------------
American Funds Growth Fund
American Funds Growth-Income Fund
American Funds Global Small Capitalization Fund
- --------------------------------------------------------------------------------
Eligible Funds buy portfolio investments to support values and benefits of the
Policies.
A-14
THIS PROSPECTUS PROVIDES A GENERAL DESCRIPTION OF THE POLICY. POLICIES
ISSUED IN YOUR STATE MAY PROVIDE DIFFERENT FEATURES AND BENEFITS FROM, AND
IMPOSE DIFFERENT COSTS THAN, THOSE DESCRIBED IN THIS PROSPECTUS. YOUR ACTUAL
POLICY AND ANY ENDORSEMENTS ARE THE CONTROLLING DOCUMENTS. YOU SHOULD READ THE
POLICY CAREFULLY FOR ANY VARIATIONS IN YOUR STATE.
POLICY VALUES AND BENEFITS
DEATH BENEFIT
If the insured dies while the Policy is in force, we pay a death benefit to
the beneficiary.
DEATH BENEFIT OPTIONS--TO AGE 100. When you apply for a Policy, you choose
between two death benefit options.
The Option A (Face Amount) death benefit is equal to the face amount of the
Policy. The Option A death benefit is fixed, subject to increases required by
the Internal Revenue Code of 1986 (the "Code").
The Option B (Face Amount Plus Cash Value) death benefit is equal to the
face amount of the Policy, plus the Policy's cash value, if any. The Option B
death benefit is also subject to increases required by the Internal Revenue
Code.
CHOICE OF TAX TEST. The Internal Revenue Code requires the Policy's death
benefit to be not less than an amount defined in the Code. As a result, if the
cash value grows to certain levels, the death benefit increases to satisfy tax
law requirements.
When you apply for your Policy, you select which tax test will apply to the
death benefit. You will choose between: (1) the guideline premium test, and (2)
the cash value accumulation test. The test you choose at issue cannot be
changed.
Under the GUIDELINE PREMIUM TEST, the death benefit will not be less than
the cash value times the guideline premium factor. See Appendix E.
Under the CASH VALUE ACCUMULATION TEST, the death benefit will not be less
than the cash value times the net single premium factor set by the Code. Net
single premium factors are based on the age, smoking status, underwriting class
and sex of the insured at the time of the calculation. Sample net single premium
factors appear in Appendix E.
If cash value growth in the later Policy years is your main objective, the
guideline premium test may be the appropriate choice because it does not require
as high a death benefit as the cash value accumulation test, and therefore cost
of insurance charges may be lower, once the Policy's death benefit is subject to
increases required by the Code. If you select the cash value accumulation test,
you can generally make a higher amount of premium payments for any given face
amount, and a higher death benefit may result in the long term. If cash value
growth in the early Policy years is your main objective, the cash value
accumulation test may be the appropriate choice because it allows you to invest
more premiums in the Policy for each dollar of death benefit.
AGE 100. If the death benefit is payable on or after the insured's
attained age 100, the death benefit will be:
-- the cash value on the date of death, if the insured was older than 80
at issue (or under any Policy issued in Florida or Illinois); or
-- the greater of (1) the cash value on the date of death, and (2) the
lesser of the face amount of the Policy on the Policy anniversary when
the insured was 80 and the face amount on the Policy anniversary when
the insured is 100, if the insured was 80 or younger at issue.
SECONDARY GUARANTEE RIDER. If available in your state, you may choose at
issue the Secondary Guarantee Rider. If you choose this benefit, we determine
whether the Secondary Guarantee is in effect on the first day of each Policy
month until the insured reaches age 100. If the Secondary Guarantee is in
effect, the Policy will not lapse even if the cash surrender value is less than
the Monthly Deduction for that month. However, any shortfall will, in effect,
cause your cash surrender value to have a negative balance. During any period in
which your Policy has negative
A-15
cash value, no earnings will be credited to the Policy. If a negative cash
surrender value balance is not restored, then upon termination of the guarantee
period, you will have to pay an amount sufficient to cover the accumulated
outstanding Monthly Deductions, in addition to the amount you are required to
pay to prevent lapse at the end of the grace period, in order to keep the Policy
in force. (See "Premiums".)
On the first day of a Policy month, if the total premiums you have paid,
less all partial withdrawals and any outstanding Policy loan and loan interest
(and less any cash value paid to you to allow the Policy to continue to qualify
as life insurance), are at least equal to the sum of the Secondary Guarantee
Premiums for each monthly anniversary since the Policy Date, then the guarantee
will apply for that month.
If your total premiums paid do not equal this amount, you will have a grace
period of 62 days from the first day of the Policy month to pay a premium
sufficient to keep the guarantee in force. If we do not receive this amount, the
rider will terminate and the guarantee provided by the rider will no longer
apply.
We will restrict any premium payment that would cause the Policy to fail to
meet the definition of a life insurance contract under the Internal Revenue
Code. This limitation will not cause the Secondary Guarantee Rider to terminate.
When testing whether the guarantee is in effect, we use each Secondary
Guarantee Premium that applied to the Policy for the period of time it was in
effect.
If you choose this rider, the Monthly Deduction will include a charge for
the rider until the rider terminates when the insured reaches age 100 (unless
the rider terminates before then).
The rider will also terminate upon request or in the event of the
following:
-- death of the insured
-- termination of the Policy
-- change of insured.
DEATH PROCEEDS PAYABLE
The death proceeds we pay are equal to the death benefit on the date of the
insured's death, reduced by any outstanding loan and accrued loan interest on
that date. If death occurs during the grace period, we reduce the proceeds by
the amount of unpaid Monthly Deductions. (See "Lapse and Reinstatement".) We
increase the death proceeds (1) by any rider benefits payable and (2) by any
cost of insurance charge made for a period beyond the date of death.
We may adjust the death proceeds if the insured's age or sex was misstated
in the application, if death results from the insured's suicide within two years
(less in some states) from the Policy's date of issue, or if a rider limits the
death benefit. (See "Limits to General American's Right to Challenge the
Policy").
CHANGE IN DEATH BENEFIT OPTION
After the first Policy year and prior to the insured's attained age 100 (85
in Florida), you may change your death benefit option by written request to our
Administrative Office. The change will be effective on the monthly anniversary
on or following the date we receive your request. We may require proof of
insurability. A change in death benefit option may have tax consequences.
If you change from Option A (Face Amount) to Option B (Face Amount Plus
Cash Value), we reduce the Policy's face amount if necessary so that the death
benefit is the same immediately before and after the change. A face amount
reduction below $50,000 requires our consent. If we reduce the face amount, we
will first reduce any prior increases in face amount that you applied for, in
the reverse order in which the increases occurred, then the face amount of any
Supplemental Coverage Term Rider, then any remaining initial face amount
(including any increase in face amount from a prior change in death benefit
option), but not below the Policy minimum, and finally, the face amount of any
Adjustable Benefit Term Rider. A partial withdrawal of cash value may be
necessary to meet Federal tax law limits on the amount of premiums that you can
pay into the Policy. A Surrender Charge may apply to
A-16
a Policy face amount reduction or partial withdrawal that reduces the face
amount on a change from Option A to Option B. (See "Surrender Charge".)
If you change from Option B (Face Amount Plus Cash Value) to Option A (Face
Amount), we increase the Policy's face amount, if necessary, so that the death
benefit is the same immediately before and after the change.
CASH VALUE
Your Policy's total cash value includes its cash value in the Separate
Account and in the General Account. If you have a Policy loan, the cash value
also includes the amount we hold in the Loan Account as a result of the loan.
The cash value reflects:
-- net premium payments
-- the net investment experience of the Policy's Divisions
-- interest credited to cash value in the General Account
-- interest credited to amounts held in the Loan Account for a Policy loan
-- the death benefit option you choose
-- Policy charges
-- partial withdrawals
-- transfers among the Divisions and the General Account.
We pay you the cash surrender value if you surrender the Policy. It equals
the cash value minus any outstanding Policy loan (plus interest) and any
Surrender Charge that applies. (See "Loan Provision" and "Surrender Charge".)
The Policy's cash value in the Separate Account may increase or decrease
daily depending on net investment experience. Poor investment experience can
reduce the cash value to zero. YOU HAVE THE ENTIRE INVESTMENT RISK FOR THE CASH
VALUE IN THE SEPARATE ACCOUNT.
The Policy's total cash value in the Separate Account equals the number of
accumulation units credited in each Division multiplied by that Division's
accumulation unit value. We convert any premium, interest earned on loan cash
value, or cash value allocated to a Division into accumulation units of the
Division. Surrenders, partial withdrawals, Policy loans, transfers and charges
deducted from the cash value reduce the number of accumulation units credited in
a Division. We determine the number of accumulation units by dividing the dollar
amount of the transaction by the Division's accumulation unit value next
determined following the transaction. (In the case of an initial premium, we use
the accumulation unit value on the investment start date).
The accumulation unit value of a Division depends on the net investment
experience of its corresponding Eligible Fund and reflects fees and expenses of
the Eligible Fund. We determine the accumulation unit value as of the close of
regular trading on the New York Stock Exchange on each day that the Exchange is
open for trading by multiplying the most recent accumulation unit value by the
net investment factor ("NIF") for that day (see below).
The NIF for a Division reflects:
-- the change in net asset value per share of the corresponding Eligible
Fund (as of the close of regular trading on the Exchange) from its last
value,
-- the amount of dividends or other distributions from the Eligible Fund
since the last determination of net asset value per share, and
-- any deductions for taxes that we make from the Separate Account.
The NIF can be greater or less than one.
ALLOCATION OF NET PREMIUMS
Your cash value is held in the General Account of General American or an
affiliate until we issue the Policy. We credit the first net premium with net
investment experience equal to that of the State Street Research Money Market
Division from the investment start date until the day we apply the initial
premium to the Policy (in states that require
A-17
a refund of premiums if you exercise the Right to Examine Policy provision,
until 15 days after we apply the initial premium to the Policy). (The
"investment start date" is defined below.) Then, we allocate the cash value to
the Divisions and/or the General Account as you choose. You can allocate to a
cumulative maximum of 49 accounts (including the General Account) over the life
of the Policy.
We will maintain an ongoing record of the accounts to which you allocate
premiums and cash values. Each time you make an allocation to an account that
has not previously received an allocation, the account will be added to your
cumulative lifetime total. An account will not be counted more than once. You
may therefore transfer all cash value out of an account and later reallocate
cash value or premiums to that same account without increasing the number of
accounts utilized. If an underlying fund is replaced by a new fund, the transfer
of cash value to the new fund will not be considered a new allocation.
Allocating premiums and cash value among a large number of accounts in early
Policy years may limit your ability to take advantage of new funds that may be
added in later years.
AMOUNT PROVIDED FOR INVESTMENT UNDER THE POLICY
INVESTMENT START DATE. The investment start date is the later of: the date
when we first receive a premium payment for the Policy at our Administrative
Office and the Policy Date.
PREMIUM WITH APPLICATION. If you make a premium payment with the
application, the Policy Date is generally the later of the date Part II (if any)
of the application is signed and receipt of the premium payment. In that case,
the Policy Date and investment start date are the same. The minimum amount of
premium you must pay is the amount set forth in the application. You may only
make one premium payment before the Policy is issued. When the Policy is
delivered to you, you will need to pay any remaining monthly No Lapse Premiums
for the period between the Policy Date and the delivery date. (See "Premiums".)
If you make a premium payment with the application, we will cover the
insured under a temporary insurance agreement for a limited period that usually
begins when we receive the premium for the Policy (or, if later, on the date
when Part II of the application is signed). The maximum temporary coverage is
the lesser of the amount of insurance applied for and $500,000. We may increase
this limit. These provisions vary in some states.
If we issue a Policy, Monthly Deductions begin from the Policy Date, even
if we delayed the Policy's issuance for underwriting. The deductions are for the
face amount of the Policy issued, even if the temporary insurance coverage
during underwriting was for a lower amount. If we decline an application, we
refund the premium payment made.
PREMIUM ON DELIVERY. If you pay the initial premium on delivery of the
Policy, the Policy Date is generally up to 21 days after issue. When you receive
the Policy, you will have an opportunity to redate it to a current date. The
investment start date is the later of the Policy Date and the date we received
the premium. Monthly Deductions begin on the Policy Date. Insurance coverage
under the Policy begins when we receive the monthly No Lapse Premiums for the
period since the Policy Date.
BACKDATING. We may sometimes backdate a Policy, if you request, by
assigning a Policy Date earlier than the date the application is signed. You may
wish to backdate so that you can obtain lower cost of insurance rates, based on
a younger insurance age. For a backdated Policy, you must also pay the No Lapse
Premiums due for the period between the Policy Date and the investment start
date. As of the investment start date, we allocate to the Policy those net
premiums, adjusted for monthly Policy charges.
RIGHT TO EXAMINE POLICY
You may cancel the Policy or an increase in face amount within ten days
(more in some states) after you receive it. You may return the Policy or face
amount increase to us or your registered representative. Insurance coverage ends
as soon as you return the Policy (determined by postmark, if the Policy is
mailed). If you cancel the Policy, we refund any premiums paid (or any other
amount that is required by state insurance law). If you return an increase in
face amount, it is cancelled from its beginning, and we will return to your cash
value the Monthly Deductions for the increase, as well as the Face Amount
Increase Administration Charge.
A-18
CHARGES AND EXPENSES
The amount of a charge may not necessarily correspond to the costs of the
services or benefits that are implied by the name of the charge or that are
associated with the particular Policy. For example, the sales charge and
surrender charge may not fully cover all of our sales and distribution expenses,
and we may use proceeds from other charges, including the mortality and expense
risk charge and the cost of insurance charge, to help cover those expenses. We
can profit from certain Policy charges.
DEDUCTIONS FROM PREMIUMS
We deduct a 5% sales charge from premiums.
The sales charge is currently 2% rather than 5% for premiums paid in Policy
year 11 and thereafter.
In North Carolina, the maximum sales charge is 5.6%.
We may reduce sales charges for Policies sold to some group or sponsored
arrangements. We may allow you to purchase the Policy, in exchange for certain
fixed-benefit life insurance policies issued by General American or General
American's affiliates, without a deduction for any sales charge from the amount
of cash surrender value that you transfer to the Policy. Eligibility conditions
apply. Your registered representative can advise you regarding terms and
availability of these arrangements.
PREMIUM TAX CHARGE. We deduct 2.5% from each premium for premium taxes and
administrative expenses. Premium taxes vary from state to state and the 2.5%
charge reflects an average. Administrative expenses covered by this charge
include those related to premium tax and certain other state filings. In North
Carolina, the maximum premium tax charge is 1.9%.
FEDERAL TAX CHARGE. We deduct 1.25% from each premium for our federal
income tax liability related to premiums.
EXAMPLE: The following chart shows the net amount that we would allocate
to the Policy assuming a premium payment of $2,000 (in the first ten Policy
years).
<Table>
<Caption>
NET
PREMIUM PREMIUM
- ------- -------
$2,000 $2,000
- 175 (8.75% X 2,000 = total sales and premium tax charge)
-------
$1,825 Net Premium
</Table>
SURRENDER CHARGE
If, during the first ten Policy years, or during the first ten Policy years
following a face amount increase, you surrender or lapse your Policy, reduce the
face amount, or make a partial withdrawal or change in death benefit option that
reduces the face amount, then we will deduct a Surrender Charge from the cash
value. (For insureds whose issue age is 90 at issue of the Policy, or the face
amount increase, the Surrender Charge period is nine years.) The maximum
Surrender Charge is shown in your Policy.
For the first partial withdrawal in any Policy year, no Surrender Charge
will apply to 10% of the cash surrender value at the time of the withdrawal (or,
if less, the amount of the withdrawal).
We base the Surrender Charge on a percentage of the Target Premium. The
Surrender Charge that applies during the first Policy year (or the first year
following a face amount increase) is equal to 45% of the Target Premium. After
the first Policy year, the Surrender Charge declines ratably on a monthly basis
until it reaches $0 in the last month of the tenth Policy year (or the tenth
year following a face amount increase).
A-19
- ----------------------------------------------------------------------------
EXAMPLES -- SURRENDER CHARGES
<Table>
<Caption>
HYPOTHETICAL MAXIMUM SURRENDER
INSURED TARGET PREMIUM CHARGE
------- -------------- -----------------
Male, Age 45 $ 6,900 $ 3,105
Preferred Nonsmoker
Face Amount $500,000
Female, Age 45 $ 1,328 $ 598
Preferred Smoker
Face Amount $100,000
Male, Age 55 $25,990 $11,696
Standard Smoker
Face Amount $1,000,000
</Table>
- ----------------------------------------------------------------------------
The table below shows the maximum Surrender Charge that applies to the
Policy. The table shows the charge that applies if the lapse, surrender or face
amount reduction occurs in any month of Policy year one and in the last month of
Policy years two through ten.
<Table>
<Caption>
THE MAXIMUM SURRENDER
FOR POLICIES WHICH ARE CHARGE IS THE FOLLOWING
SURRENDERED, LAPSED OR PERCENTAGE OF ONE
REDUCED DURING TARGET PREMIUM
---------------------- -----------------------
Entire Policy Year 1 45%
Last Month of Policy Years 2 40%
3 35%
4 30%
5 25%
6 20%
7 15%
8 10%
9 5%
10 0%
</Table>
In the case of a face amount reduction or a partial withdrawal or change in
death benefit option that results in a face amount reduction, we deduct any
Surrender Charge that applies from the Policy's remaining cash value in an
amount that is proportional to the amount of the Policy's face amount
surrendered. (See "Reduction in Face Amount," "Partial Withdrawal" and "Change
in Death Benefit Option".) The charge reduces the Policy's cash value in the
Divisions and the General Account in proportion to the amount of the Policy's
cash value in each. However, if you designate the accounts from which a partial
withdrawal is to be taken, the charge will be deducted proportionately from the
cash value of the designated accounts.
MONTHLY DEDUCTION FROM CASH VALUE
On the first day of each Policy month, starting with the Policy Date, we
deduct the "Monthly Deduction" from your cash value.
-- If your Policy is protected against lapse by the five year No Lapse
Premium guarantee or the Secondary Guarantee Rider, we make the Monthly
Deduction each month regardless of the amount of your cash surrender
value. If your cash surrender value is insufficient to pay the Monthly
Deduction in any month, your Policy will not lapse, but the shortfall
will, in effect, cause your cash surrender value to have a negative
balance. During any period in which your Policy has negative cash
value, no earnings will be credited to the Policy. If a negative cash
surrender value balance is not restored, then upon termination of the
guarantee period, you will have to pay an amount sufficient to cover
the accumulated outstanding Monthly Deductions, in addition to the
amount you are required to pay to prevent lapse at the end of the grace
period, in order to keep the Policy in force. (See "Premiums".)
A-20
-- If the five year No Lapse Premium guarantee or the Secondary Guarantee
Rider is not in effect, and the cash surrender value is not large
enough to cover the entire Monthly Deduction, we will make the
deduction to the extent cash value is available, but the Policy will be
in default, and it may lapse. (See "Lapse and Reinstatement".)
There is no Monthly Deduction on or after the Policy anniversary when the
insured attains age 100.
The Monthly Deduction reduces the cash value in each Division of the
Separate Account and in the General Account in proportion to the cash value in
each. However, you may request that we charge the Monthly Deduction to a
specific Division of the Separate Account or to the General Account. If, in any
month, the designated account has insufficient cash surrender value to satisfy
the Monthly Deduction, we will charge the Monthly Deduction to all Divisions
and, if applicable, the General Account, in proportion to the cash value in
each.
The Monthly Deduction includes the following charges:
POLICY CHARGE. The Policy Charge is currently equal to $25.00 per month in
the first Policy year and $6.00 per month thereafter (guaranteed not to exceed
these amounts in any year).
ADMINISTRATION AND ISSUE EXPENSE CHARGE. During the first ten Policy
years, and during the first ten Policy years following a face amount increase,
we impose a monthly charge for the costs of underwriting, issuing (including
sales commissions), and administering the Policy or the face amount increase.
The monthly charge ranges from approximately 3 cents to 38 cents per $1000 of
base Policy and Supplemental Coverage Term Rider face amount, and varies by the
insured's issue age and underwriting class (at the time the Policy or a face
amount increase is issued), and, except for unisex Policies, the insured's sex.
Currently, the charge is applied only to the base Policy face amount.
In addition, each time there is an underwritten increase in the face amount
of the base Policy, we deduct a one-time Face Amount Increase Administration
Charge of $100 from the Policy's cash value on the monthly anniversary when the
increase takes place.
MONTHLY CHARGES FOR THE COST OF INSURANCE. This charge covers the cost of
providing insurance protection under your Policy. The cost of insurance charge
for a Policy month is equal to the "amount at risk" under the Policy, multiplied
by the cost of insurance rate for that Policy month. We determine the amount at
risk on the first day of the Policy month after we process the Monthly
Deduction, except for the cost of insurance, Waiver of Monthly Deduction Rider
and Secondary Guarantee Rider charges. The amount at risk is the amount by which
the death benefit (generally discounted at the monthly equivalent of 3% per
year) exceeds the Policy's cash value. The cost of insurance rate for your
Policy may change from month to month.
The guaranteed cost of insurance rates for a Policy depend on the insured's
-- smoking status
-- substandard rating
-- age on the first day of the Policy year
-- sex (if the Policy is sex-based).
The current cost of insurance rates will also depend on
-- underwriting class
-- the insured's age at issue (and at the time of any face amount
increase)
-- the Policy year (and the year of any face amount increase).
We guarantee that the rates for underwritten Policies will not be higher
than rates based on
-- the 1980 Commissioners Standard Ordinary Mortality Tables (the "1980
CSO Tables") with smoker/nonsmoker modifications, for Policies issued
on non-juvenile insureds (age 18 and above at issue), adjusted for
substandard ratings or flat extras, if applicable
A-21
-- the 1980 Nonsmoker CSO Tables, for Policies issued on juvenile insureds
(below age 18 at issue).
However, in all states except New Jersey, the maximum rates for
coverage provided under the Supplemental Coverage Term Rider will be
based on 110% of the applicable 1980 CSO Table rates.
The actual rates we use may be lower than the maximum rates, depending on
our expectations about our future mortality and expense experience, lapse rates,
taxes and investment earnings. We review the adequacy of our cost of insurance
rates and other non-guaranteed charges periodically and may adjust them. Any
change will apply prospectively.
The underwriting classes we use are
-- for Policies issued on non-juvenile insureds: preferred smoker,
standard smoker, rated smoker, elite nonsmoker, preferred nonsmoker,
standard nonsmoker, rated nonsmoker, guaranteed issue smoker and
guaranteed issue nonsmoker
-- for Policies issued on juvenile insureds: standard and rated.
Rated and guaranteed issue Policies have higher cost of insurance
deductions. We base the guaranteed maximum mortality charges for substandard
ratings on multiples of the 1980 CSO Tables. (See below for a discussion of
guaranteed issue Policies.)
The following standard or better smoker and non-smoker classes are
available for underwritten Policies:
-- elite nonsmoker for Policies with total face amounts (base Policy plus
Supplemental Coverage Term Rider) of $250,000 or more where the issue
age is 18 through 80;
-- preferred smoker and preferred nonsmoker for Policies with total face
amounts (base Policy plus Supplemental Coverage Term Rider) of $100,000
or more where the issue age is 18 through 80;
-- standard smoker and standard nonsmoker for Policies with total face
amounts (base Policy plus Supplemental Coverage Term Rider) of $50,000
or more where the issue age is 18 through 90.
The elite nonsmoker class offers the best current cost of insurance rates,
and the preferred classes generally offer better current cost of insurance rates
than the standard classes.
Cost of insurance rates are generally lower for nonsmokers than for smokers
and generally lower for females than for males. Within a given underwriting
class, cost of insurance rates are generally lower for insureds with lower issue
ages. Where required by state law, and for Policies sold in connection with some
employee benefit plans, cost of insurance rates (and Policy values and benefits)
do not vary based on the sex of the insured.
We may offer Policies on a guaranteed issue basis to certain group or
sponsored arrangements. The classes available are guaranteed issue smoker and
guaranteed issue nonsmoker. We issue these Policies up to predetermined face
amount limits. Because we issue these Policies based on minimal underwriting
information, they may present a greater mortality cost to us than Policies in a
standard class. Therefore, these Policies have their own cost of insurance
rates. The cost of insurance rates are guaranteed not to exceed 100% of the 1980
CSO Tables (with smoker/nonsmoker modifications for non-juvenile insureds).
Generally the current guaranteed issue rates will exceed current cost of
insurance rates for a comparable underwritten Policy.
Some group or sponsored arrangements may be eligible to purchase Policies
on a simplified underwriting basis. They may elect simplified underwriting
instead of guaranteed issue or for amounts of insurance above our guaranteed
issue limits. However, they may not choose guaranteed issue for some members of
the group and simplified underwriting for others. There is no extra insurance
charge for Policies issued on a simplified underwriting basis.
CHARGES FOR ADDITIONAL BENEFITS AND SERVICES. We charge for the cost of
any additional rider benefits as described in the rider form. We also may charge
you a nominal fee, which we will bill directly to you, if you request a Policy
re-issue or re-dating.
A-22
ASSET CHARGE. We impose a charge for our mortality and expense risks.
Currently, the charge is made monthly, based on the cash value of the Policy in
the Divisions of the Separate Account, at an annual rate of .60% in Policy years
1 through 10; .25% in Policy years 11 through 20; and .15% thereafter. The
charge is guaranteed not to exceed .70% in Policy years 1 through 10; .35% in
Policy years 11 through 20; and .25% thereafter.
The mortality risk we assume is that insureds may live for shorter periods
of time than we estimated. The expense risk is that our costs of issuing and
administering the Policies may be more than we estimated.
CHARGES AGAINST THE ELIGIBLE FUNDS AND THE DIVISIONS OF THE SEPARATE ACCOUNT
CHARGES FOR INCOME TAXES. We currently do not charge the Separate Account
for income taxes, but in the future we may make such a charge, if appropriate.
We have the right to make a charge for any taxes imposed on the Policies in the
future. (See "General American's Income Taxes".)
ELIGIBLE FUND EXPENSES. Charges for investment advisory fees and other
expenses are deducted from the assets of the Eligible Funds. (See the "Policy
Charges" section under "Introduction to the Policies.")
GROUP, SPONSORED AND OTHER SPECIAL ARRANGEMENTS
We may issue the Policies to group or sponsored arrangements, as well as on
an individual basis. A "group arrangement" includes a situation where a trustee,
employer or similar entity purchases individual Policies covering a group of
individuals. Examples of such arrangements are non-tax qualified deferred
compensation plans. A "sponsored arrangement" includes a situation where an
employer or an association permits group solicitation of its employees or
members for the purchase of individual Policies.
We may waive, reduce or vary any Policy charges under Policies sold to a
group or sponsored arrangement. We may also raise the interest rate credited to
loaned amounts under these Policies. The amount of the variations and our
eligibility rules may change from time to time. In general, they reflect cost
savings over time that we anticipate for Policies sold to the eligible group or
sponsored arrangements and relate to objective factors such as the size of the
group, its stability, the purpose of the funding arrangement and characteristics
of the group members. Consult your registered representative for any variations
that may be available and appropriate for your case.
We may also waive, reduce or vary charges on policies sold to individuals
in situations where we can expect economies resulting from a significantly
higher amount of initial or projected premium payments, or in those
circumstances where a reasonable expectation of a reduction in expenses is
warranted.
The United States Supreme Court has ruled that insurance policies with
values and benefits that vary with the sex of the insured may not be used to
fund certain employee benefit programs. Therefore, we offer Policies that do not
vary based on the sex of the insured to certain employee benefit programs. We
recommend that employers consult an attorney before offering or purchasing the
Policies in connection with an employee benefit program.
PREMIUMS
FLEXIBLE PREMIUMS
Within limits, you choose the amount and frequency of premium payments. You
select a Planned Premium schedule, which is a level amount. This schedule
appears in your Policy. YOUR PLANNED PREMIUMS WILL NOT NECESSARILY KEEP YOUR
POLICY IN FORCE. You may skip Planned Premium payments or make additional
payments. Additional payments could be subject to underwriting. No payment can
be less than $10.
You can pay Planned Premiums on an annual, semi-annual or quarterly
schedule or, with our consent, monthly. You can change your Planned Premium
schedule by sending your request to us.
You may make payments by check or money order. We will send premium notices
for annual, semi-annual or quarterly Planned Premiums. You may also choose to
have us withdraw your premium payments from your bank checking account. (This is
known as the Pre-Authorized Checking arrangement.)
A-23
You may not make premium payments on or after the Policy anniversary when
the insured reaches age 100, except for premiums required during the grace
period.
If any payments under the Policy exceed the "7-pay limit" under Federal tax
law, your Policy will become a "Modified Endowment Contract" and you may have
more adverse tax consequences with respect to certain distributions than would
otherwise be the case if premium payments did not exceed the "7-pay limit". The
amount of your "7-pay limit" is shown in your Policy illustration. (See "Tax
Considerations".) In addition, if you have selected the guideline premium test,
Federal tax law limits the amount of premiums that you can pay under the Policy.
You need our consent if, because of tax law requirements, a payment would
increase the Policy's death benefit by more than it would increase cash value.
We may require evidence of insurability before accepting the payment.
We allocate net payments to your Policy's Divisions as of the date we
receive the payment. (See "Receipt of Communications and Payments at General
American's Administrative Office".) If you make a payment that exceeds the
"7-pay limit", we will notify you and give you an opportunity to receive a
refund of the excess premium to prevent your Policy from becoming a Modified
Endowment Contract. However, when we receive a premium payment prior to the
Policy anniversary and it is in response to a premium bill, if allocating the
premium immediately to the Policy would cause the Policy to become a "Modified
Endowment Contract" (see "Tax Considerations"), we will wait until the day after
the Policy anniversary to allocate the premium to the Divisions.
Under our current processing, unless you instruct us otherwise in writing,
amounts paid while a Policy loan is outstanding are treated as premiums. We do
not treat a payment as repayment of a Policy loan unless you instruct us to.
If you have a Policy loan, it may be better to repay the loan than to make
a premium payment, because the premium payment is subject to sales and tax
charges, whereas the loan repayment is not subject to any charges. (See "Loan
Provision" and "Deductions from Premiums".)
Two types of premium payment levels can protect your Policy against lapse
(1) for the first five Policy years, and (2) until age 100 of the insured.
FIRST FIVE POLICY YEARS. In general, if you pay the five-year No Lapse
Monthly Premium amount on time, the Policy will not lapse even if the cash
surrender value is less than the Monthly Deduction in any month. If (a) the
total premiums you have paid, less all partial withdrawals and any outstanding
Policy loan balance and loan interest (and less any cash value paid to you to
allow the Policy to continue to qualify as life insurance), at least equal (b)
the total No Lapse Monthly Premiums for the Policy up to that Policy month, the
Policy will not lapse. The guarantee will not apply if you reinstate the Policy.
We recalculate the No Lapse Premium if (1) you change the face amount, (2) you
add, delete or change rider coverage, (3) the rating classification for your
Policy is changed, (4) we correct a misstatement of the insured's age or sex, or
(5) you change the insured. The No Lapse Annual Premium is shown in your Policy.
The No Lapse Monthly Premium is one twelfth of the No Lapse Annual Premium.
TO AGE 100. In general, if you choose the Secondary Guarantee Rider and
pay the Secondary Guarantee Premiums on time, the Policy will stay in force
until the insured reaches age 100. Your total premium payments (less any partial
withdrawals, outstanding Policy loans, loan interest, and cash value paid to you
to allow the Policy to continue to qualify as life insurance) must meet the
requirements of the rider.
We recalculate the Secondary Guarantee Premium if:
-- you change your death benefit option
-- you increase or decrease the face amount
-- you add, delete or change rider coverage
-- a correction is made in the age or sex of the insured
-- the underwriting class of the Policy is changed.
If your Policy is protected against lapse by the five year No Lapse Premium
guarantee or the Secondary Guarantee Rider, we make the Monthly Deduction
regardless of the amount of your cash surrender value. If your
A-24
cash surrender value is insufficient to pay the Monthly Deduction in any month,
your Policy will not lapse, but the shortfall will, in effect, cause your cash
surrender value to have a negative balance. During any period in which your
Policy has negative cash value, no earnings will be credited to the Policy. If a
negative cash surrender value balance is not restored, then upon termination of
the guarantee period, you will have to pay an amount sufficient to cover the
accumulated outstanding Monthly Deductions, in addition to the amount you are
required to pay to prevent lapse at the end of the grace period, in order to
keep the Policy in force.
LAPSE AND REINSTATEMENT
LAPSE. Unless your Policy is protected by the Secondary Guarantee Rider or
by the five-year No Lapse Premium guarantee, in any month that your Policy's
cash surrender value is not large enough to cover a Monthly Deduction, your
Policy will be in default. Your Policy provides a 62 day grace period for
payment of a premium large enough to pay the amount due. The amount due is the
least of: a premium large enough to cover the Monthly Deduction amount due and
all deductions from the premium; a premium large enough to satisfy the Secondary
Guarantee Rider requirement, if the Policy has the rider; and a premium large
enough to meet the five-year No Lapse Monthly Premium test. We will tell you the
amount due. You have insurance coverage during the grace period, but if the
insured dies before you have paid the premium, we deduct from the death proceeds
the amount due for the period before the date of death. If you have not paid the
required premium by the end of the grace period, your Policy will lapse without
value.
REINSTATEMENT. If your Policy has lapsed, in most states you may reinstate
it within three years after the date of lapse if the insured has not attained
age 100. If more than three years have passed, you need our consent to
reinstate. Reinstatement in all cases requires payment of certain charges
described in the Policy and usually requires evidence of insurability that is
satisfactory to us.
If we deducted a Surrender Charge on lapse, we credit it back to the
Policy's cash value on reinstatement. The Surrender Charge on the date of
reinstatement is the same as it was on the date of lapse. When we determine the
Surrender Charge and other charges except cost of insurance and the Policy loan
interest rate, we do not count the amount of time that a Policy was lapsed.
Some states may require a different grace period than that described above.
Please read the grace period provision of your Policy for details.
OTHER POLICY FEATURES
INCREASE IN FACE AMOUNT
You may increase the Policy's face amount. We require satisfactory evidence
of insurability, and the insured's attained age must not exceed the maximum age
at which we currently offer new insurance for the amount of the increase. The
minimum amount of increase permitted is $10,000 ($20,000 for insureds aged 90).
The increase is effective on the monthly anniversary on or next following our
receipt of a completed request.
A Face Amount Increase Administration Charge of $100 applies to each
underwritten face amount increase, and is deducted from the Policy's cash value
on the monthly anniversary when the increase takes effect. The face amount
increase will have its own Target Premium, as well as its own Surrender Charge,
monthly Administration and Issue Expense Charge rates, current cost of insurance
rates, and Right to Examine Policy and suicide and contestability periods as if
it were a new Policy. When calculating the monthly cost of insurance charge, we
attribute the Policy's cash value first to any remaining initial face amount
(including an increase in face amount from a prior change in death benefit
option), then to the Supplemental Coverage Term Rider, then to the Adjustable
Benefit Term Rider, and finally to any face amount increases in the order in
which they were issued, for purposes of determining the net amount at risk.
LOAN PROVISION
You may borrow all or part of the Policy's "loan value". The minimum loan
amount is $500. We make the loan as of the date when we receive a loan request.
(See "Receipt of Communications and Payments at General
A-25
American's Administrative Office".) You should contact our Administrative Office
or your registered representative for information on loan procedures.
The Policy's loan value equals:
(i) the Policy's cash value; minus
(ii) the Policy's Surrender Charge; minus
(iii) the amount of the most recent Monthly Deduction, times the number of
Policy months to the earlier of the next Planned Premium due date
and the next Policy anniversary; plus
(iv) interest on the amount determined in (iii) at an annual rate of 3% to
the next Policy anniversary; minus
(v) loan interest to the next Policy anniversary; minus
(vi) any outstanding Policy loans.
- -------------------------------------------------------------------------------
EXAMPLE: Using the Policy illustrated on page A-52 assume that the
Policy's Planned Premiums have been paid and that the Policy's Divisions have
earned a constant 6% hypothetical gross annual rate of return (equal to a
constant net annual rate of return of 5.13%). After the premium payment on the
10th Policy anniversary, the maximum amount that you could borrow (if there are
no outstanding loans) would be determined as follows under an annual premium
payment schedule:
<Table>
(1) Cash Value after Premium Payment on 10th Policy
Anniversary............................................... $59,463
(2) Cash Value Reduced by the Policy's Surrender Charge.... 59,463
(3) Amount Calculated in (2), Reduced by the Most Recent
Monthly Deduction Times the Number of Policy Months to
the Earlier of the Next Planned Premium Due Date and
the Next Policy Anniversary............................ 58,409
(4) Amount Calculated in (3), Plus Interest at an Annual
Rate of 3% to the 11th Policy Anniversary.............. 60,013
(5) Amount Calculated in (4), Reduced by Loan Interest to
the Next Policy Anniversary............................ 58,279
</Table>
- -------------------------------------------------------------------------------
A Policy loan reduces the Policy's cash value in the Divisions by the
amount of the loan. A loan repayment increases the cash value in the Divisions
by the amount of the repayment. Unless you request otherwise, we attribute
Policy loans to the Divisions of the Separate Account and the General Account in
proportion to the cash value in each. We transfer cash value equal to the amount
of the loan from the Divisions and the General Account to the appropriate Loan
Sub-Account within the Loan Account (which is part of the General Account). The
Loan Account has a Loan Sub-Account that corresponds to each Division of the
Separate Account and the General Account.
When you make a loan repayment, we transfer an amount of cash value equal
to the repayment from the Loan Account to the Divisions of the Separate Account
and to the General Account in the same proportion that the cash value in each
Loan Sub-Account bears to the total cash value in the Loan Account.
We guarantee that the interest rate charged on Policy loans will not be
more than 3.50% per year. Currently, we charge:
-- 3.5% in Policy years 1-10
-- 3.25% in Policy years 11-20
-- 3.00% in Policy years 21+.
Policy loan interest is due and payable annually on each Policy
anniversary. If not paid when due, we add the interest accrued to the loan
amount, and we transfer an amount of cash value equal to the unpaid interest
from the Divisions and the General Account to the appropriate Loan Sub-Accounts
in the same manner as a new loan.
Cash value in the Loan Account earns interest at not less than 3% per year
and is transferred on each Policy anniversary to the Divisions of the Separate
Account and to the General Account in the same proportion that the cash value in
each Loan Sub-Account bears to the total cash value in the Loan Account. The
interest credited will also be
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transferred: (1) when you take a new loan; (2) when you make a full or partial
loan repayment; and (3) when the Policy enters the grace period.
The amount taken from the Policy's Divisions as a result of a loan does not
participate in the investment experience of the Divisions. Therefore, loans can
permanently affect the death benefit and cash value of the Policy, even if
repaid. In addition, we reduce any proceeds payable under a Policy by the amount
of any outstanding loan plus accrued interest.
If a Policy loan is outstanding, it may be better to repay the loan than to
pay a premium, because the payment is subject to sales and premium tax charges,
and the loan repayment is not subject to charges. (See "Deductions from
Premiums".)
Although the issue is not free from doubt, we believe that a loan from or
secured by a Policy that is not classified as a Modified Endowment Contract
should generally not be treated as a taxable distribution. A tax adviser should
be consulted when considering a loan.
If you surrender your Policy or your Policy lapses while there is an
outstanding loan balance, there will generally be Federal income tax payable on
the amount by which withdrawals and loans exceed the premiums paid to date.
Please be advised that amounts borrowed and withdrawn reduce the Policy's cash
value and any remaining cash value of the Policy may be insufficient to pay the
income tax on your gains.
If Policy loans plus accrued interest exceed the Policy's cash value less
the Surrender Charge, we notify you that the Policy is going to terminate. The
Policy terminates without value unless you make a sufficient payment within the
later of 62 days from the monthly anniversary immediately before the date when
the excess loan occurs or 31 days after we mail the notice. If the Policy lapses
with a loan outstanding, adverse tax consequences may result. If your Policy is
a Modified Endowment Contract, loans under your Policy may be treated as taxable
distributions. (See "Tax Considerations" below.)
SURRENDER
You may surrender a Policy for its cash surrender value at any time while
the insured is living. We determine the cash surrender value as of the date when
we receive the surrender request. The cash surrender value equals the cash value
reduced by any Policy loan and accrued interest and by any applicable Surrender
Charge. (See "Surrender Charge".) You may apply all or part of the cash
surrender value to a payment option. (See "Payment Options".) A surrender may
result in adverse tax consequences. (See "Tax Considerations" below.)
PARTIAL WITHDRAWAL
After the Right to Examine Policy period you may withdraw a portion of the
Policy's cash surrender value. A partial withdrawal reduces the Policy's death
benefit and may reduce the Policy's face amount if necessary so that the amount
at risk under the Policy will not increase. A partial withdrawal may also reduce
rider benefits. We reserve the right to decline a partial withdrawal request
that would reduce the face amount below the Policy's required minimum. The
minimum amount of a partial withdrawal request must be $500.
We have the right to limit partial withdrawals to no more than 90% of the
cash surrender value. In addition, a partial withdrawal will be limited by any
restriction that we currently impose on withdrawals from the General Account.
(See "The General Account".) Currently, we permit partial withdrawals of up to
100% of the cash surrender value in the Separate Account. We have the right to
limit partial withdrawals to twelve per Policy year. Currently we do not limit
the number of partial withdrawals. We reserve the right to impose a charge of
$25 on each partial withdrawal in excess of twelve per Policy year.
If a partial withdrawal reduces your Policy's face amount, the amount of
the Surrender Charge that will be deducted from your cash value is an amount
that is proportional to the amount of the face reduction. The amount deducted
will reduce the remaining Surrender Charge payable under the Policy.
For the first partial withdrawal in each Policy year, no Surrender Charge
will apply on up to 10% of the cash surrender value at the time of the
withdrawal (or, if less, the amount of the partial withdrawal).
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Any face amount reduction resulting from a partial withdrawal will reduce
the face amount in the following order: any remaining initial face amount
(including face amount increases resulting from a change in death benefit
option) down to the required minimum (excluding riders), the amount of any
Supplemental Coverage Term Rider, the face amount of any Adjustable Benefit Term
Rider, and any face amount increases in the same order in which they were
issued.
You may not reinvest cash value paid upon a partial withdrawal in the
Policy except as premium payments, which are subject to the charges described
under "Deductions From Premiums".
Unless you request otherwise, a partial withdrawal reduces the cash value
in the Divisions of the Separate Account and the General Account in the same
proportion that the cash value in each bears to the Policy's total unloaned cash
value. If current restrictions on the General Account will not permit this
allocation, we will ask you for an acceptable allocation. We determine the
amount of cash surrender value paid upon a partial withdrawal as of the date
when we receive a request. You can contact your registered representative or our
Administrative Office for information on partial withdrawal procedures.
A reduction in the death benefit as a result of a partial withdrawal may
create a Modified Endowment Contract or have other adverse tax consequences. If
you are contemplating a partial withdrawal, you should consult your tax adviser
regarding the tax consequences. (See "Tax Considerations".)
ANNIVERSARY PARTIAL WITHDRAWAL RIDER. This rider is available to you at no
cost at issue of the Policy if the insured is age 85 or younger. If you choose
the rider, you can make a partial withdrawal of cash value on any Policy
anniversary until age 95 of the insured, without reducing the Policy's face
amount. You can withdraw the greater of (1) 15% of the cash surrender value at
the beginning of the Policy year, and (2) the increase in cash surrender value
since the last Policy anniversary.
The minimum amount withdrawn must be $500. Any limits that would otherwise
apply to a partial withdrawal do not apply to a withdrawal under this rider.
However, if you make a partial withdrawal (1) for more than the amount permitted
under the rider, or (2) on a day other than the Policy anniversary, the rider
will terminate. It also terminates at age 95 of the insured, or upon your
request.
SPLIT DOLLAR PARTIAL WITHDRAWAL. If the Policy is issued in connection
with a split dollar insurance arrangement, after the first Policy year, you will
have a one-time right to request a withdrawal of up to the entire cash surrender
value without regard to the General Account withdrawal limits. Exercise of this
right must be accompanied by a release of the collateral assignment, if
applicable. Normal withdrawal rules apply unless you specifically request your
withdrawal in reference to the split dollar partial withdrawal provision. At the
time of your request, you must elect one of the following Withdrawal Options:
1. Dollar for dollar withdrawal option, under which the amount of any face
amount reduction and associated Surrender Charge are determined in the
same manner as for any other partial withdrawal. (See "Partial
Withdrawal".)
2. Split dollar rollout withdrawal option, under which the amount of any
face amount reduction is limited to the amount that would result in a
recapture ceiling taxable amount of zero.
The split dollar partial withdrawal endorsement is only available at issue and
will automatically be included with any policy issued under a split dollar
arrangement. There is no current cost for this endorsement, however, we reserve
the right to assess a transaction charge of no more than $25 for a withdrawal.
The endorsement is not available if you have selected the Anniversary Partial
Withdrawal Rider.
REDUCTION IN FACE AMOUNT
After the first Policy year you may reduce the face amount of your Policy
without receiving a distribution of any Policy cash value. You may reduce your
Policy's face amount by reducing the face amount of your Supplemental Coverage
Term Rider or your Adjustable Benefit Term Rider, if applicable, or by reducing
the face amount of your base Policy.
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If you decrease the face amount of your base Policy, we deduct any
Surrender Charge that applies from the Policy's cash value in proportion to the
amount of the face amount reduction. (A reduction in the face amount of your
Supplemental Coverage Term Rider or your Adjustable Benefit Term Rider will not
trigger a Surrender Charge.)
A face amount reduction usually decreases the Policy's death benefit.
(However, if we are increasing the death benefit to satisfy Federal income tax
laws, a face amount reduction will not decrease the death benefit unless we
deduct a Surrender Charge from the cash value. A reduction in face amount in
this situation may not be advisable.) We also may decrease any rider benefits
attached to the Policy. The amount of any face reduction must be at least
$10,000, and the face amount remaining after a reduction must meet our minimum
face amount requirements for issue, except with our consent.
If you choose to reduce your base Policy face amount, we will first
decrease any prior increases in face amount that you applied for, in the reverse
order in which the increases occurred, and then any remaining initial face
amount (including any increase in face amount from a prior change in death
benefit option).
A reduction in face amount reduces the Federal tax law limits on the amount
of premiums that you can pay under the Policy under the guideline premium test.
In these cases, a portion of the Policy's cash value may have to be paid to you
to comply with Federal tax law.
A face amount reduction takes effect as of the monthly anniversary on or
next following the date when we receive a request. You may only reduce the face
amount of your Supplemental Coverage Term Rider on the Policy anniversary. You
can contact your registered representative or the Administrative Office for
information on face reduction procedures.
A reduction in the face amount of a Policy may create a Modified Endowment
Contract or have other adverse tax consequences. If you are contemplating a
reduction in face amount, you should consult your tax adviser regarding the tax
consequences of the transaction. (See "Tax Considerations".)
INVESTMENT OPTIONS
You can allocate your Policy's premiums and cash value among the Divisions
of the Separate Account and the General Account in any combination, as long as
you choose no more than a cumulative total of 49 accounts (including the General
Account) over the life of the Policy. You may allocate any whole percentage to a
Division. For special rules regarding allocations to the General Account, see
"The General Account."
You make the initial premium allocation when you apply for a Policy. You
can change the allocation of future premiums at any time thereafter. The change
will be effective for premiums applied on or after the date when we receive your
request. You may request the change by telephone or by written request. (See
"Receipt of Communications and Payments at General American's Administrative
Office.")
See "Transfer Option" below for information on how to request a transfer or
reallocation by telephone.
TRANSFER OPTION
You may transfer your Policy's cash value between Divisions. (In states
where we refund your premium if you exercise the Right to Examine Policy
provision, your right to transfer begins after the first 15 days following
application of the initial premium to the Policy.) We reserve the right to limit
Division transfers to twelve per Policy year. Currently we do not limit the
number of Division transfers per Policy year. We reserve the right to make a
charge of $25 per transfer for transfers in excess of twelve in a Policy year.
We treat all Division transfer requests made at the same time as a single
request. The transfer is effective as of the date when we receive the transfer
request. (See "Receipt of Communications and Payments at General American's
Administrative Office".) For special rules regarding transfers involving the
General Account, see "The General Account".
We did not design the Policy's transfer privilege to give you a way to
speculate on short-term market movements. To prevent excessive transfers that
could disrupt the management of the Eligible Funds and increase transaction
costs, we may adopt procedures to limit excessive transfer activity. For
example, we may impose conditions and limits on, or refuse to accept, transfer
requests that we receive from third parties. Third parties include investment
advisers or registered representatives acting under power(s) of attorney from
one or more Policy
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owners. In addition, certain Eligible Funds may restrict or refuse purchases of
their shares and impose a redemption fee as a result of certain market timing
activities. You should read the prospectuses of the Eligible Funds for more
details.
You may request a Division transfer or reallocation of future premiums by
written request (which may be telecopied), by telephoning us, or, for Policies
that are not business-owned, over the Internet. To request a transfer or
reallocation by telephone, you should contact your registered representative or
contact us at 1-800-638-9294. We use reasonable procedures to confirm that
instructions communicated by telephone are genuine. Any telephone instructions
that we reasonably believe to be genuine are your responsibility, including
losses arising from any errors in the communication of instructions.
Telephone, facsimile, and computer systems may not always be available. Any
telephone facsimile, or computer system, whether it is yours, your service
provider's, your registered representative's, or ours, can experience outages or
slowdowns for a variety of reasons. These outages or slowdowns may delay or
prevent our processing of your request. Although we have taken precautions to
help our systems handle heavy use, we cannot promise complete reliability under
all circumstances. If you are experiencing problems, you should make your
request by writing to our Administrative Office.
DOLLAR COST AVERAGING
You may select an automated transfer privilege called dollar cost
averaging. The same dollar amount is transferred from the State Street Research
Money Market Division to other selected Divisions on a monthly basis. Over time,
more purchases of Eligible Fund shares are made when the value of those shares
is low, and fewer shares are purchased when the value is high. As a result, a
lower than average cost of purchases may be achieved over the long term. This
plan of investing allows you to take advantage of investment fluctuations, but
does not assure a profit or protect against a loss in declining markets.
Under this feature, you may request that a certain amount of your cash
value be transferred on each monthly anniversary from the State Street Research
Money Market Division to one or more of the other Divisions. You must transfer a
minimum of $100 to each account that you select under this feature, and each
selected Division must receive at least 1% of the total amount of each monthly
transfer. Fractional percentages may not be used. If we exercise our right to
limit the number of transfers in the future, or to impose a charge for transfers
in excess of 12 per Policy year, transfers made under the dollar cost averaging
program will not count against the total number of transfers allowed in a Policy
year, nor be subject to any charge. You can select a dollar cost averaging
program when you apply for the Policy or at a later date by contacting our
Administrative Office. You may not participate in the dollar cost averaging
program while you are participating in the portfolio rebalancing program. (See
"Portfolio Rebalancing" below). You can cancel your use of the dollar cost
averaging program at any time before a transfer date. Transfers will continue
until you notify us to stop. There is no extra charge for this feature. We
reserve the right to suspend dollar cost averaging at any time.
PORTFOLIO REBALANCING
You can select a portfolio rebalancing program for your cash value. Cash
value allocated to the Divisions can be expected to increase or decrease at
different rates. A portfolio rebalancing program automatically reallocates your
cash value among the Divisions and the General Account periodically to return
the allocation to the allocation percentages you specify. Portfolio rebalancing
is intended to transfer cash value from those accounts that have increased in
value to those that have declined, or not increased as much, in value. Portfolio
rebalancing does not guarantee profits, nor does it assure that you will not
have losses.
There are two methods of rebalancing available--periodic and variance.
PERIODIC REBALANCING. Under this option you elect a frequency (monthly,
quarterly, semi-annually or annually), measured from the Policy anniversary. On
each date elected, we will rebalance the accounts by generating
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transfers to reallocate the cash value according to the investment percentages
elected. You can exclude specific accounts from being rebalanced.
VARIANCE REBALANCING. Under this option you elect a specific allocation
percentage for the General Account and each Division of the Separate Account.
For each such account, the allocation percentage (if not zero) must be a whole
percentage. You also elect a maximum variance percentage (5%, 10%, 15%, or 20%
only), and can exclude specific accounts from being rebalanced. On each monthly
anniversary we will review the current account balances to determine whether any
balance is outside of the variance range (either above or below) as a percentage
of the specified allocation percentage for that account. If any account is
outside of the variance range, we will generate transfers to rebalance all of
the specified accounts back to the predetermined percentages.
If we exercise our right to limit the number of transfers in the future, or
to impose a charge for transfers in excess of 12 per Policy year, transfers
resulting from portfolio rebalancing will not count against the total number of
transfers allowed in a Policy year, nor be subject to any charge.
You may elect either form of portfolio rebalancing by specifying it on the
Policy application, or may elect it later for an in-force Policy, or may cancel
it, by submitting a change form acceptable to us under our administrative rules.
Only one form of portfolio rebalancing may be elected at any one time, and
portfolio rebalancing may not be used in conjunction with dollar cost averaging.
(See "Dollar Cost Averaging".) We reserve the right to suspend portfolio
rebalancing at any time. There is no charge for this feature.
CHANGE OF INSURED PERSON
We offer a benefit that permits you to change the insured person under your
Policy, if you provide satisfactory evidence that the person proposed to be
insured is insurable and that you have an insurable interest in that person's
life. The right to change the insured person is subject to some restrictions and
may result in a cost or credit to you. A change of the insured person is a
taxable exchange. In addition, a change of the insured person could reduce the
amount of premiums you can pay into the Policy under Federal tax law and,
therefore, may require a partial withdrawal of cash value. (No Surrender Charge
will apply.)
Your registered representative can provide current information on the
availability of this benefit. You should consult your tax adviser before
changing the insured person under your Policy.
PAYMENT OF PROCEEDS
We ordinarily pay any cash surrender value, loan value or death benefit
proceeds from the Divisions within seven days after we receive a request, or
satisfactory proof of death of the insured (and any other information we need to
pay the death proceeds). (See "Receipt of Communications and Payments at General
American's Administrative Office".) However, we may delay payment (except when a
loan is made to pay a premium to us) or transfers from the Divisions: (i) if the
New York Stock Exchange is closed for other than weekends or holidays, or if
trading on the New York Stock Exchange is restricted as determined by the SEC,
(ii) if the SEC by order permits postponement or determines that an emergency
exists that makes payments or Division transfers impractical, or (iii) at any
other time when the Eligible Funds or the Separate Account have the legal right
to suspend payment.
We may withhold payment of surrender or loan proceeds if those proceeds are
coming from a Policy Owner's check, or from a Pre-Authorized Checking premium
transaction, which has not yet cleared. We may also delay payment while we
consider whether to contest the Policy. We pay interest on the death benefit
proceeds from the date they become payable to the date we pay them.
Unless otherwise requested, we may apply the Policy's death proceeds to our
Total Control Account. We establish a Total Control Account at a banking
institution at the time for payment. The Total Control Account is an
interest-bearing checking account through which you have convenient and complete
access to the proceeds, which are maintained in our General Account or that of
an affiliate.
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Normally we promptly make payments of cash value, or of any loan value
available, from cash value in the General Account. However, we may delay those
payments for up to six months. We pay interest in accordance with state
insurance law requirements on delayed payments.
24 MONTH CONVERSION RIGHT
GENERAL RIGHT. Generally, during the first two Policy years, you may
convert the Policy to fixed benefit coverage by transferring all of your
Policy's cash value to the General Account. The transfer will not be subject to
a transfer charge, if any, and it will have no effect on the Policy's death
benefit, face amount, net amount at risk, risk classification or issue age. The
request to convert to fixed benefit coverage must be in written form
satisfactory to us.
You may exercise this privilege only once within the first two Policy
years. If you do so, we will automatically allocate all future net premiums to
the General Account and transfers of cash value to the Separate Account will no
longer be permitted.
The Policy permits us to limit allocations to the General Account under
some circumstances. (See "The General Account.") If we limit such allocations
you may still exercise the 24 Month Conversion Right.
FOR POLICIES ISSUED IN MARYLAND AND CONNECTICUT. Under Policies issued in
Maryland and Connecticut, you can exchange the face amount of your Policy for a
fixed benefit life insurance policy provided that you repay any policy loans and
(1) the Policy has not lapsed and (2) the exchange is made within the first two
Policy years. If you exercise this option, you will have to make up any
investment loss you had under the variable life insurance policy. We make the
exchange without evidence of insurability. The new policy will have the same
face amount as that being exchanged. The new policy will have the same issue
age, underwriting class and policy date as the variable life policy had. We will
attach any riders to the original Policy to the new policy if they are
available.
Contact us or your registered representative for more specific information
about the 24 Month Conversion Right in these states. The exchange may result in
a cost or credit to you. On the exchange, you may need to make an immediate
premium payment on the new policy in order to keep it in force.
PAYMENT OPTIONS
We pay the Policy's death benefit and cash surrender value in one sum
unless you or the payee choose a payment option for all or part of the proceeds.
You can choose a combination of payment options. You can make, change or revoke
the selection of payee or payment option before the death of the insured. You
can contact your registered representative or our Administrative Office for the
procedure to follow. The payment options available are fixed benefit options
only and are not affected by the investment experience of the Separate Account.
Once payments under an option begin, withdrawal rights may be restricted.
The following payment options are available:
(i)INCOME FOR A SPECIFIED NUMBER OF YEARS. We pay proceeds in equal
monthly installments for up to 30 years, with interest at a rate not
less than 3.0% a year, compounded yearly. Additional interest that we
pay for any year is added to the monthly payments for that year.
(ii)LIFE INCOME. We pay proceeds in equal monthly installments (i) for the
longer of the life of the payee or 10 years, (ii) for the longer of the
life of the payee or 15 years, or (iii) for the longer of the life of
the payee or 20 years.
(iii)LIFE INCOME WITH REFUND. We pay proceeds in equal monthly
installments during the life of the payee. At the payee's death, we
pay any remaining proceeds in one sum.
(iv)INTEREST. We hold proceeds and pay interest of at least 3.0% a year
monthly or add it to the principal annually. Withdrawals of at least
$500 may be made at any time by written request.
(v)LIFE INCOME FOR TWO LIVES. We pay proceeds in equal monthly
installments (i) while either of two payees is living, but for at least
10 years, or (ii) while the two payees are living and, after the death
of one payee, we pay two-thirds of the monthly amount for the life of
the surviving payee.
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(vi)SPECIFIED AMOUNT OF INCOME. We make monthly payments of a chosen
amount until the entire proceeds, with interest, are paid.
You need our consent to use an option if the installment payments would be
less than $50.
ADDITIONAL BENEFITS BY RIDER
You can add additional benefits to the Policy by rider, subject to our
underwriting and issuance standards. These additional benefits usually require
an additional charge as part of the Monthly Deduction from cash value. The rider
benefits available with the Policies provide fixed benefits that do not vary
with the investment experience of the Separate Account.
The term riders discussed below permit you, by purchasing term insurance,
to increase your insurance coverage. Term riders have no surrenderable cash
value.
If you seek to reduce the current overall cost of your insurance
protection, it is generally to your economic advantage to include a significant
portion or percentage of your insurance coverage under a Supplemental Coverage
Term Rider. Although current charges for the Supplemental Coverage Term Rider
are lower than for the base Policy, you should be aware that guaranteed maximum
charges on the rider are generally higher (except under Policies issued in New
Jersey, where they are the same as for the base Policy). Unlike the base Policy,
the Supplemental Coverage Term Rider terminates at age 100, and the benefit
provided by the Acceleration of Death Benefit Rider (described below) does not
apply to the coverage under the Supplemental Coverage Term Rider. Reductions in
the face amount of the Supplemental Coverage Term Rider can only occur on Policy
anniversaries.
Reductions in or elimination of term rider coverage do not trigger a
Surrender Charge, and use of a term rider generally reduces sales compensation.
Because the term insurance rider doesn't have surrender charges, a Policy
providing insurance coverage with a combination of base Policy and term rider
will have a lower maximum surrender charge than a Policy with the same amount of
insurance coverage provided solely by the base Policy. However, like the cost of
coverage under the Policy, charges deducted from the Policy's cash value to pay
for term rider coverage no longer participate in the investment experience of
the Separate Account, and usually increase with the age of the covered
individual.
Your determination as to how to purchase a desired level of insurance
coverage should be based on your specific insurance needs. Your registered
representative can provide you more information on the uses of term rider
coverage.
The following riders and endorsements, some of which have been described
previously, are available:
SUPPLEMENTAL COVERAGE TERM RIDER, which provides non-convertible term
insurance that terminates at age 100.
TEMPORARY TERM RIDER, which provides insurance coverage from the date
coverage is approved until a later Policy date.
SECONDARY GUARANTEE RIDER, which provides for a guaranteed death benefit to
age 100.
WAIVER OF MONTHLY DEDUCTION RIDER, which provides for waiver of Monthly
Deductions upon the disability of the insured.
WAIVER OF SPECIFIED PREMIUM RIDER, which provides for waiver of a specified
amount of monthly premium in the event of the disability of the insured.
GUARANTEED SURVIVOR PLUS PURCHASE OPTION, which allows the beneficiary,
upon the death of the insured, or the owner, under specified circumstances, to
purchase coverage on a designated life or lives without providing evidence of
insurability.
OPTIONS TO PURCHASE ADDITIONAL LIFE INSURANCE RIDER, which allows the Owner
to purchase additional coverage on the insured without providing evidence of
insurability.
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OPTION TO PURCHASE LONG-TERM CARE INSURANCE RIDER, which allows the Owner
to purchase long-term care coverage on the insured without providing evidence of
insurability.
ADJUSTABLE BENEFIT TERM RIDER, which provides term insurance coverage on
the insured that allows annual adjustments and which terminates at age 100.
ACCELERATION OF DEATH BENEFIT RIDER, which provides for an accelerated
payment of all or part of the Policy's death benefit, on a discounted basis, if
the insured is terminally ill, as defined in the rider.
ANNIVERSARY PARTIAL WITHDRAWAL RIDER, which allows cash value to be
withdrawn without reducing the Policy's face amount.
SPLIT DOLLAR PARTIAL WITHDRAWAL ENDORSEMENT, which provides for a one-time
withdrawal of cash value in connection with a split dollar life insurance
arrangement.
Not all riders may be available to you and riders in addition to those
listed above may be made available. You should consult your registered
representative regarding the availability of riders.
POLICY OWNER AND BENEFICIARY
The Policy Owner is named in the application but may be changed from time
to time. At the death of the Policy Owner, his or her estate will become the
Policy Owner unless a successor Policy Owner has been named. The Policy Owner's
rights (except for rights to payment of benefits) terminate at the death of the
insured.
The beneficiary is also named in the application. You may change the
beneficiary at any time before the death of the insured, unless the beneficiary
designation is irrevocable. The beneficiary has no rights under the Policy until
the death of the insured and must survive the insured in order to receive the
death proceeds. If no named beneficiary survives the insured, we pay proceeds to
the Policy Owner.
A change of Policy Owner or beneficiary is subject to all payments made and
actions taken by us under the Policy before we receive a signed change form. You
can contact your registered representative or our Administrative Office for the
procedure to follow.
You may assign (transfer) your rights in the Policy to someone else. An
absolute assignment of the Policy is a change of Policy Owner and beneficiary to
the assignee. A collateral assignment of the Policy does not change the Policy
Owner or beneficiary, but their rights will be subject to the terms of the
assignment. Assignments are subject to all payments made and actions taken by us
under the Policy before we receive a signed copy of the assignment form. We are
not responsible for determining whether or not an assignment is valid. Changing
the Policy Owner or assigning the Policy may have tax consequences. (See "Tax
Considerations" below.)
THE SEPARATE ACCOUNT
We established the Separate Account as a separate investment account on
January 24, 1985 under Missouri law. The Separate Account is the funding vehicle
for the Policies, and other General American variable life insurance policies;
these other policies impose different costs, and provide different benefits,
from the Policies. The Separate Account meets the definition of a "separate
account" under Federal securities laws, and is registered with the Securities
and Exchange Commission (the "SEC") as a unit investment trust under the
Investment Company Act of 1940. Registration with the SEC does not involve SEC
supervision of the Separate Account's management or investments. However, the
Missouri Insurance Commissioner regulates General American and the Separate
Account, which are also subject to the insurance laws and regulations where the
Policies are sold.
Although we own the assets of the Separate Account, applicable law provides
that the portion of the Separate Account assets equal to the reserves and other
liabilities of the Separate Account may not be charged with liabilities that
arise out of any other business we may conduct. We believe this means that the
assets of the Separate Account equal to the reserves and other liabilities of
the Separate Account are not available to meet the claims of our general
creditors, and may only be used to support the cash values under our variable
life insurance policies issued by the Separate Account. We may transfer to our
General Account assets which exceed the reserves and other liabilities of the
Separate Account. We will consider any possible adverse impact such a transfer
might have on the Separate Account.
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Income and realized and unrealized capital gains and losses of the Separate
Account are credited to the Separate Account without regard to any of our other
income or capital gains and losses.
INVESTMENTS OF THE SEPARATE ACCOUNT
Divisions of the Separate Account that are available in this Policy invest
in the following Eligible Funds:
The Zenith State Street Research Money Market Series (formerly, the Back
Bay Advisors Money Market Series). Its investment objective is a high level of
current income consistent with preservation of capital. An investment in the
Money Market Series is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Money Market
Series seeks to maintain a net asset value of $100 per share, it is possible to
lose money by investing in the Money Market Series. During extended periods of
low interest rates, the yields of the Division investing in the Money Market
Series may become extremely low and possibly negative.
The Zenith State Street Research Bond Income Series (formerly the Back Bay
Advisors Bond Income Series). Its investment objective is a competitive total
return primarily from investing in fixed-income securities.
The Zenith Harris Oakmark Focused Value Series (formerly, the Goldman Sachs
Midcap Value Series). Its investment objective is long-term capital
appreciation.
The Zenith Davis Venture Value Series. Its investment objective is growth
of capital.
The Zenith Alger Equity Growth Series. Its investment objective is
long-term capital appreciation.
The Metropolitan Janus Mid Cap Portfolio. Its investment objective is
long-term growth of capital.
The Metropolitan Russell 2000 Index Portfolio. Its investment objective is
to equal the return of the Russell 2000 Index.
The Metropolitan Putnam International Stock Portfolio. Its investment
objective is long-term growth of capital.
The Metropolitan MetLife Stock Index Portfolio. Its investment objective is
to equal the performance of the Standard & Poor's 500 Composite Stock Price
Index.
The Metropolitan MetLife Mid Cap Stock Index Portfolio. Its investment
objective is to equal the performance of the Standard & Poor's MidCap 400
Composite Stock Index.
The Metropolitan Morgan Stanley EAFE Index Portfolio. Its investment
objective is to equal the performance of the MSCI EAFE Index.
The Metropolitan Lehman Brothers Aggregate Bond Index Portfolio. Its
investment objective is to equal the performance of the Lehman Brothers
Aggregate Bond Index.
The Metropolitan State Street Research Aurora Portfolio. Its investment
objective is high total return, consisting principally of capital appreciation.
The Metropolitan Janus Growth Portfolio. Its investment objective is
long-term growth of capital.
The Metropolitan Neuberger Berman Partners Mid Cap Value Portfolio. Its
investment objective is capital growth.
The Metropolitan T. Rowe Price Large Cap Growth Portfolio. Its investment
objective is long-term growth of capital, and, secondarily, dividend income.
The Metropolitan Harris Oakmark Large Cap Value Portfolio. Its investment
objective is long-term capital appreciation.
The Metropolitan T. Rowe Price Small Cap Growth Portfolio. Its investment
objective is long-term capital growth.
The Metropolitan State Street Research Large Cap Value Portfolio. Its
investment objective is long-term growth of capital.
The Metropolitan State Street Research Diversified Portfolio. Its
investment objective is high total return while attempting to limit investment
risk and preserve capital.
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The Met Investors MFS Mid Cap Growth Portfolio. Its investment objective is
long-term growth of capital.
The Met Investors PIMCO Innovation Portfolio. Its investment objective is
to seek capital appreciation; no consideration is given to income.
The Met Investors Met/AIM Mid Cap Core Equity Portfolio. Its investment
objective is long-term growth of capital.
The Met Investors Met/AIM Small Cap Growth Portfolio. Its investment
objective is long-term growth of capital.
The Met Investors PIMCO Total Return Portfolio. Its investment objective is
to seek maximum total return, consistent with the preservation of capital and
prudent investment management.
The Met Investors State Street Research Concentrated International
Portfolio. Its investment objective is long-term growth of capital.
The Fidelity VIP Equity-Income Portfolio. It seeks reasonable income. The
fund will also consider the potential for capital appreciation. The fund seeks a
yield which exceeds the composite yield on the securities comprising the S&P
500.
The Fidelity VIP Growth Portfolio. Its investment objective is to achieve
capital appreciation.
The Fidelity VIP Overseas Portfolio. It seeks long-term growth of capital.
Foreign markets, particularly emerging markets, can be more volatile than the
U.S. market due to increased risks of adverse issuer, political, regulatory,
market or economic developments and can perform differently than the U.S.
market.
The Fidelity VIP High Income Portfolio. It seeks a high level of current
income while also considering growth of capital. Lower-quality debt securities
(those of less than investment-grade quality) can be more volatile due to
increased sensitivity to adverse issuer, political, regulatory, market or
economic developments.
The Fidelity VIP II Asset Manager Portfolio. It seeks high total return
with reduced risk over the long-term by allocating its assets among stocks,
bonds and short-term instruments.
The American Funds Insurance Series American Funds Growth Fund. Its
investment objective is to seek capital appreciation through stocks.
The American Funds Insurance Series American Funds Growth-Income Fund. Its
investment objective is to seek capital appreciation and income.
The American Funds Insurance Series American Funds Global Small
Capitalization Fund. Its investment objective is to seek capital appreciation
through stocks.
The SEI VP Large Cap Value Fund. Its investment objective is to provide
long-term growth of capital and income by investing in large cap
income-producing U.S. common stocks.
The SEI VP Large Cap Growth Fund. Its investment objective is to provide
capital appreciation by investing in large cap U.S. common stocks.
The SEI VP Small Cap Value Fund. Its investment objective is to provide
capital appreciation by investing in common stocks of smaller U.S. companies.
The SEI VP Small Cap Growth Fund. Its investment objective is to provide
long-term capital appreciation by investing in common stocks of smaller
companies.
The SEI VP International Equity Fund. Its investment objective is to
provide capital appreciation by investing in equity securities of foreign
companies.
The SEI VP Emerging Markets Equity Fund. Its investment objective is to
provide capital appreciation by investing in equity securities of emerging
markets companies.
The SEI VP Core Fixed Income Fund. Its investment objective is to provide
current income and preservation of capital by investing in investment grade U.S.
fixed income securities.
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The SEI VP High Yield Bond Fund. Its investment objective is to provide
total return by investing in high yield, high risk securities rated below
investment grade.
The SEI VP Emerging Markets Debt Fund. Its investment objective is to
provide total return by investing in U.S. dollar denominated debt securities of
emerging markets issuers.
The New England Zenith Fund, the Metropolitan Series Fund, Inc. and the Met
Investors Series Trust are open-end management investment companies, more
commonly known as mutual funds. These funds are available as investment vehicles
for separate investment accounts of MetLife, General American, and other life
insurance companies.
Fidelity VIP, Fidelity VIP II, the American Funds Insurance Series and the
SEI Insurance Products Trust are mutual funds that serve as the investment
vehicles for variable life insurance and variable annuity separate accounts of
various insurance companies.
The Separate Account purchases and sells Eligible Fund shares at their net
asset value (without a deduction for sales load) determined as of the close of
regular trading on the New York Stock Exchange on each day when the exchange is
open for trading.
The Eligible Funds' investment objectives may not be met. More about the
Eligible Funds, including their investments, expenses, and risks, is in the
attached Eligible Fund prospectuses and the Eligible Funds' Statements of
Additional Information.
The investment objectives and policies of certain Eligible Funds are
similar to the investment objectives and policies of other funds that may be
managed by the same sub-adviser. The investment results of the Eligible Funds
may be higher or lower than the results of these funds. There is no assurance,
and no representation is made, that the investment results of any of the
Eligible Funds will be comparable to the investment results of any other fund.
INVESTMENT MANAGEMENT
MetLife Advisers, LLC (formerly New England Investment Management, LLC) is
the investment adviser for the series of the New England Zenith Fund. The chart
below shows the sub-adviser for each series of the New England Zenith Fund.
MetLife Advisers, which is an affiliate of NELICO, and each of the sub-advisers
are registered with the SEC as investment advisers under the Investment Advisers
Act of 1940.
<Table>
<Caption>
SERIES SUB-ADVISER
------ -----------
State Street Research Money Market State Street Research and Management Company
State Street Research Bond Income State Street Research and Management Company
Harris Oakmark Focused Value Harris Associates L.P.
Davis Venture Value Davis Selected Advisers, L.P.*
Alger Equity Growth Fred Alger Management, Inc.
</Table>
- ------------
* Davis Selected may also delegate any of its responsibilities to Davis Selected
Advisers--NY, Inc., a wholly-owned subsidiary.
In the case of the State Street Research Money Market Series, the State
Street Research Bond Income Series and the Harris Oakmark Focused Value Series,
MetLife Advisers became the adviser on May 1, 1995. The State Street Research
Money Market Series' and State Street Research Bond Income Series' sub-adviser
was Back Bay Advisors, L.P. until July 1, 2001. At that time State Street
Research and Management Company became the sub-adviser. The Harris Oakmark
Focused Value Series' sub-adviser was Loomis, Sayles and Company, L.P. until May
1, 1998, when Goldman Sachs Asset Management, a separate operating division of
Goldman Sachs & Co., became the sub-adviser. Harris Associates L.P. became the
sub-adviser on May 1, 2000. For more information about the Series' advisory
agreements, see the New England Zenith Fund prospectus attached at the end of
this prospectus and the New England Zenith Fund's Statement of Additional
Information.
MetLife Advisers became the investment manager for the Metropolitan Series
Fund Portfolios on May 1, 2001. Prior to that time, MetLife was the investment
manager. For more information regarding the investment manager and
A-37
sub-investment managers of the Metropolitan Series Fund Portfolios, see the
Metropolitan Series Fund prospectus attached at the end of this prospectus and
its Statement of Additional Information. The following chart shows the
sub-investment manager for each portfolio of the Metropolitan Series Fund.
<Table>
<Caption>
PORTFOLIO SUB-INVESTMENT MANAGER
--------- ----------------------
Janus Mid Cap Janus Capital Corporation
Russell 2000 Index Metropolitan Life Insurance Company*
Putnam International Stock Putnam Investment Management, LLC
MetLife Stock Index Metropolitan Life Insurance Company*
MetLife Mid Cap Stock Index Metropolitan Life Insurance Company*
Morgan Stanley EAFE Index Metropolitan Life Insurance Company*
Lehman Brothers Aggregate Bond Index Metropolitan Life Insurance Company*
State Street Research Aurora State Street Research and Management Company
Janus Growth Janus Capital Corporation
Neuberger Berman Partners Mid Cap Value Neuberger Berman Management Inc.
T. Rowe Price Large Cap Growth T. Rowe Price Associates, Inc.
Harris Oakmark Large Cap Value Harris Associates, L.P.
T. Rowe Price Small Cap Growth T. Rowe Price Associates, Inc.
State Street Research Large Cap Value State Street Research and Management Company
State Street Research Diversified State Street Research and Management Company
</Table>
- ------------
* Metropolitan Life Insurance Company became the sub-investment manager on May
1, 2001.
Met Investors Advisory LLC (formerly known as Met Investors Advisory Corp.)
is an indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
and is the Manager for the Portfolios of the Met Investors Series Trust. For
more information regarding the Manager and Advisers of The Met Investors Series
Trust, see the Met Investors Series Trust prospectuses attached at the end of
this prospectus and their Statement of Additional Information. The following
chart shows the Adviser for each portfolio of the Met Investors Series Trust.
<Table>
<Caption>
PORTFOLIO ADVISER
--------- -------
MFS Mid Cap Growth Massachusetts Financial Services Company
PIMCO Innovation PIMCO Equity Advisors
Met/AIM Mid Cap Core Equity AIM Capital Management, Inc.
Met/AIM Small Cap Growth AIM Capital Management, Inc.
PIMCO Total Return Pacific Investment Management Company LLC
State Street Research Concentrated State Street Research and Management Company
International
</Table>
Fidelity Management & Research Company ("FMR") is the investment adviser
for VIP and VIP II. For more information regarding the VIP Equity-Income, VIP
Growth, VIP Overseas, VIP High Income and VIP II Asset Manager Portfolios and
FMR, see the VIP and VIP II prospectuses attached at the end of this prospectus
and their Statements of Additional Information.
Capital Research and Management Company ("Capital Research") is the
investment adviser for the American Funds Insurance Series. For more information
regarding the American Funds Growth Fund, the American Funds Growth-Income Fund
and the American Funds Global Small Capitalization Fund, see the American Funds
Insurance Series prospectuses attached at the end of this prospectus and their
Statement of Additional Information.
SEI Investments Management Corporation is the investment adviser for the
SEI Insurance Products Trust. For more information regarding the VP Large Cap
Value Fund, the VP Large Cap Growth Fund, the VP Small Cap Value Fund, the VP
Small Cap Growth Fund, the VP International Equity Fund, the VP Emerging Markets
Equity Fund, the VP Core Fixed Income Fund, the VP High Yield Bond Fund and the
VP Emerging Markets Debt Fund, see the SEI Insurance Products Trust prospectuses
attached at the end of this prospectus and their Statements of Additional
Information.
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SUBSTITUTION OF INVESTMENTS
If investment in the Eligible Funds or a particular Fund is no longer
possible, in our judgment becomes inappropriate for the purposes of the
Policies, or for any other reason in our sole discretion, we may substitute
another Eligible Fund or Funds without your consent. The substituted fund may
have different fees and expenses. Substitution may be made with respect to
existing investments or the investment of future premium payments, or both.
However, we will not make such substitution without any necessary approval of
the Securities and Exchange Commission. Furthermore, we may make available or
close Divisions to allocation of premium payments or cash value, or both, for
some or all classes of Policies, at any time in our sole discretion.
OTHER FUNDS AND SHARE CLASSES
The Eligible Funds offer various classes of shares, each of which has a
different level of expenses. The attached fund prospectuses may provide
information for funds or share classes that are not available through the
Policy. When you consult the attached prospectuses, be careful to refer to only
the information regarding the Eligible Funds the share classes of the Eligible
Funds that are available through the Policy. For the New England Zenith Fund and
Met Investors Series Trust we offer Class A shares only, for the Metropolitan
Series Fund we offer Class A and Class E shares, for Fidelity VIP and Fidelity
VIP II we offer Initial Class shares only, for the American Funds Insurance
Series we offer Class 2 shares only, and for the SEI Insurance Products Trust we
offer Class A shares only.
THE GENERAL ACCOUNT
You may allocate net premiums and transfer cash value to the General
Account. Because of exemptive and exclusionary provisions in the Federal
securities laws, interests in the General Account are not registered under the
Securities Act of 1933. The General Account is not registered as an investment
company under the Investment Company Act of 1940. Therefore, neither the General
Account nor any interests therein are generally subject to the provisions of
these Acts, and the SEC does not review General Account disclosure. This
disclosure may, however, be subject to certain provisions of the Federal
securities laws on the accuracy and completeness of prospectuses.
GENERAL DESCRIPTION
The General Account includes all of our assets except assets in the
Separate Account or in our other separate accounts. We decide how to invest our
General Account assets. General Account allocations do not share in the actual
investment experience of the General Account. Instead, we guarantee that the
General Account will credit interest at an annual effective rate of at least 3%.
We may or may not credit interest at a higher rate. We declare the current
interest rate for the General Account periodically. The General Account earns
interest daily.
VALUES AND BENEFITS
Cash value in the General Account increases from net premiums allocated and
transfers to the General Account and General Account interest, and decreases
from loans, partial withdrawals made from the General Account, charges and
transfers from the General Account. We deduct charges from the General Account
and the Policy's Divisions in proportion to the amount of cash value in each.
(See "Monthly Deduction from Cash Value".) A Policy's total cash value includes
cash value in the Separate Account, the General Account, and any cash value held
in the Loan Account due to a Policy loan.
Cash value in the General Account is included in the calculation of the
Policy's death benefit in the same manner as the cash value in the Separate
Account. (See "Death Benefit".)
POLICY TRANSACTIONS
Except as described below, the General Account has the same rights and
limitations regarding premium allocations, transfers, loans, surrenders and
partial withdrawals as the Separate Account. (See "Other Policy Features".) The
following special rules apply to the General Account.
A-39
After the Right to Examine Policy period, a portion of the cash value may
be withdrawn from the General Account or transferred from the General Account to
the Separate Account. The amount of any partial withdrawal (net of applicable
Surrender Charges) or any transfer must be at least $500, unless the balance
remaining would be less than $100, in which case you may withdraw or transfer
the entire General Account cash value. No amount may be withdrawn from the
General Account that would result in there being insufficient cash value to meet
any Surrender Charges that would be payable immediately following the withdrawal
upon the surrender of the remaining cash value in the Policy. The total amount
of transfers and withdrawals in a Policy year may not exceed a Maximum Amount
equal to the greater of (a) 25% of the Policy's cash surrender value in the
General Account at the beginning of the Policy year, or (b) the previous Policy
year's Maximum Amount (not to exceed the total cash surrender value of the
Policy).
Transfers and premium allocations to, and withdrawals from, the General
Account are limited by the Maximum Allocation Percent and the Maximum Withdrawal
Percent Limit set forth in your Policy and in effect at the time a transfer
request is made.
There is no transaction charge for the first twelve partial withdrawals or
twelve transfers in a Policy year. We reserve the right to limit partial
withdrawals and transfers to twelve each in a Policy year and to impose a charge
of $25 for each partial withdrawal or transfer in excess of twelve in a Policy
year. We may revoke or modify the privilege of transferring amounts to or from
the General Account at any time. Partial withdrawals will result in the
imposition of any applicable Surrender Charges.
Unless you request otherwise, a Policy loan reduces the Policy's cash value
in the Divisions and the General Account proportionately. We allocate all loan
repayments in the same proportion that the cash value in each Loan Sub-Account
bears to the total value of the Loan Account. The amount transferred from the
Policy's Divisions and the General Account as a result of a loan earns interest
at an effective rate of at least 3% per year, which we credit to the Policy's
cash value in the Divisions and the General Account in proportion to the
Policy's cash value in each on the day it is credited.
Unless you request otherwise, we take partial withdrawals from the Policy's
Divisions and the General Account in the same proportion that the cash value in
each account bears to the Policy's total unloaned cash value. If current
restrictions on the General Account will not permit this allocation, we will ask
you for an acceptable allocation.
We can delay transfers, surrenders, withdrawals and Policy loans from the
General Account for up to six months (to the extent allowed by state insurance
law). We will not delay loans to pay premiums on policies issued by us.
DISTRIBUTION OF THE POLICIES
The Policy will be sold by individuals who, in addition to being licensed
as life insurance agents for General American, are also registered
representatives of broker-dealers who have entered into written sales agreements
with General American Distributors, Inc. ("General American Distributors"), 700
Market Street, St. Louis, Missouri, 63101. General American Distributors, a
Missouri corporation organized in 2000 and a wholly-owned subsidiary of
GenAmerica Financial Corporation, serves as the principal underwriter for the
Policies under a Distribution Agreement with General American. General American
Distributors is registered with the SEC under the Securities Exchange Act of
1934 as a broker-dealer and is a member of the National Association of
Securities Dealers, Inc. More information about General American Distributors is
available at http://www.nasdr.com or by calling 1-800-289-9999. You also can
obtain an investor brochure from NASD Regulation describing its Public
Disclosure Program. As principal underwriter for the Policies, General American
Distributors may receive a fee of up to 2% of premium for distribution of the
Policies.
General American Distributors has entered into a selling agreement with an
affiliated broker-dealer under which selling agents will receive commissions
based on commission schedules and rules that vary based on the agent's contract.
Under contracts that are based on agent level commissions, agent first year
commissions are 50% of Target Premium and 2.25% of excess premium paid in year
1. In years 2-10, the agent commissions range from 1% to 1.75% of premium
depending on the agent's contract type. In years 11 and later there is a service
fee from 1.50% to 2% of premium depending on the agent's contract type. An
additional service fee determined as a percentage of
A-40
the Policy's unloaned cash value may also be paid. The maximum percentage paid
varies by Policy year decreasing from 0.20% to 0.12% of average monthly unloaned
assets. For certain contracts there is no cash value based fee.
In addition, General American, the General Agent, and the selling agent may
enter into agreements that compensate the selling agent for basic expenses,
renewal overrides, and incentive bonuses. Reductions may be possible under
certain circumstances (see "Group, Sponsored and Other Special Arrangements".)
In addition to commissions, General American may also pay the following sales
expenses: General Agent and agency manager compensation; agent training
allowances; deferred compensation and insurance benefits of agents, General
Agents and agency managers; advertising expenses and other expenses of
distributing the Policies. General Agents' compensation may be in part based on
the level of productivity of agents in their agencies. Agents receive less
compensation for the sale of Policies that provide a significant portion of
death benefit coverage through the use of term riders.
General American Distributors also enters into selling agreements with
unaffiliated broker-dealers, the terms of which may, under certain
circumstances, also apply to affiliated broker-dealers. Under these agreements,
which are based on gross dealer concessions payable to the broker-dealer, first
year compensation ranges from 80% to 95% of Target Premium and from 3% to 4% of
excess premium paid in year 1, depending on contract type. In years 2-10, the
compensation is 2% of premium. In years 11 and later there is a service fee from
1% to 2% of premium depending on the contract type. An additional service fee
determined as a percentage of the Policy's unloaned cash value may also be paid.
The maximum percentage paid varies by Policy year decreasing from 0.20% to 0.10%
of average monthly unloaned assets. For certain contracts there is no cash value
based fee. The broker-dealer may also receive additional compensation, which in
some cases will vary based on the productivity of the registered
representatives. General American, General American Distributors and the
broker-dealer may enter into an agreement that compensates the broker-dealer for
expenses associated with the distribution of the policies. The compensation
payable to the registered representatives and General Agents will be determined
by their agreement with the broker-dealer. Reductions may be possible under
certain circumstances (see "Group, Sponsored and Other Special Arrangements".)
Broker-dealers receive less compensation for the sale of Policies that provide a
significant portion of death benefit coverage through the use of term riders.
An affiliate of General American Distributors may receive 12b-1 fees from
the American Funds Growth Fund, the American Funds Growth-Income Fund and the
American Funds Global Small Capitalization Fund.
Registered representatives of an affiliated broker-dealer who are also
agents of General American are eligible for various cash benefits, such as
bonuses, insurance benefits and financing arrangements, and non-cash
compensation programs that General American offers, such as conferences, trips,
prizes, and awards. Other payments may be made for other services that do not
directly involve the sale of the Policies. These services may include the
recruitment and training of personnel, production of promotional literature, and
similar services.
The General Agent commission schedules and rules differ for different types
of agency contracts.
We intend to recoup commissions and other sales expenses through fees and
charges imposed under the Policy. Commissions paid on the Policy, including
other incentives or payments, are not charged directly to the Policy owners or
the Separate Account.
We offer the Policies to the public on a continuous basis. We anticipate
continuing to offer the Policies, but reserve the right to discontinue the
offering.
LIMITS TO GENERAL AMERICAN'S RIGHT TO CHALLENGE THE POLICY
Generally, we can challenge the validity of your Policy or a rider during
the insured's lifetime for two years (or less, if required by state law) from
the date of issue, based on misrepresentations made in the application. We can
challenge the portion of the death benefit resulting from an underwritten
premium payment for two years during the insured's lifetime from receipt of the
premium payment. However, if the insured dies within two years of the date of
issue, we can challenge all or part of the Policy at any time based on
misrepresentations in the application. We can challenge an increase in face
amount, with regard to material misstatements concerning such increase, for two
years during the insured's lifetime from its effective date.
A-41
MISSTATEMENT OF AGE OR SEX
If the application misstates the insured's age or sex, the Policy's death
benefit is the amount that the most recent Monthly Deduction which was made
would provide, based on the insured's correct age and, if the Policy is
sex-based, correct sex.
SUICIDE
If the insured, while sane or insane, commits suicide within two years (or
less, if required by state law) from the date of issue, the death benefit is
limited to premiums paid, less any outstanding loan and loan interest to the
date of death and partial withdrawals. If the insured, while sane or insane,
commits suicide within two years (or less, if required by state law) after the
effective date of an increase in face amount, the death benefit for such
increase will be limited to the Monthly Deductions for the increase. (Where
required by state law, we determine the death benefit under this provision by
using the greater of: the reserve of the insurance which is subject to the
provision; and the amounts used to purchase the insurance which is subject to
the provision.)
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income
tax considerations associated with the Policy and does not purport to be
complete or to cover all tax situations. This discussion is not intended as tax
advice. Counsel or other competent tax advisers should be consulted for more
complete information. This discussion is based upon our understanding of the
present Federal income tax laws. No representation is made as to the likelihood
of continuation of the present Federal income tax laws or as to how they may be
interpreted by the Internal Revenue Service.
TAX STATUS OF THE POLICY
In order to qualify as a life insurance contract for Federal income tax
purposes and to receive the tax treatment normally accorded life insurance
contracts under Federal tax law, a Policy must satisfy certain requirements
which are set forth in the Internal Revenue Code. Guidance as to how these
requirements are to be applied is limited. Nevertheless, we believe that the
Policies should satisfy the applicable requirements. There is less guidance,
however, with respect to Policies issued on a substandard or guaranteed issue
basis and Policies with term riders added, and it is not clear whether such
Policies will in all cases satisfy the applicable requirements. We may take
appropriate steps to bring the Policy into compliance with applicable
requirements, and we reserve the right to restrict Policy transactions in order
to do so.
In certain circumstances, owners of variable life insurance contracts have
been considered for Federal income tax purposes to be the owners of the assets
of the variable account supporting their contracts, due to their ability to
exercise investment control over those assets. Where this is the case, the
contract owners have been currently taxed on income and gains attributable to
variable account assets. There is little guidance in this area, and some
features of the Policies, such as the flexibility of a Policy Owner to allocate
premiums and cash values, have not been explicitly addressed in published
rulings. While we believe that the Policies do not give Policy Owners investment
control over Separate Account assets, we reserve the right to modify the
Policies as necessary to prevent a Policy Owner from being treated as the owner
of the Separate Account assets supporting the Policy.
In addition, the Code requires that the investments of the Separate Account
be "adequately diversified" in order for the Policies to be treated as life
insurance contracts for Federal income tax purposes. It is intended that the
Separate Account, through the Eligible Funds, will satisfy these diversification
requirements.
The following discussion assumes that the Policy will qualify as a life
insurance contract for Federal income tax purposes.
A-42
TAX TREATMENT OF POLICY BENEFITS
IN GENERAL. We believe that the death benefit under a Policy should be
excludible from the gross income of the beneficiary. Federal, state and local
transfer, and other tax consequences of ownership or receipt of Policy proceeds
depend on the circumstances of each Policy Owner or beneficiary. A tax adviser
should be consulted on these consequences.
Generally, the Policy Owner will not be deemed to be in constructive
receipt of the Policy cash value until there is a distribution or a deemed
distribution. When distributions from a Policy occur, or when loans are taken
from or secured by a Policy, the tax consequences depend on whether the Policy
is classified as a "Modified Endowment Contract."
MODIFIED ENDOWMENT CONTRACTS. Under the Internal Revenue Code, certain
life insurance contracts are classified as "Modified Endowment Contracts," with
less favorable income tax treatment than other life insurance contracts. In
general a Policy will be classified as a Modified Endowment Contract if the
amount of premiums paid into the Policy causes the Policy to fail the "7-pay
test." A Policy will fail the 7-pay test if at any time in the first seven
Policy years, the amount paid into the Policy exceeds the sum of the level
premiums that would have been paid at that point under a Policy that provided
for paid-up future benefits after the payment of seven level annual payments.
If there is a reduction in the benefits under the Policy during the first
seven Policy years, for example, as a result of a partial withdrawal, the 7-pay
test will have to be reapplied as if the Policy had originally been issued at
the reduced face amount. If there is a "material change" in the Policy's
benefits or other terms, even after the first seven Policy years, the Policy may
have to be retested as if it were a newly issued Policy. A material change can
occur, for example, when there is an increase in the death benefit which is due
to the payment of an unnecessary premium. Unnecessary premiums are premiums paid
into the Policy which are not needed in order to provide a death benefit equal
to the lowest death benefit that was payable in the first seven Policy years. To
prevent your Policy from becoming a Modified Endowment Contract, it may be
necessary to limit premium payments or to limit reductions in benefits. A
current or prospective Policy Owner should consult a tax adviser to determine
whether a Policy transaction will cause the Policy to be classified as a
Modified Endowment Contract.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM MODIFIED ENDOWMENT
CONTRACTS. Policies classified as Modified Endowment Contracts are subject to
the following tax rules:
(1) All distributions other than death benefits, including
distributions upon surrender and withdrawals, from a Modified Endowment
Contract will be treated first as distributions of gain taxable as ordinary
income and as tax-free recovery of the Policy Owner's investment in the
Policy only after all gain has been distributed.
(2) Loans taken from or secured by a Policy classified as a Modified
Endowment Contract are treated as distributions and taxed accordingly.
(3) A 10 percent additional income tax is imposed on the amount
subject to tax except where the distribution or loan is made when the
Policy Owner has attained age 59 1/2 or is disabled, or where the
distribution is part of a series of substantially equal periodic payments
for the life (or life expectancy) of the Policy Owner or the joint lives
(or joint life expectancies) of the Policy Owner and the Policy Owner's
beneficiary or designated beneficiary.
If a Policy becomes a Modified Endowment Contract, distributions will be
taxed as distributions from a Modified Endowment Contract. In addition,
distributions from a Policy within two years before it becomes a Modified
Endowment Contract will be taxed in this manner. This means that a distribution
made from a Policy that is not a Modified Endowment Contract could later become
taxable as a distribution from a Modified Endowment Contract. The IRS has
promulgated a procedure for the correction of inadvertent Modified Endowment
Contracts.
DISTRIBUTIONS OTHER THAN DEATH BENEFITS FROM POLICIES THAT ARE NOT MODIFIED
ENDOWMENT CONTRACTS. Distributions other than death benefits from a Policy that
is not classified as a Modified Endowment Contract are generally treated first
as a recovery of the Policy Owner's investment in the Policy and only after the
recovery of all investment in the Policy as taxable income. However, certain
distributions which must be made in order to enable
A-43
the Policy to continue to qualify as a life insurance contract for Federal
income tax purposes if Policy benefits are reduced during the first 15 Policy
years may be treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Policy that is not a Modified Endowment Contract
are generally not treated as distributions. However, the tax consequences
associated with Policy loans that are outstanding after the first ten Policy
years are less clear and a tax adviser should be consulted about such loans.
Finally, neither distributions from nor loans from or secured by a Policy
that is not a Modified Endowment Contract are subject to the 10 percent
additional income tax.
INVESTMENT IN THE POLICY. Your investment in the Policy is generally your
aggregate premiums. When a distribution is taken from the Policy, your
investment in the Policy is reduced by the amount of the distribution that is
tax-free.
POLICY LOANS. In general, interest on a Policy loan will not be
deductible. If a Policy loan is outstanding when a Policy is canceled or lapses,
the amount of the outstanding indebtedness will be added to the amount
distributed and will be taxed accordingly. A loan may also be taxed when a
Policy is exchanged. Before taking out a Policy loan, you should consult a tax
adviser as to the tax consequences.
MULTIPLE POLICIES. All Modified Endowment Contracts that are issued by
General American (or its affiliates) to the same Policy Owner during any
calendar year are treated as one Modified Endowment Contract for purposes of
determining the amount includible in the Policy Owner's income when a taxable
distribution occurs.
WITHHOLDING. To the extent that Policy distributions are taxable, they are
generally subject to withholding for the recipient's federal income tax
liability. Recipients can generally elect, however, not to have tax withheld
from distributions.
ACCELERATION OF DEATH BENEFIT RIDER. We believe that payments received
under the Acceleration of Death Benefit Rider should be fully excludable from
the gross income of the beneficiary except in certain business contexts.
However, you should consult a qualified tax adviser about the consequences of
adding this rider to a Policy or requesting payment under this rider.
OTHER POLICY OWNER TAX MATTERS. The transfer of the Policy or designation
of a beneficiary may have Federal, state, and/or local transfer and inheritance
tax consequences, including the imposition of gift, estate, and
generation-skipping transfer taxes. For example, the transfer of the Policy or
the payment of proceeds to a person who is assigned to a generation which is two
or more generations below the generation assignment of the Policy Owner may have
generation-skipping transfer tax consequences under Federal tax law. Federal and
state estate, inheritance, transfer and other tax consequences depend on the
individual circumstances of each Policy Owner or beneficiary.
The tax consequences of continuing the Policy beyond the insured's 100th
year are unclear. You should consult a tax adviser if you intend to keep the
Policy in force beyond the insured's 100th year.
If a trustee under a pension or profit-sharing plan, or similar deferred
compensation arrangement, owns a Policy, the Federal, state and estate tax
consequences could differ. The amounts of life insurance that may be purchased
on behalf of a participant in a pension or profit-sharing plan are limited. The
current cost of insurance for the net amount at risk is treated as a "current
fringe benefit" and must be included annually in the plan participant's gross
income. We report this cost to the participant annually. If the plan participant
dies while covered by the plan and the Policy proceeds are paid to the
participant's beneficiary, then the excess of the death benefit over the cash
value is not income taxable. However, the cash value will generally be taxable
to the extent it exceeds the participant's cost basis in the Policy. Policies
owned under these types of plans may be subject to restrictions under the
Employee Retirement Income Security Act of 1974 ("ERISA"). You should consult a
qualified adviser regarding ERISA.
Department of Labor ("DOL") regulations impose requirements for participant
loans under retirement plans covered by ERISA. Plan loans must also satisfy tax
requirements to be treated as nontaxable. Plan loan requirements and provisions
may differ from the Policy loan provisions. Failure of plan loans to comply with
the requirements and provisions of the DOL regulations and of tax law may result
in adverse tax consequences and/or adverse
A-44
consequences under ERISA. Plan fiduciaries and participants should consult a
qualified adviser before requesting a loan under a Policy held in connection
with a retirement plan.
Businesses can use the Policies in various arrangements, including
nonqualified deferred compensation or salary continuance plans, split dollar
insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit
plans, retiree medical benefit plans and others. The tax consequences of such
plans may vary depending on the particular facts and circumstances. If you are
purchasing the Policy for any arrangement the value of which depends in part on
its tax consequences, you should consult a qualified tax adviser. In recent
years, moreover, Congress has adopted new rules relating to life insurance owned
by businesses. Any business contemplating the purchase of a new Policy or a
change in an existing Policy should consult a tax adviser.
NEW GUIDANCE ON SPLIT DOLLAR PLANS. The IRS has recently issued guidance
on split dollar insurance plans. A tax adviser should be consulted with respect
to this new guidance if you have purchased or are considering the purchase of a
Policy for a split dollar insurance plan. If your Policy is part of an equity
split dollar arrangement, there is a risk that some portion of the Policy cash
value may be taxed prior to any Policy distribution.
ALTERNATIVE MINIMUM TAX. There may also be an indirect tax upon the income
in the Policy or the proceeds of a Policy under the Federal corporate
alternative minimum tax, if the Policyowner is subject to that tax.
POSSIBLE TAX LAW CHANGES. Although the likelihood of legislative changes
is uncertain, there is always the possibility that the tax treatment of the
Policy could change by legislation or otherwise. Consult a tax adviser with
respect to legislative developments and their effect on the Policy.
GENERAL AMERICAN'S INCOME TAXES
Under current Federal income tax law, General American is not taxed on the
Separate Account's operations. Thus, currently we do not deduct a charge from
the Separate Account for Federal income taxes. We reserve the right to charge
the Separate Account for any future Federal income taxes we may incur.
Under current laws in several states, we may incur state and local taxes
(in addition to premium taxes). These taxes are not now significant and we are
not currently charging for them. If they increase, we may deduct charges for
such taxes.
MANAGEMENT
The directors and executive officers of General American and their
principal business experience during the past five years are:
DIRECTORS OF GENERAL AMERICAN
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME DURING PAST FIVE YEARS
---- -----------------------
James M. Benson................... Chairman, President and Chief Executive Officer of General
Metropolitan Life American since 2002, Chairman, President and Chief Executive
Insurance Company Officer of New England Life Insurance Company ("NELICO")
One Madison Avenue since 1998 and President, Individual Business of
New York, NY 10010 Metropolitan Life Insurance Company since 1999; formerly,
Director, President and Chief Operating Officer 1997-1998
of NELICO; President and Chief Executive Officer 1996-1997
of Equitable Life Assurance Society.
William E. Cornelius.............. Retired Chairman and Chief Executive Officer, Union Electric
Union Electric Company Company
P.O. Box 149
St. Louis, Missouri 63166
John C. Danforth.................. Partner, Bryan Cave (law firm). Formerly, U.S. Senator,
Bryan Cave State of Missouri
One Metropolitan Square,
Suite 3600
St. Louis, Missouri 63102
</Table>
A-45
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME DURING PAST FIVE YEARS
---- -----------------------
Arnold W. Donald.................. Chairman and Chief Executive Officer, Merisant Company
Merisant Company
1 North Brentwood,
Suite 510
Clayton, MO 63105
Jerald L. Kent.................... Formerly President and Chief Executive Officer, Charter
13351 Buckland Hall Road Communications, Inc.
St. Louis, MO 63131
Stewart G. Nagler................. Vice Chairman of Board and Chief Financial Officer, MetLife
Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010
Craig D. Schnuck.................. Chairman and Chief Executive Officer, Schnuck Markets, Inc.
Schnuck Markets, Inc.
11420 Lackland Road
P.O. Box 46928
St. Louis, MO 63146
William P. Stiritz................ Chairman, Chief Executive Officer and President, Agribrands
Agribrands International, Inc. International, Inc. Formerly Chairman, Chief Executive
9811 So. Forty Drive Officer and President, Ralston Purina Company (pet food,
St. Louis, Missouri 63124 batteries, and bread business). Chairman, Ralcorp
Holdings, Inc.
Andrew C. Taylor.................. Chief Executive Officer and President, Enterprise Rent-A-Car
Enterprise Rent-A-Car
600 Corporate Park Drive
St. Louis, Missouri 63105
Robert L. Virgil.................. Principal, Edward Jones
Edward Jones
12555 Manchester
St. Louis, Missouri
63131-3729
Lisa M. Weber..................... Executive Vice President -- Human Resources, MetLife
Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010
Virginia V. Weldon, M.D........... Director, Center for the Study of American Business,
Monsanto Company Washington University. Retired Senior Vice President, Public
800 North Lindbergh Policy, Monsanto Company
Company
St. Louis, Missouri 63167
</Table>
A-46
EXECUTIVE OFFICERS OF GENERAL AMERICAN
OTHER THAN DIRECTORS
<Table>
<Caption>
PRINCIPAL OCCUPATION(S)
NAME DURING PAST FIVE YEARS*
---- -----------------------
Richard D. Evans.................. Senior Vice President, 1/99-present. Regional Vice
President, 7/95-1/99.
Timothy J. Klopfenstein........... Chief Financial Officer, GenAmerica Financial Corp.,
1/2001-present. Vice President and CFO -- Individual Line,
6/99-12/2000. Actuarial Consultant, 6/98-5/99. Vice
President, Connecticut General Life Insurance, 1/98-5/98.
Vice President, Healthsource -- Provident Administrators,
6/95-12/97.
Donald Lambert.................... Vice President -- 10/2000-present. Vice President, GenServe,
1998-present. Regional Vice President, 1990-1998.
Leland J. Launer, Jr.............. Treasurer -- 1/2001-present. Treasurer, Metropolitan Life
Insurance Company, 2/2000-present.
Richard A. Liddy.................. Chairman, 9/2000-present. Chairman, President and CEO,
1/95-9/2000. Chairman of the Executive Committee,
5/92-9/2000. President and CEO, 5/92-1/95.
Matthew P. McCauley............... Vice President, General Counsel, and Secretary,
1/2001-present. Vice President, Associate General Counsel,
1/95-1/2001.
Daniel J. McDonald................ Senior Vice President -- 10/2000-present. Senior Vice
President -- Special Markets, 8/99-10/2000. President,
Applied InnovationMonetary Solutions, 9/96-8/2000.
Regional CEO, Lincoln Financial Group, 5/92-9/96.
Richard J. Miller................. Executive Vice President and Chief Marketing Officer,
2/2002-present. Senior Vice President -- GenAmerica Advisory
Sales, 8/2000-2/2002. President and CEO, Walnut Street
Securities, 1/97-present. General Agent, Wrenshall-Miller
Agency, 1989-1/97.
Jerome M. Mueller................. Senior Vice President -- National Marketing, 4/98-present.
Senior Vice President, Mercantile Bancorporation, 9/91-4/98.
John E. Petersen.................. Senior Vice President -- Sales, 10/2000-present. Vice
President -- Sales, 1/99-10/2000. Regional Vice President,
1/92-1/99.
William S. Slater................. Senior Vice President, 10/2000-present. Chief Executive
Officer, General American Retirement Plans Group,
9/99-present. Vice President, Retirement Plans Group,
1/99-9/2000. Executive Vice President, Genelco,
6/97-12/98. Vice President Pension Sales & Client
Services, New England Life Insurance Co., 1/95-6/97.
Bernard H. Wolzenski.............. Executive Vice President -- Individual Insurance,
10/91-present.
A. Greig Woodring................. President and Chief Executive Officer, Reinsurance Group of
America, 12/92-present.
</Table>
- ------------
* All positions listed are with General American unless otherwise indicated.
** The principal business address of Messrs. McCauley, Evans, Lambert, McDonald,
Miller, Mueller, Petersen, Slater and Wolzenski is General American Life
Insurance Company, 700 Market Street, St. Louis, Missouri 63101. The
principal business address for Mr. Woodring is 1370 Timberlake Manor Parkway,
Chesterfield, MO 63017. The principal business address for Mr. Klopfenstein
is 13045 Tesson Ferry Road, St. Louis, MO 63128. The principal business
address for Mr. Launer is Metropolitan Life Insurance Company, One Madison
Avenue, New York, NY 10010.
A-47
VOTING RIGHTS
We own Eligible Fund shares held in the Separate Account and vote those
shares at meetings of the Eligible Fund shareholders. Under Federal securities
law, you currently have the right to instruct us how to vote shares that are
attributable to your Policy.
Policy Owners who are entitled to give voting instructions and the number
of shares attributable to their Policies are determined as of the meeting record
date. If we do not receive timely instructions, we will vote shares in the same
proportion as (i) the aggregate cash value of policies giving instructions,
respectively, to vote for, against, or withhold votes on a proposition, bears to
(ii) the total cash value in that Division for all policies for which we receive
voting instructions. No voting privileges apply to the General Account or to
cash value removed from the Separate Account due to a Policy loan.
We will vote Eligible Fund shares held by our General Account (or any
unregistered separate account for which voting privileges were not extended) in
the same proportion as the total of (i) shares for which voting instructions
were received and (ii) shares that are voted in proportion to such voting
instructions.
The Eligible Funds' Boards of Trustees monitor events to identify conflicts
that may arise from the sale of Eligible Fund shares to variable life and
variable annuity separate accounts of affiliated and, if applicable,
unaffiliated insurance companies and qualified plans. Conflicts could result
from changes in state insurance law or Federal income tax law, changes in
investment management of an Eligible Fund, or differences in voting instructions
given by variable life and variable annuity contract owners and by qualified
plans, if applicable. If there is a material conflict, the Board of Trustees
will determine what action should be taken, including the removal of the
affected Divisions from the Eligible Fund(s), if necessary. If we believe any
Eligible Fund action is insufficient, we will consider taking other action to
protect Policy Owners. There could, however, be unavoidable delays or
interruptions of operations of the Separate Account that we may be unable to
remedy.
We may disregard voting instructions for changes in the investment policy,
investment adviser or principal underwriter of an Eligible Fund portfolio if
required by state insurance law, or if we (i) reasonably disapprove of the
changes and (ii) in the case of a change in investment policy or investment
adviser, make a good faith determination that the proposed change is prohibited
by state authorities or inconsistent with a Division's investment objectives. If
we do disregard voting instructions, the next annual report to Policy Owners
will include a summary of that action and the reasons for it.
RIGHTS RESERVED BY GENERAL AMERICAN
We and our affiliates may change the voting procedures described above, and
vote Eligible Fund shares without Policy Owner instructions, if the securities
laws change. We also reserve the right: (1) to add Divisions; (2) to combine
Divisions; (3) to substitute shares of a new fund for shares of an Eligible Fund
(the new fund may have different fees and expenses), to close a Division to
allocations of premium payments or cash value or both at any time in our sole
discretion, or to transfer assets to our General Account as permitted by
applicable law; (4) to operate the Separate Account as a management investment
company under the Investment Company Act of 1940 or in any other form; (5) to
deregister the Separate Account under the Investment Company Act of 1940; (6) to
combine it with other Separate Accounts; and (7) to transfer its assets to other
Separate Accounts. We will exercise these rights in accordance with applicable
law, including approval of Policy Owners if required. We will notify you if
exercise of any of these rights would result in a material change in the
Separate Account or its investments.
RESTRICTIONS ON FINANCIAL TRANSACTIONS
If mandated under applicable law, we may be required to reject a premium
payment. We may also be required to block a Policy Owner's account and thereby
refuse to pay any request for transfers, withdrawals, surrenders, loans, or
death benefits, until instructions are received from the appropriate regulator.
A-48
TOLL-FREE NUMBERS
For information about historical values of the Separate Account Divisions,
for Division transfers, premium reallocations, or Statements of Additional
Information for the Eligible Funds, and for current information about your
Policy values, to change or update Policy information such as your address,
billing mode, beneficiary or ownership, or for information about other Policy
transactions, call 1-800-638-9294.
REPORTS
We will send you an annual statement showing your Policy's death benefit,
cash value and any outstanding Policy loan principal. We will also confirm
Policy loans, Division transfers, lapses, surrenders and other Policy
transactions when they occur.
You will be sent semiannual reports containing the financial statements of
the Separate Account and the Eligible Funds.
ADVERTISING PRACTICES
Professional organizations may endorse the Policies. We may use such
endorsements in Policy sales material. We may pay the professional organization
for the use of its customer or mailing lists to distribute Policy promotional
materials. An endorsement by a third party does not predict the future
performance of the Policies.
Articles discussing the Separate Account's investment performance, rankings
and other characteristics may appear in publications. Some or all of these
publishers or ranking services (including, but not limited to, Lipper Analytical
Services, Inc. and Morningstar, Inc.) may publish their own rankings or
performance reviews of variable contract separate accounts, including the
Separate Account. We may use references to, or reprints of such articles or
rankings as sales material and may include rankings that indicate the names of
other variable contract separate accounts and their investment experience. We
may also use "unit values" to provide information about the Separate Account's
investment performance in this prospectus, marketing materials, and historical
illustrations.
Publications may use articles and releases, developed by General American,
the Eligible Funds and other parties, about the Separate Account or the Eligible
Funds. We may use references to or reprints of such articles in sales material
for the Policies or the Separate Account. Such literature may refer to personnel
of the advisers, who have portfolio management responsibility, and their
investment style, and include excerpts from media articles.
We are a member of the Insurance Marketplace Standards Association
("IMSA"), and may include the IMSA logo and information about IMSA membership in
our advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and service for individually
sold life insurance and annuities.
Policy sales material may refer to historical, current and prospective
economic trends. In addition, sales material may discuss topics of general
investor interest for the benefit of registered representatives and prospective
Policy Owners. These materials may include, but are not limited to, discussions
of college planning, retirement planning, reasons for investing and historical
examples of the investment performance of various classes of securities,
securities markets and indices.
LEGAL MATTERS
Legal matters in connection with the Policies described in this prospectus
have been passed on by Mathew P. McCauley, Vice President, General Counsel and
Secretary of General American. Sutherland Asbill & Brennan LLP, of Washington,
D.C., has provided advice on certain matters relating to federal securities
laws.
REGISTRATION STATEMENT
This prospectus omits certain information contained in the Registration
Statement which has been filed with the SEC. Copies of such additional
information may be obtained from the SEC upon payment of the prescribed fee.
A-49
LEGAL PROCEEDINGS
Various litigation, claims, and assessments against General American have
arisen in the course of its business, including, without limitation, matters
relating to its activities as an insurer, employer, investor and taxpayer. In
addition, state insurance regulatory authorities and other Federal and state
authorities regularly make inquiries and conduct investigations concerning
General American's compliance with applicable insurance and other laws and
regulations. However, there are no pending legal proceedings to which the
Separate Account is a party or to which the assets of the Separate Account are
subject, and General American is not a party to any pending legal proceeding
that it considers to be material with respect to Policy Owners by reason of the
nature of the claim or the amount thereof.
General American has received and responded to subpoenas for documents and
other information from the office of the U.S. Attorney for the Eastern District
of Missouri with respect to certain administrative services provided by its
former Medicare Unit during the period January 1, 1988 through December 31,
1998, which services ended and which unit was disbanded prior to MetLife's
acquisition of General American. The subpoenas were issued as part of the
Government's criminal investigation alleging that General American's former
Medicare Unit engaged in improper billing and claims payment practices. The
Government is also conducting a civil investigation under the Federal False
Claims Act. General American is cooperating fully with the Government's
investigations. In March 2002, General American and the Government reached an
agreement in principle to resolve all issues through a civil settlement. The
agreement is subject to approvals and there can be no assurance that it will be
approved. On April 11, 2002, it was announced that General American will take a
$48 million after-tax charge to cover costs associated with the civil
settlement. (See Notes to Financial Statements).
EXPERTS
The consolidated financial statements as of and for the years ended
December 31, 2000 and December 31, 2001 of the Company included in this
Prospectus and in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph that discusses the Company's change in basis of accounting, as of
January 1, 2000, as a result of a business combination accounted for as a
purchase), and have been included in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of the Separate Account as of December 31, 2001,
and for each of the periods in the two-year period ended December 31, 2001,
included in this Prospectus and in the registration statement have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of the Company for the year ended
December 31, 1999, and the statement of operations and changes in net assets of
the Separate Account for the year ended December 31, 1999, have been included in
this Prospectus in reliance on the reports of KPMG LLP, independent certified
public accountants, and on the authority of said firm as experts in accounting
and auditing.
Actuarial matters included in this Prospectus have been examined by James
J. Reilly, F.S.A., M.A.A.A., Vice President and Actuary of Metropolitan Life
Insurance Company, a General American affiliate, as stated in the opinion filed
as an exhibit to the registration statement.
A-50
APPENDIX A
ILLUSTRATIONS OF DEATH BENEFITS, CASH VALUES,
CASH SURRENDER VALUES AND ACCUMULATED PREMIUMS
The tables in Appendix A illustrate the way the Policies work. They show
how the death benefit, cash surrender value and cash value could vary over an
extended period of time assuming hypothetical gross rates of return (i.e.,
investment income and capital gains and losses, realized or unrealized) for the
Separate Account equal to constant after tax annual rates of 0%, 6% and 12%. The
tables are based on a face amount of $500,000 for a male aged 45. The insured is
assumed to be in the preferred nonsmoker class. The Tables assume no rider
benefits and assume that no allocations are made to the General Account. Values
are first given based on current mortality and other Policy charges and then
based on guaranteed mortality and other Policy charges. Illustrations show the
Options A and B death benefits with the guideline premium test.
The illustrated death benefits, cash surrender values and cash values for a
Policy would be different, either higher or lower, from the amounts shown if the
actual gross rates of return averaged 0%, 6% or 12%, but varied above and below
that average during the period, if premiums were paid in other amounts or at
other than annual intervals. They would also be different depending on the
allocation of cash value among the Separate Account's Divisions, if the actual
gross rate of return for all Divisions averaged 0%, 6% or 12%, but varied above
or below that average for individual Divisions. They would also differ if a
Policy loan or partial withdrawal were made during the period of time
illustrated, if the insured were female or in another risk classification, or if
the Policies were issued at unisex rates. For example, as a result of variations
in actual returns, additional premium payments beyond those illustrated may be
necessary to maintain the Policy in force for the periods shown or to realize
the Policy values shown on particular illustrations even if the average rate of
return is achieved.
The death benefits, cash surrender values and cash values shown in the
tables reflect: (i) deductions from premiums for the sales charge, premium tax
and federal tax charge; and (ii) a Monthly Deduction (consisting of a Policy
charge, an administration and issue expense charge, an asset charge, and a
charge for the cost of insurance) from the cash value on the first day of each
Policy month. The cash surrender values reflect a Surrender Charge deducted from
the cash value upon surrender, face reduction or lapse during the first ten
Policy years. (See "Charges and Expenses".) The illustrations reflect an average
of the investment advisory fees and operating expenses of the Eligible Funds at
an annual rate of .828% of the average daily net assets of the Eligible Funds.
This average reflects expense subsidies by the investment advisers of certain
Eligible Funds that may be voluntary and of limited duration.
Taking account of the average investment advisory fee and operating
expenses of the Eligible Funds, the gross annual rates of return of 0%, 6% and
12% correspond to net investment experience at constant annual rates of -.82%,
5.13% and 11.08%, respectively.
The second column of each table shows the amount which would accumulate if
an amount equal to the annual premium were invested to earn interest, after
taxes, of 5% per year, compounded annually.
The internal rate of return on cash surrender value is equivalent to an
interest rate (after taxes) at which an amount equal to the illustrated premiums
could have been invested outside the Policy to arrive at the cash surrender
value of the Policy. The internal rate of return on the death benefit is
equivalent to an interest rate (after taxes) at which an amount equal to the
illustrated premiums could have been invested outside the Policy to arrive at
the death benefit of the Policy. The internal rate of return is compounded
annually, and the premiums are assumed to be paid at the beginning of each
Policy year.
If you request, we will furnish a personalized illustration reflecting the
proposed insured's age, sex, underwriting classification, and the face amount or
premium payment schedule requested. Because these and other assumptions will
differ, the values shown in the personalized illustrations can differ very
substantially from those shown in the tables below. Therefore, you should
carefully review the information that accompanies any personalized illustration.
That information will disclose all the assumptions on which the personalized
illustration is based. Where applicable, we will also furnish on request an
illustration for a Policy which is not affected by the sex of the insured.
A-51
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1 $ 7,245 $500,000 $500,000 $ 500,000 $ 237 $ 517 $ 800 $ 3,342 $ 3,622 $ 3,905
2 14,852 500,000 500,000 500,000 4,006 4,783 5,597 6,766 7,543 8,357
3 22,840 500,000 500,000 500,000 7,712 9,212 10,846 10,127 11,627 13,261
4 31,227 500,000 500,000 500,000 12,468 14,955 17,768 14,538 17,025 19,838
5 40,033 500,000 500,000 500,000 17,100 20,878 25,313 18,825 22,603 27,038
6 49,280 500,000 500,000 500,000 21,596 26,977 33,531 22,976 28,357 34,911
7 58,989 500,000 500,000 500,000 25,935 33,237 42,474 26,970 34,272 43,509
8 69,183 500,000 500,000 500,000 30,118 39,663 52,215 30,808 40,353 52,905
9 79,887 500,000 500,000 500,000 34,149 46,270 62,847 34,494 46,615 63,192
10 91,127 500,000 500,000 500,000 38,021 53,055 74,458 38,021 53,055 74,458
15 156,337 500,000 500,000 500,000 61,076 97,868 161,727 61,076 97,868 161,727
20 239,563 500,000 500,000 500,000 78,946 151,171 305,896 78,946 151,171 305,896
25 345,783 500,000 500,000 641,062 92,309 217,510 552,640 92,309 217,510 552,640
30 481,349 500,000 500,000 1,033,796 96,662 299,168 966,164 96,662 299,168 966,164
35 654,371 500,000 500,000 1,741,233 86,206 403,276 1,658,317 86,206 403,276 1,658,317
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1 -96.57% -92.50% -88.41% 7,146.37% 7,146.37% 7,146.37%
2 -58.86 -52.88 -46.99 702.72 702.72 702.72
3 -41.80 -35.34 -29.00 278.75 278.75 278.75
4 -29.36 -23.06 -16.86 159.82 159.82 159.82
5 -22.54 -16.30 -10.15 107.60 107.60 107.60
6 -18.36 -12.13 -5.99 79.10 79.10 79.10
7 -15.61 -9.36 -3.21 61.44 61.44 61.44
8 -13.68 -7.40 -1.24 49.54 49.54 49.54
9 -12.27 -5.95 0.24 41.04 41.04 41.04
10 -11.20 -4.84 1.38 34.70 34.70 34.70
15 -6.94 -0.70 5.40 18.08 18.08 18.08
20 -5.69 0.86 7.09 11.13 11.13 11.13
25 -5.24 1.74 8.09 7.45 7.45 9.04
30 -5.51 2.28 8.70 5.21 5.21 9.04
35 -6.83 2.69 9.09 3.74 3.74 9.30
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY GENERAL AMERICAN OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-52
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION A DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1... $ 7,245 $500,000 $500,000 $500,000 $ 0 $ 176 $ 447 $ 3,011 $ 3,281 $ 3,552
2... 14,852 500,000 500,000 500,000 3,320 4,055 4,825 6,080 6,815 7,585
3... 22,840 500,000 500,000 500,000 6,559 7,958 9,486 8,974 10,373 11,901
4... 31,227 500,000 500,000 500,000 9,615 11,878 14,451 11,685 13,948 16,521
5... 40,033 500,000 500,000 500,000 12,474 15,799 19,738 14,199 17,524 21,463
6... 49,280 500,000 500,000 500,000 15,129 19,713 25,374 16,509 21,093 26,754
7... 58,989 500,000 500,000 500,000 17,552 23,589 31,368 18,587 24,624 32,403
8... 69,183 500,000 500,000 500,000 19,712 27,394 37,729 20,402 28,084 38,419
9... 79,887 500,000 500,000 500,000 21,587 31,100 44,474 21,932 31,445 44,819
10.. 91,127 500,000 500,000 500,000 23,137 34,663 51,612 23,137 34,663 51,612
15.. 156,337 500,000 500,000 500,000 30,097 55,556 102,623 30,097 55,556 102,623
20.. 239,563 500,000 500,000 500,000 22,864 68,232 177,292 22,864 68,232 177,292
25.. 345,783 500,000 500,000 59,899 294,390 59,899 294,390
30.. 481,349 500,000 538,445 537 503,220 537 503,220
35.. 654,371 911,137 867,750 867,750
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY ----------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1... -100.00% -97.46% 93.52% 7,146.37% 7,146.37% 7,146.37%
2... -64.49 -58.48 -52.57 702.72 702.72 702.72
3... -47.32 -40.69 -34.23 278.75 278.75 278.75
4... -37.93 -31.00 -24.26 159.82 159.82 159.82
5... -32.13 -24.98 -18.07 107.60 107.60 107.60
6... -28.26 -20.91 -13.85 79.10 79.10 79.10
7... -25.56 -18.01 -10.81 61.44 61.44 61.44
8... -23.64 -15.87 -8.53 49.54 49.54 49.54
9... -22.27 -14.26 -6.76 41.04 41.04 41.04
10.. -21.33 -13.02 -5.36 34.70 34.70 34.70
15.. -17.85 -8.27 -0.11 18.08 18.08 18.08
20.. -23.09 -7.33 2.33 11.13 11.13 11.13
25.. -9.58 3.90 7.45 7.45
30.. -100.00 5.24 5.21 5.61
35.. 6.28 6.50
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY GENERAL AMERICAN OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-53
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON CURRENT POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST -------------------------------- ------------------------------- -------------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1... $ 7,245 $503,329 $503,609 $ 503,890 $ 224 $ 504 $ 785 $ 3,329 $ 3,609 $ 3,890
2... 14,852 506,731 507,504 508,313 3,971 4,744 5,553 6,731 7,504 8,313
3... 22,840 510,058 511,547 513,169 7,643 9,132 10,754 10,058 11,547 13,169
4... 31,227 514,460 516,930 519,723 12,390 14,860 17,653 14,460 16,930 19,723
5... 40,033 518,732 522,485 526,889 17,007 20,760 25,164 18,732 22,485 26,889
6... 49,280 522,861 528,205 534,712 21,481 26,825 33,332 22,861 28,205 34,712
7... 58,989 526,825 534,072 543,237 25,790 33,037 42,202 26,825 34,072 43,237
8... 69,183 530,619 540,086 552,529 29,929 39,396 51,839 30,619 40,086 52,529
9... 79,887 534,251 546,258 562,673 33,906 45,913 62,328 34,251 46,258 62,673
10.. 91,127 537,708 552,581 573,742 37,708 52,581 73,742 37,708 52,581 73,742
15.. 156,337 560,032 596,019 658,409 60,032 96,019 158,409 60,032 96,019 158,409
20.. 239,563 576,185 645,338 793,164 76,185 145,338 293,164 76,185 145,338 293,164
25.. 345,783 586,584 702,655 1,013,510 86,584 202,655 513,510 86,584 202,655 513,510
30.. 481,349 585,637 763,341 1,369,270 85,637 263,341 869,270 85,637 263,341 869,270
35.. 654,371 566,843 820,177 1,942,919 66,843 320,177 1,442,919 66,843 320,177 1,442,919
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1... -96.75% -92.70% -88.62% 7,194.62% 7,198.68% 7,202.76%
2... -59.15 -53.18 -47.30 708.42 709.08 709.76
3... -42.12 -35.67 -29.34 281.55 281.97 282.41
4... -29.57 -23.28 -17.10 161.97 162.33 162.74
5... -22.71 -16.48 -10.34 109.42 109.78 110.20
6... -18.51 -12.29 -6.16 80.73 81.10 81.55
7... -15.75 -9.51 -3.37 62.94 63.33 63.83
8... -13.82 -7.55 -1.40 50.95 51.37 51.91
9... -12.42 -6.11 0.07 42.38 42.83 43.43
10.. -11.37 -5.01 1.20 35.98 36.47 37.13
15.. -7.18 -0.94 5.16 19.31 19.99 21.07
20.. -6.08 0.49 6.73 12.27 13.18 14.81
25.. -5.83 1.22 7.62 8.47 9.62 11.90
30.. -6.54 1.51 8.15 6.07 7.48 10.46
35.. -9.05 1.51 8.50 4.33 6.03 9.76
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY GENERAL AMERICAN OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-54
MALE ISSUE AGE 45
$6,900 ANNUAL PREMIUM FOR
PREFERRED NONSMOKER UNDERWRITING RISK
$500,000 FACE AMOUNT
OPTION B DEATH BENEFIT
GUIDELINE PREMIUM TEST
THIS ILLUSTRATION IS BASED ON GUARANTEED POLICY CHARGES.
<Table>
<Caption>
DEATH BENEFIT CASH SURRENDER VALUE CASH VALUE
PREMIUMS ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL ASSUMING HYPOTHETICAL
ACCUMULATED GROSS ANNUAL GROSS ANNUAL GROSS ANNUAL
END OF AT 5% RATE OF RETURN OF RATE OF RETURN OF RATE OF RETURN OF
POLICY INTEREST ------------------------------ ---------------------------- ----------------------------
YEAR PER YEAR 0% 6% 12% 0% 6% 12% 0% 6% 12%
- ------ ----------- -- -- --- -- -- --- -- -- ---
1... $ 7,245 $502,995 $503,264 $503,535 $ 0 $ 159 $ 430 $ 2,995 $ 3,264 $ 3,535
2... 14,852 506,038 506,768 507,533 3,278 4,008 4,773 6,038 6,768 7,533
3... 22,840 508,891 510,277 511,790 6,476 7,862 9,375 8,891 10,277 11,790
4... 31,227 511,548 513,782 516,323 9,478 11,712 14,253 11,548 13,782 16,323
5... 40,033 513,991 517,263 521,139 12,266 15,538 19,414 13,991 17,263 21,139
6... 49,280 516,214 520,708 526,255 14,834 19,328 24,875 16,214 20,708 26,255
7... 58,989 518,186 524,079 531,668 17,151 23,044 30,633 18,186 24,079 31,668
8... 69,183 519,875 527,338 537,370 19,185 26,648 36,680 19,875 27,338 37,370
9... 79,887 521,257 530,449 543,360 20,912 30,104 43,015 21,257 30,449 43,360
10.. 91,127 522,292 533,360 549,620 22,292 33,360 49,620 22,292 33,360 49,620
15.. 156,337 527,852 551,286 594,498 27,852 51,286 94,498 27,852 51,286 94,498
20.. 239,563 518,381 557,031 649,746 18,381 57,031 149,746 18,381 57,031 149,746
25.. 345,783 535,490 709,333 35,490 209,333 35,490 209,333
30.. 481,349 753,730 253,730 253,730
35.. 654,371 735,604 235,604 235,604
<Caption>
INTERNAL RATE OF RETURN INTERNAL RATE OF RETURN
ON CASH SURRENDER VALUE ON DEATH BENEFIT
ASSUMING HYPOTHETICAL GROSS ASSUMING HYPOTHETICAL GROSS
END OF ANNUAL RATE OF RETURN OF ANNUAL RATE OF RETURN OF
POLICY --------------------------- ---------------------------------
YEAR 0% 6% 12% 0% 6% 12%
- ------ -- -- --- -- -- ---
1... -100.00% -97.69% -93.77% 7,189.78% 7,193.69% 7,197.62%
2... -64.85 -58.85 -52.96 707.84 708.46 709.10
3... -47.74 -41.13 -34.68 281.23 281.61 282.03
4... -38.39 -31.47 -24.75 161.54 161.87 162.24
5... -32.64 -25.49 -18.59 108.96 109.28 109.65
6... -28.80 -21.46 -14.41 80.26 80.58 80.97
7... -26.15 -18.60 -11.41 62.46 62.79 63.20
8... -24.29 -16.52 -9.17 50.46 50.80 51.25
9... -22.99 -14.96 -7.45 41.88 42.24 42.72
10.. -22.13 -13.79 -6.10 35.47 35.84 36.37
15.. -19.20 -9.43 -1.15 18.67 19.14 19.96
20.. -27.26 -9.45 0.77 11.43 12.00 13.23
25.. -16.11 1.46 7.89 9.68
30.. 1.28 7.41
35.. -0.14 5.54
</Table>
IT IS EMPHASIZED THAT THE HYPOTHETICAL GROSS ANNUAL RATES OF RETURN SHOWN ABOVE
AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED
A REPRESENTATION OF PAST OR FUTURE GROSS ANNUAL RATES OF RETURN. ACTUAL GROSS
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER
OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY A POLICY OWNER, THE
FREQUENCY OF PREMIUM PAYMENTS CHOSEN BY A POLICY OWNER, AND THE INVESTMENT
EXPERIENCE OF THE POLICY'S DIVISIONS. THE DEATH BENEFIT, CASH VALUE AND CASH
SURRENDER VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL
GROSS ANNUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS,
BUT VARIED ABOVE OR BELOW THAT AVERAGE DURING THE PERIOD. THEY WOULD ALSO BE
DIFFERENT IF ANY POLICY LOAN WERE MADE DURING THE PERIOD. NO REPRESENTATIONS CAN
BE MADE BY GENERAL AMERICAN OR THE ELIGIBLE FUNDS THAT THOSE HYPOTHETICAL RATES
OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
A-55
APPENDIX B
LONG TERM MARKET TRENDS
The information below compares the average annual returns of common stock,
high grade corporate bonds and 30-day U.S. Treasury bills over 20-year and
30-year holding periods.* The average annual returns assume the reinvestment of
dividends, capital gains and interest. This is an historical record and does not
predict future performance. The information does not reflect Policy charges.
The data indicates that, historically, the investment performance of common
stocks over long periods has been positive and generally superior to that of
long-term, high grade debt securities. Common stocks have, however, been subject
to more dramatic market adjustments over short periods.
Over the 57 20-year time periods beginning in 1926 and ending in 2001
(i.e., 1926-1945, 1927-1946, and so on through 1982-2001):
-- The average annual return of common stocks was superior to that of high
grade, long-term corporate bonds in 54 of the 57 periods.
-- The average annual return of common stocks surpassed that of U.S.
Treasury bills in each of the 57 periods.
-- Common stock average annual returns exceeded the average annual rate of
inflation in each of the 57 periods.
Over the 47 30-year periods beginning in 1926 and ending in 2001, the
average annual return of common stocks was superior to that of high grade,
long-term corporate bonds, U.S. Treasury bills and inflation in all 47 periods.
From 1926 through 2001 the average annual return for common stocks was
10.7%, compared to 5.8% for high grade, long-term corporate bonds, 3.8% for U.S.
Treasury bills and 3.1% for the Consumer Price Index.
- ------------
* Used with permission. (C)2002 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
------------------------
SUMMARY: HISTORIC S&P STOCK INDEX RESULTS FOR
SPECIFIC HOLDING PERIODS
The following chart categorizes the historical results of the Standard &
Poor's 500 Stock Index with dividends reinvested, over one-year, five-year and
twenty-year periods beginning in 1926 and ending 2001.
The chart does not predict future stock market results. It shows the
historic performance of a broad index of stocks, and not the performance of any
fund or investment.
------------------------
PERCENT OF HOLDING PERIODS WITH THE FOLLOWING RETURNS:
<Table>
<Caption>
GREATER
0- 5.01- 10.01- 15.01- THAN
HOLDING NEGATIVE 5.00% 10.00% 15.00% 20.00% 20.00%
PERIOD RETURN RETURN RETURN RETURN RETURN RETURN
- ------- -------- ------ ------ ------ ------ -------
1 year....................................... 25% 4% 11% 7% 13% 40%
5 years...................................... 10% 14% 15% 30% 18% 13%
10 years..................................... 3% 9% 33% 24% 29% 2%
20 years..................................... 0% 7% 31% 53% 9% 0%
</Table>
- ------------
Used with permission. (C)2002 Ibbotson Associates, Inc. All rights reserved.
[Certain portions of this work were derived from copyrighted works of Roger G.
Ibbotson and Rex Sinquefield.]
A-56
APPENDIX C
USES OF LIFE INSURANCE
These are examples of ways the Policy can be used to address certain
financial objectives.
FAMILY INCOME PROTECTION
You may purchase life insurance on the lives of family income earners to
provide a death benefit to cover final expenses, and continue current family
income. The amount of insurance you purchase should be an amount which will
provide a death benefit that, when invested outside the policy at a reasonable
interest rate, will generate enough money to replace the individual's income.
ESTATE PROTECTION
A trust may purchase life insurance on the life of the person whose estate
will incur federal estate taxes upon the person's death. The amount of insurance
purchased should equal the amount of the estimated estate tax liability. On the
insured's death, the trustee makes the death proceeds available to the estate
for the payment of estate tax costs.
EDUCATION FUNDING
You may purchase life insurance on the life of the parent(s) or primary
person funding an education. The amount of insurance you purchase should equal
the total education cost projected at a reasonable inflation rate.
In the event of death, the guaranteed death benefit is available to help
pay the education costs. If the insured lives through the education years, cash
value may be accessed to meet education costs. Loans or withdrawals reduce the
Policy's death benefit.
MORTGAGE PROTECTION
You may purchase life insurance on the life of the person responsible for
making mortgage payments. The amount of insurance you purchase should equal the
mortgage amount. In the event of the insured's death, the guaranteed death
benefit can be used to pay the mortgage balance.
During the insured's lifetime, cash value may be accessed late in the
mortgage term to help make the remaining mortgage payments. Loans or withdrawals
reduce the Policy's death benefit.
KEY PERSON PROTECTION
A business may purchase life insurance on the life of a key person in an
amount equal to the key person's value, considering salary, benefits, and
contribution to the business. On the key person's death, the business uses the
death benefit to ease the interruption of business operations and/or to provide
a replacement fund for hiring a new executive.
BUSINESS CONTINUATION PROTECTION
You can insure each business owner in an amount equal to the value of each
owner's business interest. In the event of death, the guaranteed death benefit
provides funds for the purchase of the deceased's business interest by the
business, or surviving owners, from the deceased owner's heirs.
RETIREMENT INCOME
You may purchase life insurance on the life of a family income earner
during his or her working life. If the insured lives to retirement, cash value
may be accessed to provide retirement payments. In the event of the insured's
death, the proceeds may be used to provide retirement income to his or her
spouse. Loans or withdrawals reduce the Policy's death benefit.
A-57
Because the Policy provides a death benefit and cash value accumulation,
you can use the Policy for various individual and business planning purposes. If
you purchase the Policy for such purposes, you assume certain risks,
particularly if the Policy's cash value, as opposed to its death benefit, will
be the principal Policy feature used for such planning purposes. If the
investment performance of the Divisions to which cash value is allocated is
poorer than expected, or if you don't pay sufficient premiums or maintain cash
values, the Policy may lapse or may not accumulate sufficient cash value or cash
surrender value to fund the purpose for which you purchased the Policy. If you
borrow from the Policy for these purposes, poor investment performance may make
it difficult or impossible to repay the Policy loans. Moreover, if the Policy
lapses, outstanding loans could create a significant income tax liability.
Because the Policy is designed to provide benefits on a long-term basis, before
purchasing a Policy for a specialized purpose, you should consider whether the
long-term nature of the Policy is consistent with your goals. If you wish to
access your Policy's cash value, through loans or withdrawals, you should
consult your tax adviser about possible tax consequences. (See "Tax
Considerations".)
A-58
APPENDIX D
TAX INFORMATION
The Office of Tax Analysis of the U.S. Department of the Treasury published
a "Report to the Congress on the Taxation of Life Insurance Company Products" in
March 1990. Page 4 of this report is Table 1.1, a "Comparison of Tax Treatment
of Life Insurance Products and Other Retirement Savings Plans". Because it is a
convenient summary of the relevant tax characteristics of these products and
plans, we have reprinted it here, and added footnotes to reflect exceptions to
the general rules.
------------------------
TABLE 1.1
COMPARISON OF TAX TREATMENT OF LIFE INSURANCE PRODUCTS AND OTHER RETIREMENT
SAVINGS PLANS
<Table>
<Caption>
CASH-VALUE
LIFE NON-QUALIFIED QUALIFIED
INSURANCE ANNUITIES IRA'S PENSION
---------- ------------- ----- ---------
Annual Contribution
Limits No No Yes Yes
Income Eligibility
Limits No No Yes** No
Borrowing Treated as
Distributions No* Yes Loans not allowed Yes, beyond $50,000
Income Ordering Rules
(Income included in
First Distribution) No* Yes Yes Yes
Early Withdrawal
Penalties No* Yes*** Yes*** Yes***
Minimum Distribution
Rules by Age 70 1/2 No No Yes Yes
Anti-discrimination
Rules No No No Yes
</Table>
- ------------
Department of the Treasury March 1990
Office of Tax Analysis
* If the Policy is not a modified endowment contract.
** If amounts paid in to fund the IRA are deductible; once over the income
eligibility limits amounts paid into an IRA are permitted but not
deductible.
*** There are several exceptions to the application of the early withdrawal
penalties for annuities, IRAs and qualified pensions.
This appendix is not tax advice. You should consult with your own tax advisor
for more complete information.
A-59
APPENDIX E
GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST
In order to meet the Internal Revenue Code's definition of life insurance,
the Policies provide that the death benefit will not be less than what is
required by the "guideline premium test" under Section 7702(a)(2) of the
Internal Revenue Code, or by the "cash value accumulation test" under Section
7702(a)(1) of the Internal Revenue Code, as selected by you when the Policy is
issued. The test you choose at issue will be used for the life of the Policy.
(See "Death Benefit".)
For the guideline premium test, the table below shows the percentage of the
Policy's cash value that is used to determine the death benefit.
<Table>
<Caption>
AGE OF INSURED AT AGE OF INSURED AT
START OF THE PERCENTAGE OF START OF THE PERCENTAGE OF
POLICY YEAR CASH VALUE POLICY YEAR CASH VALUE
- ----------------- ------------- ----------------- -------------
0 through 40 250 61 128
41 243 62 126
42 236 63 124
43 229 64 122
44 222 65 120
45 215 66 119
46 209 67 118
47 203 68 117
48 197 69 116
49 191 70 115
50 185 71 113
51 178 72 111
52 171 73 109
53 164 74 107
54 157 75 through 90 105
55 150 91 104
56 146 92 103
57 142 93 102
58 138 94 through 99 101
59 134 100+ 100
60 130
</Table>
For the cash value accumulation test, sample net single premiums for
selected ages of male and female insureds, in a standard or better nonsmoker
risk class, are listed below.
<Table>
<Caption>
NET SINGLE PREMIUM
---------------------
AGE MALE FEMALE
- --- --------- ---------
30......................................................... 0.1955185 0.1743701
40......................................................... 0.2736424 0.2437963
50......................................................... 0.3786685 0.3359599
60......................................................... 0.5098683 0.4542278
70......................................................... 0.6534828 0.5984410
80......................................................... 0.7815873 0.7483734
90......................................................... 0.8737282 0.8654986
100......................................................... 1.0000000 1.0000000
</Table>
A-60
INDEPENDENT AUDITORS' REPORT
The Board of Directors
General American Life Insurance Company
and Contract Holders of General American
Separate Account Eleven:
We have audited the statement of assets and liabilities, including the
schedule of investments, of the S&P 500 Index, Money Market, Bond Index, Managed
Equity, Asset Allocation, International Index, Mid-Cap Equity, Small-Cap Equity,
Equity Income, Growth, Overseas, Asset Manager, High Income, Mid Cap Portfolio,
Worldwide Hard Assets, Worldwide Emerging Markets, Multi-Style Equity, Core
Bond, Aggressive Equity, Non-US, Income & Growth, International, Value, Bond
Portfolio, Small Company Portfolio, Large Cap Value, Large Cap Growth, Small Cap
Value, Small Cap Growth, International Equity, Emerging Markets Equity, Core
Fixed Income, High Yield Bond, International Fixed Income, Emerging Markets
Debt, Janus Mid-Cap, T. Rowe Price Large Cap Growth, T. Rowe Price Small Cap
Growth, Alger Equity Growth Series, Janus Growth, Harris Oakmark Mid-Cap, and
PIMCO Innovations Fund Divisions of General American Separate Account Eleven as
of December 31, 2001, and the respective related statements of operations and
changes in net assets for each of the periods in the two years then ended and
the financial highlights as of and for the year ended December 31, 2001. These
financial statements and financial highlights are the responsibility of the
management of General American Separate Account Eleven. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The statements of operations and changes in net assets for the
year ended December 31, 1999 were audited by other auditors whose report dated
February 25, 2000 expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2001 by correspondence with the custodian
and the depositor of the Separate Account. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the respective financial positions of the S&P 500
Index, Money Market, Bond Index, Managed Equity, Asset Allocation, International
Index, Mid-Cap Equity, Small-Cap Equity, Equity Income, Growth, Overseas, Asset
Manager, High Income, Mid Cap Portfolio, Worldwide Hard Assets, Worldwide
Emerging Markets, Multi-Style Equity, Core Bond, Aggressive Equity, Non-US,
Income & Growth, International, Value, Bond Portfolio, Small Company Portfolio,
Large Cap Value, Large Cap Growth, Small Cap Value, Small Cap Growth,
International Equity, Emerging Markets Equity, Core Fixed Income, High Yield
Bond, International Fixed Income, Emerging Markets Debt, Janus Mid-Cap, T. Rowe
Price Large Cap Growth, T. Rowe Price Small Cap Growth, Alger Equity Growth
Series, Janus Growth, Harris Oakmark Mid-Cap, and PIMCO Innovations Fund
Divisions of General American Separate Account Eleven as of December 31, 2001,
the respective results of their operations and the changes in their net assets
for each of the periods in the two years then ended and their financial
highlights as of and for the year ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
February 15, 2002
AA-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
of General American Life Insurance Company
and Policyholders of General American
Separate Account Eleven:
We have audited the statements of operations and changes in net assets of
the S&P 500 Index, Money Market, Bond Index, Managed Equity, Asset Allocation,
International Index, Mid-Cap Equity, Small-Cap Equity, Equity Income, Growth,
Overseas, Asset Manager, High Income, Worldwide Hard Assets, Worldwide Emerging
Markets, Multi-Style Equity, Core Bond, Aggressive Equity, Non-US, Income &
Growth, International, Value, Bond Portfolio, and Small Company Portfolio Fund
Divisions of General American Separate Account Eleven for the year ended
December 31, 1999. These financial statements are the responsibility of the
management of General American Separate Account Eleven. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly,
in all material respects, the results of operations and changes in net assets of
the S&P 500 Index, Money Market, Bond Index, Managed Equity, Asset Allocation,
International Index, Mid-Cap Equity, Small-Cap Equity, Equity Income, Growth,
Overseas, Asset Manager, High Income, Worldwide Hard Assets, Worldwide Emerging
Markets, Multi-Style Equity, Core Bond, Aggressive Equity, Non-US, Income &
Growth, International, Value, Bond Portfolio, and Small Company Portfolio Fund
Divisions of General American Separate Account Eleven for the year ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America.
KPMG LLP
St. Louis, Missouri
February 25, 2000
AA-2
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
S&P 500 INDEX MONEY MARKET BOND INDEX MANAGED EQUITY ASSET ALLOCATION
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- -------------- ----------------
ASSETS:
Investments at market value (see Schedule of
Investments):
General American Capital Company........... $74,014,429 $40,980,438 $9,178,270 $7,793,000 $12,410,604
Fidelity VIP Fund.......................... -- -- -- -- --
Fidelity VIP Fund II....................... -- -- -- -- --
Van Eck Worldwide Insurance Trust.......... -- -- -- -- --
Russell Insurance Fund..................... -- -- -- -- --
American Century Variable Portfolios....... -- -- -- -- --
J.P. Morgan Series Trust II................ -- -- -- -- --
SEI Insurance Products Trust............... -- -- -- -- --
Metropolitan Series Fund, Inc.............. -- -- -- -- --
New England Zenith Fund.................... -- -- -- -- --
Metlife Investors Series Trust............. -- -- -- -- --
Receivable from General American Life
Insurance Company.......................... -- 13,734 -- 194 --
----------- ----------- ---------- ---------- -----------
Total assets.......................... 74,014,429 40,994,172 9,178,270 7,793,194 12,410,604
----------- ----------- ---------- ---------- -----------
LIABILITIES:
Payable to General American Life Insurance
Company.................................... 3,517 -- 123 -- 60
----------- ----------- ---------- ---------- -----------
Total net assets...................... $74,010,912 $40,994,172 $9,178,147 $7,793,194 $12,410,544
=========== =========== ========== ========== ===========
Total units held--VUL-95........................ 212,434 36,235 91,265 79,697 97,851
Total units held--VGSP.......................... 604,236 253,899 148,777 76,103 95,808
Total units held--VUL-100....................... 738,351 64,723 140,291 75,455 124,605
Total units held--Russell VUL................... -- -- -- -- --
Total units held--VUL-2000...................... 2,161,559 2,419,475 142,879 58,251 237,542
Total units held--JSVUL-2000.................... 360,167 535,954 29,276 8,134 21,682
Total units held--Destiny....................... 22,789 115,651 5,632 3,901 --
VUL-95 Net unit value........................... $ 42.99 $ 19.94 $ 26.27 $ 37.07 $ 38.92
VGSP Net unit value............................. $ 27.94 $ 14.59 $ 16.22 $ 25.93 $ 23.26
VUL-100 Net unit value.......................... $ 26.07 $ 13.66 $ 16.14 $ 25.21 $ 22.90
Russell VUL Net unit value...................... $ -- $ -- $ -- $ -- $ --
VUL-2000 Net unit value......................... $ 11.32 $ 11.62 $ 11.84 $ 13.86 $ 13.58
JSVUL-2000 Net unit value....................... $ 11.32 $ 11.62 $ 11.84 $ 13.86 $ 13.58
Destiny Net unit value.......................... $ 9.21 $ 11.57 $ 11.83 $ 11.01 $ 11.09
Cost of investments............................. $92,748,168 $40,693,059 $8,668,662 $9,135,683 $14,954,824
<Caption>
INTERNATIONAL INDEX
FUND DIVISION
-------------------
ASSETS:
Investments at market value (see Schedule of
Investments):
General American Capital Company........... $ 8,258,119
Fidelity VIP Fund.......................... --
Fidelity VIP Fund II....................... --
Van Eck Worldwide Insurance Trust.......... --
Russell Insurance Fund..................... --
American Century Variable Portfolios....... --
J.P. Morgan Series Trust II................ --
SEI Insurance Products Trust............... --
Metropolitan Series Fund, Inc.............. --
New England Zenith Fund.................... --
Metlife Investors Series Trust............. --
Receivable from General American Life
Insurance Company.......................... --
-----------
Total assets.......................... 8,258,119
-----------
LIABILITIES:
Payable to General American Life Insurance
Company.................................... 145
-----------
Total net assets...................... $ 8,257,974
===========
Total units held--VUL-95........................ 116,900
Total units held--VGSP.......................... 83,890
Total units held--VUL-100....................... 97,080
Total units held--Russell VUL................... --
Total units held--VUL-2000...................... 71,690
Total units held--JSVUL-2000.................... 17,420
Total units held--Destiny....................... 3,209
VUL-95 Net unit value........................... $ 15.85
VGSP Net unit value............................. $ 13.79
VUL-100 Net unit value.......................... $ 11.64
Russell VUL Net unit value...................... $ --
VUL-2000 Net unit value......................... $ 9.73
JSVUL-2000 Net unit value....................... $ 9.73
Destiny Net unit value.......................... $ 8.16
Cost of investments............................. $10,629,151
</Table>
See accompanying notes to the financial statements.
AA-3
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
MID-CAP EQUITY SMALL-CAP EQUITY EQUITY INCOME GROWTH OVERSEAS ASSET MANAGER
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
-------------- ---------------- ------------- ------------- ------------- -------------
ASSETS:
Investments at market value
(see Schedule of
Investments):
General American Capital
Company................ $5,538,633 $4,695,030 $ -- $ -- $ -- $ --
Fidelity VIP Fund........ -- -- 24,163,967 49,498,764 11,332,088 --
Fidelity VIP Fund II..... -- -- -- -- -- 3,200,738
Van Eck Worldwide
Insurance Trust........ -- -- -- -- -- --
Russell Insurance Fund... -- -- -- -- -- --
American Century Variable
Portfolios............. -- -- -- -- -- --
J.P. Morgan Series Trust
II..................... -- -- -- -- -- --
SEI Insurance Products
Trust.................. -- -- -- -- -- --
Metropolitan Series Fund,
Inc.................... -- -- -- -- -- --
New England Zenith
Fund................... -- -- -- -- -- --
Metlife Investors Series
Trust.................. -- -- -- -- -- --
Receivable from General
American Life Insurance
Company.................. -- 637 456 1,357 -- 761
---------- ---------- ----------- ----------- ----------- ----------
Total assets........ 5,538,633 4,695,667 24,164,423 49,500,121 11,332,088 3,201,499
---------- ---------- ----------- ----------- ----------- ----------
LIABILITIES:
Payable to General American
Life Insurance Company... 442 -- -- -- 1,618 --
---------- ---------- ----------- ----------- ----------- ----------
Total net assets.... $5,538,191 $4,695,667 $24,164,423 $49,500,121 $11,330,470 $3,201,499
========== ========== =========== =========== =========== ==========
Total units held--VUL-95...... 104,525 34,756 226,808 333,596 144,120 10,275
Total units held--VGSP........ 100,890 109,557 221,445 456,809 295,031 24,955
Total units held--VUL-100..... 88,951 109,181 328,034 515,523 151,935 68,657
Total units held--Russell
VUL......................... -- -- -- -- -- --
Total units held--VUL-2000.... 136,517 73,295 339,788 1,021,729 181,986 119,595
Total units
held--JSVUL-2000............ 15,311 16,756 48,291 87,674 10,088 12,370
Total units held--Destiny..... -- 2,094 12,947 54,930 46,522 --
VUL-95 Net unit value......... $ 14.73 $ 13.72 $ 26.33 $ 29.28 $ 17.15 $ 16.49
VGSP Net unit value........... $ 14.82 $ 13.82 $ 26.55 $ 27.82 $ 15.45 $ 16.65
VUL-100 Net unit value........ $ 13.43 $ 13.69 $ 22.73 $ 25.33 $ 13.34 $ 16.44
Russell VUL Net unit value.... $ -- $ -- $ -- $ -- $ -- $ --
VUL-2000 Net unit value....... $ 8.62 $ 13.15 $ 12.17 $ 12.15 $ 9.91 $ 11.28
JSVUL-2000 Net unit value..... $ 8.62 $ 13.15 $ 12.17 $ 12.15 $ 9.91 $ 11.28
Destiny Net unit value........ $ 8.06 $ 12.26 $ 10.19 $ 8.85 $ 7.96 $ 10.02
Cost of investments........... $9,268,676 $4,230,910 $25,240,080 $60,426,020 $16,034,321 $3,532,724
</Table>
See accompanying notes to the financial statements.
AA-4
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
MID CAP WORLDWIDE WORLDWIDE MULTI-STYLE
HIGH INCOME PORTFOLIO HARD ASSETS EMERGING MARKETS EQUITY CORE BOND
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- ---------------- ------------- -------------
ASSETS:
Investments at market value
(see Schedule of
Investments):
General American Capital
Company................. $ -- $ -- $ -- $ -- $ -- $ --
Fidelity VIP Fund......... 6,100,851 2,191,325 -- -- -- --
Fidelity VIP Fund II...... -- -- -- -- -- --
Van Eck Worldwide
Insurance Trust......... -- -- 347,520 815,958 -- --
Russell Insurance Fund.... -- -- -- -- 7,721,161 3,203,580
American Century Variable
Portfolios.............. -- -- -- -- -- --
J.P. Morgan Series Trust
II...................... -- -- -- -- -- --
SEI Insurance Products
Trust................... -- -- -- -- -- --
Metropolitan Series Fund,
Inc..................... -- -- -- -- -- --
New England Zenith Fund... -- -- -- -- -- --
Metlife Investors Series
Trust................... -- -- -- -- -- --
Receivable from General
American Life Insurance
Company................... -- -- -- -- -- 53
---------- ---------- -------- -------- ---------- ----------
Total assets......... 6,100,851 2,191,325 347,520 815,958 7,721,161 3,203,633
---------- ---------- -------- -------- ---------- ----------
LIABILITIES:
Payable to General American
Life Insurance Company.... 342 349 57 401 1,130 --
---------- ---------- -------- -------- ---------- ----------
Total net assets..... $6,100,509 $2,190,976 $347,463 $815,557 $7,720,031 $3,203,633
========== ========== ======== ======== ========== ==========
Total units held--VUL-95....... 19,900 13,389 7,048 1,124 32,528 8,262
Total units held--VGSP......... 169,603 38,866 4,990 56,789 382,597 180,308
Total units held--VUL-100...... 235,538 21,480 16,168 9,129 51,649 11,808
Total units held--Russell
VUL.......................... -- -- -- -- 19,776 9,377
Total units held--VUL-2000..... 239,812 113,524 6,847 13,523 101,857 24,947
Total units held--JSVUL-2000... 16,955 11,024 519 702 18,008 9,351
Total units held--Destiny...... 2,424 -- -- 2,147 -- --
VUL-95 Net unit value.......... $ 9.75 $ 11.01 $ 9.15 $ 8.93 $ 9.43 $ 11.99
VGSP Net unit value............ $ 9.84 $ 11.04 $ 9.23 $ 8.96 $ 14.15 $ 13.51
VUL-100 Net unit value......... $ 9.71 $ 11.00 $ 9.12 $ 8.91 $ 9.41 $ 11.96
Russell VUL Net unit value..... $ -- $ -- $ -- $ -- $ 14.23 $ 13.50
VUL-2000 Net unit value........ $ 7.64 $ 11.07 $ 12.16 $ 13.78 $ 10.27 $ 11.71
JSVUL-2000 Net unit value...... $ 7.64 $ 11.07 $ 12.16 $ 13.78 $ 10.27 $ 11.71
Destiny Net unit value......... $ 7.08 $ 11.17 $ 9.82 $ 8.95 $ -- $ --
Cost of investments............ $8,565,024 $2,121,229 $349,424 $866,729 $9,206,637 $3,111,473
</Table>
See accompanying notes to the financial statements.
AA-5
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
AGGRESSIVE
EQUITY NON-US INCOME & GROWTH INTERNATIONAL VALUE BOND PORTFOLIO
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- --------------- ------------- ------------- --------------
ASSETS:
Investments at market value
(see Schedule of
Investments):
General American Capital
Company................. $ -- $ -- $ -- $ -- $ -- $ --
Fidelity VIP Fund......... -- -- -- -- -- --
Fidelity VIP Fund II...... -- -- -- -- -- --
Van Eck Worldwide
Insurance Trust......... -- -- -- -- -- --
Russell Insurance Fund.... 2,990,971 2,413,341 -- -- -- --
American Century Variable
Portfolios.............. -- -- 3,457,297 3,773,785 1,825,316 --
J.P. Morgan Series Trust
II...................... -- -- -- -- -- 1,097,165
SEI Insurance Products
Trust................... -- -- -- -- -- --
Metropolitan Series Fund,
Inc..................... -- -- -- -- -- --
New England Zenith Fund... -- -- -- -- -- --
Metlife Investors Series
Trust................... -- -- -- -- -- --
Receivable from General
American Life Insurance
Company................... -- -- 466 -- -- 147
---------- ---------- ---------- ---------- ---------- ----------
Total assets......... 2,990,971 2,413,341 3,457,763 3,773,785 1,825,316 1,097,312
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES:
Payable to General American
Life Insurance Company.... 1,633 222 -- 309 771 --
---------- ---------- ---------- ---------- ---------- ----------
Total net assets..... $2,989,338 $2,413,119 $3,457,763 $3,773,476 $1,824,545 $1,097,312
========== ========== ========== ========== ========== ==========
Total units held--VUL-95....... 8,021 5,389 71,586 22,103 13,125 1,427
Total units held--VGSP......... 137,786 184,885 15,763 47,095 12,309 15,016
Total units held--VUL-100...... 24,116 12,894 58,549 33,418 15,270 2,126
Total units held--Russell
VUL.......................... 14,892 12,984 -- -- -- --
Total units held--VUL-2000..... 49,305 20,708 176,933 271,211 69,677 72,046
Total units held--JSVUL-2000... 5,623 6,384 10,958 9,128 11,774 3,589
Total units held--Destiny...... -- -- 1,730 2,871 13,650 1
VUL-95 Net unit value.......... $ 9.10 $ 8.64 $ 8.95 $ 8.93 $ 11.95 $ 11.44
VGSP Net unit value............ $ 13.50 $ 10.05 $ 8.98 $ 8.97 $ 12.00 $ 11.48
VUL-100 Net unit value......... $ 9.09 $ 8.62 $ 8.94 $ 8.92 $ 11.93 $ 11.42
Russell VUL Net unit value..... $ 13.69 $ 9.83 $ -- $ -- $ -- $ --
VUL-2000 Net unit value........ $ 11.52 $ 9.93 $ 11.37 $ 10.10 $ 14.12 $ 11.69
JSVUL-2000 Net unit value...... $ 11.52 $ 9.93 $ 11.37 $ 10.10 $ 14.12 $ 11.69
Destiny Net unit value......... $ -- $ -- $ 9.18 $ 8.91 $ 13.78 $ 12.00
Cost of investments............ $3,134,680 $3,280,786 $3,916,417 $5,429,749 $1,601,220 $1,099,614
</Table>
See accompanying notes to the financial statements.
AA-6
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
SMALL COMPANY LARGE CAP LARGE CAP SMALL CAP SMALL CAP INTERNATIONAL
PORTFOLIO VALUE GROWTH VALUE GROWTH EQUITY
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
------------- ------------- ------------- -------------- ------------- -------------
ASSETS:
Investments at market value
(see Schedule of
Investments):
General American Capital
Company................... $ -- $ -- $ -- $ -- $ -- $ --
Fidelity VIP Fund........... -- -- -- -- -- --
Fidelity VIP Fund II........ -- -- -- -- -- --
Van Eck Worldwide Insurance
Trust..................... -- -- -- -- -- --
Russell Insurance Fund...... -- -- -- -- -- --
American Century Variable
Portfolios................ -- -- -- -- -- --
J.P. Morgan Series Trust
II........................ 3,128,484 -- -- -- -- --
SEI Insurance Products
Trust..................... -- 6,400,384 3,323,671 2,606,461 1,636,346 2,642,604
Metropolitan Series Fund,
Inc....................... -- -- -- -- -- --
New England Zenith Fund..... -- -- -- -- -- --
Metlife Investors Series
Trust..................... -- -- -- -- -- --
Receivable from General
American Life Insurance
Company..................... 91 -- -- 20 4,267 --
---------- ---------- ---------- ---------- ---------- ----------
Total assets........... 3,128,575 6,400,384 3,323,671 2,606,481 1,640,613 2,642,604
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES:
Payable to General American
Life Insurance Company...... -- 467 245 -- -- 464
---------- ---------- ---------- ---------- ---------- ----------
Total net assets....... $3,128,575 $6,399,917 $3,323,426 $2,606,481 $1,640,613 $2,642,140
========== ========== ========== ========== ========== ==========
Total units held--VUL-95......... 7,368 45,804 90,770 11,280 3,361 106,525
Total units held--VGSP........... 36,132 119,580 28,435 17,554 18,274 18,924
Total units held--VUL-100........ 23,513 41,487 71,417 11,153 19,334 96,583
Total units held--Russell VUL.... -- -- -- -- -- --
Total units held--VUL-2000....... 162,937 262,701 386,062 80,376 80,137 185,968
Total units held--JSVUL-2000..... 9,070 28,303 52,516 8,771 11,981 28,902
Total units held--Destiny........ 2,654 109,665 2,311 60,743 96,150 1
VUL-95 Net unit value............ $ 11.48 $ 10.63 $ 5.51 $ 13.45 $ 7.50 $ 6.24
VGSP Net unit value.............. $ 11.53 $ 10.48 $ 5.17 $ 13.69 $ 7.07 $ 5.87
VUL-100 Net unit value........... $ 11.47 $ 10.63 $ 5.50 $ 13.43 $ 7.49 $ 6.24
Russell VUL Net unit value....... $ -- $ -- $ -- $ -- $ -- $ --
VUL-2000 Net unit value.......... $ 13.51 $ 10.50 $ 5.18 $ 13.72 $ 7.09 $ 5.88
JSVUL-2000 Net unit value........ $ 13.51 $ 10.50 $ 5.18 $ 13.72 $ 7.09 $ 5.88
Destiny Net unit value........... $ 12.60 $ 10.60 $ 5.23 $ 13.85 $ 7.16 $ 5.94
Cost of investments.............. $3,408,897 $6,469,838 $4,209,946 $2,527,883 $1,806,527 $3,367,956
</Table>
See accompanying notes to the financial statements.
AA-7
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
EMERGING CORE FIXED HIGH YIELD INTERNATIONAL EMERGING JANUS
MARKETS EQUITY INCOME BOND FIXED INCOME MARKETS DEBT MID-CAP
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
-------------- ------------- ------------- ------------- ------------- -------------
ASSETS:
Investments at market value
(see Schedule of
Investments):
General American Capital
Company................... $ -- $ -- $ -- $ -- $ -- $ --
Fidelity VIP Fund........... -- -- -- -- -- --
Fidelity VIP Fund II........ -- -- -- -- -- --
Van Eck Worldwide Insurance
Trust..................... -- -- -- -- -- --
Russell Insurance Fund...... -- -- -- -- -- --
American Century Variable
Portfolios................ -- -- -- -- -- --
J.P. Morgan Series Trust
II........................ -- -- -- -- -- --
SEI Insurance Products
Trust..................... 1,168,921 9,524,816 1,151,678 859,205 284,050 --
Metropolitan Series Fund,
Inc....................... -- -- -- -- -- 3,933,524
New England Zenith Fund..... -- -- -- -- -- --
Metlife Investors Series
Trust..................... -- -- -- -- -- --
Receivable from General
American Life Insurance
Company..................... 800 -- 12 18 -- 10,503
---------- ---------- ---------- -------- -------- ----------
Total assets........... 1,169,721 9,524,816 1,151,690 859,223 284,050 3,944,027
---------- ---------- ---------- -------- -------- ----------
LIABILITIES:
Payable to General American
Life Insurance Company...... -- 1,195 -- -- 25 --
---------- ---------- ---------- -------- -------- ----------
Total net assets....... $1,169,721 $9,523,621 $1,151,690 $859,223 $284,025 $3,944,027
========== ========== ========== ======== ======== ==========
Total units held--VUL-95......... 41,663 78,946 18,447 850 366 93,032
Total units held--VGSP........... 13,686 403,877 7,813 65,717 12,501 214,163
Total units held--VUL-100........ 29,117 41,052 23,087 1,962 1,556 152,634
Total units held--Russell VUL.... -- -- -- -- -- --
Total units held--VUL-2000....... 105,471 117,474 41,511 22,113 8,243 361,379
Total units held--JSVUL-2000..... 18,507 8,183 3,823 1,798 1,178 24,349
Total units held--Destiny........ 2 175,438 19,206 -- -- 2,354
VUL-95 Net unit value............ $ 6.07 $ 11.61 $ 10.06 $ 9.59 $ 12.04 $ 4.64
VGSP Net unit value.............. $ 5.36 $ 11.49 $ 10.10 $ 9.28 $ 11.89 $ 4.65
VUL-100 Net unit value........... $ 6.07 $ 11.60 $ 10.05 $ 9.58 $ 12.03 $ 4.63
Russell VUL Net unit value....... $ -- $ -- $ -- $ -- $ -- $ --
VUL-2000 Net unit value.......... $ 5.38 $ 11.52 $ 10.12 $ 9.30 $ 11.92 $ 4.66
JSVUL-2000 Net unit value........ $ 5.38 $ 11.52 $ 10.12 $ 9.30 $ 11.92 $ 4.66
Destiny Net unit value........... $ 5.43 $ 11.63 $ 10.22 $ 9.39 $ 12.03 $ 4.70
Cost of investments.............. $1,329,619 $9,550,969 $1,210,617 $867,325 $291,796 $5,769,656
</Table>
See accompanying notes to the financial statements.
AA-8
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2001
<Table>
<Caption>
T. ROWE PRICE T. ROWE PRICE ALGER EQUITY HARRIS OAKMARK PIMCO
LARGE CAP GROWTH SMALL CAP GROWTH GROWTH SERIES JANUS GROWTH MID-CAP FUND INNOVATIONS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION DIVISION FUND DIVISION
---------------- ---------------- ------------- ------------- -------------- -------------
ASSETS:
Investments at market
value (see Schedule of
Investments):
General American
Capital Company..... $ -- $ -- $ -- $ -- $ -- $ --
Fidelity VIP Fund..... -- -- -- -- -- --
Fidelity VIP Fund
II.................. -- -- -- -- -- --
Van Eck Worldwide
Insurance Trust..... -- -- -- -- -- --
Russell Insurance
Fund................ -- -- -- -- -- --
American Century
Variable
Portfolios.......... -- -- -- -- -- --
J.P. Morgan Series
Trust II............ -- -- -- -- -- --
SEI Insurance Products
Trust............... -- -- -- -- -- --
Metropolitan Series
Fund, Inc........... 2,195,816 1,249,538 -- 69,590 -- --
New England Zenith
Fund................ -- -- 808,566 -- 1,296,183 --
Metlife Investors
Series Trust........ -- -- -- -- -- 15,414
Receivable from General
American Life
Insurance Company..... 1,608 30,034 24,349 -- 4,657 --
---------- ---------- -------- ------- ---------- -------
Total assets..... 2,197,424 1,279,572 832,915 69,590 1,300,840 15,414
---------- ---------- -------- ------- ---------- -------
LIABILITIES:
Payable to General
American Life
Insurance Company..... -- -- -- 30 -- 24
---------- ---------- -------- ------- ---------- -------
Total net
assets......... $2,197,424 $1,279,572 $832,915 $69,560 $1,300,840 $15,390
========== ========== ======== ======= ========== =======
Total units held--VUL-95... 12,982 11,525 12,180 380 1,579 30
Total units held--VGSP..... 60,528 56,763 8,652 1,766 7,941 462
Total units
held--VUL-100............ 8,665 11,468 12,063 70 1,002 --
Total units held--Russell
VUL...................... -- -- -- -- -- --
Total units
held--VUL-2000........... 30,280 74,011 77,990 6,364 6,346 1,520
Total units
held--JSVUL-2000......... 1,705 6,373 2,321 352 385 --
Total units
held--Destiny............ 143,350 -- 2,968 -- 97,242 --
VUL-95 Net unit value...... $ 8.46 $ 7.96 $ 7.14 $ 7.78 $ 11.30 $ 7.64
VGSP Net unit value........ $ 8.48 $ 7.98 $ 7.16 $ 7.78 $ 11.32 $ 7.64
VUL-100 Net unit value..... $ 8.45 $ 7.96 $ 7.14 $ 7.77 $ 11.30 $ --
Russell VUL Net unit
value.................... $ -- $ -- $ -- $ -- $ -- $ --
VUL-2000 Net unit value.... $ 8.50 $ 8.00 $ 7.18 $ 7.79 $ 11.33 $ 7.65
JSVUL-2000 Net unit
value.................... $ 8.50 $ 8.00 $ 7.18 $ 7.79 $ 11.33 $ --
Destiny Net unit value..... $ 8.58 $ -- $ 7.24 $ -- $ 11.37 $ --
Cost of investments........ $2,111,175 $1,321,585 $918,280 $70,992 $1,215,819 $13,327
</Table>
See accompanying notes to the financial statements.
AA-9
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
S & P 500 INDEX FUND DIVISION MONEY MARKET FUND DIVISION
----------------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
------------ ------------ ----------- ---------- --------- ---------
Investment income (See Note 2C):
Dividend Income....................... $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges......... (490,060) (492,959) (404,761) (180,618) (63,761) (60,049)
------------ ------------ ----------- ---------- --------- ---------
Net investment income (expense).... (490,060) (492,959) (404,761) (180,618) (63,761) (60,049)
------------ ------------ ----------- ---------- --------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) from
distributions...................... 260,324 14,676,037 3,826,572 55,030 776,924 501,472
Realized gain (loss) on sales......... (1,247,290) 2,585,415 2,194,234 216,875 45,553 46,905
------------ ------------ ----------- ---------- --------- ---------
Net realized gain (loss) on
investments........................... (986,966) 17,261,452 6,020,806 271,905 822,477 548,377
------------ ------------ ----------- ---------- --------- ---------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on investments,
beginning of period................ (11,146,657) 12,073,799 8,332,257 (492,305) (292,325) (183,578)
Unrealized gain (loss) on investments,
end of period...................... (18,733,739) (11,146,657) 12,073,799 287,379 (492,305) (292,325)
------------ ------------ ----------- ---------- --------- ---------
Net unrealized gain (loss) on
investments...................... (7,587,082) (23,220,456) 3,741,542 779,684 (199,980) (108,747)
------------ ------------ ----------- ---------- --------- ---------
Net gain (loss) on investments..... (8,574,048) (5,959,004) 9,762,348 1,051,589 622,497 439,630
------------ ------------ ----------- ---------- --------- ---------
Net increase (decrease) in net assets
resulting from operations............. $ (9,064,108) $ (6,451,963) $ 9,357,587 $ 870,971 $ 558,736 $ 379,581
============ ============ =========== ========== ========= =========
</Table>
See accompanying notes to the financial statements.
AA-10
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
BOND INDEX FUND DIVISION MANAGED EQUITY FUND DIVISION
-------------------------------- -------------------------------------
2001 2000 1999 2001 2000 1999
-------- --------- --------- ----------- ----------- ---------
Investment income (See Note 2C):
Dividend Income............................. $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges............... (60,494) (51,753) (49,087) (56,525) (52,636) (50,674)
-------- --------- --------- ----------- ----------- ---------
Net investment income (expense).......... (60,494) (51,753) (49,087) (56,525) (52,636) (50,674)
-------- --------- --------- ----------- ----------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions..... 16,145 400,130 370,745 39,240 2,416,109 302,748
Realized gain (loss) on sales............... 110,111 2,144 (13,113) (204,219) 190,926 169,830
-------- --------- --------- ----------- ----------- ---------
Net realized gain (loss) on investments....... 126,256 402,274 357,632 (164,979) 2,607,035 472,578
-------- --------- --------- ----------- ----------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period...................... (59,387) (448,862) 79,646 (1,691,506) 110,752 436,496
Unrealized gain (loss) on investments, end
of period................................ 509,608 (59,387) (448,862) (1,342,683) (1,691,506) 110,752
-------- --------- --------- ----------- ----------- ---------
Net unrealized gain (loss) on
investments............................ 568,995 389,475 (528,508) 348,823 (1,802,258) (325,744)
-------- --------- --------- ----------- ----------- ---------
Net gain (loss) on investments........... 695,251 791,749 (170,876) 183,844 804,777 146,834
-------- --------- --------- ----------- ----------- ---------
Net increase (decrease) in net assets
resulting from operations................... $634,757 $ 739,996 $(219,963) $ 127,319 $ 752,141 $ 96,160
======== ========= ========= =========== =========== =========
</Table>
See accompanying notes to the financial statements.
AA-11
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
ASSET ALLOCATION FUND DIVISION INTERNATIONAL INDEX FUND DIVISION
-------------------------------------- --------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ---------- ----------- ----------- ----------
Investment income (See Note 2C):
Dividend Income...................... $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges........ (107,537) (161,076) (130,807) (53,562) (96,591) (90,299)
----------- ----------- ---------- ----------- ----------- ----------
Net investment income (expense)... (107,537) (161,076) (130,807) (53,562) (96,591) (90,299)
----------- ----------- ---------- ----------- ----------- ----------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions..................... 121,131 6,903,265 287,031 -- 1,771,145 164,897
Realized gain (loss) on sales........ (1,708,787) 955,801 804,253 (232,121) 523,080 295,829
----------- ----------- ---------- ----------- ----------- ----------
Net realized gain (loss) on
investments.......................... (1,587,656) 7,859,066 1,091,284 (232,121) 2,294,225 460,726
----------- ----------- ---------- ----------- ----------- ----------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on
investments, beginning of
period............................ (2,924,861) 4,658,326 2,336,704 (392,875) 3,766,663 1,297,560
Unrealized gain (loss) on
investments, end of period........ (2,544,220) (2,924,861) 4,658,326 (2,371,032) (392,875) 3,766,663
----------- ----------- ---------- ----------- ----------- ----------
Net unrealized gain (loss) on
investments..................... 380,641 (7,583,187) 2,321,622 (1,978,157) (4,159,538) 2,469,103
----------- ----------- ---------- ----------- ----------- ----------
Net gain (loss) on investments.... (1,207,015) 275,879 3,412,906 (2,210,278) (1,865,313) 2,929,829
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations............ $(1,314,552) $ 114,803 $3,282,099 $(2,263,840) $(1,961,904) $2,839,530
=========== =========== ========== =========== =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-12
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
MID-CAP EQUITY FUND DIVISION SMALL-CAP EQUITY FUND DIVISION
-------------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ---------- --------- --------- ---------
Investment income (See Note 2C):
Dividend Income........................... $ -- $ -- $ -- $ -- $ -- $ --
Expenses:
Mortality and expense charges............. (43,465) (67,013) (57,427) (30,708) (23,815) (21,138)
----------- ----------- ---------- --------- --------- ---------
Net investment income (expense)........ (43,465) (67,013) (57,427) (30,708) (23,815) (21,138)
----------- ----------- ---------- --------- --------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions... 40,342 2,473,629 16,722 4,894 208,782 116,957
Realized gain (loss) on sales............. (880,515) 577,510 239,296 (22,004) (225,132) (200,146)
----------- ----------- ---------- --------- --------- ---------
Net realized gain (loss) on investments..... (840,173) 3,051,139 256,018 (17,110) (16,350) (83,189)
----------- ----------- ---------- --------- --------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period.................... (2,712,068) 1,140,498 389,305 (190,367) (439,908) (414,321)
Unrealized gain (loss) on investments, end
of period.............................. (3,730,043) (2,712,068) 1,140,498 464,120 (190,367) (439,908)
----------- ----------- ---------- --------- --------- ---------
Net unrealized gain (loss) on
investments.......................... (1,017,975) (3,852,566) 751,193 654,487 249,541 (25,587)
----------- ----------- ---------- --------- --------- ---------
Net gain (loss) on investments......... (1,858,148) (801,427) 1,007,211 637,377 233,191 (108,776)
----------- ----------- ---------- --------- --------- ---------
Net increase (decrease) in net assets
resulting from operations................. $(1,901,613) $ (868,440) $ 949,784 $ 606,669 $ 209,376 $(129,914)
=========== =========== ========== ========= ========= =========
</Table>
See accompanying notes to the financial statements.
AA-13
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
EQUITY INCOME FUND DIVISION GROWTH FUND DIVISION
------------------------------------- -----------------------------------------
2001 2000 1999 2001 2000 1999
----------- ---------- ---------- ------------ ------------ -----------
Investment income (See Note 2C):
Dividend Income.................... $ 398,762 $ 405,669 $ 314,148 $ 39,900 $ 62,273 $ 64,208
Expenses:
Mortality and expense charges...... (180,832) (180,926) (188,156) (371,131) (464,392) (347,933)
----------- ---------- ---------- ------------ ------------ -----------
Net investment income
(expense)..................... 217,930 224,743 125,992 (331,231) (402,119) (283,725)
----------- ---------- ---------- ------------ ------------ -----------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions................... 1,120,333 1,528,337 694,432 3,750,572 6,196,177 4,037,056
Realized gain (loss) on sales...... 25,609 760,990 803,421 (699,917) 2,588,618 1,981,320
----------- ---------- ---------- ------------ ------------ -----------
Net realized gain (loss) on
investments........................ 1,145,942 2,289,327 1,497,853 3,050,655 8,784,795 6,018,376
----------- ---------- ---------- ------------ ------------ -----------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on
investments, beginning of
period.......................... 1,729,089 2,561,251 3,031,759 2,654,006 18,619,738 10,185,551
Unrealized gain (loss) on
investments, end of period...... (1,076,113) 1,729,089 2,561,251 (10,927,256) 2,654,006 18,619,738
----------- ---------- ---------- ------------ ------------ -----------
Net unrealized gain (loss) on
investments................... (2,805,202) (832,162) (470,508) (13,581,262) (15,965,732) 8,434,187
----------- ---------- ---------- ------------ ------------ -----------
Net gain (loss) on
investments................... (1,659,260) 1,457,165 1,027,345 (10,530,607) (7,180,937) 14,452,563
----------- ---------- ---------- ------------ ------------ -----------
Net increase (decrease) in net assets
resulting from operations.......... $(1,441,330) $1,681,908 $1,153,337 $(10,861,838) $ (7,583,056) $14,168,838
=========== ========== ========== ============ ============ ===========
</Table>
See accompanying notes to the financial statements.
AA-14
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
OVERSEAS FUND DIVISION ASSET MANAGER FUND DIVISION
-------------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ---------- --------- --------- --------
Investment income (See Note 2C):
Dividend Income............................ $ 684,329 $ 215,081 $ 155,887 $ 115,441 $ 76,446 $ 41,846
Expenses:
Mortality and expense charges.............. (90,905) (117,674) (90,840) (20,693) (18,919) (15,438)
----------- ----------- ---------- --------- --------- --------
Net investment income (expense)......... 593,424 97,407 65,047 94,748 57,527 26,408
----------- ----------- ---------- --------- --------- --------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions.... 1,081,681 1,354,432 251,431 43,291 180,102 53,005
Realized gain (loss) on sales.............. (707,133) 466,998 344,512 (132,840) (2,259) 31,755
----------- ----------- ---------- --------- --------- --------
Net realized gain (loss) on investments...... 374,548 1,821,430 595,943 (89,549) 177,843 84,760
----------- ----------- ---------- --------- --------- --------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period..................... (619,966) 4,550,473 898,037 (187,017) 178,795 93,508
Unrealized gain (loss) on investments, end
of period............................... (4,702,233) (619,966) 4,550,473 (331,986) (187,017) 178,795
----------- ----------- ---------- --------- --------- --------
Net unrealized gain (loss) on
investments........................... (4,082,267) (5,170,439) 3,652,436 (144,969) (365,812) 85,287
----------- ----------- ---------- --------- --------- --------
Net gain (loss) on investments.......... (3,707,719) (3,349,009) 4,248,379 (234,518) (187,969) 170,047
----------- ----------- ---------- --------- --------- --------
Net increase (decrease) in net assets
resulting from operations.................. $(3,114,295) $(3,251,602) $4,313,426 $(139,770) $(130,442) $196,455
=========== =========== ========== ========= ========= ========
</Table>
See accompanying notes to the financial statements.
AA-15
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
MID CAP PORTFOLIO FUND
HIGH INCOME FUND DIVISION DIVISION
------------------------------------- ----------------------
2001 2000 1999 2001 2000**
----------- ----------- --------- ---------- ---------
Investment income (See Note 2C):
Dividend Income....................................... $ 711,911 $ 297,498 $ 282,249 $ -- $ 3,443
Expenses:
Mortality and expense charges......................... (43,350) (38,853) (29,555) (10,025) (1,385)
----------- ----------- --------- -------- -------
Net investment income (expense).................... 668,561 258,645 252,694 (10,025) 2,058
----------- ----------- --------- -------- -------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions............... -- -- 10,551 -- --
Realized gain (loss) on sales......................... (499,890) (153,890) (195,235) 5,749 1,905
----------- ----------- --------- -------- -------
Net realized gain (loss) on investments................. (499,890) (153,890) (184,684) 5,749 1,905
----------- ----------- --------- -------- -------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, beginning of
period............................................. (1,520,552) (27,408) (198,858) 33,908 --
Unrealized gain (loss) on investments, end of
period............................................. (2,464,173) (1,520,552) (27,408) 70,096 33,908
----------- ----------- --------- -------- -------
Net unrealized gain (loss) on investments.......... (943,621) (1,493,144) 171,450 36,188 33,908
----------- ----------- --------- -------- -------
Net gain (loss) on investments..................... (1,443,511) (1,647,034) (13,234) 41,937 35,813
----------- ----------- --------- -------- -------
Net increase (decrease) in net assets resulting from
operations............................................ $ (774,950) $(1,388,389) $ 239,460 $ 31,912 $37,871
=========== =========== ========= ======== =======
</Table>
- ---------------
** For Period May 1, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-16
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
WORLDWIDE HARD ASSETS FUND DIVISION WORLDWIDE EMERGING MARKETS FUND DIVISION
------------------------------------- ----------------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ----------- ------------ ------------ ----------
Investment income (See Note 2C):
Dividend Income..................... $ 3,771 $ 3,521 $ 3,217 $ -- $ -- $ --
Expenses:
Mortality and expense charges....... (2,764) (2,821) (2,303) (7,340) (7,572) (583)
-------- -------- --------- --------- --------- -------
Net investment income
(expense)...................... 1,007 700 914 (7,340) (7,572) (583)
-------- -------- --------- --------- --------- -------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions.................... -- -- -- -- -- --
Realized gain (loss) on sales....... (2,165) (32,872) (40,905) (594,374) (86,751) 29,159
-------- -------- --------- --------- --------- -------
Net realized gain (loss) on
investments......................... (2,165) (32,872) (40,905) (594,374) (86,751) 29,159
-------- -------- --------- --------- --------- -------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on
investments, beginning
of period........................ 38,766 (28,094) (115,608) (550,168) 44,010 143
Unrealized gain (loss) on
investments, end of period....... (1,904) 38,766 (28,094) (50,771) (550,168) 44,010
-------- -------- --------- --------- --------- -------
Net unrealized gain (loss) on
investments.................... (40,670) 66,860 87,514 499,397 (594,178) 43,867
-------- -------- --------- --------- --------- -------
Net gain (loss) on investments... (42,835) 33,988 46,609 (94,977) (680,929) 73,026
-------- -------- --------- --------- --------- -------
Net increase (decrease) in net assets
resulting from operations........... $(41,828) $ 34,688 $ 47,523 $(102,317) $(688,501) $72,443
======== ======== ========= ========= ========= =======
</Table>
See accompanying notes to the financial statements.
AA-17
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
MULTI-STYLE EQUITY FUND DIVISION CORE BOND FUND DIVISION
-------------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ---------- -------- --------- ---------
Investment income (See Note 2C):
Dividend Income............................ $ 41,403 $ 74,081 $ 104,649 $182,428 $ 445,197 $ 476,170
Expenses:
Mortality and expense charges.............. (60,287) (96,695) (94,698) (21,368) (55,268) (48,381)
----------- ----------- ---------- -------- --------- ---------
Net investment income (expense)......... (18,884) (22,614) 9,951 161,060 389,929 427,789
----------- ----------- ---------- -------- --------- ---------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions.... 176,452 513,373 1,357,954 19,878 -- 292,845
Realized gain (loss) on sales.............. (1,292,312) 934,300 281,283 29,828 (472,084) (62,678)
----------- ----------- ---------- -------- --------- ---------
Net realized gain (loss) on investments...... (1,115,860) 1,447,673 1,639,237 49,706 (472,084) 230,167
----------- ----------- ---------- -------- --------- ---------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period..................... (1,130,058) 2,118,228 1,504,566 103,744 (651,116) 99,544
Unrealized gain (loss) on investments, end
of period............................... (1,485,476) (1,130,058) 2,118,228 92,107 103,744 (651,116)
----------- ----------- ---------- -------- --------- ---------
Net unrealized gain (loss) on
investments........................... (355,418) (3,248,286) 613,662 (11,637) 754,860 (750,660)
----------- ----------- ---------- -------- --------- ---------
Net gain (loss) on investments.......... (1,471,278) (1,800,613) 2,252,899 38,069 282,776 (520,493)
----------- ----------- ---------- -------- --------- ---------
Net increase (decrease) in net assets
resulting from operations.................. $(1,490,162) $(1,823,227) $2,262,850 $199,129 $ 672,705 $ (92,704)
=========== =========== ========== ======== ========= =========
</Table>
See accompanying notes to the financial statements.
AA-18
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
AGGRESSIVE EQUITY FUND DIVISION NON-US FUND DIVISION
-------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
--------- --------- -------- --------- ----------- ----------
Investment income (See Note 2C):
Dividend Income.............................. $ 3,637 $ 15,814 $ 13,632 $ 14,996 $ 4,604 $ 75,751
Expenses:
Mortality and expense charges................ (22,937) (30,352) (25,526) (18,194) (25,678) (24,741)
--------- --------- -------- --------- ----------- ----------
Net investment income (expense)........... (19,300) (14,538) (11,894) (3,198) (21,074) 51,010
--------- --------- -------- --------- ----------- ----------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions...... -- 472,086 21,933 -- 286,885 104,370
Realized gain (loss) on sales................ (162,100) (38,895) (47,751) (90,231) 488,585 109,735
--------- --------- -------- --------- ----------- ----------
Net realized gain (loss) on investments........ (162,100) 433,191 (25,818) (90,231) 775,470 214,105
--------- --------- -------- --------- ----------- ----------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period....................... (177,317) 318,975 (22,415) (261,333) 1,132,570 160,666
Unrealized gain (loss) on investments, end
of period................................. (143,709) (177,317) 318,975 (867,445) (261,333) 1,132,570
--------- --------- -------- --------- ----------- ----------
Net unrealized gain (loss) on
investments............................. 33,608 (496,292) 341,390 (606,112) (1,393,903) 971,904
--------- --------- -------- --------- ----------- ----------
Net gain (loss) on investments............ (128,492) (63,101) 315,572 (696,343) (618,433) 1,186,009
--------- --------- -------- --------- ----------- ----------
Net increase (decrease) in net assets resulting
from operations.............................. $(147,792) $ (77,639) $303,678 $(699,541) $ (639,507) $1,237,019
========= ========= ======== ========= =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-19
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
INCOME & GROWTH FUND DIVISION INTERNATIONAL FUND DIVISION
------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
--------- --------- ------- ----------- --------- --------
Investment income (See Note 2C):
Dividend Income................................. $ 32,247 $ 7,351 $ 8 $ 3,651 $ 2,080 $ --
Expenses:
Mortality and expense charges................... (21,730) (13,332) (2,364) (22,723) (17,848) (989)
--------- --------- ------- ----------- --------- --------
Net investment income (expense).............. 10,517 (5,981) (2,356) (19,072) (15,768) (989)
--------- --------- ------- ----------- --------- --------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions......... -- -- -- 403,113 31,114 --
Realized gain (loss) on sales................... (208,919) 4,053 34,901 (805,746) 46,401 49,932
--------- --------- ------- ----------- --------- --------
Net realized gain (loss) on investments........... (208,919) 4,053 34,901 (402,633) 77,515 49,932
--------- --------- ------- ----------- --------- --------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, beginning
of period.................................... (283,900) 43,675 471 (583,356) 120,672 45
Unrealized gain (loss) on investments, end of
period....................................... (459,120) (283,900) 43,675 (1,655,964) (583,356) 120,672
--------- --------- ------- ----------- --------- --------
Net unrealized gain (loss) on investments.... (175,220) (327,575) 43,204 (1,072,608) (704,028) 120,627
--------- --------- ------- ----------- --------- --------
Net gain (loss) on investments............... (384,139) (323,522) 78,105 (1,475,241) (626,513) 170,559
--------- --------- ------- ----------- --------- --------
Net increase (decrease) in net assets resulting
from operations................................. $(373,622) $(329,503) $75,749 $(1,494,313) $(642,281) $169,570
========= ========= ======= =========== ========= ========
</Table>
See accompanying notes to the financial statements.
AA-20
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
VALUE FUND DIVISION BOND PORTFOLIO FUND DIVISION
------------------------------ ----------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- -------- ------- -------
Investment income (See Note 2C):
Dividend Income........................................ $ 19,250 $ 3,598 $ 48 $ 66,356 $62,032 $ 2,328
Expenses:
Mortality and expense charges.......................... (6,302) (2,305) (541) (5,407) (3,528) (221)
-------- -------- -------- -------- ------- -------
Net investment income (expense)..................... 12,948 1,293 (493) 60,949 58,504 2,107
-------- -------- -------- -------- ------- -------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions................ -- 9,205 450 9,201 -- 40
Realized gain (loss) on sales.......................... 221,520 (1,159) (14,864) 28,799 455 (262)
-------- -------- -------- -------- ------- -------
Net realized gain (loss) on investments.................. 221,520 8,046 (14,414) 38,000 455 (222)
-------- -------- -------- -------- ------- -------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, beginning of
period.............................................. 222,677 1,835 85 23,238 (2,016) 3
Unrealized gain (loss) on investments, end of period... 224,096 222,677 1,835 (2,449) 23,238 (2,016)
-------- -------- -------- -------- ------- -------
Net unrealized gain (loss) on investments........... 1,419 220,842 1,750 (25,687) 25,254 (2,019)
-------- -------- -------- -------- ------- -------
Net gain (loss) on investments...................... 222,939 228,888 (12,664) 12,313 25,709 (2,241)
-------- -------- -------- -------- ------- -------
Net increase (decrease) in net assets resulting from
operations............................................. $235,887 $230,181 $(13,157) $ 73,262 $84,213 $ (134)
======== ======== ======== ======== ======= =======
</Table>
See accompanying notes to the financial statements.
AA-21
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
LARGE CAP VALUE
SMALL COMPANY PORTFOLIO FUND DIVISION FUND DIVISION
-------------------------------------- --------------------
2001 2000 1999 2001 2000*
----------- ----------- ---------- --------- --------
Investment income (See Note 2C):
Dividend Income........................................ $ 1,396 $ 7,170 $ 104 $ 60,646 $ 10,201
Expenses:
Mortality and expense charges.......................... (18,295) (14,914) (731) (26,927) (5,062)
--------- --------- -------- --------- --------
Net investment income (expense)..................... (16,899) (7,744) (627) 33,719 5,139
--------- --------- -------- --------- --------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions................ -- 42,416 11,337 101,095 --
Realized gain (loss) on sales.......................... (750,139) 71,004 4,540 19,878 269
--------- --------- -------- --------- --------
Net realized gain (loss) on investments.................. (750,139) 113,420 15,877 120,973 269
--------- --------- -------- --------- --------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments, beginning of
period.............................................. (507,291) 96,610 187 194,619 --
Unrealized gain (loss) on investments, end of period... (280,413) (507,291) 96,610 (69,454) 194,619
--------- --------- -------- --------- --------
Net unrealized gain (loss) on investments........... 226,878 (603,901) 96,423 (264,073) 194,619
--------- --------- -------- --------- --------
Net gain (loss) on investments...................... (523,261) (490,481) 112,300 (143,100) 194,888
--------- --------- -------- --------- --------
Net increase (decrease) in net assets resulting from
operations............................................. $(540,160) $(498,225) $111,673 $(109,381) $200,027
========= ========= ======== ========= ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-22
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001 AND 2000
<Table>
<Caption>
LARGE CAP GROWTH SMALL CAP VALUE SMALL CAP GROWTH
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------- ------------------ --------------------
2001 2000* 2001 2000* 2001 2000*
--------- --------- -------- ------- --------- --------
Investment income (See Note 2C):
Dividend Income........................... $ -- $ -- $ 7,632 $ 1,598 $ -- $ --
Expenses:
Mortality and expense charges............. (17,086) (5,429) (5,959) (827) (5,267) (1,240)
--------- --------- -------- ------- --------- --------
Net investment income (expense)........ (17,086) (5,429) 1,673 771 (5,267) (1,240)
--------- --------- -------- ------- --------- --------
Net realized gain (loss) on investments:
Realized gain (loss) from distributions... -- -- 164,358 9,311 -- --
Realized gain (loss) on sales............. (273,188) (1,016) 17,458 712 (43,461) 336
--------- --------- -------- ------- --------- --------
Net realized gain (loss) on investments..... (273,188) (1,016) 181,816 10,023 (43,461) 336
--------- --------- -------- ------- --------- --------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period.................... (431,299) -- 28,138 -- (40,036) --
Unrealized gain (loss) on investments, end
of period.............................. (886,275) (431,299) 78,578 28,138 (170,181) (40,036)
--------- --------- -------- ------- --------- --------
Net unrealized gain (loss) on
investments.......................... (454,976) (431,299) 50,440 28,138 (130,145) (40,036)
--------- --------- -------- ------- --------- --------
Net gain (loss) on investments......... (728,164) (432,315) 232,256 38,161 (173,606) (39,700)
--------- --------- -------- ------- --------- --------
Net increase (decrease) in net assets
resulting from operations................. $(745,250) $(437,744) $233,929 $38,932 $(178,873) $(40,940)
========= ========= ======== ======= ========= ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-23
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
INTERNATIONAL EQUITY EMERGING MARKETS EQUITY CORE FIXED INCOME
FUND DIVISION FUND DIVISION FUND DIVISION
--------------------- ----------------------- --------------------
2001 2000* 2001 2000* 2001 2000*
--------- --------- ---------- ---------- --------- --------
Investment income (See Note 2C):
Dividend Income...................... $ 3,320 $ 19,342 $ -- $ -- $ 570,668 $ 71,862
Expenses:
Mortality and expense charges........ (16,945) (5,386) (5,858) (1,934) (45,754) (9,123)
--------- --------- --------- --------- --------- --------
Net investment income (expense)... (13,625) 13,956 (5,858) (1,934) 524,914 62,739
--------- --------- --------- --------- --------- --------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions..................... -- -- -- -- -- --
Realized gain (loss) on sales........ (150,854) (5,118) (71,561) (4,309) 63,329 897
--------- --------- --------- --------- --------- --------
Net realized gain (loss) on
investments.......................... (150,854) (5,118) (71,561) (4,309) 63,329 897
--------- --------- --------- --------- --------- --------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on
investments, beginning of
period............................ (254,806) -- (142,634) -- 137,043 --
Unrealized gain (loss) on
investments, end of period........ (725,352) (254,806) (160,698) (142,634) (26,153) 137,043
--------- --------- --------- --------- --------- --------
Net unrealized gain (loss) on
investments..................... (470,546) (254,806) (18,064) (142,634) (163,196) 137,043
--------- --------- --------- --------- --------- --------
Net gain (loss) on investments.... (621,400) (259,924) (89,625) (146,943) (99,867) 137,940
--------- --------- --------- --------- --------- --------
Net increase (decrease) in net assets
resulting from operations............ $(635,025) $(245,968) $ (95,483) $(148,877) $ 425,047 $200,679
========= ========= ========= ========= ========= ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-24
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
HIGH YIELD BOND INTERNATIONAL FIXED EMERGING MARKETS DEBT
FUND DIVISION INCOME FUND DIVISION FUND DIVISION
------------------- -------------------- ---------------------
2001 2000* 2001 2000* 2001 2000*
-------- -------- --------- -------- --------- ---------
Investment income (See Note 2C):
Dividend Income.......................... $ 71,607 $ 7,586 $ 5,857 $ -- $ 24,667 $ 13,370
Expenses:
Mortality and expense charges............ (5,121) (514) (5,060) (752) (1,601) (367)
-------- -------- -------- ------- -------- --------
Net investment income (expense)....... 66,486 7,072 797 (752) 23,066 13,003
-------- -------- -------- ------- -------- --------
Net realized gain (loss) on investments:
Realized gain (loss) from
distributions......................... -- -- -- -- -- 2,411
Realized gain (loss) on sales............ (11,370) (233) 3,141 (876) 109 129
-------- -------- -------- ------- -------- --------
Net realized gain (loss) on investments.... (11,370) (233) 3,141 (876) 109 2,540
-------- -------- -------- ------- -------- --------
Net unrealized gain (loss) on investments:
Unrealized gain (loss) on investments,
beginning of period................... (13,421) -- 40,423 -- (10,850) --
Unrealized gain (loss) on investments,
end of period......................... (58,939) (13,421) (8,120) 40,423 (7,746) (10,850)
-------- -------- -------- ------- -------- --------
Net unrealized gain (loss) on
investments......................... (45,518) (13,421) (48,543) 40,423 3,104 (10,850)
-------- -------- -------- ------- -------- --------
Net gain (loss) on investments........ (56,888) (13,654) (45,402) 39,547 3,213 (8,310)
-------- -------- -------- ------- -------- --------
Net increase (decrease) in net assets
resulting from operations................ $ 9,598 $ (6,582) $(44,605) $38,795 $ 26,279 $ 4,693
======== ======== ======== ======= ======== ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-25
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
{T. ROWE PRICE LARGE CAP T. ROWE PRICE SMALL CAP
JANUS MID-CAP FUND DIVISION GROWTH FUND DIVISION} GROWTH FUND DIVISION
--------------------------- ------------------------- ------------------------
2001 2000* 2001 2000* 2001 2000*
------------ ------------ ----------- ----------- ----------- ----------
Investment income (See Note
2C):
Dividend Income.......... $ -- $ -- $ 139 $ 1,560 $ -- $ --
Expenses:
Mortality and expense
charges............... (23,470) (8,532) (5,207) (3,198) (7,035) (884)
----------- ----------- --------- --------- --------- --------
Net investment income
(expense)........... (23,470) (8,532) (5,068) (1,638) (7,035) (884)
----------- ----------- --------- --------- --------- --------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions......... -- 169,898 15 31,871 67,141 --
Realized gain (loss) on
sales................. (890,046) 19,511 (263,785) 12,647 (147,529) (2,971)
----------- ----------- --------- --------- --------- --------
Net realized gain (loss) on
investments.............. (890,046) 189,409 (263,770) 44,518 (80,388) (2,971)
----------- ----------- --------- --------- --------- --------
Net unrealized gain (loss)
on investments:
Unrealized gain (loss) on
investments, beginning
of period............. (1,114,808) -- (120,834) -- (36,551) --
Unrealized gain (loss) on
investments, end of
period................ (1,836,132) (1,114,808) 84,641 (120,834) (72,047) (36,551)
----------- ----------- --------- --------- --------- --------
Net unrealized gain
(loss) on
investments......... (721,324) (1,114,808) 205,475 (120,834) (35,496) (36,551)
----------- ----------- --------- --------- --------- --------
Net gain (loss) on
investments......... (1,611,370) (925,399) (58,295) (76,316) (115,884) (39,522)
----------- ----------- --------- --------- --------- --------
Net increase (decrease) in
net assets resulting from
operations............... $(1,634,840) $ (933,931) $ (63,363) $ (77,954) $(122,919) $(40,406)
=========== =========== ========= ========= ========= ========
</Table>
- ---------------
* For Period May 1, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-26
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
JANUS HARRIS OAKMARK PIMCO
ALGER EQUITY GROWTH SERIES GROWTH MID-CAP INNOVATIONS
FUND DIVISION FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------- ------------- -------------- -------------
2001 2000* 2001** 2001** 2001**
------------ ------------ ------------- -------------- -------------
Investment income (See Note 2C):
Dividend Income................... $ 2,915 $ 855 $ -- $ -- $ --
Expenses:
Mortality and expense charges..... (8,509) (4,682) (110) (191) (26)
--------- --------- ------- ------- ------
Net investment income
(expense).................... (5,594) (3,827) (110) (191) (26)
--------- --------- ------- ------- ------
Net realized gain (loss) on
investments:
Realized gain (loss) from
distributions.................. 57,696 2,136 -- -- --
Realized gain (loss) on sales..... (554,108) 10,503 (922) 10,815 388
--------- --------- ------- ------- ------
Net realized gain (loss) on
investments....................... (496,412) 12,639 (922) 10,815 388
--------- --------- ------- ------- ------
Net unrealized gain (loss) on
investments:
Unrealized gain (loss) on
investments, beginning of
period......................... (261,796) -- -- -- --
Unrealized gain (loss) on
investments, end of period..... (109,714) (261,796) (1,402) 80,364 2,087
--------- --------- ------- ------- ------
Net unrealized gain (loss) on
investments.................. 152,082 (261,796) (1,402) 80,364 2,087
--------- --------- ------- ------- ------
Net gain (loss) on
investments.................. (344,330) (249,157) (2,324) 91,179 2,475
--------- --------- ------- ------- ------
Net increase (decrease) in net
assets resulting from
operations........................ $(349,924) $(252,984) $(2,434) $90,988 $2,449
========= ========= ======= ======= ======
</Table>
- ---------------
* For Period May 1, 2000 (inception) to December 31, 2000
** For Period May 1, 2001 (inception) to December 31, 2001
See accompanying notes to the financial statements.
AA-27
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
S & P 500 INDEX FUND DIVISION MONEY MARKET FUND DIVISION
---------------------------------------- --------------------------------------
2001 2000 1999 2001 2000 1999
----------- ------------ ----------- ----------- ----------- ----------
Operations:
Net investment income (expense).... $ (490,060) $ (492,959) $ (404,761) $ (180,618) $ (63,761) $ (60,049)
Net realized gain (loss) on
investments..................... (986,966) 17,261,452 6,020,806 271,905 822,477 548,377
Net unrealized gain (loss) on
investments..................... (7,587,082) (23,220,456) 3,741,542 779,684 (199,980) (108,747)
----------- ------------ ----------- ----------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations.................... (9,064,108) (6,451,963) 9,357,587 870,971 558,736 379,581
Net deposits into (withdrawals
from) Separate Account.......... 17,611,794 11,162,463 8,977,500 26,544,164 3,108,059 2,797,074
----------- ------------ ----------- ----------- ----------- ----------
Increase (decrease) in net
assets........................ 8,547,686 4,710,500 18,335,087 27,415,135 3,666,795 3,176,655
Net assets, beginning of period.... 65,463,226 60,752,726 42,417,639 13,579,037 9,912,242 6,735,587
----------- ------------ ----------- ----------- ----------- ----------
Net assets, end of period.......... $74,010,912 $ 65,463,226 $60,752,726 $40,994,172 $13,579,037 $9,912,242
=========== ============ =========== =========== =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-28
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
BOND INDEX FUND DIVISION MANAGED EQUITY FUND DIVISION
------------------------------------ -------------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ---------- ----------- ----------
Operations:
Net investment income (expense)......... $ (60,494) $ (51,753) $ (49,087) $ (56,525) $ (52,636) $ (50,674)
Net realized gain (loss) on
investments.......................... 126,256 402,274 357,632 (164,979) 2,607,035 472,578
Net unrealized gain (loss) on
investments.......................... 568,995 389,475 (528,508) 348,823 (1,802,258) (325,744)
---------- ---------- ---------- ---------- ----------- ----------
Net increase (decrease) in net assets
resulting from operations.......... 634,757 739,996 (219,963) 127,319 752,141 96,160
Net deposits into (withdrawals from)
Separate Account..................... 833,422 833,230 1,249,584 752,147 (222,481) 761,498
---------- ---------- ---------- ---------- ----------- ----------
Increase (decrease) in net assets.... 1,468,179 1,573,226 1,029,621 879,466 529,660 857,658
Net assets, beginning of period......... 7,709,968 6,136,742 5,107,121 6,913,728 6,384,068 5,526,410
---------- ---------- ---------- ---------- ----------- ----------
Net assets, end of period............... $9,178,147 $7,709,968 $6,136,742 $7,793,194 $ 6,913,728 $6,384,068
========== ========== ========== ========== =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-29
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
ASSET ALLOCATION FUND DIVISION INTERNATIONAL INDEX FUND DIVISION
--------------------------------------- ---------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ----------- ----------- ----------- -----------
Operations:
Net investment income (expense).... $ (107,537) $ (161,076) $ (130,807) $ (53,562) $ (96,591) $ (90,299)
Net realized gain (loss) on
investments..................... (1,587,656) 7,859,066 1,091,284 (232,121) 2,294,225 460,726
Net unrealized gain (loss) on
investments..................... 380,641 (7,583,187) 2,321,622 (1,978,157) (4,159,538) 2,469,103
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations.................... (1,314,552) 114,803 3,282,099 (2,263,840) (1,961,904) 2,839,530
Net deposits into (withdrawals
from) Separate Account.......... (5,997,096) 1,034,218 1,858,100 182,775 (692,669) 237,255
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) in net
assets........................ (7,311,648) 1,149,021 5,140,199 (2,081,065) (2,654,573) 3,076,785
Net assets, beginning of period.... 19,722,192 18,573,171 13,432,972 10,339,039 12,993,612 9,916,827
----------- ----------- ----------- ----------- ----------- -----------
Net assets, end of period.......... $12,410,544 $19,722,192 $18,573,171 $ 8,257,974 $10,339,039 $12,993,612
=========== =========== =========== =========== =========== ===========
</Table>
See accompanying notes to the financial statements.
AA-30
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
MID-CAP EQUITY FUND DIVISION SMALL-CAP EQUITY FUND DIVISION
-------------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ---------- ---------- ---------- ----------
Operations:
Net investment income (expense)........ $ (43,465) $ (67,013) $ (57,427) $ (30,708) $ (23,815) $ (21,138)
Net realized gain (loss) on
investments......................... (840,173) 3,051,139 256,018 (17,110) (16,350) (83,189)
Net unrealized gain (loss) on
investments......................... (1,017,975) (3,852,566) 751,193 654,487 249,541 (25,587)
----------- ----------- ---------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ (1,901,613) (868,440) 949,784 606,669 209,376 (129,914)
Net deposits into (withdrawals from)
Separate Account.................... 676,857 (722,594) 26,099 538,596 423,482 672,746
----------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets... (1,224,756) (1,591,034) 975,883 1,145,265 632,858 542,832
Net assets, beginning of period........ 6,762,947 8,353,981 7,378,098 3,550,402 2,917,544 2,374,712
----------- ----------- ---------- ---------- ---------- ----------
Net assets, end of period.............. $ 5,538,191 $ 6,762,947 $8,353,981 $4,695,667 $3,550,402 $2,917,544
=========== =========== ========== ========== ========== ==========
</Table>
See accompanying notes to the financial statements.
AA-31
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
EQUITY INCOME FUND DIVISION GROWTH FUND DIVISION
--------------------------------------- -----------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ----------- ------------ ------------ -----------
Operations:
Net investment income
(expense)..................... $ 217,930 $ 224,743 $ 125,992 $ (331,231) $ (402,119) $ (283,725)
Net realized gain (loss) on
investments................... 1,145,942 2,289,327 1,497,853 3,050,655 8,784,795 6,018,376
Net unrealized gain (loss) on
investments................... (2,805,202) (832,162) (470,508) (13,581,262) (15,965,732) 8,434,187
----------- ----------- ----------- ------------ ------------ -----------
Net increase (decrease) in net
assets resulting from
operations.................. (1,441,330) 1,681,908 1,153,337 (10,861,838) (7,583,056) 14,168,838
Net deposits into (withdrawals
from) Separate Account........ 1,530,030 (1,760,622) 2,171,008 2,444,336 9,787,954 6,264,467
----------- ----------- ----------- ------------ ------------ -----------
Increase (decrease) in net
assets...................... 88,700 (78,714) 3,324,345 (8,417,502) 2,204,898 20,433,305
Net assets, beginning of
period........................ 24,075,723 24,154,437 20,830,092 57,917,623 55,712,725 35,279,420
----------- ----------- ----------- ------------ ------------ -----------
Net assets, end of period........ $24,164,423 $24,075,723 $24,154,437 $ 49,500,121 $ 57,917,623 $55,712,725
=========== =========== =========== ============ ============ ===========
</Table>
See accompanying notes to the financial statements.
AA-32
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
OVERSEAS FUND DIVISION ASSET MANAGER FUND DIVISION
--------------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ----------- ---------- ---------- ----------
Operations:
Net investment income (expense)....... $ 593,424 $ 97,407 $ 65,047 $ 94,748 $ 57,527 $ 26,408
Net realized gain (loss) on
investments........................ 374,548 1,821,430 595,943 (89,549) 177,843 84,760
Net unrealized gain (loss) on
investments........................ (4,082,267) (5,170,439) 3,652,436 (144,969) (365,812) 85,287
----------- ----------- ----------- ---------- ---------- ----------
Net increase (decrease) in net
assets resulting from
operations....................... (3,114,295) (3,251,602) 4,313,426 (139,770) (130,442) 196,455
Net deposits into (withdrawals from)
Separate Account................... (69,965) 2,714,981 765,467 529,083 524,707 984,955
----------- ----------- ----------- ---------- ---------- ----------
Increase (decrease) in net
assets........................... (3,184,260) (536,621) 5,078,893 389,313 394,265 1,181,410
Net assets, beginning of period....... 14,514,730 15,051,351 9,972,458 2,812,186 2,417,921 1,236,511
----------- ----------- ----------- ---------- ---------- ----------
Net assets, end of period............. $11,330,470 $14,514,730 $15,051,351 $3,201,499 $2,812,186 $2,417,921
=========== =========== =========== ========== ========== ==========
</Table>
See accompanying notes to the financial statements.
AA-33
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
MID CAP PORTFOLIO
HIGH INCOME FUND DIVISION FUND DIVISION
------------------------------------- ---------------------
2001 2000 1999 2001 2000*
---------- ----------- ---------- ---------- --------
Operations:
Net investment income (expense)........................ $ 668,561 $ 258,645 $ 252,694 $ (10,025) $ 2,058
Net realized gain (loss) on investments................ (499,890) (153,890) (184,684) 5,749 1,905
Net unrealized gain (loss) on investments.............. (943,621) (1,493,144) 171,450 36,188 33,908
---------- ----------- ---------- ---------- --------
Net increase (decrease) in net assets resulting from
operations........................................ (774,950) (1,388,389) 239,460 31,912 37,871
Net deposits into (withdrawals from) Separate
Account............................................. 1,135,694 2,755,535 1,146,113 1,284,427 836,766
---------- ----------- ---------- ---------- --------
Increase (decrease) in net assets................... 360,744 1,367,146 1,385,573 1,316,339 874,637
Net assets, beginning of period........................ 5,739,765 4,372,619 2,987,046 874,637 --
---------- ----------- ---------- ---------- --------
Net assets, end of period.............................. $6,100,509 $ 5,739,765 $4,372,619 $2,190,976 $874,637
========== =========== ========== ========== ========
</Table>
- ---------------
* For Period May 1, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-34
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
WORLDWIDE HARD ASSETS FUND DIVISION WORLDWIDE EMERGING MARKETS FUND DIVISION
------------------------------------ ----------------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- ---------- ------------ ------------ ----------
Operations:
Net investment income (expense)...... $ 1,007 $ 700 $ 914 $ (7,340) $ (7,572) $ (583)
Net realized gain (loss) on
investments....................... (2,165) (32,872) (40,905) (594,374) (86,751) 29,159
Net unrealized gain (loss) on
investments....................... (40,670) 66,860 87,514 499,397 (594,178) 43,867
-------- -------- -------- ---------- ---------- --------
Net increase (decrease) in net
assets resulting from
operations...................... (41,828) 34,688 47,523 (102,317) (688,501) 72,443
Net deposits into (withdrawals from)
Separate Account.................. 42,937 (4,676) 47,731 (505,153) 1,842,734 194,510
-------- -------- -------- ---------- ---------- --------
Increase (decrease) in net
assets.......................... 1,109 30,012 95,254 (607,470) 1,154,233 266,953
Net assets, beginning of period...... 346,354 316,342 221,088 1,423,027 268,794 1,841
-------- -------- -------- ---------- ---------- --------
Net assets, end of period............ $347,463 $346,354 $316,342 $ 815,557 $1,423,027 $268,794
======== ======== ======== ========== ========== ========
</Table>
See accompanying notes to the financial statements.
AA-35
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
MULTI-STYLE EQUITY FUND DIVISION CORE BOND FUND DIVISION
--------------------------------------- -------------------------------------
2001 2000 1999 2001 2000 1999
----------- ----------- ----------- ---------- ----------- ----------
Operations:
Net investment income (expense)...... $ (18,884) $ (22,614) $ 9,951 $ 161,060 $ 389,929 $ 427,789
Net realized gain (loss) on
investments....................... (1,115,860) 1,447,673 1,639,237 49,706 (472,084) 230,167
Net unrealized gain (loss) on
investments....................... (355,418) (3,248,286) 613,662 (11,637) 754,860 (750,660)
----------- ----------- ----------- ---------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations...................... (1,490,162) (1,823,227) 2,262,850 199,129 672,705 (92,704)
Net deposits into (withdrawals from)
Separate Account.................. (1,054,224) (4,904,923) 3,014,155 (125,586) (7,352,285) 3,244,804
----------- ----------- ----------- ---------- ----------- ----------
Increase (decrease) in net
assets.......................... (2,544,386) (6,728,150) 5,277,005 73,543 (6,679,580) 3,152,100
Net assets, beginning of period...... 10,264,417 16,992,567 11,715,562 3,130,090 9,809,670 6,657,570
----------- ----------- ----------- ---------- ----------- ----------
Net assets, end of period............ $ 7,720,031 $10,264,417 $16,992,567 $3,203,633 $ 3,130,090 $9,809,670
=========== =========== =========== ========== =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-36
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
AGGRESSIVE EQUITY FUND DIVISION NON-US FUND DIVISION
------------------------------------- -------------------------------------
2001 2000 1999 2001 2000 1999
----------- ---------- ---------- ---------- ----------- ----------
Operations:
Net investment income (expense)........ $ (19,300) $ (14,538) $ (11,894) $ (3,198) $ (21,074) $ 51,010
Net realized gain (loss) on
investments......................... (162,100) 433,191 (25,818) (90,231) 775,470 214,105
Net unrealized gain (loss) on
investments......................... 33,608 (496,292) 341,390 (606,112) (1,393,903) 971,904
----------- ---------- ---------- ---------- ----------- ----------
Net increase (decrease) in net
assets resulting from
operations........................ (147,792) (77,639) 303,678 (699,541) (639,507) 1,237,019
Net deposits into (withdrawals from)
Separate Account.................... (973,335) (679,894) 607,124 (15,426) (1,231,010) 349,703
----------- ---------- ---------- ---------- ----------- ----------
Increase (decrease) in net assets... (1,121,127) (757,533) 910,802 (714,967) (1,870,517) 1,586,722
Net assets, beginning of period........ 4,110,465 4,867,998 3,957,196 3,128,086 4,998,603 3,411,881
----------- ---------- ---------- ---------- ----------- ----------
Net assets, end of period.............. $ 2,989,338 $4,110,465 $4,867,998 $2,413,119 $ 3,128,086 $4,998,603
=========== ========== ========== ========== =========== ==========
</Table>
See accompanying notes to the financial statements.
AA-37
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
INCOME & GROWTH FUND DIVISION INTERNATIONAL FUND DIVISION
---------------------------------- -----------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- -------- ----------- ---------- --------
Operations:
Net investment income (expense)............. $ 10,517 $ (5,981) $ (2,356) $ (19,072) $ (15,768) $ (989)
Net realized gain (loss) on investments..... (208,919) 4,053 34,901 (402,633) 77,515 49,932
Net unrealized gain (loss) on investments... (175,220) (327,575) 43,204 (1,072,608) (704,028) 120,627
---------- ---------- -------- ----------- ---------- --------
Net increase (decrease) in net assets
resulting from operations.............. (373,622) (329,503) 75,749 (1,494,313) (642,281) 169,570
Net deposits into (withdrawals from)
Separate Account......................... 130,414 3,295,158 652,207 649,371 4,656,505 433,721
---------- ---------- -------- ----------- ---------- --------
Increase (decrease) in net assets........ (243,208) 2,965,655 727,956 (844,942) 4,014,224 603,291
Net assets, beginning of period............. 3,700,971 735,316 7,360 4,618,418 604,194 903
---------- ---------- -------- ----------- ---------- --------
Net assets, end of period................... $3,457,763 $3,700,971 $735,316 $ 3,773,476 $4,618,418 $604,194
========== ========== ======== =========== ========== ========
</Table>
See accompanying notes to the financial statements.
AA-38
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000, 1999
<Table>
<Caption>
VALUE FUND DIVISION BOND PORTFOLIO FUND DIVISION
---------------------------------- ----------------------------------
2001 2000 1999 2001 2000 1999
---------- ---------- -------- ---------- ---------- --------
Operations:
Net investment income (expense).............. $ 12,948 $ 1,293 $ (493) $ 60,949 $ 58,504 $ 2,107
Net realized gain (loss) on investments...... 221,520 8,046 (14,414) 38,000 455 (222)
Net unrealized gain (loss) on investments.... 1,419 220,842 1,750 (25,687) 25,254 (2,018)
---------- ---------- -------- ---------- ---------- --------
Net increase (decrease) in net assets
resulting from operations............... 235,887 230,181 (13,157) 73,262 84,213 (133)
Net deposits into (withdrawals from) Separate
Account................................... 17,786 1,243,813 106,165 (94,561) 892,937 138,293
---------- ---------- -------- ---------- ---------- --------
Increase (decrease) in net assets......... 253,673 1,473,994 93,008 (21,299) 977,150 138,160
Net assets, beginning of period.............. 1,570,872 96,878 3,870 1,118,611 141,461 3,301
---------- ---------- -------- ---------- ---------- --------
Net assets, end of period.................... $1,824,545 $1,570,872 $ 96,878 $1,097,312 $1,118,611 $141,461
========== ========== ======== ========== ========== ========
</Table>
See accompanying notes to the financial statements.
AA-39
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999, EXCEPT AS NOTED BELOW
<Table>
<Caption>
SMALL COMPANY PORTFOLIO FUND DIVISION LARGE CAP VALUE FUND DIVISION
-------------------------------------- -----------------------------
2001 2000 1999 2001 2000*
------------ ----------- --------- ------------- -------------
Operations:
Net investment income (expense)............... $ (16,899) $ (7,744) $ (627) $ 33,719 $ 5,139
Net realized gain (loss) on investments....... (750,139) 113,420 15,877 120,973 269
Net unrealized gain (loss) on investments..... 226,878 (603,901) 96,423 (264,073) 194,619
----------- ---------- -------- ---------- ----------
Net increase (decrease) in net assets
resulting from operations................ (540,160) (498,225) 111,673 (109,381) 200,027
Net deposits into (withdrawals from) Separate
Account.................................... (892,667) 4,462,190 482,575 3,625,595 2,683,676
----------- ---------- -------- ---------- ----------
Increase (decrease) in net assets.......... (1,432,827) 3,963,965 594,248 3,516,214 2,883,703
Net assets, beginning of period............... 4,561,402 597,437 3,189 2,883,703 --
----------- ---------- -------- ---------- ----------
Net assets, end of period..................... $ 3,128,575 $4,561,402 $597,437 $6,399,917 $2,883,703
=========== ========== ======== ========== ==========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-40
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
LARGE CAP GROWTH SMALL CAP VALUE SMALL CAP GROWTH
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- --------------------- ---------------------
2001 2000* 2001 2000* 2001 2000*
---------- ---------- ---------- -------- ---------- --------
Operations:
Net investment income (expense)..... $ (17,086) $ (5,429) $ 1,673 $ 771 $ (5,267) $ (1,240)
Net realized gain (loss) on
investments...................... (273,188) (1,016) 181,816 10,023 (43,461) 336
Net unrealized gain (loss) on
investments...................... (454,976) (431,299) 50,440 28,138 (130,145) (40,036)
---------- ---------- ---------- -------- ---------- --------
Net increase (decrease) in net
assets resulting from
operations..................... (745,250) (437,744) 233,929 38,932 (178,873) (40,940)
Net deposits into (withdrawals from)
Separate Account................. 2,228,383 2,278,037 1,977,357 356,263 1,151,881 708,545
---------- ---------- ---------- -------- ---------- --------
Increase (decrease) in net
assets......................... 1,483,133 1,840,293 2,211,286 395,195 973,008 667,605
Net assets, beginning of period..... 1,840,293 -- 395,195 -- 667,605 --
---------- ---------- ---------- -------- ---------- --------
Net assets, end of period........... $3,323,426 $1,840,293 $2,606,481 $395,195 $1,640,613 $667,605
========== ========== ========== ======== ========== ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-41
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
INTERNATIONAL EQUITY EMERGING MARKETS EQUITY CORE FIXED INCOME
FUND DIVISION FUND DIVISION FUND DIVISION
----------------------- ------------------------ -----------------------
2001 2000* 2001 2000* 2001 2000*
---------- ---------- ----------- ---------- ---------- ----------
Operations:
Net investment income
(expense)................... $ (13,625) $ 13,956 $ (5,858) $ (1,934) $ 524,914 $ 62,739
Net realized gain (loss) on
investments................. (150,854) (5,118) (71,561) (4,309) 63,329 897
Net unrealized gain (loss) on
investments................. (470,546) (254,806) (18,064) (142,634) (163,196) 137,043
---------- ---------- ---------- --------- ---------- ----------
Net increase (decrease) in
net assets resulting from
operations................ (635,025) (245,968) (95,483) (148,877) 425,047 200,679
Net deposits into (withdrawals
from) Separate Account...... 1,484,136 2,038,997 642,792 771,289 3,708,404 5,189,491
---------- ---------- ---------- --------- ---------- ----------
Increase (decrease) in net
assets.................... 849,111 1,793,029 547,309 622,412 4,133,451 5,390,170
Net assets, beginning of
period...................... 1,793,029 -- 622,412 -- 5,390,170 --
---------- ---------- ---------- --------- ---------- ----------
Net assets, end of period...... $2,642,140 $1,793,029 $1,169,721 $ 622,412 $9,523,621 $5,390,170
========== ========== ========== ========= ========== ==========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-42
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
INTERNATIONAL FIXED INCOME
HIGH YIELD BOND FUND DIVISION FUND DIVISION
------------------------------ ---------------------------
2001 2000* 2001 2000*
-------------- ------------ ------------ ------------
Operations:
Net investment income (expense)............ $ 66,486 $ 7,072 $ 797 $ (752)
Net realized gain (loss) on investments.... (11,370) (233) 3,141 (876)
Net unrealized gain (loss) on
investments............................. (45,518) (13,421) (48,543) 40,423
---------- -------- -------- --------
Net increase (decrease) in net assets
resulting from operations............. 9,598 (6,582) (44,605) 38,795
Net deposits into (withdrawals from)
Separate Account........................ 757,090 391,584 287,068 577,965
---------- -------- -------- --------
Increase (decrease) in net assets....... 766,688 385,002 242,463 616,760
Net assets, beginning of period............ 385,002 -- 616,760 --
---------- -------- -------- --------
Net assets, end of period.................. $1,151,690 $385,002 $859,223 $616,760
========== ======== ======== ========
<Caption>
EMERGING MARKETS DEBT
FUND DIVISION
---------------------
2001 2000*
--------- ---------
Operations:
Net investment income (expense)............ $ 23,066 $ 13,003
Net realized gain (loss) on investments.... 109 2,540
Net unrealized gain (loss) on
investments............................. 3,104 (10,850)
-------- --------
Net increase (decrease) in net assets
resulting from operations............. 26,279 4,693
Net deposits into (withdrawals from)
Separate Account........................ 73,054 179,999
-------- --------
Increase (decrease) in net assets....... 99,333 184,692
Net assets, beginning of period............ 184,692 --
-------- --------
Net assets, end of period.................. $284,025 $184,692
======== ========
</Table>
- ---------------
* For Period April 10, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-43
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
T. ROWE PRICE LARGE CAP T. ROWE PRICE SMALL CAP
JANUS MID-CAP FUND DIVISION GROWTH FUND DIVISION GROWTH FUND DIVISION
--------------------------- ----------------------- -----------------------
2001 2000* 2001 2000* 2001 2000*
------------ ------------ ---------- ---------- ----------- ---------
Operations:
Net investment income
(expense)................ $ (23,470) $ (8,532) $ (5,068) $ (1,638) $ (7,035) $ (884)
Net realized gain (loss) on
investments.............. (890,046) 189,409 (263,770) 44,518 (80,388) (2,971)
Net unrealized gain (loss)
on investments........... (721,324) (1,114,808) 205,475 (120,834) (35,496) (36,551)
----------- ----------- ---------- ---------- ---------- --------
Net increase (decrease)
in net assets resulting
from operations........ (1,634,840) (933,931) (63,363) (77,954) (122,919) (40,406)
Net deposits into
(withdrawals from)
Separate Account......... 2,232,468 4,280,330 1,192,679 1,146,062 777,186 665,711
----------- ----------- ---------- ---------- ---------- --------
Increase (decrease) in
net assets............. 597,628 3,346,399 1,129,316 1,068,108 654,267 625,305
Net assets, beginning of
period................... 3,346,399 -- 1,068,108 -- 625,305 --
----------- ----------- ---------- ---------- ---------- --------
Net assets, end of period... $ 3,944,027 $ 3,346,399 $2,197,424 $1,068,108 $1,279,572 $625,305
=========== =========== ========== ========== ========== ========
</Table>
- ---------------
* For Period May 1, 2000 (inception) to December 31, 2000
See accompanying notes to the financial statements.
AA-44
GENERAL AMERICAN ACCOUNT ELEVEN
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
<Table>
<Caption>
HARRIS OAKMARK
ALGER EQUITY GROWTH SERIES JANUS GROWTH MID-CAP
FUND DIVISION FUND DIVISION FUND DIVISION
-------------------------- ------------- --------------
2001 2000* 2001** 2001**
----------- ----------- ------------- --------------
Operations:
Net investment income (expense)... $ (5,594) $ (3,827) $ (110) $ (191)
Net realized gain (loss) on
investments.................... (496,412) 12,639 (922) 10,815
Net unrealized gain (loss) on
investments.................... 152,082 (261,796) (1,402) 80,364
---------- ---------- ------- ----------
Net increase (decrease) in net
assets resulting from
operations................... (349,924) (252,984) (2,434) 90,988
Net deposits into (withdrawals
from) Separate Account......... (550,407) 1,986,230 71,994 1,209,852
---------- ---------- ------- ----------
Increase (decrease) in net
assets....................... (900,331) 1,733,246 69,560 1,300,840
Net assets, beginning of
period......................... 1,733,246 -- -- --
---------- ---------- ------- ----------
Net assets, end of period........... $ 832,915 $1,733,246 $69,560 $1,300,840
========== ========== ======= ==========
<Caption>
PIMCO INNOVATIONS
FUND DIVISION
-----------------
2001**
-----------------
Operations:
Net investment income (expense)... $ (26)
Net realized gain (loss) on
investments.................... 388
Net unrealized gain (loss) on
investments.................... 2,087
-------
Net increase (decrease) in net
assets resulting from
operations................... 2,449
Net deposits into (withdrawals
from) Separate Account......... 12,941
-------
Increase (decrease) in net
assets....................... 15,390
Net assets, beginning of
period......................... --
-------
Net assets, end of period........... $15,390
=======
</Table>
- ---------------
* For Period May 1, 2000 (inception) to December 31, 2000
** For Period May 1, 2001 (inception) to December 31, 2001
See accompanying notes to the financial statements.
AA-45
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2001
NOTE 1--ORGANIZATION
General American Separate Account Eleven (the Separate Account) commenced
operations on September 15, 1987 and is registered under the Investment Company
Act of 1940 (1940 Act) as a unit investment trust. The Separate Account offers
seven products: Variable Universal Life (VUL-95), Variable General Select Plus
(VGSP), Variable Universal Life (VUL-100), Russell Variable Universal Life
(Russell VUL), Variable Universal Life (VUL-2000), Joint and Survivor Universal
Life (JSVUL-2000), and Destiny that receive and invest net premiums for flexible
premium variable life insurance policies that are issued by General American
Life Insurance Company (General American). The Separate Account is divided into
forty-two Fund Divisions. Each Fund Division invests exclusively in shares of a
single Fund of either General American Capital Company, Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II, Van Eck
Worldwide Insurance Trust, Russell Insurance Funds, American Century Variable
Portfolios, Inc., J.P. Morgan Series Trust II, SEI Insurance Products Trust,
Metropolitan Series Fund, Metlife Investors Series Trust, or New England Zenith
Fund which are open-end, diversified management companies. The Funds of the
General American Capital Company, sponsored by General American, are the S & P
500 Index (formerly Equity Index), Money Market, Bond Index, Managed Equity,
Asset Allocation, International Index (formerly International Equity), Mid-Cap
Equity (formerly Special Equity), and the Small-Cap Equity Fund Divisions. The
Funds of the Variable Insurance Products Fund, managed by Fidelity Management &
Research Company, are the Equity Income, Growth, Overseas, High Income, and the
Mid Cap Fund Divisions. The Fund of the Variable Insurance Products Fund II,
managed by Fidelity Management and Research Company is the Asset Manager Fund.
The Funds of the Van Eck Worldwide Insurance Trust, managed by Van Eck
Associates Corporation, are the Worldwide Hard Assets (formerly Gold and Natural
Resources) and the Worldwide Emerging Markets Fund Divisions. The Funds of the
Russell Variable Insurance Product, managed by Frank Russell Investment
Management Company are the Multi-Style Equity, Core Bond, Aggressive Equity, and
Non-US Fund Divisions. The Funds of the American Century Variable Portfolios,
Inc. managed by American Century Investments are the Income & Growth,
International, and Value Fund Divisions. The Funds of the J.P. Morgan Trust II,
managed by J.P. Morgan Investment Management, Inc. are the Bond Portfolio and
Small Company Portfolio Fund Divisions. The Funds of the SEI Insurance Products
Trust, managed by SEI Investments Management Company are the Large Cap Value,
Large Cap Growth, Small Cap Value, Small Cap Growth, International Equity,
Emerging Markets Equity, Core Fixed Income, High Yield Bond, International Fixed
Income, and Emerging Markets Debt Fund Divisions. The Funds of the Metropolitan
Series Fund, managed by Metropolitan Life Insurance Company are the Janus
Mid-Cap, T. Rowe Price Large Cap Growth, T. Rowe Price Small Cap Growth, and
Janus Growth Fund Divisions. The Fund of the Metlife Investors Series, managed
by Metropolitan Life Insurance Company is PIMCO Innovations Fund Division. The
Funds of the New England Zenith Fund sponsored by New England Investment
Management, Inc. are the Alger Equity Growth Series and Harris Oakmark Mid-Cap
Fund Divisions. Policyholders have the option of directing their premium
payments into one or all of the Funds as well as into the general account of
General American, which is not generally subject to regulation under the
Securities Act of 1933 or the 1940 Act and which is not part of the Separate
Account.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Separate Account in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in the
United States of America.
A. INVESTMENTS
The Separate Accounts' investments in the forty-two Fund Divisions are
valued daily based on the net asset values of the respective Fund shares held as
reported to General American by General American Capital Company, Fidelity
Variable Insurance Products Fund, Fidelity Variable Insurance Products Fund II,
Van Eck Worldwide
AA-46
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Insurance Trust, Russell Insurance Funds, American Century Portfolios, J.P.
Morgan Series Trust II, SEI Insurance Products Trust, Metropolitan Series Fund,
Inc., Metlife Investors Series Trust, and New England Zenith Fund.
For the period May 12, 2001 through December 31, 2001, the average cost
method was used in determining the cost of shares sold on withdrawals by the
Separate Account. For the period January 1, 2001 through May 11, 2001 and the
years ended December 31, 2000 and 1999, the first-in, first-out method was used
in determining the cost of shares sold on withdrawals by each of the Fund
Divisions of the Separate Account. Share transactions are recorded on the trade
date, which is the same as the settlement date.
B. FEDERAL INCOME TAXES
General American is taxed as a life insurance company under the Internal
Revenue Code of 1986, as amended (the Code). Since the Fund Divisions of the
Separate Account are not separate entities from General American, and their
operations form a part of General American, they will not be taxed separately as
a regulated investment company under sub-chapter M of the Code. Under existing
federal income tax law, investment income of the Fund Divisions, to the extent
it is applied to increase reserves under a contract, is not taxed and may be
compounded for reinvestment without additional tax to General American.
C. DISTRIBUTION OF INCOME AND REALIZED CAPITAL GAINS
For the years ended December 31, 1999 and December 31, 2000, each of the
Fund Divisions of the Separate Account followed the federal income tax practice
known as consent dividending for the funds of the General American Capital
Company, whereby substantially all of the net investment income and realized
gains are deemed to be passed through to the respective Fund Divisions of the
Separate Account. As a result, the cost basis in each of the Fund Divisions of
the Separate Account is increased and a corresponding capital gain is
recognized. This adjustment has no impact on the net assets of the Fund
Divisions.
For the year ended December 31, 2001, the funds of the General American
Capital Company and for each of the years in the two year period then ended the
Fidelity Variable Insurance Products Fund, Fidelity Variable Insurance Products
Fund II, Van Eck Worldwide Insurance Trust, Russell Insurance Funds, American
Century Variable Portfolios, J.P. Morgan Series Trust II, SEI Insurance Products
Trust, Metropolitan Series Fund, Inc., Metlife Investors Series Trust and New
England Zenith Fund intend to pay out all of their net investment income and net
realized capital gains each year. Dividends from the funds are distributed at
least annually on a per share basis and are recorded on the ex dividend date.
Normally, net realized capital gains, if any, are distributed each year for each
fund. Such income and capital gain distributions are automatically reinvested in
additional shares of the funds.
D. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of increase and
decrease in net assets from operations during the period. Actual results could
differ from those estimates.
NOTE 3--POLICY CHARGES
Charges are deducted from premiums and paid to General American for
providing the insurance benefits set forth in the contracts and any additional
benefits added by rider, administering the policies, reimbursement of expenses
incurred in distributing the policies, and assuming certain risks in connection
with the policies.
Prior to the allocation of net premiums among General American's general
account and the Fund Divisions of the Separate Account, premium payments are
reduced by premium expense charges, which consist of a sales charge and a charge
for premium taxes. The premium payment, less the premium expense charge, equals
the net premium.
AA-47
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Sales Charge: A sales charge equal to 6% is deducted from each VUL-95
premium paid. A sales charge of 5% in years one through ten and 2.25% thereafter
is deducted from each VGSP premium paid. A maximum sales charge of 5% in years
one through ten and a maximum 2.25% thereafter based on initial deposit is
deducted from each Russell VUL premium paid. A sales charge equal to 15% up to
the target premium and 5% on the excess in the first policy year is deducted
from each VUL-2000 and JSVUL-2000 premium paid. The sales charge is 5% on all
premiums in policy years two to twelve, and 2% on all premiums in policy years
eleven or later. This charge is deducted to partially reimburse General American
for expenses incurred in distributing the policy and any additional benefits
provided by rider. No sales charge is deducted from VUL-100 premiums. A sales
charge of 5% of each premium payment will be deducted from each Frank Russell
premium payment in the policy years one through ten and 2.25% in policy years
past year ten. Destiny has no sales charge.
Premium Taxes: Various state and political subdivisions impose a tax on
premiums received by insurance companies. Premium taxes vary from state to
state. A deduction of 2% of each VUL-95 premium, 2.5% of each VGSP premium,
2.10% of each VUL-100 premium, 2.5% of each Russell VUL premium, and each Frank
Russell premium, up to 3.55% for each Destiny premium, and the actual tax rate
for VUL-2000 and JSVUL-2000 is made from each premium payment for these taxes.
In addition, a 1.25% deduction is taken from VUL-100 premiums and a 1.3%
deduction is taken from VUL-2000 and JSVUL-2000 to cover the company's Federal
income tax costs attributable to the amount of premium received.
Charges are deducted monthly from the cash value of each policy to
compensate General American for (a) certain administrative costs; (b) insurance
underwriting and acquisition expenses in connection with issuing a policy; (c)
the cost of insurance, and (d) the cost of optional benefits added by rider.
Administrative Charge: General American has responsibility for the
administration of the policies and the Separate Account. As reimbursement for
administrative expenses related to the maintenance of each policy and the
Separate Account, General American assesses a monthly administrative charge
against each policy. This charge is $10 per month for a standard policy and $12
per month for a pension policy during the first 12 policy months and $4
(standard) and $6 (pension) per month for all policy months beyond the 12th for
VUL-95 contracts. The charge is $4 per month for VGSP, Russell VUL and Frank
Russell contracts. The charge is $13 per month during the first 12 policy months
and $6 per month thereafter for VUL-100 contracts. The charge is $25 per month
in the first policy year and $6 per month in each subsequent policy year for
VUL-2000 and JSVUL-2000 contracts. The company assesses an initial policy charge
of $800 for Destiny premiums. This amount is deducted from the cash value as
soon as the policy is issued and the initial premium is made.
Insurance Underwriting and Acquisition Expense Charge: An additional
administrative charge is deducted from the policy cash value for VUL-95 as part
of the monthly deduction during the first 12 policy months and for the first 12
policy months following an increase in the face amount. The charge is $0.08 per
month for each $1,000 in policy coverage. For VUL-100, the charge during the
first 12 policy months is $0.16 per month for each $1,000 in policy coverage,
and in all policy years thereafter, the charge is $0.01 per month for each
$1,000 in policy coverage. For VUL-2000 and JSVUL-2000, there is a charge per
$1,000 of face amount, determined by age, sex, and smoker class, payable for ten
years following the policy issue or an increase in the face amount. No charge is
deducted from Frank Russell and Destiny premiums.
Cost of Insurance: The cost of insurance is deducted on each monthly
anniversary date for the following policy month. Because the cost of insurance
depends upon a number of variables, the cost varies for each policy month. The
cost of insurance is determined separately for the initial face amount and for
any subsequent increases in face amount. General American determines the monthly
cost of insurance charge by multiplying the applicable cost of insurance rate or
rates by the net amount at risk for each policy month.
Optional Rider Benefits Charge: This monthly deduction includes charges
for any additional benefits provided by rider.
AA-48
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Contingent Deferred Sales Charge: During the first ten policy years for
VUL-95, VGSP, Russell VUL, Frank Russell and Destiny, and the first fifteen
years for VUL-100, General American also assesses a charge upon surrender or
lapse of a policy, a requested decrease in face amount, or a partial withdrawal
that causes the face amount to decrease. The amount of the charge assessed
depends on a number of factors, including whether the event is a full surrender
or lapse or only a decrease in face amount, the amount of premiums received to
date by General American, and the policy year in which the surrender or other
event takes place.
For VUL-2000 and JSVUL-2000, the charge is based on the annual target
premium, rather than the premiums actually received by General American.
Mortality and Expense Charge: In addition to the above charges, a daily
charge is made at the separate account level for the mortality and expense risks
assumed by General American. General American deducts a daily charge from the
Fund Division of the Separate Account at the rate of .002319% for VUL-95,
...0019111% for VGSP, .002455% for VUL-100, .0015027% for VUL-2000 and JSVUL-2000,
...0019111% for Frank Russell and .0020471% for Destiny of the net assets of each
division of the Separate Account, which equals an annual rate of .85%, .70%,
...90%, .50%, .55%, 55%, .70%, and .75% for VUL-95, VGSP, VUL-100, VUL, VUL 98,
and JSVUL-2000, respectively. VUL-95, VGSP, VUL-100, VUL-2000, JSVUL-2000, Frank
Russell, and Destiny mortality and expense charges for 2001 were $490,185,
$560,432, $571,946, $438,322, $53,884, $12,614, and $0 respectively. The
mortality risk assumed by General American is the risk that those insured may
die sooner than anticipated and therefore, that General American will pay an
aggregate amount of death benefits greater than anticipated. The expense risk
assumed is that expenses incurred in issuing and administering the policy will
exceed the amounts realized from the administrative charges assessed against the
policy.
NOTE 4--INVESTMENT OBJECTIVES, MANAGER CHANGES AND NEW DIVISIONS
Effective April 30, 1998, the four divisions of the Frank Russell funds
became available for VUL-95 and VUL 100.
On September 15, 1998, six new divisions and two new products--VUL-2000 and
JSVUL-2000--were added to Separate Account Eleven. Three of the new divisions
are the Income & Growth Fund, the International Fund, and the Value Fund. The
underlying funds in these divisions are offered by American Century Variable
Portfolios and managed by American Century Investments. Two of the new divisions
are the Bond Portfolio Fund and the Small Company Portfolio Fund. The underlying
funds in these divisions are offered by J.P. Morgan Trust II and managed by J.P.
Morgan Investment Management, Inc. The Worldwide Emerging Markets Fund Division
is offered by Van Eck World Wide Insurance Trust and managed by Van Eck
Associates Corporation. The investment objectives of each of these new divisions
are as follows:
Income & Growth Fund--To provide dividend growth, current income and
capital appreciation by investing in common stocks.
International Fund--To provide capital growth by investing primarily
in an internationally diversified portfolio of common stocks that are
considered by management to have prospects for appreciation.
Value Fund--To provide long-term capital growth by investing in
securities that management believes to be undervalued at the time of
purchase.
Bond Portfolio Fund--To provide a high total return consistent with
moderate risk of capital and maintenance of liquidity.
Small Company Portfolio Fund--To provide a high total return from a
portfolio of equity securities of small companies.
Worldwide Emerging Markets Fund--To provide long-term capital
appreciation by investing primarily in equity securities in emerging
markets around the world.
AA-49
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Effective April 30, 1999, the three divisions of the American Century
funds, the two divisions of the J.P. Morgan funds, and the Worldwide Emerging
Markets Division offered by Van Eck Associates became available for VUL-95,
VGSP, and VUL-100.
Effective April 10, 2000, ten new divisions were added to Separate Account
Eleven. The new divisions are the Large Cap Value Fund, Large Cap Growth Fund,
Small Cap Value Fund, Small Cap Growth Fund, International Equity Fund, Emerging
Markets Equity Fund, Core Fixed Income Fund, High Yield Bond Fund, International
Fixed Income Fund, and Emerging Markets Debt Fund. The underlying funds in these
divisions are offered by SEI Insurance Products Trust and managed by SEI
Investments Management Company. The investment objectives of each of these new
divisions are as follows:
Large Cap Value Fund--To provide capital appreciation by investing in
large cap U.S. common stocks.
Large Cap Growth Fund--To provide long-term growth and income by
investing in large cap income-producing U.S. common stocks.
Small Cap Value Fund--To provide capital appreciation by investing in
common stock of smaller U.S. companies.
Small Cap Growth Fund--To provide long-term capital appreciation by
investing in common stock of smaller U.S. companies.
International Equity--To provide capital appreciation by investing in
equity securities of foreign companies.
Emerging Markets Equity Fund--To provide capital appreciation by
investing in equity securities of emerging markets companies.
Core Fixed Income Fund--To provide current income and preservation of
capital by investing in investment grade U.S. fixed income securities.
High Yield Bond Fund--To provide total return by investing in high
yield, high risk securities.
International Fixed Income Fund--To provide capital appreciation and
current income by investing in investment grade fixed income securities of
foreign government and corporate issuers.
Emerging Markets Debt Fund--To provide total return by investing U.S.
dollar denominated debt in securities of emerging market issuers.
Effective May 1, 2000, five new divisions were added to Separate Account
Eleven. The Mid Cap Portfolio is offered by Fidelity Investments Variable
Insurance Products Fund and managed by Fidelity Management and Research Company.
Three of the new divisions are the Janus Mid-Cap Portfolio, T. Rowe Price Large
Cap Growth Portfolio, and T. Rowe Price Small Cap Growth Portfolio. The
underlying funds in these divisions are offered by Metropolitan Series Fund,
Inc. and managed by Metropolitan Life Insurance Company. The Alger Equity Growth
Series is offered by New England Zenith Fund and managed by New England
Investment Management, Inc. The investment objectives of each of these new
divisions are as follows:
Mid Cap Portfolio--To provide long-term growth by investing in common
stocks of medium capitalization companies.
Janus Mid-Cap Portfolio--To provide long-term growth by investing in
common stocks of medium capitalization companies.
T. Rowe Price Large Cap Growth Portfolio--To provide long-term growth
and income by investing in large capitalization growth companies.
AA-50
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
T. Rowe Price Small Cap Growth Portfolio--To provide long-term growth
by investing in small capitalization companies.
Alger Equity Growth Series--To provide growth by investing in growth
stocks.
Effective October 1, 2000, two new products--Destiny and Frank
Russell--were added to Separate Account Eleven. These products were made
available in all fund divisions.
Effective May 1, 2001, three new divisions were added to Separate Account
Eleven. The Janus Growth is offered by Metropolitan Series Fund, Inc. and
managed by Metropolitan Life Insurance Company. PIMCO Innovations is offered by
Metlife Investors Series Trust Fund and is managed by Metropolitan Life
Insurance Company. Harris Oakmark Mid-Cap is offered by New England Zenith Fund
and is managed by New England Investment Management, Inc. The investment
objectives of each of these new divisions are as follows:
Janus Growth Fund--To provide long-term capital growth and current
income by investing in equity securities.
PIMCO Innovations Fund--To provide capital appreciation by investing
in companies which utilize new, creative or different, or innovative
technology.
Harris Oakmark Mid Cap Fund--To provide long-term capital appreciation
by investing in equity securities priced significantly below what is
believed to be the true business value.
NOTE 5--PURCHASES AND SALES
During the year ended December 31, 2001, purchases including net realized
gain and income from distribution and proceeds from sales of General American
Capital Company shares were as follows:
<Table>
<Caption>
S & P 500 MONEY BOND MANAGED
INDEX FUND MARKET FUND INDEX FUND EQUITY FUND
----------- ----------- ---------- -----------
Purchases.......................... $21,384,709 $68,191,642 $3,084,295 $1,613,963
=========== =========== ========== ==========
Sales.............................. $ 3,949,387 $41,309,354 $2,299,562 $ 882,504
=========== =========== ========== ==========
</Table>
<Table>
<Caption>
ASSET SMALL-CAP
ALLOCATION INTERNATIONAL MID-CAP EQUITY
FUND INDEX FUND EQUITY FUND FUND
----------- ------------- ----------- ---------
Purchases............................ $ 5,737,717 $1,164,947 $1,692,469 $987,018
=========== ========== ========== ========
Sales................................ $11,733,005 $1,040,992 $1,031,798 $477,289
=========== ========== ========== ========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund Shares
were as follows:
<Table>
<Caption>
EQUITY HIGH MID CAP
INCOME FUND GROWTH FUND OVERSEAS FUND INCOME FUND PORTFOLIO
----------- ----------- ------------- ----------- ----------
Purchases.............. $5,877,942 $11,847,975 $4,001,763 $2,788,744 $2,158,634
========== =========== ========== ========== ==========
Sales.................. $3,027,351 $ 6,024,905 $2,402,497 $ 987,599 $ 880,846
========== =========== ========== ========== ==========
</Table>
AA-51
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Variable Insurance Products Fund II
shares were as follows:
<Table>
<Caption>
ASSET MANAGER
FUND
-------------
Purchases...................................... $1,285,505
==========
Sales.......................................... $ 620,882
==========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Van Eck Worldwide Insurance Trust
shares were as follows:
<Table>
<Caption>
WORLDWIDE WORLDWIDE
HARD ASSETS EMERGING
FUND MARKETS FUND
----------- ------------
Purchases............................................. $112,364 $ 819,379
======== ==========
Sales................................................. $ 68,558 $1,356,220
======== ==========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Russell Insurance Funds shares were as
follows:
<Table>
<Caption>
MULTI-STYLE CORE BOND AGGRESSIVE NON-US
EQUITY FUND FUND EQUITY FUND FUND
----------- --------- ----------- --------
Purchases............................... $1,182,353 $617,884 $ 436,358 $350,693
========== ======== ========== ========
Sales................................... $2,086,963 $564,499 $1,432,741 $372,359
========== ======== ========== ========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of American Century Variable Portfolios
shares were as follows:
<Table>
<Caption>
INCOME & INTERNATIONAL
GROWTH FUND FUND VALUE FUND
----------- ------------- ----------
Purchases........................................ $1,272,796 $2,539,671 $1,400,047
========== ========== ==========
Sales............................................ $1,132,981 $1,509,049 $1,369,130
========== ========== ==========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of J.P. Morgan Series Trust II shares were
as follows:
<Table>
<Caption>
BOND PORTFOLIO SMALL COMPANY
FUND PORTFOLIO FUND
-------------- --------------
Purchases.......................................... $545,018 $1,661,529
======== ==========
Sales.............................................. $569,923 $2,565,975
======== ==========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of SEI Insurance Products Trust were as
follows:
<Table>
<Caption>
LARGE CAP LARGE CAP SMALL CAP SMALL CAP INTERNATIONAL
VALUE FUND GROWTH FUND VALUE FUND GROWTH FUND EQUITY FUND
---------- ----------- ---------- ----------- -------------
Purchases..................... $4,450,138 $2,717,426 $2,359,058 $1,439,901 $1,857,743
========== ========== ========== ========== ==========
Sales......................... $ 713,588 $ 529,495 $ 218,490 $ 298,202 $ 386,035
========== ========== ========== ========== ==========
</Table>
AA-52
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
<Table>
<Caption>
EMERGING INTERNATIONAL EMERGING
MARKETS EQUITY CORE FIXED HIGH YIELD FIXED INCOME MARKETS DEBT
FUND INCOME FUND BOND FUND FUND FUND
-------------- ----------- ---------- ------------- ------------
Purchases.................... $821,740 $6,101,871 $1,008,573 $449,982 $119,093
======== ========== ========== ======== ========
Sales........................ $194,266 $1,844,134 $ 181,717 $162,465 $ 23,051
======== ========== ========== ======== ========
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Metropolitan Series Fund, Inc. were as
follows:
<Table>
<Caption>
T. ROWE PRICE T. ROWE PRICE MAY 1 TO
JANUS MID-CAP LARGE CAP SMALL CAP DECEMBER 31, 2001
PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO JANUS GROWTH FUND
------------- ---------------- ---------------- -----------------
Purchases.................... $3,260,648 $2,093,224 $1,239,567 $70,120
========== ========== ========== =======
Sales........................ $1,061,623 $ 911,344 $ 468,590 $12,008
========== ========== ========== =======
</Table>
During the year ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of New England Zenith Fund were as
follows:
<Table>
<Caption>
MAY 1 TO
DECEMBER 31, 2001
ALGER EQUITY HARRIS OAKMARK
GROWTH SERIES MID-CAP FUND
------------- -----------------
Purchases........................................ $ 945,129 $1,371,742
========== ==========
Sales............................................ $1,643,854 $ 167,528
========== ==========
</Table>
During the period ended December 31, 2001, purchases (including dividend
reinvestment) and proceeds from sales of Metlife Investors Series Trust Fund
were as follows:
<Table>
<Caption>
MAY 1 TO
DECEMBER 31, 2001
PIMCO INNOVATIONS
-----------------
Purchases.................................... $12,802
=======
Sales........................................ $ 5,086
=======
</Table>
AA-53
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
------------------------------------------------------------------------------
S & P 500 INDEX FUND DIVISION MONEY MARKET FUND DIVISION
---------------------------------- --------------------------------------
2001 2000 1999 2001 2000 1999
--------- --------- -------- ---------- ---------- ----------
VARIABLE UNIVERSAL LIFE--95
Deposits....................................... 41,545 33,287 40,318 432,967 11,813 56,074
Withdrawals.................................... (33,935) (61,937) (51,800) (431,710) (44,926) (31,779)
Outstanding units, beginning of year........... 204,824 233,474 244,956 34,978 68,091 43,796
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 212,434 204,824 233,474 36,235 34,978 68,091
========= ========= ======== ========== ========== ==========
VARIABLE GENERAL SELECT PLUS
Deposits....................................... 114,637 184,201 143,955 115,257 161,565 636,987
Withdrawals.................................... (90,302) (148,584) (105,975) (66,151) (265,969) (500,114)
Outstanding units, beginning of year........... 579,901 544,284 506,304 204,793 309,197 172,324
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 604,236 579,901 544,284 253,899 204,793 309,197
========= ========= ======== ========== ========== ==========
VARIABLE UNIVERSAL LIFE--100
Deposits....................................... 160,125 142,514 195,193 39,286 70,296 343,675
Withdrawals.................................... (103,579) (112,424) (130,533) (48,703) (106,128) (400,299)
Outstanding units, beginning of year........... 681,804 651,714 587,054 74,140 109,972 166,596
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 738,351 681,804 651,714 64,723 74,140 109,972
========= ========= ======== ========== ========== ==========
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits....................................... -- -- -- -- -- --
Withdrawals.................................... -- -- -- -- -- --
Outstanding units, beginning of year........... -- -- -- -- -- --
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. -- -- -- -- -- --
========= ========= ======== ========== ========== ==========
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits....................................... 1,597,644 930,635 493,771 7,816,632 2,862,494 1,665,714
Withdrawals.................................... (491,929) (320,877) (59,617) (6,076,407) (2,445,139) (1,553,256)
Outstanding units, beginning of year........... 1,055,844 446,086 11,932 679,250 261,895 149,437
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 2,161,559 1,055,844 446,086 2,419,475 679,250 261,895
========= ========= ======== ========== ========== ==========
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits....................................... 271,233 114,497 93,119 902,465 206,688 206,783
Withdrawals.................................... (52,190) (42,669) (23,926) (441,273) (167,356) (195,215)
Outstanding units, beginning of year........... 141,124 69,296 103 74,762 35,430 23,862
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 360,167 141,124 69,296 535,954 74,762 35,430
========= ========= ======== ========== ========== ==========
DESTINY
Deposits....................................... 17,850 96,990 -- 196,711 106,857 --
Withdrawals.................................... (87,174) (4,877) -- (131,510) (56,407) --
Outstanding units, beginning of year........... 92,113 -- -- 50,450 -- --
--------- --------- -------- ---------- ---------- ----------
Outstanding units, end of year................. 22,789 92,113 -- 115,651 50,450 --
========= ========= ======== ========== ========== ==========
</Table>
AA-54
NOTE 6--ACCUMULATION UNIT ACTIVITY:
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
-----------------------------------------------------------------------
BOND INDEX FUND DIVISION MANAGED EQUITY FUND DIVISION
--------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
--------- -------- -------- -------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits.............................................. 18,074 14,182 19,306 11,030 13,741 12,253
Withdrawals........................................... (14,577) (41,347) (14,321) (14,675) (23,918) (14,768)
Outstanding units, beginning of year.................. 87,768 114,933 109,948 83,342 93,519 96,034
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 91,265 87,768 114,933 79,697 83,342 93,519
======== ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits.............................................. 52,922 52,544 23,730 30,593 11,021 11,280
Withdrawals........................................... (21,384) (20,011) (9,825) (3,901) (7,918) (6,022)
Outstanding units, beginning of year.................. 117,239 84,706 70,801 49,411 46,308 41,050
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 148,777 117,239 84,706 76,103 49,411 46,308
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits.............................................. 21,227 22,020 63,648 19,387 22,745 34,949
Withdrawals........................................... (15,509) (33,899) (30,779) (25,325) (28,299) (16,792)
Outstanding units, beginning of year.................. 134,573 146,452 113,583 81,393 86,947 68,790
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 140,291 134,573 146,452 75,455 81,393 86,947
======== ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits.............................................. -- -- -- -- -- --
Withdrawals........................................... -- -- -- -- -- --
Outstanding units, beginning of year.................. -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ -- -- -- -- -- --
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits.............................................. 97,811 60,429 65,154 33,684 21,711 23,377
Withdrawals........................................... (25,314) (32,460) (23,294) (10,286) (8,506) (2,443)
Outstanding units, beginning of year.................. 70,382 42,413 553 34,853 21,648 714
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 142,879 70,382 42,413 58,251 34,853 21,648
======== ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits.............................................. 29,529 4,791 6,676 6,931 1,581 3,213
Withdrawals........................................... (10,554) (982) (270) (1,182) (2,240) (169)
Outstanding units, beginning of year.................. 10,301 6,492 86 2,385 3,044 --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 29,276 10,301 6,492 8,134 2,385 3,044
======== ======= ======= ======= ======= =======
DESTINY
Deposits.............................................. 94,635 82,617 -- 8,915 4,305 --
Withdrawals........................................... (170,599) (1,021) -- (9,063) (256) --
Outstanding units, beginning of year.................. 81,596 -- -- 4,049 -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 5,632 81,596 -- 3,901 4,049 --
======== ======= ======= ======= ======= =======
</Table>
AA-55
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
--------------------------------------------------------------------------
ASSET ALLOCATION FUND DIVISION INTERNATIONAL INDEX FUND DIVISION
--------------------------------- -----------------------------------
2001 2000 1999 2001 2000 1999
--------- -------- -------- --------- --------- ---------
VARIABLE UNIVERSAL LIFE--95
Deposits........................................... 27,369 27,538 36,270 20,700 22,272 24,166
Withdrawals........................................ (219,186) (31,239) (37,511) (31,436) (62,842) (30,239)
Outstanding units, beginning of year............... 289,668 293,369 294,610 127,636 168,206 174,279
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... 97,851 289,668 293,369 116,900 127,636 168,206
======== ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits........................................... 165,159 12,758 62,080 16,153 17,446 15,664
Withdrawals........................................ (145,314) (19,909) (56,513) (12,452) (18,512) (11,959)
Outstanding units, beginning of year............... 75,963 83,114 77,547 80,189 81,255 77,550
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... 95,808 75,963 83,114 83,890 80,189 81,255
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits........................................... 45,010 36,065 58,534 25,881 33,049 43,793
Withdrawals........................................ (40,575) (36,819) (25,963) (25,023) (56,168) (41,530)
Outstanding units, beginning of year............... 120,170 120,924 88,353 96,222 119,341 117,078
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... 124,605 120,170 120,924 97,080 96,222 119,341
======== ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits........................................... -- -- -- -- -- --
Withdrawals........................................ -- -- -- -- -- --
Outstanding units, beginning of year............... -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... -- -- -- -- -- --
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits........................................... 146,984 89,917 77,838 52,815 43,535 19,887
Withdrawals........................................ (65,209) (11,134) (1,877) (29,141) (14,090) (2,009)
Outstanding units, beginning of year............... 155,767 76,984 1,023 48,016 18,571 693
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... 237,542 155,767 76,984 71,690 48,016 18,571
======== ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits........................................... 9,886 8,107 10,560 13,454 3,193 4,680
Withdrawals........................................ (3,704) (2,735) (432) (3,087) (656) (245)
Outstanding units, beginning of year............... 15,500 10,128 -- 7,053 4,516 81
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... 21,682 15,500 10,128 17,420 7,053 4,516
======== ======= ======= ======= ======= =======
DESTINY
Deposits........................................... -- 14,860 -- 679 13,906 --
Withdrawals........................................ (14,662) (198) -- (11,238) (138) --
Outstanding units, beginning of year............... 14,662 -- -- 13,768 -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year..................... -- 14,662 -- 3,209 13,768 --
======== ======= ======= ======= ======= =======
</Table>
AA-56
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
----------------------------------------------------------------------
MID-CAP EQUITY FUND DIVISION SMALL-CAP EQUITY FUND DIVISION
-------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- -------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................... 21,842 19,886 23,187 5,516 9,136 8,482
Withdrawals............................................ (29,249) (70,742) (35,782) (7,820) (22,364) (7,148)
Outstanding units, beginning of year................... 111,932 162,788 175,383 37,060 50,288 48,954
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 104,525 111,932 162,788 34,756 37,060 50,288
======= ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits............................................... 27,097 27,434 23,177 16,462 46,994 45,417
Withdrawals............................................ (33,852) (19,303) (31,804) (7,236) (39,981) (23,263)
Outstanding units, beginning of year................... 107,645 99,514 108,141 100,331 93,318 71,164
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 100,890 107,645 99,514 109,557 100,331 93,318
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................... 28,897 30,205 46,286 23,016 48,174 43,499
Withdrawals............................................ (21,914) (41,286) (40,979) (15,305) (34,576) (38,432)
Outstanding units, beginning of year................... 81,968 93,049 87,742 101,470 87,872 82,805
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 88,951 81,968 93,049 109,181 101,470 87,872
======= ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................... -- -- -- -- -- --
Withdrawals............................................ -- -- -- -- -- --
Outstanding units, beginning of year................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... -- -- -- -- -- --
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................... 107,471 60,254 27,940 48,133 38,571 30,720
Withdrawals............................................ (34,217) (22,575) (2,928) (25,732) (14,319) (4,697)
Outstanding units, beginning of year................... 63,263 25,584 572 50,894 26,642 619
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 136,517 63,263 25,584 73,295 50,894 26,642
======= ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................... 11,718 4,320 4,042 11,285 4,717 6,826
Withdrawals............................................ (2,980) (1,378) (574) (3,465) (1,761) (1,009)
Outstanding units, beginning of year................... 6,573 3,631 163 8,936 5,980 163
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 15,311 6,573 3,631 16,756 8,936 5,980
======= ======= ======= ======= ======= =======
DESTINY
Deposits............................................... -- -- -- 2,623 4,791 --
Withdrawals............................................ -- -- -- (5,252) (68) --
Outstanding units, beginning of year................... -- -- -- 4,723 -- --
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... -- -- -- 2,094 4,723 --
======= ======= ======= ======= ======= =======
</Table>
AA-57
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
---------------------------------------------------------------------------
EQUITY INCOME FUND DIVISION GROWTH FUND DIVISION
--------------------------------- ------------------------------------
2001 2000 1999 2001 2000 1999
-------- --------- -------- ---------- --------- ---------
VARIABLE UNIVERSAL LIFE--95
Deposits.......................................... 37,247 42,664 54,849 51,499 55,269 58,832
Withdrawals....................................... (52,562) (86,784) (72,847) (78,711) (79,784) (78,887)
Outstanding units, beginning of year.............. 242,123 286,243 304,241 360,808 385,323 405,378
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 226,808 242,123 286,243 333,596 360,808 385,323
======= ======== ======= ========= ======== ========
VARIABLE GENERAL SELECT PLUS
Deposits.......................................... 31,169 53,398 97,662 96,193 133,086 158,244
Withdrawals....................................... (49,757) (126,253) (67,788) (105,920) (117,476) (93,901)
Outstanding units, beginning of year.............. 240,033 312,888 283,014 466,536 450,926 386,583
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 221,445 240,033 312,888 456,809 466,536 450,926
======= ======== ======= ========= ======== ========
VARIABLE UNIVERSAL LIFE--100
Deposits.......................................... 81,165 78,937 99,022 112,371 101,587 158,445
Withdrawals....................................... (57,328) (89,636) (79,710) (104,154) (117,214) (109,918)
Outstanding units, beginning of year.............. 304,197 314,896 295,584 507,306 522,933 474,406
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 328,034 304,197 314,896 515,523 507,306 522,933
======= ======== ======= ========= ======== ========
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits.......................................... -- -- -- -- -- --
Withdrawals....................................... -- -- -- -- -- --
Outstanding units, beginning of year.............. -- -- -- -- -- --
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... -- -- -- -- -- --
======= ======== ======= ========= ======== ========
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits.......................................... 209,291 129,840 113,215 612,531 525,857 250,110
Withdrawals....................................... (61,041) (45,464) (8,208) (259,507) (89,563) (21,492)
Outstanding units, beginning of year.............. 191,538 107,162 2,155 668,705 232,411 3,793
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 339,788 191,538 107,162 1,021,729 668,705 232,411
======= ======== ======= ========= ======== ========
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits.......................................... 28,072 13,463 16,121 46,499 37,077 26,076
Withdrawals....................................... (6,170) (2,579) (856) (13,874) (6,264) (1,917)
Outstanding units, beginning of year.............. 26,389 15,505 240 55,049 24,236 77
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 48,291 26,389 15,505 87,674 55,049 24,236
======= ======== ======= ========= ======== ========
DESTINY
Deposits.......................................... 36,016 38,872 -- 71,724 249,784 --
Withdrawals....................................... (61,241) (700) -- (260,765) (5,813) --
Outstanding units, beginning of year.............. 38,172 -- -- 243,971 -- --
------- -------- ------- --------- -------- --------
Outstanding units, end of year.................... 12,947 38,172 -- 54,930 243,971 --
======= ======== ======= ========= ======== ========
</Table>
AA-58
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
----------------------------------------------------------------------
OVERSEAS FUND DIVISION ASSET MANAGER FUND DIVISION
-------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- -------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................... 28,669 28,844 32,130 3,106 2,383 6,173
Withdrawals............................................ (93,219) (61,068) (38,877) (4,153) (1,813) (4,532)
Outstanding units, beginning of year................... 208,670 240,894 247,641 11,322 10,752 9,111
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 144,120 208,670 240,894 10,275 11,322 10,752
======= ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits............................................... 47,916 137,425 50,014 3,341 3,850 14,236
Withdrawals............................................ (32,161) (63,984) (24,381) (3,808) (2,687) (4,489)
Outstanding units, beginning of year................... 279,276 205,835 180,202 25,422 24,259 14,512
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 295,031 279,276 205,835 24,955 25,422 24,259
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................... 40,642 55,254 47,585 15,543 15,288 34,209
Withdrawals............................................ (38,071) (36,661) (52,739) (10,846) (15,149) (21,189)
Outstanding units, beginning of year................... 149,364 130,771 135,925 63,960 63,821 50,801
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 151,935 149,364 130,771 68,657 63,960 63,821
======= ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................... -- -- -- -- -- --
Withdrawals............................................ -- -- -- -- -- --
Outstanding units, beginning of year................... -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... -- -- -- -- -- --
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................... 92,991 115,959 39,237 66,942 35,871 53,511
Withdrawals............................................ (41,372) (21,743) (3,669) (22,283) (10,794) (4,287)
Outstanding units, beginning of year................... 130,367 36,151 583 74,936 49,859 635
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 181,986 130,367 36,151 119,595 74,936 49,859
======= ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................... 4,806 4,720 3,258 11,723 1,206 431
Withdrawals............................................ (1,304) (1,089) (466) (666) (22) (302)
Outstanding units, beginning of year................... 6,586 2,955 163 1,313 129 --
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 10,088 6,586 2,955 12,370 1,313 129
======= ======= ======= ======= ======= =======
DESTINY
Deposits............................................... 51,487 14,230 -- -- 15,883 --
Withdrawals............................................ (19,049) (146) -- (15,695) (188) --
Outstanding units, beginning of year................... 14,084 -- -- 15,695 -- --
------- ------- ------- ------- ------- -------
Outstanding units, end of year......................... 46,522 14,084 -- -- 15,695 --
======= ======= ======= ======= ======= =======
</Table>
AA-59
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
------------------------------------------------------------------------
HIGH INCOME FUND DIVISION MID CAP FUND DIVISION
---------------------------------------- ------------------------
2001 2000 1999 2001 2000*
-------- -------- -------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................. 8,880 3,219 2,853 10,320 5,741
Withdrawals.......................................... (2,951) (3,425) (11,513) (2,562) (110)
Outstanding units, beginning of year................. 13,971 14,177 22,837 5,631 --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 19,900 13,971 14,177 13,389 5,631
======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits............................................. 38,900 108,376 21,266 20,636 22,139
Withdrawals.......................................... (8,442) (30,742) (47,125) (3,496) (413)
Outstanding units, beginning of year................. 139,145 61,511 87,370 21,726 --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 169,603 139,145 61,511 38,866 21,726
======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................. 24,141 71,523 143,496 19,984 2,604
Withdrawals.......................................... (25,208) (26,940) (64,124) (1,036) (72)
Outstanding units, beginning of year................. 233,605 189,022 109,650 2,532 --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 232,538 233,605 189,022 21,480 2,532
======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................. -- -- -- -- --
Withdrawals.......................................... -- -- -- -- --
Outstanding units, beginning of year................. -- -- -- -- --
------- ------- ------- ------- -------
Outstanding units, end of year....................... -- -- -- -- --
======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................. 181,557 106,480 44,520 105,681 42,150
Withdrawals.......................................... (73,758) (16,180) (3,941) (33,441) (866)
Outstanding units, beginning of year................. 132,013 41,713 1,134 41,284 --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 239,812 132,013 41,713 113,524 41,284
======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................. 13,036 6,522 6,839 7,647 5,081
Withdrawals.......................................... (1,363) (7,169) (1,080) (1,569) (135)
Outstanding units, beginning of year................. 5,282 5,929 170 4,946 --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 16,955 5,282 5,929 11,024 4,946
======= ======= ======= ======= =======
DESTINY
Deposits............................................. 14,188 29,414 -- 69,130 --
Withdrawals.......................................... (40,833) (345) -- (69,130) --
Outstanding units, beginning of year................. 29,069 -- -- -- --
------- ------- ------- ------- -------
Outstanding units, end of year....................... 2,424 29,069 -- -- --
======= ======= ======= ======= =======
</Table>
- ---------------
* For the period May 1, 2000 (inception) to December 31, 2000.
AA-60
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
-------------------------------------------------------------------------
WORLDWIDE HARD ASSETS WORLDWIDE EMERGING MARKETS
FUND DIVISION FUND DIVISION
-------------------------------- -----------------------------------
2001 2000 1999 2001 2000 1999
-------- -------- -------- ---------- --------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................ 1,407 2,465 865 6,947 13,687 4,159
Withdrawals......................................... (2,098) (4,251) (1,622) (14,207) (7,982) (1,480)
Outstanding units, beginning of year................ 7,739 9,525 10,282 8,384 2,679 --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... 7,048 7,739 9,525 1,124 8,384 2,679
====== ====== ====== ======== ======= ======
VARIABLE GENERAL SELECT PLUS
Deposits............................................ 493 999 4,811 60,634 124,118 9,565
Withdrawals......................................... (399) (3,070) (312) (109,366) (28,100) (62)
Outstanding units, beginning of year................ 4,896 6,967 2,468 105,521 9,503 --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... 4,990 4,896 6,967 56,789 105,521 9,503
====== ====== ====== ======== ======= ======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................ 3,766 4,772 7,343 8,793 14,141 11,327
Withdrawals......................................... (4,830) (3,862) (6,724) (12,934) (2,494) (9,704)
Outstanding units, beginning of year................ 17,232 16,322 15,703 13,270 1,623 --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... 16,168 17,232 16,322 9,129 13,270 1,623
====== ====== ====== ======== ======= ======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................ -- -- -- -- -- --
Withdrawals......................................... -- -- -- -- -- --
Outstanding units, beginning of year................ -- -- -- -- -- --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... -- -- -- -- -- --
====== ====== ====== ======== ======= ======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................ 6,024 2,255 950 11,647 11,355 1,992
Withdrawals......................................... (1,811) (458) (124) (8,368) (2,800) (453)
Outstanding units, beginning of year................ 2,634 837 11 10,244 1,689 150
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... 6,847 2,634 837 13,523 10,244 1,689
====== ====== ====== ======== ======= ======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................ 342 230 -- 614 1,158 345
Withdrawals......................................... (30) (23) -- (1,208) (179) (28)
Outstanding units, beginning of year................ 207 -- -- 1,296 317 --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... 519 207 -- 702 1,296 317
====== ====== ====== ======== ======= ======
DESTINY
Deposits............................................ -- -- -- 6,990 10,214 --
Withdrawals......................................... -- -- -- (14,925) (132) --
Outstanding units, beginning of year................ -- -- -- 10,082 -- --
------ ------ ------ -------- ------- ------
Outstanding units, end of year...................... -- -- -- 2,147 10,082 --
====== ====== ====== ======== ======= ======
</Table>
AA-61
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
------------------------------------------------------------------------
MULTI-STYLE EQUITY FUND DIVISION CORE BOND FUND DIVISION
--------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
-------- --------- -------- -------- --------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................. 4,360 12,517 25,719 882 7,715 2,587
Withdrawals.......................................... (7,865) (14,696) (2,365) (2,528) (4,129) (335)
Outstanding units, beginning of year................. 36,033 38,212 14,858 9,908 6,322 4,070
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 32,528 36,033 38,212 8,262 9,908 6,322
======= ======== ======= ======= ======== =======
VARIABLE GENERAL SELECT PLUS
Deposits............................................. 55,313 110,156 167,069 22,596 177,929 310,229
Withdrawals.......................................... (54,464) (296,295) (72,422) (33,628) (633,634) (60,786)
Outstanding units, beginning of year................. 381,748 567,887 473,240 191,340 647,045 397,602
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 382,597 381,748 567,887 180,308 191,340 647,045
======= ======== ======= ======= ======== =======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................. 12,086 16,931 56,809 4,660 3,373 39,861
Withdrawals.......................................... (10,696) (7,993) (22,765) (1,953) (2,173) (32,644)
Outstanding units, beginning of year................. 50,259 41,321 7,277 9,101 7,901 684
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 51,649 50,259 41,321 11,808 9,101 7,901
======= ======== ======= ======= ======== =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................. 3,315 3,561 9,282 2,447 2,312 3,615
Withdrawals.......................................... (87,090) (124,397) (8,686) (2,158) (151,676) (10,478)
Outstanding units, beginning of year................. 103,551 224,387 223,791 9,088 158,452 165,315
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 19,776 103,551 224,387 9,377 9,088 158,452
======= ======== ======= ======= ======== =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................. 37,479 54,565 59,760 5,375 9,046 36,182
Withdrawals.......................................... (24,022) (21,677) (8,199) (6,537) (10,117) (9,781)
Outstanding units, beginning of year................. 88,400 55,512 3,951 26,109 27,180 779
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 101,857 88,400 55,512 24,947 26,109 27,180
======= ======== ======= ======= ======== =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................. 7,382 9,113 7,599 3,751 2,577 6,321
Withdrawals.......................................... (4,021) (1,625) (838) (2,842) (365) (255)
Outstanding units, beginning of year................. 14,647 7,159 398 8,442 6,230 164
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... 18,008 14,647 7,159 9,351 8,442 6,230
======= ======== ======= ======= ======== =======
DESTINY
Deposits............................................. -- -- -- -- -- --
Withdrawals.......................................... -- -- -- -- -- --
Outstanding units, beginning of year................. -- -- -- -- -- --
------- -------- ------- ------- -------- -------
Outstanding units, end of year....................... -- -- -- -- -- --
======= ======== ======= ======= ======== =======
</Table>
AA-62
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
----------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND DIVISION NON-US FUND DIVISION
----------------------------------- -----------------------------------
2001 2000 1999 2001 2000 1999
--------- --------- --------- --------- --------- ---------
VARIABLE UNIVERSAL LIFE--95
Deposits......................................... 3,111 8,148 6,833 1,855 1,589 7,044
Withdrawals...................................... (11,068) (11,180) (1,715) (3,936) (9,310) (1,673)
Outstanding units, beginning of year............. 15,978 19,010 13,892 7,470 15,191 9,820
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 8,021 15,978 19,010 5,389 7,470 15,191
======= ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits......................................... 19,783 35,572 62,730 23,149 41,902 33,941
Withdrawals...................................... (20,220) (74,328) (59,340) (28,563) (47,227) (26,047)
Outstanding units, beginning of year............. 138,223 176,979 173,589 190,299 195,624 187,730
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 137,786 138,223 176,979 184,885 190,299 195,624
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits......................................... 6,366 10,826 16,636 3,608 4,500 21,192
Withdrawals...................................... (3,650) (4,680) (4,051) (3,006) (2,011) (12,838)
Outstanding units, beginning of year............. 21,400 15,254 2,669 12,292 9,803 1,449
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 24,116 21,400 15,254 12,894 12,292 9,803
======= ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits......................................... 2,679 3,445 8,286 3,256 1,931 3,570
Withdrawals...................................... (58,752) (44,016) (3,252) (1,158) (88,465) (6,141)
Outstanding units, beginning of year............. 70,965 111,536 106,502 10,886 97,420 99,991
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 14,892 70,965 111,536 12,984 10,886 97,420
======= ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits......................................... 17,612 41,603 36,276 8,311 11,476 14,411
Withdrawals...................................... (33,810) (11,027) (5,039) (5,379) (6,505) (2,475)
Outstanding units, beginning of year............. 65,503 34,927 3,690 17,776 12,805 869
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 49,305 65,503 34,927 20,708 17,776 12,805
======= ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits......................................... 2,094 2,756 3,172 2,487 3,429 2,535
Withdrawals...................................... (1,259) (676) (464) (1,634) (331) (262)
Outstanding units, beginning of year............. 4,788 2,708 -- 5,531 2,433 160
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... 5,623 4,788 2,708 6,384 5,531 2,433
======= ======= ======= ======= ======= =======
DESTINY
Deposits......................................... -- -- -- -- -- --
Withdrawals...................................... -- -- -- -- -- --
Outstanding units, beginning of year............. -- -- -- -- -- --
------- ------- ------- ------- ------- -------
Outstanding units, end of year................... -- -- -- -- -- --
======= ======= ======= ======= ======= =======
</Table>
AA-63
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
-----------------------------------------------------------------------
INCOME & GROWTH FUND DIVISION INTERNATIONAL FUND DIVISION
--------------------------------- --------------------------------
2001 2000 1999 2001 2000 1999
--------- -------- -------- -------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits.............................................. 8,452 70,803 2,824 7,870 24,727 1,001
Withdrawals........................................... (7,895) (2,574) (24) (9,239) (2,253) (3)
Outstanding units, beginning of year.................. 71,029 2,800 -- 23,472 998 --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 71,586 71,029 2,800 22,103 23,472 998
======== ======= ======= ======= ======= =======
VARIABLE GENERAL SELECT PLUS
Deposits.............................................. 8,937 12,980 1,838 17,407 69,935 5,156
Withdrawals........................................... (6,393) (1,578) (21) (21,558) (23,220) (625)
Outstanding units, beginning of year.................. 13,219 1,817 -- 51,246 4,531 --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 15,763 13,219 1,817 47,095 51,246 4,531
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE--100
Deposits.............................................. 19,611 50,223 19,391 14,282 34,342 17,730
Withdrawals........................................... (7,667) (6,050) (16,959) (18,744) (3,563) (10,629)
Outstanding units, beginning of year.................. 46,605 2,432 -- 37,880 7,101 --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 58,549 46,605 2,432 33,418 37,880 7,101
======== ======= ======= ======= ======= =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits.............................................. -- -- -- -- -- --
Withdrawals........................................... -- -- -- -- -- --
Outstanding units, beginning of year.................. -- -- -- -- -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ -- -- -- -- -- --
======== ======= ======= ======= ======= =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits.............................................. 86,799 113,669 48,580 179,896 165,627 24,488
Withdrawals........................................... (48,244) (19,211) (5,275) (78,506) (18,355) (2,024)
Outstanding units, beginning of year.................. 138,378 43,920 615 169,821 22,549 85
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 176,933 138,378 43,920 271,211 169,821 22,549
======== ======= ======= ======= ======= =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits.............................................. 8,428 4,089 3,433 8,640 4,046 1,188
Withdrawals........................................... (3,102) (1,349) (541) (3,977) (655) (114)
Outstanding units, beginning of year.................. 5,632 2,892 -- 4,465 1,074 --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 10,958 5,632 2,892 9,128 4,465 1,074
======== ======= ======= ======= ======= =======
DESTINY
Deposits.............................................. 43,680 62,201 -- 30,735 55,187 --
Withdrawals........................................... (103,446) (705) -- (82,447) (604) --
Outstanding units, beginning of year.................. 61,496 -- -- 54,583 -- --
-------- ------- ------- ------- ------- -------
Outstanding units, end of year........................ 1,730 61,496 -- 2,871 54,583 --
======== ======= ======= ======= ======= =======
</Table>
AA-64
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999
--------------------------------------------------------------------------
VALUE FUND DIVISION BOND PORTFOLIO FUND DIVISION
----------------------------------- ---------------------------------
2001 2000 1999 2001 2000 1999
---------- -------- --------- --------- -------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits........................................... 9,779 5,319 -- 1,169 53 896
Withdrawals........................................ (1,910) (63) -- (107) (41) (543)
Outstanding units, beginning of year............... 5,256 -- -- 365 353 --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 13,125 5,256 -- 1,427 365 353
======== ====== ======= ======= ====== ======
VARIABLE GENERAL SELECT PLUS
Deposits........................................... 9,304 5,829 805 15,454 9,390 932
Withdrawals........................................ (2,596) (1,023) (10) (8,287) (2,467) (6)
Outstanding units, beginning of year............... 5,601 795 -- 7,849 926 --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 12,309 5,601 795 15,016 7,849 926
======== ====== ======= ======= ====== ======
VARIABLE UNIVERSAL LIFE--100
Deposits........................................... 8,095 18,220 10,510 2,470 166 340
Withdrawals........................................ (5,124) (5,921) (10,510) (797) (44) (9)
Outstanding units, beginning of year............... 12,299 -- -- 453 331 --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 15,270 12,299 -- 2,126 453 331
======== ====== ======= ======= ====== ======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits........................................... -- -- -- -- -- --
Withdrawals........................................ -- -- -- -- -- --
Outstanding units, beginning of year............... -- -- -- -- -- --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... -- -- -- -- -- --
======== ====== ======= ======= ====== ======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits........................................... 56,429 23,784 9,149 30,306 52,183 12,486
Withdrawals........................................ (13,555) (5,111) (1,376) (18,139) (4,438) (680)
Outstanding units, beginning of year............... 26,803 8,130 357 59,879 12,134 328
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 69,677 26,803 8,130 72,046 59,879 12,134
======== ====== ======= ======= ====== ======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits........................................... 11,748 759 302 3,127 1,917 528
Withdrawals........................................ (795) (178) (62) (692) (1,184) (107)
Outstanding units, beginning of year............... 821 240 -- 1,154 421 --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 11,774 821 240 3,589 1,154 421
======== ====== ======= ======= ====== ======
DESTINY
Deposits........................................... 68,356 80,878 -- 10,528 31,780 --
Withdrawals........................................ (134,638) (946) -- (42,041) (266) --
Outstanding units, beginning of year............... 79,932 -- -- 31,514 -- --
-------- ------ ------- ------- ------ ------
Outstanding units, end of year..................... 13,650 79,932 -- 1 31,514 --
======== ====== ======= ======= ====== ======
</Table>
AA-65
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, 1999, EXCEPT AS NOTED BELOW
----------------------------------------------------------------------------------------
LARGE CAP VALUE LARGE CAP GROWTH
SMALL COMPANY PORTFOLIO FUND DIVISION FUND DIVISION FUND DIVISION
--------------------------------------- ----------------- ----------------
2001 2000 1999 2001 2000* 2001 2000*
------------ ----------- ---------- ------- ------- ------- ------
VARIABLE UNIVERSAL LIFE--95
Deposits............................. 3,359 22,672 4,033 6,945 45,671 20,100 99,334
Withdrawals.......................... (13,086) (8,157) (1,453) (5,393) (1,419) (26,922) (1,742)
Outstanding units, beginning of
year............................... 17,095 2,580 -- 44,252 -- 97,592
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 7,368 17,095 2,580 45,804 44,252 90,770 97,592
======== ======= ====== ======= ======= ======= ======
VARIABLE GENERAL SELECT PLUS
Deposits............................. 18,223 98,349 10,153 32,479 111,916 22,799 16,290
Withdrawals.......................... (67,966) (22,565) (62) (24,399) (416) (10,213) (441)
Outstanding units, beginning of
year............................... 85,875 10,091 -- 111,500 -- 15,849 --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 36,132 85,875 10,091 119,580 111,500 28,435 15,849
======== ======= ====== ======= ======= ======= ======
VARIABLE UNIVERSAL LIFE--100
Deposits............................. 12,392 26,215 3,598 19,405 30,742 35,324 65,941
Withdrawals.......................... (14,464) (4,212) (16) (6,795) (1,865) (27,303) (2,545)
Outstanding units, beginning of
year............................... 25,585 3,582 -- 28,877 -- 63,396 --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 23,513 25,585 3,582 41,487 28,877 71,417 63,396
======== ======= ====== ======= ======= ======= ======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................. -- -- -- -- -- -- --
Withdrawals.......................... -- -- -- -- -- -- --
Outstanding units, beginning of
year............................... -- -- -- -- -- -- --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... -- -- -- -- -- -- --
======== ======= ====== ======= ======= ======= ======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................. 115,427 113,296 22,053 223,180 80,543 384,774 66,982
Withdrawals.......................... (68,408) (16,429) (3,275) (35,132) (5,890) (59,249) (6,445)
Outstanding units, beginning of
year............................... 115,918 19,051 273 74,653 -- 60,537 --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 162,937 115,918 19,051 262,701 74,653 386,062 60,537
======== ======= ====== ======= ======= ======= ======
JOINT AND SURVIVOR VARIABLE UNIVERSAL
LIFE INSURANCE--2000
Deposits............................. 7,372 6,064 3,035 26,746 6,177 50,514 10,134
Withdrawals.......................... (5,390) (1,685) (326) (4,145) (475) (7,442) (690)
Outstanding units, beginning of
year............................... 7,088 2,709 -- 5,702 -- 9,444 --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 9,070 7,088 2,709 28,303 5,702 52,516 9,444
======== ======= ====== ======= ======= ======= ======
DESTINY
Deposits............................. 27,089 82,889 -- 188,000 -- 2,344 --
Withdrawals.......................... (106,395) (929) -- (78,335) -- (33) --
Outstanding units, beginning of
year............................... 81,960 -- -- -- -- -- --
-------- ------- ------ ------- ------- ------- ------
Outstanding units, end of year....... 2,654 81,960 -- 109,665 -- 2,311 --
======== ======= ====== ======= ======= ======= ======
</Table>
- ---------------
* For the period April 10, 2000 (inception) to December 31, 2000.
AA-66
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
------------------------------------------------------------------------
SMALL CAP VALUE SMALL CAP GROWTH INTERNATIONAL EQUITY
FUND DIVISION FUND DIVISION FUND DIVISION
------------------ ------------------ --------------------
2001 2000* 2001 2000* 2001 2000*
-------- ------- -------- ------- --------- --------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................. 10,246 2,793 3,259 12,600 22,356 98,222
Withdrawals.......................................... (1,449) (310) (12,299) (199) (12,228) (1,825)
Outstanding units, beginning of year................. 2,483 -- 12,401 -- 96,397 --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 11,280 2,483 3,361 12,401 106,525 96,397
======= ====== ======= ====== ======= ======
VARIABLE GENERAL SELECT PLUS
Deposits............................................. 6,042 13,566 4,694 20,501 11,315 11,380
Withdrawals.......................................... (1,718) (336) (6,511) (410) (3,699) (72)
Outstanding units, beginning of year................. 13,230 -- 20,091 -- 11,308 --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 17,554 13,230 18,274 20,091 18,924 11,308
======= ====== ======= ====== ======= ======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................. 10,589 2,360 17,544 15,003 36,050 71,515
Withdrawals.......................................... (1,757) (39) (12,963) (250) (7,278) (3,704)
Outstanding units, beginning of year................. 2,321 -- 14,753 -- 67,811 --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 11,153 2,321 19,334 14,753 96,583 67,811
======= ====== ======= ====== ======= ======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................. -- -- -- -- -- --
Withdrawals.......................................... -- -- -- -- -- --
Outstanding units, beginning of year................. -- -- -- -- -- --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... -- -- -- -- -- --
======= ====== ======= ====== ======= ======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................. 75,953 15,120 74,087 22,443 167,659 42,066
Withdrawals.......................................... (9,451) (1,246) (14,983) (1,410) (21,739) (2,018)
Outstanding units, beginning of year................. 13,874 -- 21,033 -- 40,048 --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 80,376 13,874 80,137 21,033 185,968 40,048
======= ====== ======= ====== ======= ======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................. 9,551 1,171 10,666 3,312 27,223 4,436
Withdrawals.......................................... (1,877) (74) (1,897) (100) (2,474) (283)
Outstanding units, beginning of year................. 1,097 -- 3,212 -- 4,153 --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 8,771 1,097 11,981 3,212 28,902 4,153
======= ====== ======= ====== ======= ======
DESTINY
Deposits............................................. 117,337 -- 119,818 -- 45,507 --
Withdrawals.......................................... (56,594) -- (23,668) -- (45,506) --
Outstanding units, beginning of year................. -- -- -- -- -- --
------- ------ ------- ------ ------- ------
Outstanding units, end of year....................... 60,743 -- 96,150 -- 1 --
======= ====== ======= ====== ======= ======
</Table>
- ---------------
* For the period April 10, 2000 (inception) to December 31, 2000.
AA-67
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
-------------------------------------------------------------------------
EMERGING MARKETS CORE FIXED INCOME HIGH YIELD BOND
EQUITY FUND DIVISION FUND DIVISION FUND DIVISION
-------------------- ------------------- ------------------
2001 2000* 2001 2000* 2001 2000*
--------- -------- -------- -------- -------- -------
VARIABLE UNIVERSAL LIFE--95
Deposits............................................ 9,564 38,440 12,563 75,249 13,343 9,820
Withdrawals......................................... (5,534) (807) (6,221) (2,645) (4,590) (126)
Outstanding units, beginning of year................ 37,633 -- 72,604 -- 9,694 --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 41,663 37,633 78,946 72,604 18,447 9,694
======= ====== ======= ======= ======= ======
VARIABLE GENERAL SELECT PLUS
Deposits............................................ 12,741 2,902 91,270 371,083 3,601 5,289
Withdrawals......................................... (1,908) (49) (57,123) (1,353) (1,049) (28)
Outstanding units, beginning of year................ 2,853 -- 369,730 -- 5,261 --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 13,686 2,853 403,877 369,730 7,813 5,261
======= ====== ======= ======= ======= ======
VARIABLE UNIVERSAL LIFE--100
Deposits............................................ 10,103 22,143 12,700 35,188 14,481 11,108
Withdrawals......................................... (1,884) (1,245) (4,937) (1,899) (2,403) (99)
Outstanding units, beginning of year................ 20,898 -- 33,289 -- 11,009 --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 29,117 20,898 41,052 33,289 23,087 11,009
======= ====== ======= ======= ======= ======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits............................................ -- -- -- -- -- --
Withdrawals......................................... -- -- -- -- -- --
Outstanding units, beginning of year................ -- -- -- -- -- --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... -- -- -- -- -- --
======= ====== ======= ======= ======= ======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits............................................ 90,376 30,791 118,638 23,652 43,958 13,174
Withdrawals......................................... (13,792) (1,904) (23,703) (1,113) (15,132) (489)
Outstanding units, beginning of year................ 28,887 -- 22,539 -- 12,685 --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 105,471 28,887 117,474 22,539 41,511 12,685
======= ====== ======= ======= ======= ======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits............................................ 16,694 4,494 7,587 2,271 3,447 797
Withdrawals......................................... (2,501) (180) (1,545) (130) (391) (30)
Outstanding units, beginning of year................ 4,314 -- 2,141 -- 767 --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 18,507 4,314 8,183 2,141 3,823 767
======= ====== ======= ======= ======= ======
DESTINY
Deposits............................................ 6,744 -- 198,636 -- 22,216 --
Withdrawals......................................... (6,742) -- (23,198) -- (3,010) --
Outstanding units, beginning of year................ -- -- -- -- -- --
------- ------ ------- ------- ------- ------
Outstanding units, end of year...................... 2 -- 175,438 -- 19,206 --
======= ====== ======= ======= ======= ======
</Table>
- ---------------
* For the period April 10, 2000 (inception) to December 31, 2000.
AA-68
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
-------------------------------------------------------------------------------
INTERNATIONAL FIXED EMERGING MARKETS JANUS MID-CAP
INCOME FUND DIVISION DEBT FUND DIVISION FUND DIVISION
-------------------- ------------------ ---------------------
2001 2000* 2001 2000* 2001 2000**
------ ------ ------ ------ -------- -------
VARIABLE UNIVERSAL LIFE--95
Deposits...................................... 255 1,180 180 459 44,665 92,530
Withdrawals................................... (521) (64) (224) (49) (33,446) (10,717)
Outstanding units, beginning of year.......... 1,116 -- 410 -- 81,813 --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ 850 1,116 366 410 93,032 81,813
====== ====== ====== ====== ======== =======
VARIABLE GENERAL SELECT PLUS
Deposits...................................... 14,820 57,092 276 12,496 162,980 180,529
Withdrawals................................... (5,989) (206) (226) (45) (107,885) (21,461)
Outstanding units, beginning of year.......... 56,886 -- 12,451 -- 159,068 --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ 65,717 56,886 12,501 12,451 214,163 159,068
====== ====== ====== ====== ======== =======
VARIABLE UNIVERSAL LIFE--100
Deposits...................................... 2,078 56 343 1,348 127,688 74,193
Withdrawals................................... (171) (1) (83) (52) (45,733) (3,514)
Outstanding units, beginning of year.......... 55 -- 1,296 -- 70,679 --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ 1,962 55 1,556 1,296 152,634 70,679
====== ====== ====== ====== ======== =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits...................................... -- -- -- -- -- --
Withdrawals................................... -- -- -- -- -- --
Outstanding units, beginning of year.......... -- -- -- -- -- --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ -- -- -- -- -- --
====== ====== ====== ====== ======== =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits...................................... 22,094 4,448 7,585 2,798 315,221 134,019
Withdrawals................................... (4,034) (395) (1,981) (159) (83,639) (4,222)
Outstanding units, beginning of year.......... 4,053 -- 2,639 -- 129,797 --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ 22,113 4,053 8,243 2,639 361,379 129,797
====== ====== ====== ====== ======== =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits...................................... 1,901 380 908 578 21,452 6,662
Withdrawals................................... (438) (45) (274) (34) (3,544) (221)
Outstanding units, beginning of year.......... 335 -- 544 -- 6,441 --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ 1,798 335 1,178 544 24,349 6,441
====== ====== ====== ====== ======== =======
DESTINY
Deposits...................................... -- -- -- -- 13,778 --
Withdrawals................................... -- -- -- -- (11,424) --
Outstanding units, beginning of year.......... -- -- -- -- -- --
------ ------ ------ ------ -------- -------
Outstanding units, end of year................ -- -- -- -- 2,354 --
====== ====== ====== ====== ======== =======
</Table>
- ---------------
* For the period April 10, 2000 (inception) to December 31, 2000.
** For the period May 1, 2000 (inception) to December 31, 2000.
AA-69
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000, EXCEPT AS NOTED BELOW
----------------------------------------------------------------------------------
T. ROWE PRICE T. ROWE PRICE ALGER EQUITY
LARGE CAP GROWTH SMALL CAP GROWTH GROWTH SERIES
FUND DIVISION FUND DIVISION FUND DIVISION
---------------------- ------------------- ---------------------
2001 2000* 2001 2000* 2001 2000*
------- ------- ------- ------ -------- -------
VARIABLE UNIVERSAL LIFE--95
Deposits................................... 13,993 19,532 16,977 3,787 14,906 46,149
Withdrawals................................ (11,290) (9,253) (9,110) (129) (38,486) (10,389)
Outstanding units, beginning of year....... 10,279 -- 3,658 -- 35,760 --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 12,982 10,279 11,525 3,658 12,180 35,760
======= ======= ======= ====== ======== =======
VARIABLE GENERAL SELECT PLUS
Deposits................................... 66,763 99,784 70,306 46,279 59,884 125,869
Withdrawals................................ (88,192) (17,827) (58,146) (1,676) (155,719) (21,382)
Outstanding units, beginning of year....... 81,957 -- 44,603 -- 104,487 --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 60,528 81,957 56,763 44,603 8,652 104,487
======= ======= ======= ====== ======== =======
VARIABLE UNIVERSAL LIFE--100
Deposits................................... 8,575 11,001 16,061 2,004 21,691 34,113
Withdrawals................................ (9,153) (1,758) (6,510) (87) (41,616) (2,125)
Outstanding units, beginning of year....... 9,243 -- 1,917 -- 31,988 --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 8,665 9,243 11,468 1,917 12,063 31,988
======= ======= ======= ====== ======== =======
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits................................... -- -- -- -- -- --
Withdrawals................................ -- -- -- -- -- --
Outstanding units, beginning of year....... -- -- -- -- -- --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. -- -- -- -- -- --
======= ======= ======= ====== ======== =======
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits................................... 30,955 11,504 65,993 19,176 67,580 40,359
Withdrawals................................ (11,568) (611) (10,659) (499) (28,217) (1,732)
Outstanding units, beginning of year....... 10,893 -- 18,677 -- 38,627 --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 30,280 10,893 74,011 18,677 77,990 38,627
======= ======= ======= ====== ======== =======
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits................................... 1,981 410 5,476 1,985 2,122 793
Withdrawals................................ (654) (32) (975) (113) (527) (67)
Outstanding units, beginning of year....... 378 -- 1,872 -- 726 --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 1,705 378 6,373 1,872 2,321 726
======= ======= ======= ====== ======== =======
DESTINY
Deposits................................... 160,704 -- -- -- 125,499 --
Withdrawals................................ (17,354) -- -- -- (122,531) --
Outstanding units, beginning of year....... -- -- -- -- -- --
------- ------- ------- ------ -------- -------
Outstanding units, end of year............. 143,350 -- -- -- 2,968 --
======= ======= ======= ====== ======== =======
</Table>
- ---------------
* For the period May 1, 2000 (inception) to December 31, 2000.
AA-70
NOTE 6--ACCUMULATION UNIT ACTIVITY
The following is a summary of the accumulation unit activity:
<Table>
<Caption>
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2001, EXCEPT AS NOTED BELOW
----------------------------------------------------------------------
HARRIS OAKMARK
JANUS GROWTH MID-CAP PIMCO INNOVATIONS
FUND DIVISION FUND DIVISION FUND DIVISION
------------- --------------- ------------------
2001* 2001* 2001*
------------- --------------- ------------------
VARIABLE UNIVERSAL LIFE--95
Deposits.............................................. 475 1,766 90
Withdrawals........................................... (95) (187) (60)
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ 380 1,579 30
===== ======= =====
VARIABLE GENERAL SELECT PLUS
Deposits.............................................. 1,811 7,982 485
Withdrawals........................................... (45) (41) (23)
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ 1,766 7,941 462
===== ======= =====
VARIABLE UNIVERSAL LIFE--100
Deposits.............................................. 156 1,026 --
Withdrawals........................................... (86) (24) --
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ 70 1,002 --
===== ======= =====
RUSSELL VARIABLE UNIVERSAL LIFE
Deposits.............................................. -- -- --
Withdrawals........................................... -- -- --
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ -- -- --
===== ======= =====
VARIABLE UNIVERSAL LIFE INSURANCE--2000
Deposits.............................................. 6,476 6,510 1,784
Withdrawals........................................... (112) (164) (264)
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ 6,364 6,346 1,520
===== ======= =====
JOINT AND SURVIVOR VARIABLE UNIVERSAL LIFE
INSURANCE--2000
Deposits.............................................. 357 390 --
Withdrawals........................................... (5) (5) --
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ 352 385 --
===== ======= =====
DESTINY
Deposits.............................................. -- 123,197 --
Withdrawals........................................... -- (25,955) --
Outstanding units, beginning of year.................. -- -- --
----- ------- -----
Outstanding units, end of year........................ -- 97,242 --
===== ======= =====
</Table>
- ---------------
* For the period May 1, 2001 (inception) to December 31, 2001.
AA-71
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
FINANCIAL HIGHLIGHTS
General American Separate Account Eleven sells a number of variable life
insurance products, both of which have unique combinations of features and fees
that are charged against the contract owner's account balance. Differences in
the fee structures result in a variety of unit values, expense ratios and total
returns.
The following table was developed by determining which products offered by
General American Separate Account Eleven have the lowest and highest total
return. Only product designs within each Fund Division that had units
outstanding during the respective periods were considered when determining the
lowest and highest total return. The summary may not reflect the minimum and
maximum contract charges offered by General American as contract owners may not
have selected all available and applicable contract options as discussed in Note
3.
<Table>
<Caption>
AS OF DECEMBER 31, 2001 FOR THE YEAR ENDED DECEMBER 31, 2001
---------------------------------------- ----------------------------------------------------------
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO** TOTAL RETURN***
(000) (LOWEST TO HIGHEST) (000) INCOME RATIO* (LOWEST TO HIGHEST) (LOWEST TO HIGHEST)
----- ------------------- ---------- ------------- ------------------- --------------------
S & P 500 INDEX FUND
DIVISION................ 4,100 $ 9.21 to 42.99 $74,011 0.00% 0.00% to 0.90% (12.80)% to (12.00)%
MONEY MARKET FUND
DIVISION................ 3,426 11.57 to 19.94 40,994 0.00% 0.00% to 0.90% 3.12% to 4.05%
BOND INDEX FUND
DIVISION................ 558 11.83 to 26.27 9,178 0.00% 0.00% to 0.90% 7.42% to 8.39%
MANAGED EQUITY FUND
DIVISION................ 302 11.01 to 37.07 7,793 0.00% 0.00% to 0.90% 0.92% to 1.89%
ASSET ALLOCATION FUND
DIVISION................ 577 11.09 to 38.92 12,411 0.00% 0.00% to 0.90% (7.40)% to (6.57)%
INTERNATIONAL INDEX FUND
DIVISION................ 390 8.16 to 15.85 8,258 0.00% 0.00% to 0.90% (26.98)% to (21.69)%
MID-CAP EQUITY FUND
DIVISION................ 446 8.06 to 14.82 5,538 0.00% 0.00% to 0.90% (26.95)% to (26.28)%
SMALL-CAP EQUITY FUND
DIVISION................ 346 12.26 to 13.82 4,696 0.00% 0.00% to 0.90% 16.12% to 17.15%
EQUITY INCOME FUND
DIVISION................ 1,177 10.19 to 26.55 24,164 1.68% 0.00% to 0.90% (5.81)% to (4.96)%
GROWTH FUND DIVISION...... 2,470 8.85 to 29.28 49,500 0.08% 0.00% to 0.90% (18.39)% to (17.65)%
OVERSEAS FUND DIVISION.... 830 7.96 to 17.15 11,330 5.56% 0.00% to 0.90% (21.87)% to (21.17)%
ASSET MANAGER FUND
DIVISION................ 236 10.02 to 16.65 3,201 3.89% 0.00% to 0.90% (4.95)% to (4.09)%
HIGH INCOME FUND
DIVISION................ 684 7.08 to 9.84 6,101 12.00% 0.00% to 0.90% (12.52)% to (11.73)%
MID CAP FUND DIVISION..... 198 11.00 to 11.17 2,191 0.00% 0.00% to 0.90% (4.08)% to (3.21)%
WORLDWIDE HARD ASSETS FUND
DIVISION................ 36 9.12 to 12.16 347 1.08% 0.00% to 0.90% (11.25)% to (10.45)%
WORLDWIDE EMERGING MARKETS
FUND DIVISION........... 83 8.91 to 13.78 816 0.00% 0.00% to 0.90% (2.69)% to (1.81)%
MULTI-STYLE EQUITY FUND
DIVISION................ 606 9.41 to 14.23 7,720 0.46% 0.00% to 0.90% (14.98)% to (14.64)%
CORE BOND FUND DIVISION... 244 11.71 to 13.51 3,204 5.82% 0.00% to 0.90% 6.45% to 6.87%
AGGRESSIVE EQUITY FUND
DIVISION................ 240 9.09 to 13.69 2,989 0.10% 0.00% to 0.90% (3.24)% to (2.85)%
NON-US FUND DIVISION...... 243 8.62 to 10.05 2,413 0.56% 0.00% to 0.90% (22.73)% to (22.42)%
INCOME & GROWTH FUND
DIVISION................ 336 8.94 to 11.37 3,458 0.92% 0.00% to 0.90% (9.17)% to (8.35)%
INTERNATIONAL FUND
DIVISION................ 386 8.91 to 10.10 3,773 0.09% 0.00% to 0.90% (29.81)% to (29.17)%
VALUE FUND DIVISION....... 136 11.93 to 14.12 1,825 1.07% 0.00% to 0.90% 11.82% to 12.82%
BOND PORTFOLIO FUND
DIVISION................ 94 11.42 to 12.00 1,097 5.72% 0.00% to 0.90% 5.97% to 6.93%
SMALL COMPANY PORTFOLIO
FUND DIVISION........... 242 11.47 to 13.51 3,129 0.04% 0.00% to 0.90% (8.85)% to (8.03)%
LARGE CAP VALUE FUND
DIVISION................ 608 10.48 to 10.63 6,400 1.29% 0.00% to 0.90% (3.46)% to (2.92)%
LARGE CAP GROWTH FUND
DIVISION................ 632 5.17 to 5.51 3,323 0.00% 0.00% to 0.90% (27.80)% to (27.14)%
SMALL CAP VALUE FUND
DIVISION................ 190 13.43 to 13.85 2,606 0.51% 0.00% to 0.90% 13.86% to 14.89%
SMALL CAP GROWTH FUND
DIVISION................ 229 7.07 to 7.50 1,641 0.00% 0.00% to 0.90% (22.62)% to (21.91)%
INTERNATIONAL EQUITY FUND
DIVISION................ 437 5.88 to 6.24 2,642 0.14% 0.00% to 0.90% (24.73)% to (24.06)%
EMERGING MARKETS EQUITY
FUND DIVISION........... 208 5.36 to 6.07 1,170 0.00% 0.00% to 0.90% (11.89)% to (11.08)%
CORE FIXED INCOME FUND
DIVISION................ 825 11.49 to 11.63 9,524 0.00% 0.00% to 0.90% 6.73% to 7.57%
HIGH YIELD BOND FUND
DIVISION................ 114 10.05 to 10.22 1,152 9.26% 0.00% to 0.90% 3.07% to 4.00%
</Table>
AA-72
<Table>
<Caption>
AS OF DECEMBER 31, 2001 FOR THE YEAR ENDED DECEMBER 31, 2001
---------------------------------------- ----------------------------------------------------------
UNITS UNIT FAIR VALUE NET ASSETS INVESTMENT EXPENSE RATIO** TOTAL RETURN***
(000) (LOWEST TO HIGHEST) (000) INCOME RATIO* (LOWEST TO HIGHEST) (LOWEST TO HIGHEST)
----- ------------------- ---------- ------------- ------------------- --------------------
INTERNATIONAL FIXED INCOME
FUND DIVISION........... 92 9.28 to 9.59 859 0.78% 0.00% to 0.90% (6.16)% to (5.32)%
EMERGING MARKETS DEBT FUND
DIVISION................ 24 11.89 to 12.04 284 10.27% 0.00% to 0.90% 11.56% to 12.56%
JANUS MID-CAP FUND
DIVISION................ 848 4.63 to 4.70 3,944 0.00% 0.00% to 0.90% (37.90)% to (37.32)%
T. ROWE PRICE LARGE CAP
GROWTH FUND DIVISION.... 258 8.45 to 8.58 2,197 0.01% 0.00% to 0.90% (10.70)% to (9.90)%
T. ROWE PRICE SMALL CAP
GROWTH FUND DIVISION.... 160 7.96 to 8.08 1,280 0.00% 0.00% to 0.90% (9.86)% to (9.03)%
ALGER EQUITY GROWTH SERIES
FUND DIVISION........... 116 7.14 to 7.24 833 0.21% 0.00% to 0.90% (12.79)% to (12.02)%
JANUS GROWTH FUND
DIVISION................ 9 7.77 to 7.78 70 0.00% 0.00% to 0.90% 10.67% to 10.92%
HARRIS OAKMARK MID-CAP
FUND DIVISION........... 114 11.30 to 11.37 1,301 0.00% 0.00% to 0.90% 26.66% to 27.78%
PIMCO INNOVATIONS FUND
DIVISION................ 2 7.63 to 7.68 15 0.00% 0.00% to 0.90% 46.35% to 46.68%
</Table>
- ---------------
* These amounts represent the dividends, excluding distributions of capital
gains, received by the divisions from the underlying mutual fund, net of
management fees assessed by the fund manager, divided by the average net
assets. These ratios exclude those expenses, such as mortality and expense
charges, that result in direct reductions in the unit values. The
recognition of investment income by the division is affected by the timing
of the declaration of dividends by the underlying fund in which the
divisions invest.
** These ratios represent the annualized contract expenses of the separate
account, consisting of mortality and expense charges, for each period
indicated. The ratios include only those expenses that result in a direct
reduction to unit values. Charges made directly to contract owner accounts
through the redemption of units and expenses of the underlying fund are
excluded.
*** These amounts represent the total return for the periods indicated,
including changes in the value of the underlying fund, and reflect
deductions for all items included in the expense ratio. The total return
does not include any expenses assessed through the redemption of units;
inclusion of these expenses in the calculation would result in a reduction
in the total return presented.
AA-73
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2001
<Table>
<Caption>
NO. OF SHARES MARKET VALUE
------------- ------------
S & P 500 Index Fund Division
General American Capital Company.......................... 1,512,451 $74,014,429
Money Market Fund Division
General American Capital Company.......................... 1,826,972 40,980,438
Bond Index Fund Division
General American Capital Company.......................... 308,851 9,178,270
Managed Equity Fund Division
General American Capital Company.......................... 185,000 7,793,000
Asset Allocation Fund Division
General American Capital Company.......................... 282,899 12,410,604
International Index Fund Division
General American Capital Company.......................... 477,797 8,258,119
Mid-Cap Equity Fund Division
General American Capital Company.......................... 341,380 5,538,633
Small-Cap Equity Fund Division
General American Capital Company.......................... 89,261 4,695,030
Equity Income Fund Division
Variable Insurance Products Fund.......................... 1,062,152 24,163,967
Growth Fund Division
Variable Insurance Products Fund.......................... 1,472,739 49,498,764
Overseas Fund Division
Variable Insurance Products Fund.......................... 816,433 11,332,088
Asset Manager Fund Division
Variable Insurance Products Fund II....................... 220,588 3,200,738
High Income Fund Division
Variable Insurance Products Fund.......................... 951,771 6,100,851
Mid Cap Portfolio Fund Division
Variable Insurance Products Fund.......................... 111,802 2,191,325
Worldwide Hard Assets Fund Division
Van Eck Worldwide Insurance Trust......................... 32,509 347,520
Worldwide Emerging Markets Fund Division
Van Eck Worldwide Insurance Trust......................... 100,241 815,958
Multi-Style Equity Fund Division
Russell Insurance Funds................................... 652,125 7,721,161
Core Bond Fund Division
Russell Insurance Funds................................... 316,247 3,203,580
Aggressive Equity Fund Division
Russell Insurance Funds................................... 261,449 2,990,971
Non-US Fund Division
Russell Insurance Funds................................... 279,322 2,413,341
Income & Growth Fund Division
American Century Variable Portfolios...................... 535,185 3,457,297
International Fund Division
American Century Variable Portfolios...................... 572,653 3,773,785
</Table>
See accompanying notes to the financial statements.
AA-74
GENERAL AMERICAN SEPARATE ACCOUNT ELEVEN
SCHEDULE OF INVESTMENTS--(CONTINUED)
<Table>
<Caption>
NO. OF SHARES MARKET VALUE
------------- ------------
Value Fund Division
American Century Variable Portfolios...................... 245,338 $ 1,825,316
Bond Portfolio Fund Division
J.P. Morgan Series Trust II............................... 94,502 1,097,165
Small Company Portfolio Fund Division
J.P. Morgan Series Trust II............................... 236,648 3,128,484
Large Cap Value Fund Division
SEI Insurance Products Trust.............................. 626,874 6,400,384
Large Cap Growth Fund Division
SEI Insurance Products Trust.............................. 609,848 3,323,671
Small Cap Value Fund Division
SEI Insurance Products Trust.............................. 207,356 2,606,461
Small Cap Growth Fund Division
SEI Insurance Products Trust.............................. 217,599 1,636,346
International Equity Fund Division
SEI Insurance Products Trust.............................. 438,243 2,642,604
Emerging Markets Equity Fund Division
SEI Insurance Products Trust.............................. 210,997 1,168,921
Core Fixed Income Fund Division
SEI Insurance Products Trust.............................. 918,497 9,524,816
High Yield Bond Fund Division
SEI Insurance Products Trust.............................. 132,988 1,151,678
International Fixed Income Fund Division
SEI Insurance Products Trust.............................. 92,388 859,205
Emerging Markets Debt Fund Division
SEI Insurance Products Trust.............................. 28,377 284,050
Janus Mid-Cap Fund Division
Metropolitan Series Fund, Inc............................. 268,317 3,933,524
T. Rowe Price Large Cap Growth Fund Division
Metropolitan Series Fund, Inc............................. 188,644 2,195,816
T. Rowe Price Small Cap Growth Fund Division
Metropolitan Series Fund, Inc............................. 105,180 1,249,538
Alger Equity Growth Series Fund Division
New England Zenith Fund................................... 38,986 808,566
Janus Growth Fund Division
Metropolitan Series Fund, Inc............................. 8,999 69,590
Harris Oakmark Mid-cap Fund Division
New England Zenith Fund................................... 6,965 1,296,183
PIMCO Innovations Fund Division
Metlife Investors Series Trust............................ 2,490 15,414
</Table>
See accompanying notes to the financial statements.
AA-75
INDEPENDENT AUDITORS' REPORT
The 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 ("GALIC" or the "Company") as
of December 31, 2001 and 2000, and the related consolidated statements of
income, stockholder's equity and cash flows for each of the two years in the
period ended December 31, 2001. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of General American
Life Insurance Company and subsidiaries as of December 31, 2001 and 2000, and
the consolidated results of their operations and their consolidated cash flows
for each of the two years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States of America.
As more fully discussed in Note 1 to the consolidated financial statements,
the Company was acquired in a business combination accounted for as a purchase.
As a result of the acquisition, the consolidated financial statements for the
periods subsequent to the acquisition are presented on a different basis of
accounting than those for the period prior to the acquisition and, therefore,
are not directly comparable.
DELOITTE & TOUCHE LLP
St. Louis, Missouri
April 12, 2002
1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Member of
General American Life Insurance Company:
We have audited the consolidated statements of operations, comprehensive
income, stockholder equity, and cash flows of General American Life Insurance
Company and subsidiaries for the year ended December 31, 1999. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of the operations and the
cash flows of General American Life Insurance Company and subsidiaries for the
year ended December 31, 1999 in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
St. Louis, Missouri
February 4, 2000
2
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
<Table>
<Caption>
2001 2000
---------- ----------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value........ $ 9,299 $ 8,621
Equity securities, at fair value.......................... 110 29
Mortgage loans on real estate............................. 1,334 1,504
Real estate and real estate joint ventures................ 115 120
Policy loans.............................................. 2,452 2,368
Other limited partnership interests....................... 50 51
Short-term investments.................................... 164 56
Other invested assets..................................... 1,202 1,004
------- -------
Total investments................................. 14,726 13,753
Cash and cash equivalents................................... 535 598
Accrued investment income................................... 172 189
Premiums and other receivables.............................. 1,570 1,414
Deferred policy acquisition costs and value of business
acquired.................................................. 1,864 1,588
Other assets................................................ 490 614
Separate account assets..................................... 6,716 6,948
------- -------
Total assets...................................... $26,073 $25,104
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Future policy benefits.................................... $ 6,380 $ 6,101
Policyholder account balances............................. 7,972 7,334
Other policyholder funds.................................. 863 959
Policyholder dividends payable............................ 123 134
Long-term debt............................................ 425 299
Short-term debt........................................... 9 --
Current income taxes payable.............................. 57 19
Deferred income taxes payable............................. 103 71
Other liabilities......................................... 1,343 1,432
Separate account liabilities.............................. 6,716 6,948
------- -------
Total liabilities................................. 23,991 23,297
------- -------
Commitments and Contingencies (Note 9)
Company-obligated mandatorily redeemable securities of
subsidiary trusts......................................... 158 --
------- -------
Stockholder's Equity:
Common stock, $1.00 par value; 5,000,000 shares
authorized; 3,000,000 shares issued and outstanding.... 3 3
Additional paid-in capital................................ 1,707 1,674
Retained earnings......................................... 140 111
Accumulated other comprehensive income.................... 74 19
------- -------
Total stockholder's equity........................ 1,924 1,807
------- -------
Total liabilities and stockholder's equity........ $26,073 $25,104
======= =======
</Table>
See accompanying Notes to Consolidated Financial Statements.
3
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
------ ------ -------------
(DOLLARS IN MILLIONS)
REVENUES
Premiums.................................................... $2,090 $1,950 $2,189
Universal life and investment-type product policy fees...... 261 270 202
Net investment income....................................... 1,111 1,110 1,160
Other revenues.............................................. 112 215 429
Net investment gains (losses) (net of amounts allocable to
other accounts of $15 and $(28), and $8 respectively)..... 12 50 (157)
------ ------ ------
Total revenues.................................... 3,586 3,595 3,823
------ ------ ------
EXPENSES
Policyholder benefits and claims............................ 1,914 1,739 1,978
Interest credited to policyholder account balances.......... 422 393 534
Policyholder dividends...................................... 195 209 192
Other expenses (excludes amounts directly related to net
investment gains (losses) of $15 and $(28), and $8
respectively)............................................. 958 1,081 1,352
------ ------ ------
Total expenses.................................... 3,489 3,422 4,056
------ ------ ------
Income (loss) before provision for income taxes............. 97 173 (233)
Provision (benefit) for income taxes........................ 60 61 (84)
------ ------ ------
Net income (loss)........................................... $ 37 $ 112 $ (149)
====== ====== ======
</Table>
See accompanying Notes to Consolidated Financial Statements.
4
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
-----------------------------------------
FOREIGN MINIMUM
ADDITIONAL NET UNREALIZED CURRENCY PENSION
COMMON PAID-IN RETAINED INVESTMENT TRANSLATION LIABILITY
PREDECESSOR'S BASIS STOCK CAPITAL EARNINGS GAINS (LOSSES) ADJUSTMENT ADJUSTMENT TOTAL
- ------------------- ------ ---------- -------- -------------- ----------- ---------- ------
(DOLLARS IN MILLIONS)
Balance at January 1, 1999......... $3 $ 32 $1,242 $ 88 $(33) $(2) $1,330
Capital contribution from parent... 68 68
Parent's share of subsidiary's
issuance of non-voting stock..... 25 25
Dividends.......................... (41) (41)
Comprehensive loss:
Net loss......................... (149) (149)
Other comprehensive loss:
Unrealized investment losses,
net of related offsets,
reclassification adjustments
and income taxes............. (334) (334)
Foreign currency translation
adjustments.................. 13 13
------
Other comprehensive loss....... (321)
------
Comprehensive loss............... (470)
------
Balance at December 31, 1999....... $3 $ 100 $1,077 $(246) $(20) $(2) $ 912
== ====== ====== ===== ==== === ======
Balance at January 1, 2000......... $3 $1,332 $ -- $ -- $ -- $-- $1,335
Capital contribution from parent... 342 342
Dividends.......................... (1) (1)
Comprehensive income:
Net income....................... 112 112
Other comprehensive income:
Unrealized investment income,
net of related offsets,
reclassification adjustments
and income taxes............. 29 29
Foreign currency translation
adjustments.................. (10) (10)
------
Other comprehensive income..... 19
------
Comprehensive income............. 131
-- ------ ------ ----- ---- --- ------
Balance at December 31, 2000....... 3 1,674 111 29 (10) -- 1,807
Dividends........................ (8) (8)
Parents share of subsidiary's
capital stock transactions..... 33 33
Comprehensive income:
Net income....................... 37 37
Other comprehensive Income:
Unrealized investment income,
net of related offsets,
reclassification adjustments
and income taxes............. 53 53
Foreign currency translation
adjustments.................. 2 2
------
Other comprehensive income..... 55
------
Comprehensive income............. 92
-- ------ ------ ----- ---- --- ------
Balance at December 31, 2001....... $3 $1,707 $ 140 $ 82 $ (8) $-- $1,924
== ====== ====== ===== ==== === ======
</Table>
See accompanying Notes to Consolidated Financial Statements.
5
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
------- ------- -------------
(DOLLARS IN MILLIONS)
Cash flows from operating activities
Net income (loss)........................................... $ 37 $ 112 $ (149)
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Non-cash reconciling items:
Depreciation and amortization expenses............... (35) 119 (27)
Losses (gains) from sales of investments and
businesses, net................................... 3 (79) 201
Interest credited to other policyholder account
balances.......................................... 422 393 534
Universal life and investment-type product policy
fees.............................................. (261) (270) (183)
Change in assets and liabilities:
Premiums and other receivables....................... (163) 95 342
Deferred policy acquisition costs, net............... (283) (233) (166)
Insurance related liabilities........................ 172 57 517
Income taxes payable................................. 35 169 (372)
Other liabilities.................................... (19) 141 257
Other, net........................................... (13) (71) 210
------- ------- -------
Net cash (used in) provided by operating activities......... (105) 433 1,164
------- ------- -------
Cash flows from investing activities
Sales, maturities and repayments of:
Fixed maturities....................................... 2,314 1,999 11,215
Equity securities...................................... 44 -- 10
Mortgage loans on real estate.......................... 241 237 1,443
Real estate and real estate joint ventures............. 8 36 35
Other limited partnership interests.................... 6 11 --
Purchases of:
Fixed maturities....................................... (2,888) (3,726) (8,111)
Equity securities...................................... (93) (21) (19)
Mortgage loans on real estate.......................... (93) (163) (800)
Real estate and real estate joint ventures............. (13) (12) (58)
Net change in short-term investments...................... (108) 231 (91)
Net change in policy loans................................ (84) (124) (93)
Proceeds from sales of business........................... 68 94 66
Other, net................................................ (155) (116) (398)
------- ------- -------
Net cash (used in) provided by investing activities......... $ (753) $(1,554) $ 3,199
------- ------- -------
</Table>
See accompanying Notes to Consolidated Financial Statements.
6
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Table>
<Caption>
2001 2000 1999
------- ------- -------
(DOLLARS IN MILLIONS)
Cash flows from financing activities
Policyholder account balances:
Deposits............................................... $ 1,528 $ 2,216 $ 1,060
Withdrawals............................................ (1,051) (1,777) (5,247)
Short-term debt, net...................................... 9 -- --
Long-term debt issued..................................... 126 92 --
Long-term debt repaid..................................... -- (9) (1)
Net proceeds from issuance of company-obligated
mandatorily redeemable securities...................... 191 -- --
Dividends paid............................................ (8) (1) --
Capital contribution from parent.......................... -- 319 129
Other, net................................................ -- -- (17)
------- ------- -------
Net cash provided by (used in) financing activities......... 795 840 (4,076)
------- ------- -------
Change in cash and cash equivalents......................... (63) (281) 287
Cash and cash equivalents, beginning of period.............. 598 879 592
------- ------- -------
Cash and cash equivalents, end of period.................... $ 535 $ 598 $ 879
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the period for:
Interest............................................... $ 58 $ 20 $ 18
======= ======= =======
Income taxes........................................... $ 38 $ (68) $ 77
======= ======= =======
Contribution of an affiliate to a subsidiary........... $ -- $ 27 $ --
======= ======= =======
</Table>
See accompanying Notes to Consolidated Financial Statements.
7
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The consolidated financial statements include the assets, liabilities, and
results of operations of General American Life Insurance Company ("General
American" or the "Company") and the following wholly owned insurance
subsidiaries: Cova Corporation ("COVA"), an insurance holding company, Paragon
Life Insurance Company, Security Equity Life Insurance Company, General Life
Insurance Company ("GLIC"), and its 48.9% owned subsidiary, Reinsurance Group of
America, Incorporated ("RGA"), an insurance holding company. In addition, the
financial statements include the assets, liabilities, and results of operations
of the following wholly owned non-insurance subsidiaries: White Oak Royalty
Company, Krisman, Inc., GM Marketing, Incorporated (formerly known as GenMark,
Inc.) and GenAmerica Management Corporation ("GAMCO"). The financial statements
also include the assets, liabilities and results of operations of Conning
Corporation ("Conning"), Navisys, Incorporated ("Navisys") and Consultec, LLC
through the dates of sale of these entities, as more fully described in Note 10.
The Company's principal lines of business, conducted through General
American or one of its subsidiaries, are: individual life insurance,
institutional, annuities, and reinsurance. The Company distributes its products
and services primarily through a nationwide network of general agencies, and
independent brokers. The Company and its subsidiaries are licensed to conduct
business in all fifty states, ten Canadian provinces, Puerto Rico, and the
District of Columbia. Through its subsidiaries, the Company has operations in
Europe, Pacific Rim countries, Latin America, and Africa.
ACQUISITION BY METLIFE
On January 6, 2000, Metropolitan Life Insurance Company ("MetLife")
headquartered in New York, purchased 100% of the GenAmerica Financial
Corporation ("GenAmerica"), the Company's Parent, for $1.2 billion in cash.
GenAmerica operates as a wholly owned stock subsidiary of MetLife. The $1.2
billion purchase price was paid to GenAmerica's parent company, General American
Mutual Holding Company ("GAMHC") and deposited in an account for the benefit of
the Company's policyholders. Ultimately, these funds, minus adjustments, will be
distributed to participating General American policyholders, with accumulated
interest and GAMHC will be dissolved.
The acquisition of GenAmerica by MetLife was accounted for under the
purchase method of accounting. The purchase price was allocated to the assets
and liabilities acquired based upon the fair market value of such assets and
liabilities at the date of acquisition. The Company allocated the purchase price
to the net assets on January 1, 2000, as a convenience date. These allocations
have been reflected in the January 1, 2000 balance in the Consolidated Balance
Sheets and Statements of Stockholder's Equity. This purchase resulted in the
creation of goodwill and intangible assets totaling $1,517 million, which is
being amortized between 2 and 30 years.
As a result of the acquisition, the consolidated financial statements for
periods subsequent to the acquisition have different carrying values than those
for the period prior to the acquisition and, therefore, are not directly
comparable. For the period prior to the date of acquisition, the presentation is
referred to as the "Predecessor Basis".
On August 10, 1999, at management's request, the Missouri Department of
Insurance (the "Department") placed the GAMHC under an order of administrative
supervision (the "Order"). The immediate cause of the Order was the Company's
inability to immediately satisfy approximately $4 billion in institutional
funding agreement contract surrenders. The funding agreements guaranteed the
holder a return on principal at a stated interest rate for a specified period of
time.
In connection with the acquisition, MetLife offered each holder of a
General American funding agreement the option to exchange its funding agreement
for a MetLife funding agreement with substantially identical terms and
8
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
conditions or receive cash equal to the principal amount plus accrued interest.
In consideration of this exchange offer, the Company transferred to MetLife
assets having a market value equal to the market value of the funding agreement
liabilities, approximately $5.7 billion. As a result of its efforts to raise
liquidity to meet the funding agreement requests and the transfer of assets to
MetLife, the Company incurred approximately $215 million in pretax capital
losses. In addition to the capital losses, the Company incurred $141 million in
fees associated with the recapture and transfer of the funding agreement
business. With the transfer, the Company fully exited the funding agreement
business.
On November 23, 1999, RGA completed a private placement of securities in
which it sold 4,784,689 shares of its common stock, $0.01 par value per share to
MetLife. The price per share was $26.125, and the aggregate value of the
transaction was approximately $125 million. After the private offering, the
Company's ownership percentage was 48.9%.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
partnerships and joint ventures in which the Company has a majority voting
interest or general partner interest with limited removal rights by limited
partners. Intercompany accounts and transactions have been eliminated. The
Company continues to consolidate the financial statements of RGA even though its
ownership percentage has declined to below 50% since the Company has retained
control of RGA through a majority representation on RGA's Board of Directors
during 2001, 2000, and 1999.
In October 2001, GenAmerica contributed the common stock in GAMCO, which
had a value of $37 million, to General American. The consolidated financial
statements have been restated as if this transfer took place January 1, 1999.
The Company uses the equity method to account for its investments in real
estate joint ventures and other limited partnership interests in which it does
not have a controlling interest, but has more than a minimal interest.
Minority interest related to consolidated entities included in other
liabilities was $504 million and $494 million at December 31, 2001 and 2000,
respectively.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to adopt accounting policies and make estimates and assumptions that
affect amounts reported in the consolidated financial statements. The
significant accounting policies and related judgments underlying the Company's
consolidated financial statements are summarized below. In applying these
policies, management makes subjective and complex judgments that frequently
require estimates about matters that are inherently uncertain. Many of these
policies are common in the insurance and financial services industries; others
are specific to the Company's businesses and operations.
INVESTMENTS
The Company's principal investments are in fixed maturities, mortgage loans
and real estate, all of which are exposed to three primary sources of investment
risk: credit, interest rate and market valuation. The financial statement risks
are those associated with the recognition of income, impairments and the
determination of fair values. In addition, the earnings on certain investments
are dependent upon market conditions which could result in prepayments and
changes in amounts to be earned due to changing interest rates or equity
markets.
The Company's fixed maturity and equity securities are classified as
available-for-sale and are reported at their estimated fair value. Unrealized
investment gains and losses on securities are recorded as a separate component
of
9
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
other comprehensive income (loss), net of deferred income taxes. The cost of
fixed maturity and equity securities is adjusted for impairments in value deemed
to be other than temporary. These adjustments are recorded as investment losses.
Investment gains and losses on sales of securities are determined on a specific
identification basis. All security transactions are recorded on a trade date
basis.
Mortgage loans on real estate are stated at amortized cost, net of
valuation allowances. Valuation allowances are established for the excess
carrying value of the mortgage loan over its estimated fair value when it is
probable that, based upon current information and events, the Company will be
unable to collect all amounts due under the contractual terms of the loan
agreement. Valuation allowances are included in net investment gains and losses
and are based upon the present value of expected future cash flows discounted at
the loan's original effective interest rate or the collateral value if the loan
is collateral dependent. Interest income earned on impaired loans is accrued on
the net carrying value amount of the loan based on the loan's effective interest
rate. However, interest ceases to be accrued for loans on which interest is more
than 60 days past due.
Real estate, including related improvements, is stated at cost less
accumulated depreciation. Depreciation is provided on a straight-line basis over
the estimated useful life of the asset (typically 20 to 40 years). Cost is
adjusted for impairment whenever events or changes in circumstances indicate the
carrying amount of the asset may not be recoverable. Impaired real estate is
written down to estimated fair value with the impairment loss being included in
net realized investment gains (losses). Impairment losses are based upon the
estimated fair value of real estate, which is generally computed using the
present value of expected future cash flows from the real estate discounted at a
rate commensurate with the underlying risks. Real estate acquired in
satisfaction of debt is recorded at estimated fair value at the date of
foreclosure. Valuation allowances on real estate held-for-sale are computed
using the lower of depreciated cost or estimated fair value, net of disposition
costs.
Policy loans are stated at unpaid principal balances.
Short-term investments are stated at amortized cost, which approximates
fair value.
Funds withheld represent amounts contractually withheld by ceding companies
in accordance with reinsurance agreements. For agreements written on a modified
coinsurance basis and certain agreements written on a coinsurance basis, assets
equal to the net statutory reserves are withheld and legally owned by the ceding
company. Interest accrues to these funds withheld at rates defined by the treaty
terms.
DERIVATIVE INSTRUMENTS
The Company uses derivative instruments to manage risk through one of four
principal risk management strategies: the hedging of liabilities, invested
assets, portfolios of assets or liabilities and anticipated transactions.
Additionally, the Company enters into income generation and replication
derivative transactions as permitted by its derivatives use plan that was
approved by the Missouri State Insurance Department (the "Department"). The
Company's derivative hedging strategy employs a variety of instruments,
including financial futures, financial forwards, interest rate, credit and
foreign currency swaps, foreign exchange contracts, and options, including caps
and floors.
On the date the Company enters into a derivative contract, management
designates the derivative as a hedge of the identified exposure (fair value,
cash flow or foreign currency). If a derivative does not qualify as a hedge,
according to Statement of Financial Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended ("SFAS 133"), the
derivative is recorded at fair value and changes in its fair value are reported
in net investment gains or losses.
The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management objective and
strategy for undertaking various hedge transactions. In this documentation, the
Company specifically identifies the asset, liability, firm commitment, or
forecasted transaction that has been
10
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
designated as a hedged item and states how the hedging instrument is expected to
hedge the risks related to the hedged item. The Company formally measures
effectiveness of its hedging relationships both at the hedge inception and on an
ongoing basis in accordance with its risk management policy. The Company
generally determines hedge effectiveness based on total changes in fair value of
a derivative instrument. The Company discontinues hedge accounting prospectively
when: (i) it is determined that the derivative is no longer effective in
offsetting changes in the fair value or cash flows of a hedged item, (ii) the
derivative expires or is sold, terminated, or exercised, (iii) the derivative is
designated as a hedge instrument, (iv) it is probable that the forecasted
transaction will not occur, (v) a hedged firm commitment no longer meets the
definition of a firm commitment, or (vi) management determines that designation
of the derivative as a hedge instrument is no longer appropriate.
The Company designates and accounts for the following as cash flow hedges,
when they have met the effectiveness requirements of SFAS 133: (i) various types
of interest rate swaps to convert floating rate investments to fixed rate
investments, (ii) receive U.S. dollar fixed on foreign currency swaps to hedge
the foreign currency cash flow exposure of foreign currency denominated
investments, (iii) foreign currency forwards to hedge the exposure of future
payments or receipts in foreign currencies, and (iv) other instruments to hedge
the cash flows of various other anticipated transactions. For all qualifying and
highly effective cash flow hedges, the effective portion of changes in fair
value of the derivative instrument is reported in other comprehensive income or
loss. The ineffective portion of changes in fair value of the derivative
instrument is reported in net investment gains or losses. Hedged forecasted
transactions, other than the receipt or payment of variable interest payments,
are not expected to occur more than 12 months after hedge inception.
The Company designates and accounts for the following as fair value hedges
when they have met the effectiveness requirements of SFAS 133: (i) various types
of interest rate swaps to convert fixed rate investments to floating rate
investments, (ii) receive U.S. dollar floating on foreign currency swaps to
hedge the foreign currency fair value exposure of foreign currency denominated
investments, and (iii) other instruments to hedge various other fair value
exposures of investments. For all qualifying and highly effective fair value
hedges, the changes in fair value of the derivative instrument are reported as
net investment gains or losses. In addition, changes in fair value attributable
to the hedged portion of the underlying instrument are reported in net
investment gains and losses.
When hedge accounting is discontinued because it is determined that the
derivative no longer qualifies as an effective fair value hedge, the derivative
continues to be carried on the consolidated balance sheet at its fair value, but
the hedged asset or liability will no longer be adjusted for changes in fair
value. When hedge accounting is discontinued because the hedged item no longer
meets the definition of a firm commitment, the derivative continues to be
carried on the consolidated balance sheet at its fair value, and any asset or
liability that was recorded pursuant to recognition of the firm commitment is
removed from the consolidated balance sheet and recognized as a net investment
gain or loss in the current period. When hedge accounting is discontinued
because it is probable that a forecasted transaction will not occur, the
derivative continues to be carried on the consolidated balance sheet at its fair
value, and gains and losses that were accumulated in other comprehensive income
or loss are recognized immediately in net investment gains or losses. When the
hedged forecasted transaction is no longer probable, but is reasonably possible,
the accumulated gain or loss remains in other comprehensive income or loss and
is recognized when the transaction affects net income or loss; however,
prospective hedge accounting for the transaction is terminated. In all other
situations in which hedge accounting is discontinued, the derivative is carried
at its fair value on the consolidated balance sheet, with changes in its fair
value recognized in the current period as net investment gains or losses.
The Company may enter into contracts that are not themselves derivative
instruments but contain embedded derivatives. For each contract, the Company
assesses whether the economic characteristics of the embedded derivative are
clearly and closely related to those of the host contract and determines whether
a separate instrument with the same terms as the embedded instrument would meet
the definition of a derivative instrument. If it is determined that the embedded
derivative possesses economic characteristics that are not clearly and closely
related
11
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
to the economic characteristics of the host contract, and that a separate
instrument with the same terms would qualify as a derivative instrument, the
embedded derivative is separated from the host contract and accounted for as a
stand-alone derivative. Such embedded derivatives are recorded on the
consolidated balance sheet at fair value and changes in their fair value are
recorded currently in net investment gains or losses. If the Company is unable
to properly identify and measure an embedded derivative for separation from its
host contract, the entire contract is carried on the consolidated balance sheet
at fair value, with changes in fair value recognized in the current period as
net investment gains or losses.
CASH AND CASH EQUIVALENTS
The Company considers all investments purchased with an original maturity
of three months or less to be cash equivalents.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements, which are included in other
assets, are stated at cost, less accumulated depreciation and amortization.
Depreciation is determined using either the straight-line or sum-of-the-
years-digits method over the estimated useful lives of the assets. Estimated
lives range from ten to 40 years for leasehold improvements and three to 15
years for all other property and equipment. Accumulated depreciation of property
and equipment and accumulated amortization on leasehold improvements was $19
million and $21 million at December 31, 2001 and 2000, respectively.
Computer software, which is included in other assets, is stated at cost,
less accumulated amortization. Purchased software costs, as well as internal and
external costs incurred to develop internal-use computer software during the
application development stage, are capitalized. Such costs are amortized
generally over a three-year period using the straight-line method. Accumulated
amortization of capitalized software was $28 million and $46 million at December
31, 2001 and 2000, respectively.
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 incurred
but not reported 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 precisely determined and may vary from the estimated amount included
in the consolidated balance sheets.
DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new insurance business that vary with, and are
primarily related to, the production of new business are deferred. Such costs,
which consist principally of commissions and policy issue expenses, are
amortized with interest over the expected life of the contract for participating
traditional life, universal life and investment-type products. Generally,
deferred policy acquisition costs are amortized in proportion to the present
value of estimated gross margins or profits from investment, mortality, expense
margins and surrender charges. Interest rates are based on rates in effect at
the inception or acquisition of the contracts. Actual gross margins or profits
can vary from management's estimates resulting in increases or decreases in the
rate of amortization. Management periodically updates these estimates and
evaluates the recoverability of deferred policy acquisition costs. When
appropriate, management revises its assumptions of the estimated gross margins
or profits of these
12
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
contracts, and the cumulative amortization is re-estimated and adjusted by a
cumulative charge or credit to current operations.
Deferred policy acquisition costs for non-participating traditional life,
non-medical health and annuity policies with life contingencies are amortized in
proportion to anticipated premiums. Assumptions as to anticipated premiums are
made at the date of policy issuance or acquisition and are consistently applied
during the lives of the contracts. Deviations from estimated experience are
included in operations when they occur. For these contracts, the amortization
period is typically the estimated life of the policy.
Deferred policy acquisition costs related to internally replaced contracts
are expensed at date of replacement.
Value of business acquired, included as part of deferred policy acquisition
costs, represents the present value of future profits generated from existing
insurance contracts in force at the date of acquisition and is amortized over
the expected policy or contract duration in relation to the present value of
estimated gross profits from such policies and contracts.
Information regarding deferred policy acquisition costs, including value of
business acquired, is as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
--------- --------- -------------
(DOLLARS IN MILLIONS)
Balance at January 1.................................... $1,588 $1,566 $ 774
Capitalization of policy acquisition costs.............. 610 446 325
------ ------ ------
Total......................................... 2,198 2,012 1,099
------ ------ ------
Amortization allocated to:
Net investment (losses) gains......................... (15) 28 (8)
Unrealized investment (losses) gains.................. 7 59 (342)
Other expenses........................................ 342 337 162
------ ------ ------
Total amortization............................ 334 424 (188)
------ ------ ------
Balance at December 31.................................. $1,864 $1,588 $1,287
====== ====== ======
</Table>
Amortization of deferred policy acquisition costs, including value of
business acquired, is allocated to (a) investment gains and losses to provide
consolidated statement of income information regarding the impact of such gains
and losses on the amount of the amortization, (b) unrealized investment gains
and losses to provide information regarding the amount of deferred policy
acquisition costs, including value of business acquired, that would have been
amortized if such gains and losses had been realized and (c) other expenses to
provide amounts related to the gross margins or profits originating from
transactions other than investment gains and losses.
Investment gains and losses related to certain products have a direct
impact on the amortization of deferred policy acquisition costs, including value
of business acquired. Presenting investment gains and losses net of related
amortization of deferred policy acquisition costs provides information useful in
evaluating the operating performance of the Company. This presentation may not
be comparable to presentations made by other insurers.
GOODWILL
The excess of cost over the fair value of net assets acquired ("goodwill")
is included in other assets. Goodwill is amortized on a straight-line basis over
of 20 years. The Company reviews goodwill to assess recoverability from
13
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
future operations using undiscounted cash flows. Impairments are recognized in
operating results when permanent diminution in value was deemed to have
occurred.
<Table>
<Caption>
YEARS ENDED
DECEMBER 31
-----------
2001 2000
---- ----
(DOLLARS IN
MILLIONS)
Net Balance at January 1.................................... $257 $289
Amortization................................................ (15) (17)
Dispositions................................................ (42) (15)
---- ----
Net Balance at December 31.................................. $200 $257
==== ====
</Table>
<Table>
<Caption>
DECEMBER 31
-----------
2001 2000
---- ----
(DOLLARS IN
MILLIONS)
Accumulated Amortization.................................... $32 $17
=== ===
</Table>
See "--Application of Accounting Pronouncements" below regarding changes in
amortization and impairment testing effective January 1, 2002.
FUTURE POLICY BENEFITS AND POLICYHOLDER ACCOUNT BALANCES
Future policy benefit liabilities for participating traditional life
insurance policies are equal to the aggregate of (i) net level premium reserves
for death and endowment policy benefits (calculated based upon the nonforfeiture
interest rate, ranging from 2% to 8%, and mortality rates guaranteed in
calculating the cash surrender values described in such contracts), (ii) the
liability for terminal dividends and (iii) premium deficiency reserves, which
are established when the liabilities for future policy benefits plus the present
value of expected future gross premiums are insufficient to provide for expected
future policy benefits and expenses after deferred policy acquisition costs are
written off.
Future policy benefit liabilities for traditional annuities are equal to
accumulated contractholder fund balances during the accumulation period and the
present value of expected future payments after annuitization. Interest rates
used in establishing such liabilities range from 3% to 8%. Future policy benefit
liabilities for disabled lives are estimated using the present value of benefits
method and experience assumptions as to claim terminations, expenses and
interest. Interest rates used in establishing such liabilities range from 3% to
6%.
Policyholder account balances for universal life and investment-type
contracts are equal to the policy account values, which consist of an
accumulation of gross premium payments plus credited interest, ranging from 3%
to 16%, less expenses, mortality charges and withdrawals.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS
Premiums related to traditional life and annuity policies with life
contingencies are recognized as revenues when due. Benefits and expenses are
provided against such revenues to recognize profits over the estimated lives of
the policies. When premiums are due over a significantly shorter period than the
period over which benefits are provided, any excess profit is deferred and
recognized into operations in a constant relationship to insurance in-force or,
for annuities, the amount of expected future policy benefit payments.
Deposits related to universal life and investment-type products are
credited to policyholder account balances. Revenues from such contracts consist
of amounts assessed against policyholder account balances for mortality,
14
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
policy administration and surrender charges. Amounts that are charged to
operations include interest credited and benefit claims incurred in excess of
related policyholder account balances.
POLICYHOLDER DIVIDENDS
Policyholder dividends are approved annually by the boards of directors.
The aggregate amount of policyholder dividends is related to actual interest,
mortality, morbidity and expense experience for the year, as well as
management's judgment as to the appropriate level of statutory surplus to be
retained by the insurance companies.
PARTICIPATING BUSINESS
Participating business represented approximately 80% and 87% of the
Company's life insurance in-force, and 75% and 78% of the number of life
insurance policies in-force, at December 31, 2001 and 2000, respectively.
Participating policies represented 80%, 82%, and 86% of the gross life insurance
premiums for the years ended December 31, 2001, 2000, and 1999, respectively.
The percentages indicated are calculated excluding the business of the
reinsurance line of business.
INCOME TAXES
The Company and its includable life insurance file a consolidated U.S.
federal income tax return in accordance with the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"). Non-includable subsidiaries file
either separate tax returns or separate consolidated tax returns. The future tax
consequences of temporary differences between financial reporting and tax basis
of assets and liabilities are measured at the balance sheet dates and are
recorded as deferred income tax assets and liabilities.
REINSURANCE
The Company has reinsured certain of its life insurance contracts with
other insurance companies under various agreements. Amounts due from reinsurers
are estimated based upon assumptions consistent with those used in establishing
the liabilities related to the underlying reinsured contracts. Policy and
contract liabilities are reported gross of reinsurance credits. Deferred policy
acquisition costs are reduced by amounts recovered under reinsurance contracts.
Amounts received from reinsurers for policy administration are reported as
offsets to other expenses.
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 other assets/liabilities. The amount of revenue
reported on these contracts represents fees and the cost of insurance under the
terms of the reinsurance agreement.
SEPARATE ACCOUNTS
Separate accounts are established in conformity with insurance laws and are
generally not chargeable with liabilities that arise from any other business of
the Company. Separate account assets are subject to general account claims only
to the extent the value of such assets exceeds the separate account liabilities.
Investments (stated at estimated fair value) and liabilities of the separate
accounts are reported separately as assets and liabilities. Deposits to separate
accounts, investment income and recognized and unrealized gains and losses on
the investments of the separate accounts accrue directly to contractholders,
and, accordingly, are not reflected in the Company's consolidated statements of
income and cash flows. Mortality, policy administration and surrender charges to
all separate accounts are included in revenues.
15
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
FOREIGN CURRENCY TRANSLATION
Balance sheet accounts of foreign operations are translated at the exchange
rates in effect at each year-end and income and expense accounts are translated
at the average rates of exchange prevailing during the year. The local
currencies of foreign operations are the functional currencies unless the local
economy is highly inflationary. Translation adjustments are charged or credited
directly to other comprehensive income or loss. Gains and losses from foreign
currency transactions are reported in earnings.
APPLICATION OF ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, the Company adopted SFAS 133 which established
new accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. The effect of the adoption of SFAS 133, as of January 1, 2001, had
no material impact on other comprehensive income or on net income. The FASB
continues to issue additional guidance relating to the accounting for
derivatives under SFAS 133, which may result in further adjustments to the
Company's treatment of derivatives in subsequent accounting periods.
Effective April 1, 2001, the Company adopted certain additional accounting
and reporting requirements of SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities -- a
replacement of FASB Statement No. 125, relating to the derecognition of
transferred assets and extinguished liabilities and the reporting of servicing
assets and liabilities. The adoption of these requirements had no material
impact on the Company's consolidated financial statements.
Effective April 1, 2001, the Company adopted Emerging Issues Task Force
Issue No. 99-20, Recognition of Interest Income and Impairment on Certain
Investments ("EITF 99-20"). This pronouncement requires investors in certain
asset-backed securities to record changes in their estimated yield on a
prospective basis and to apply specific evaluation methods to these securities
for an other-than-temporary decline in value. The adoption of EITF 99-20 had no
material impact on the Company's consolidated financial statements.
In June 2001, the FASB issued SFAS No. 141, Business Combinations("SFAS
141"), and SFAS No. 142, Goodwill and Other Intangible Assets("SFAS 142"). SFAS
141, which was generally effective July 1, 2001, requires the purchase method of
accounting for all business combinations and separate recognition of intangible
assets apart from goodwill if such intangible assets meet certain criteria. SFAS
142, effective for fiscal years beginning after December 15, 2001, eliminates
the systematic amortization and establishes criteria for measuring the
impairment of goodwill and certain other intangible assets by reporting unit.
Amortization of goodwill and other intangible assets was $15 million and $17
million for the years ended December 31, 2001 and 2000, respectively. These
amounts are not necessarily indicative of the amortization that will not be
recorded in future periods in accordance with SFAS 142. The Company is in the
process of developing a preliminary estimate of the impact of the adoption of
SFAS 142 but has not yet finalized the effect, if any, on its consolidated
financial statements. The Company has determined that there will be no
significant reclassifications between goodwill and other intangible asset
balances and no significant impairment of other intangible assets as of January
1, 2002. The Company will complete the impairment requirements by December 31,
2002.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 provides a
single model for accounting for long-lived assets to be disposed of by
superceding SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of ("SFAS 121"), and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30, Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions ("APB 30"). Under SFAS 144, discontinued operations are measured at
the lower of carrying value or fair value less costs to sell rather than on a
net realizable value basis. Future operating losses relating to discontinued
operations also are no longer recognized
16
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
before they occur. SFAS 144 broadens the definition of a discontinued operation
to include a component of an entity (rather than a segment of a business). SFAS
144 also requires long-lived assets to be disposed of other than by sale to be
considered held and used until disposed. SFAS 144 retains the basic provisions
of (i) APB 30 regarding the presentation of discontinued operations in the
statements of income, (ii) SFAS 121 relating to recognition and measurement of
impaired long-lived assets (other than goodwill) and (iii) SFAS 121 relating to
the measurement of long-lived assets classified as held for sale. SFAS 144 must
be adopted beginning January 1, 2002. The adoption of SFAS 144 by the Company
did not have a material impact on the Company's consolidated financial
statements at the date of adoption.
Effective October 1, 2000, the Company adopted SAB No. 101, Revenue
Recognition in Financial Statements ("SAB 101"). SAB 101 summarizes certain of
the Securities and Exchange Commission's views in applying GAAP to revenue
recognition in financial statements. The requirements of SAB 101 did not have a
material effect on the Company's consolidated financial statements.
Effective January 1, 2000, the Company adopted Statement of Position 98-7,
Accounting for Insurance and Reinsurance Contracts That Do Not Transfer
Insurance Risk ("SOP 98-7"). SOP 98-7 provides guidance on the method of
accounting for insurance and reinsurance contracts that do not transfer
insurance risk, defined in the SOP as the deposit method. SOP 98-7 classifies
insurance and reinsurance contracts for which the deposit method is appropriate
into those that (i) transfer only significant timing risk, (ii) transfer only
significant underwriting risk, (iii) transfer neither significant timing nor
underwriting risk and (iv) have an indeterminate risk. Adoption of SOP 98-7 did
not have a material effect on the Company's consolidated financial statements.
The FASB is currently deliberating the issuance of an interpretation of
SFAS No. 94, Consolidation of All Majority-Owned Subsidiaries, to provide
additional guidance to assist companies in identifying and accounting for
Special Purpose Entities ("SPE's"), including when SPE's should be consolidated
by the investor. The interpretation would introduce a concept that consolidation
would be required by the primary beneficiary of the activities of an SPE unless
the SPE can meet certain substantive independent economic substance criteria. It
is not possible to determine at this time what conclusions will be included in
the final interpretation; however, the result could impact the accounting
treatment of these entities.
The FASB is currently deliberating the issuance of a proposed statement
that would amend SFAS No. 133. The proposed statement will address and resolve
certain pending Derivatives Implementation Group ("DIG") issues. The outcome of
the pending DIG issues and other provisions of the statement could impact the
Company's accounting for beneficial interest, loan commitments and other
transactions deemed to be derivatives under the new statement. The Company's
accounting for such transactions is currently based on management's best
interpretation of the accounting literature as of April 12, 2002.
RECLASSIFICATION
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform with the 2001 presentation.
17
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
2. INVESTMENTS
FIXED MATURITIES AND EQUITY SECURITIES
Fixed maturities and equity securities at December 31, 2001 were as
follows:
<Table>
<Caption>
GROSS
COST OR UNREALIZED
AMORTIZED ----------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
(DOLLARS IN MILLIONS)
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies................ $ 197 $ 3 $ 3 $ 197
States and political subdivisions..................... 1 -- -- 1
Foreign governments................................... 760 81 23 818
Corporate............................................. 4,458 176 90 4,544
Mortgage- and asset-backed securities................. 2,795 81 64 2,812
Other................................................. 932 38 43 927
------ ---- ---- ------
Total fixed maturities................................ $9,143 $379 $223 $9,299
====== ==== ==== ======
Equity Securities:
Common stocks............................................ $ 19 $ 9 $ 1 $ 27
Nonredeemable preferred stocks........................... 82 1 -- 83
------ ---- ---- ------
Total equity securities............................... $ 101 $ 10 $ 1 $ 110
====== ==== ==== ======
</Table>
Fixed maturities and equity securities at December 31, 2000 were as
follows:
<Table>
<Caption>
GROSS
COST OR UNREALIZED
AMORTIZED ----------- ESTIMATED
COST GAIN LOSS FAIR VALUE
--------- ---- ---- ----------
(DOLLARS IN MILLIONS)
Fixed Maturities:
Bonds:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies................ $ 67 $ 3 $ -- $ 70
Foreign governments................................... 874 91 41 924
Corporate............................................. 4,344 106 161 4,289
Mortgage- and asset-backed securities................. 2,373 96 34 2,435
Other................................................. 896 31 24 903
------ ---- ---- ------
Total fixed maturities................................ $8,554 $327 $260 $8,621
====== ==== ==== ======
Equity Securities:
Common stocks............................................ $ 34 $ 3 $ 8 $ 29
====== ==== ==== ======
</Table>
The Company held fixed maturities at estimated fair values that were below
investment grade or not rated by an independent rating agency that totaled $438
million and $393 million at December 31, 2001 and 2000, respectively. Non-income
producing fixed maturities were insignificant.
18
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The cost or amortized cost and estimated fair value of bonds at December
31, 2001, by contractual maturity date, are shown below:
<Table>
<Caption>
COST OR
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
(DOLLARS IN MILLIONS)
Due in one year or less..................................... $ 208 $ 212
Due after one year through five years....................... 1,409 1,448
Due after five years through ten years...................... 1,853 1,892
Due after ten years......................................... 2,878 2,935
------ ------
Total............................................. 6,348 6,487
Mortgage- and asset-backed securities....................... 2,795 2,812
------ ------
Total bonds....................................... $9,143 $9,299
====== ======
</Table>
Bonds not due at a single maturity date have been included in the above
table in the year of final maturity. Actual maturities may differ from
contractual maturities due to the exercise of prepayment options.
Sales of securities classified as available-for-sale were as follows:
<Table>
<Caption>
YEARS ENDED
DECEMBER 31,
---------------------
2001 2000
--------- ---------
(DOLLARS IN MILLIONS)
Proceeds.................................................... $2,293 $1,167
Gross realized gains........................................ 111 72
Gross realized losses....................................... 104 58
</Table>
Gross investment losses above exclude writedowns recorded during 2001, 2000
and 1999 for other than temporarily impaired available-for-sale securities of
$52 million, $41 million and $68 million, respectively.
Excluding investments in U.S. Treasury securities and obligations of U.S.
government corporations and agencies, the Company is not exposed to any
significant concentration of credit risk in its fixed maturities portfolio.
ASSETS ON DEPOSIT AND HELD IN TRUST
The Company had investment assets on deposit with regulatory agencies with
a fair market value of $ 305 million and $371 million at December 31, 2001 and
2000, respectively. The Company's securities held in trust to satisfy collateral
requirements had an amortized cost of $1,218 million and $1,234 million at
December 31, 2001 and 2000, respectively.
MORTGAGE LOANS ON REAL ESTATE
Mortgage loans on real estate were categorized as follows:
<Table>
<Caption>
DECEMBER 31,
---------------------
2001 2000
--------- ---------
(DOLLARS IN MILLIONS)
Commercial mortgage loans................................... $1,359 $1,512
Less: Valuation allowances.................................. 25 8
------ ------
Mortgage loans......................................... $1,334 $1,504
====== ======
</Table>
19
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
Mortgage loans on real estate are collateralized by properties primarily
located throughout the United States. At December 31, 2001, approximately 18%,
9% and 9% of the properties were located in California, Texas and Georgia,
respectively. Generally, the Company (as the lender) requires that a minimum of
one-fourth of the purchase price of the underlying real estate be paid by the
borrower.
Changes in mortgage loan valuation allowances were as follows:
<Table>
<Caption>
YEARS ENDED
DECEMBER 31,
---------------------
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Balance at January 1........................................ $ 8 $7
Additions................................................... 21 1
Deductions for writedowns and dispositions.................. (4) --
--- --
Balance at December 31...................................... $25 $8
=== ==
</Table>
A portion of the Company's mortgage loans on real estate was impaired and
consisted of the following:
<Table>
<Caption>
DECEMBER 31,
---------------------
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Impaired mortgage loans with valuation allowances........... $122 $76
Impaired mortgage loans without valuation allowances........ 11 25
---- ---
Total............................................. 133 101
Less: Valuation allowances.................................. 25 8
---- ---
Impaired mortgage loans................................ $108 $93
==== ===
</Table>
The average investment in impaired mortgage loans on real estate was $57
million, $78 million and $75 million for the years ended December 31, 2001, 2000
and 1999, respectively. Interest income on impaired mortgage loans was $10
million, $7 million and $4 million for the years ended December 31, 2001, 2000
and 1999, respectively.
The investment in restructured mortgage loans on real estate was $9 million
and $15 million at December 31, 2001 and 2000, respectively. There was no gross
interest income that would have been recorded in accordance with the original
terms of such loans for the years ended December 31, 2001, and 2000,
respectively.
Mortgage loans on real estate with scheduled payments of 60 days or more
past due or in foreclosure had an amortized cost of $11 million and $9 million
at December 31, 2001 and 2000, respectively.
REAL ESTATE AND REAL ESTATE JOINT VENTURES
Real estate and real estate joint ventures consisted of the following:
<Table>
<Caption>
DECEMBER 31,
----------------------
2001 2000
-------- --------
(DOLLARS IN MILLIONS)
Real estate and real estate joint ventures
held-for-investment....................................... $ 96 $ 60
Real estate and real estate joint ventures held-for-sale.... 22 63
Valuation allowance......................................... (3) (3)
---- ----
Total............................................. 19 60
---- ----
Real estate and real estate joint ventures.................. $115 $120
==== ====
</Table>
20
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
Accumulated depreciation on real estate was $9 million at December 31, 2001
and 2000, respectively.
Real estate and real estate joint ventures were categorized as follows:
<Table>
<Caption>
DECEMBER 31,
-----------------------------------
2001 2000
---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLARS IN MILLIONS)
Office............................................... $ 83 72% $ 91 76%
Retail............................................... 8 7% -- 0%
Land................................................. 22 19% 22 18%
Other................................................ 2 2% 7 6%
---- --- ---- ---
Total...................................... $115 100% $120 100%
==== === ==== ===
</Table>
The Company's real estate holdings are primarily located throughout the
United States. At December 31, 2001, approximately 73% of the Company's real
estate holdings were located in California.
Changes in real estate and real estate joint ventures held-for-sale
valuation allowance were as follows:
<Table>
<Caption>
YEARS ENDED
DECEMBER 31,
----------------------
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Balance at January 1........................................ $(3) $--
Deductions for writedowns and dispositions.................. -- (3)
--- ---
Balance at December 31...................................... $(3) $(3)
=== ===
</Table>
Investment expense related to impaired real estate and real estate joint
ventures held-for-investment was $0 and $2 million for the years ended December
31, 2001 and 2000, respectively. The carrying value of non-income producing real
estate and real estate joint ventures was $0 and $2 million at December 31, 2001
and 2000, respectively.
The Company owned real estate acquired in satisfaction of debt of $11
million and $9 million at December 31, 2001 and 2000, respectively.
21
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
NET INVESTMENT INCOME
The components of net investment income were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
--------- --------- -------------
(DOLLARS IN MILLIONS)
Fixed maturities........................................ $ 699 $ 705 $ 751
Equity securities....................................... 3 1 2
Mortgage loans on real estate........................... 119 133 175
Real estate and real estate joint ventures.............. 12 7 25
Policy loans............................................ 172 158 145
Other limited partnership interests..................... 1 -- --
Cash, cash equivalents and short-term investments....... 30 35 50
Other................................................... 90 78 32
------ ------ ------
Total......................................... 1,126 1,117 1,180
Less: Investment expenses............................... (15) (7) (20)
------ ------ ------
Net investment income.............................. $1,111 $1,110 $1,160
====== ====== ======
</Table>
NET INVESTMENT GAINS (LOSSES)
Net realized investment gains (losses), including changes in valuation
allowances, were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
-------- -------- -------------
(DOLLARS IN MILLIONS)
Fixed maturities........................................ $(58) $(27) $(260)
Equity securities....................................... 13 -- 5
Mortgage loans on real estate........................... (21) (3) --
Real estate and real estate joint ventures.............. (8) 14 36
Other limited partnership interests..................... (6) -- --
Sales of businesses..................................... 35 -- 43
Other................................................... 42 94 11
---- ---- -----
Total......................................... (3) 78 (165)
Amounts allocable to deferred policy acquisition
costs................................................. 15 (28) 8
---- ---- -----
Net realized investment (losses) gains........ $ 12 $ 50 $(157)
==== ==== =====
</Table>
Investment gains and losses have been reduced by deferred policy
acquisition cost, including value of business acquired amortization to the
extent that such amortization results from investment gains and losses. This
presentation may not be comparable to presentations made by other insurers.
22
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
NET UNREALIZED INVESTMENT GAINS (LOSSES)
The components of net unrealized investment gains (losses), included in
accumulated other comprehensive income, were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
--------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
--------- -------- -------------
(DOLLARS IN MILLIONS)
Fixed maturities........................................ $ 156 $ 72 $(660)
Equity securities....................................... 9 (5) 7
Other invested assets................................... 37 45 51
----- ---- -----
Total......................................... 202 112 (602)
----- ---- -----
Amounts allocable to deferred policy acquisition
costs................................................. (65) (59) 186
Deferred income taxes................................... (55) (24) 170
----- ---- -----
Total......................................... (120) (83) 356
----- ---- -----
Net unrealized investment gains (losses)...... $ 82 $ 29 $(246)
===== ==== =====
</Table>
The changes in net unrealized investment gains (losses) included in
accumulated other comprehensive income were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
------- ------- -------------
(DOLLARS IN MILLIONS)
Balance at January 1................................... $ 29 $ -- $ 88
Unrealized investment gains during the year............ 90 112 --
Unrealized investment gains (losses) relating to
deferred policy acquisition costs.................... (6) (59) (520)
Deferred income taxes.................................. (31) (24) 186
---- ---- -----
Balance at December 31................................. $ 82 $ 29 $(246)
==== ==== =====
Net change in unrealized investment gains.............. $ 53 $ 29 $ 334
==== ==== =====
</Table>
3. DERIVATIVE INSTRUMENTS
The table below provides a summary of the carrying value, notional amount
and current market or fair value of derivative financial instruments held at
December 31, 2001 and 2000:
<Table>
<Caption>
2001 2000
------------------------------------------- -------------------------------------------
CURRENT MARKET CURRENT MARKET
OR FAIR VALUE OR FAIR VALUE
CARRYING NOTIONAL --------------------- CARRYING NOTIONAL ---------------------
VALUE AMOUNT ASSETS LIABILITIES VALUE AMOUNT ASSETS LIABILITIES
-------- -------- ------ ------------ -------- -------- ------ ------------
(DOLLARS IN MILLIONS)
Interest rate swaps........... $34 $483 $34 $ -- $38 $1,143 $38 $ --
Exchange traded options....... -- -- -- -- 1 4 1 --
--- ---- --- ----- --- ------ --- -----
Total contractual
commitments................. $34 $483 $34 $ -- $39 $1,147 $39 $ --
=== ==== === ===== === ====== === =====
</Table>
23
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The following is a reconciliation of the notional amounts by derivative
type and strategy at December 31, 2001 and 2000:
<Table>
<Caption>
DECEMBER 31, 2000 TERMINATIONS/ DECEMBER 31, 2001
NOTIONAL AMOUNT ADDITIONS MATURITIES NOTIONAL AMOUNT
----------------- --------- ------------- -----------------
(DOLLARS IN MILLIONS)
BY DERIVATIVE TYPE
Interest rate swaps..................... $1,143 $ -- $660 $483
Exchange traded options................. 4 -- 4 --
------ ----- ---- ----
Total contractual commitments........... $1,147 $ -- $664 $483
====== ===== ==== ====
BY STRATEGY
Liability hedging....................... $1,147 $ -- $664 $483
------ ----- ---- ----
Total contractual commitments........... $1,147 $ -- $664 $483
====== ===== ==== ====
</Table>
The following table presents the notional amounts of derivative financial
instruments by maturity at December 31, 2001:
<Table>
<Caption>
REMAINING LIFE
-------------------------------------------------------------------
ONE YEAR AFTER ONE YEAR AFTER FIVE YEARS
OR LESS THROUGH FIVE YEARS THROUGH TEN YEARS AFTER TEN YEARS TOTAL
-------- ------------------ ----------------- --------------- -----
(DOLLARS IN MILLIONS)
Interest rate swaps............. $61 $170 $105 $147 $483
--- ---- ---- ---- ----
Total contractual commitments... $61 $170 $105 $147 $483
=== ==== ==== ==== ====
</Table>
The following table presents the notional amounts and fair values of
derivatives by type of hedge designation at December 31, 2001 and 2000:
<Table>
<Caption>
2001 2000
---------------------------- ----------------------------
CURRENT MARKET CURRENT MARKET
OR FAIR VALUE OR FAIR VALUE
NOTIONAL ----------------- NOTIONAL -----------------
AMOUNT ASSET LIABILITY AMOUNT ASSET LIABILITY
-------- ----- --------- -------- ----- ---------
BY HEDGE TYPE
Not designated................................ $483 $34 $-- $1,147 $39 $--
==== === == ====== === ==
</Table>
For the year ended December 31, 2001, the amount of hedge ineffectiveness
for fair value and cash flow hedges was insignificant and there were no
discontinued fair value or cash flow hedges.
For the years ended December 31, 2001, 2000 and 1999, the Company
recognized net investment income/(loss) of $11 million, $(1) million and $0
million, respectively, from the periodic settlement of interest rate swaps.
The Company did not have any effective cash flow hedges and since the
Company followed mark to market accounting in previous years the Company did not
have a SFAS 133 transition adjustment.
For the year ended December 31, 2001, the Company recognized net investment
expense of $1 million and net investment gains of $19 million from derivatives
not designated as accounting hedges. The use of these non-speculative
derivatives is permitted by the Department.
24
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
4. FAIR VALUE INFORMATION
The estimated fair values of financial instruments have been determined by
using available market information and the valuation methodologies described
below. Considerable judgment is often required in interpreting market data to
develop estimates of fair value. Accordingly, the estimates presented herein may
not necessarily be indicative of amounts that could be realized in a current
market exchange. The use of different assumptions or valuation methodologies may
have a material effect on the estimated fair value amounts.
Amounts related to the Company's financial instruments were as follows:
<Table>
<Caption>
DECEMBER 31, 2001
--------------------------------
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
(DOLLARS IN MILLIONS)
ASSETS:
Fixed maturities........................................ $9,299 $9,299
Equity securities....................................... 110 110
Mortgage loans on real estate........................... 1,334 1,423
Policy loans............................................ 2,452 2,452
Short-term investments.................................. 164 164
Cash and cash equivalents............................... 535 535
Mortgage loan commitments............................... $108 -- --
LIABILITIES:
Policyholder account balances........................... 6,286 6,188
Short-term debt......................................... 9 9
Long-term debt.......................................... 425 441
OTHER:
Company-obligated mandatorily redeemable securities of
subsidiary trusts.................................... 158 158
</Table>
<Table>
<Caption>
DECEMBER 31, 2000
--------------------------------
NOTIONAL CARRYING ESTIMATED
AMOUNT VALUE FAIR VALUE
-------- -------- ----------
(DOLLARS IN MILLIONS)
ASSETS:
Fixed maturities........................................ $8,621 $8,621
Equity securities....................................... 29 29
Mortgage loans on real estate........................... 1,504 1,573
Policy loans............................................ 2,368 2,368
Short-term investments.................................. 56 56
Cash and cash equivalents............................... 598 598
Mortgage loan commitments............................... $16 -- --
LIABILITIES:
Policyholder account balances........................... 5,468 5,658
Long-term debt.......................................... 299 294
</Table>
25
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The methods and assumptions used to estimate the fair values of financial
instruments are summarized as follows:
FIXED MATURITIES AND EQUITY SECURITIES
The fair value of fixed maturities and equity securities are based upon
quotations published by applicable stock exchanges or received from other
reliable sources. For securities in which the market values were not readily
available, fair values were estimated using quoted market prices of comparable
investments.
MORTGAGE LOANS ON REAL ESTATE AND MORTGAGE LOAN COMMITMENTS
Fair values for mortgage loans on real estate are estimated by discounting
expected future cash flows, using current interest rates for similar loans with
similar credit risk. For mortgage loan commitments, the estimated fair value is
the net premium or discount of the commitments.
POLICY LOANS
The carrying values for policy loans approximate fair value.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The carrying values for cash and cash equivalents and short-term
investments approximated fair market values due to the short-term maturities of
these instruments.
POLICYHOLDER ACCOUNT BALANCES
The fair value of policyholder account balances are estimated by
discounting expected future cash flows, based upon interest rates currently
being offered for similar contracts with maturities consistent with those
remaining for the agreements being valued.
SHORT-TERM AND LONG-TERM DEBT AND COMPANY-OBLIGATED MANDATORILY REDEEMABLE
SECURITIES OF SUBSIDIARY TRUSTS
The fair values of short-term and long-term debt and Company-obligated
mandatorily redeemable securities of subsidiary trusts are determined by
discounting expected future cash flows, using risk rates currently available for
debt with similar terms and remaining maturities.
DERIVATIVE INSTRUMENTS
The fair value of derivative instruments, including interest rate and
exchange-traded options are based upon quotations obtained from dealers or other
reliable sources. See Note 3 for derivative fair value disclosures.
5. EMPLOYEE BENEFIT PLANS
PENSION BENEFIT AND OTHER BENEFIT PLANS
Effective January 1, 2001, the Company's employees became employees of
Metropolitan Life. This transition affected the provision of employee benefit
plans as described below:
The Company continues to sponsor and administer a defined benefit plan
covering all existing and eligible active and retired employees as of January 1,
2001. Retirement benefits are based on years of credited service and final
average earnings history.
The Company also continues to offer several non-qualified, defined benefit,
and defined contribution plans to existing directors and management associates.
26
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
Prior to January 1, 2001, the Company provided certain health care and life
insurance benefits for retired employees. As of January 1, 2001, most
postretirement benefits were merged into the postretirement benefit plans of
MetLife, Inc. Consistent with the Company's former plan, employees may become
eligible for these benefits under the MetLife, Inc. plan if they attain
retirement age, with sufficient service, while working for MetLife, Inc.
<Table>
<Caption>
DECEMBER 31,
-----------------------------------
PENSION BENEFITS OTHER BENEFITS
----------------- ---------------
2001 2000 2001 2000
------- ------- ------ ------
(DOLLARS IN MILLIONS)
Change in projected benefit obligation:
Projected benefit obligation at beginning of year........... $170 $160 $37 $ 37
Service cost.............................................. 4 7 -- 1
Interest cost............................................. 12 12 -- 3
Acquisitions.............................................. (12) -- -- --
Actuarial losses (gains).................................. 10 -- 1 (2)
Curtailments and terminations............................. 1 1 -- --
Change in benefits........................................ 1 (2) -- --
Transfers out of controlled groups........................ -- -- (35) --
Benefits paid............................................. (10) (8) -- (2)
---- ---- --- ----
Projected benefit obligation at end of year................. 176 170 3 37
---- ---- --- ----
Change in plan assets:
Contract value of plan assets at beginning of year.......... 175 179 -- --
Actual return on plan assets.............................. (4) 2 -- --
Acquisitions.............................................. (11) -- -- --
Employer contribution..................................... 3 2 -- 2
Benefits paid............................................. (10) (8) -- (2)
---- ---- --- ----
Contract value of plan assets at end of year................ 153 175 -- --
---- ---- --- ----
Over (under) funded......................................... (23) 5 (3) (37)
Unrecognized net asset at transition........................ 36 -- -- --
Unrecognized net actuarial losses (gains)................... 1 15 -- (2)
Unrecognized prior service cost............................. -- (2) -- --
---- ---- --- ----
Prepaid (accrued) benefit cost.............................. $ 14 $ 18 $(3) $(39)
==== ==== === ====
Qualified plan prepaid pension cost......................... $ 57 $ 61
Non-qualified plan accrued pension cost..................... (44) (43)
Unamortized prior service cost.............................. 1 --
---- ----
Prepaid benefit cost........................................ $ 14 $ 18
==== ====
</Table>
MetLife, Inc. provides postemployment benefits for eligible employees as of
this transition date.
27
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The aggregate projected benefit obligation and aggregate contract value of
plan assets for the pension plans were as follows:
<Table>
<Caption>
NON-QUALIFIED
QUALIFIED PLAN PLAN TOTAL
--------------- ------------- -------------
2001 2000 2001 2000 2001 2000
------ ------ ----- ----- ----- -----
(DOLLARS IN MILLIONS)
Aggregate projected benefit
obligation........................... $(129) $(127) $(47) $(43) $(176) $(170)
Aggregate contract value of plan assets
(principally Company contracts)...... 153 175 -- -- 153 175
----- ----- ---- ---- ----- -----
Over (under) funded.................... $ 24 $ 48 $(47) $(43) $ (23) $ 5
===== ===== ==== ==== ===== =====
</Table>
The assumptions used in determining the aggregate projected benefit
obligation and aggregate contract value for the pension and other benefits were
as follows:
<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
------------------ ---------------
2001 2000 2001 2000
----------- ---- ------ ------
(DOLLARS IN MILLIONS)
Weighted average assumptions at December 31:
Discount rate....................................... 7.40% 7.50% 7.50% 7.50%
Expected rate of return on plan assets.............. 9.00% 9.00% N/A N/A
Rate of compensation increase....................... 4.95%-5.45% 4.95% N/A N/A
</Table>
The assumed health care cost trend rates used in measuring the accumulated
nonpension postretirement benefit obligation were as follows:
<Table>
<Caption>
2001 2000
---- ----
Present rate, eligible benefits before age 65............... 9.5% 6.5%
Present rate, eligible benefits age 65 and after............ 11.5% 6.0%
</Table>
The health care cost trend rates are projected to decline gradually to 5.0%
by 2006 and to remain at that level thereafter.
A one percentage point change in assumed health care cost trend rates would
not have a material impact on the Company's operations.
The components of net periodic benefit cost were as follows:
<Table>
<Caption>
PENSION BENEFITS OTHER BENEFITS
----------------- ---------------
2001 2000 2001 2000
------- ------- ------ ------
(DOLLARS IN MILLIONS)
Service cost.............................................. $ 4 $ 7 $-- $1
Interest cost............................................. 12 12 -- 2
Expected return on plan assets............................ (14) (16) -- .
Amortization of prior actuarial gains..................... -- -- -- --
Curtailment (credit) cost................................. 6 1 -- --
---- ---- -- --
Net periodic benefit (credit) cost........................ $ 8 $ 4 $-- $3
==== ==== == ==
</Table>
28
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
SAVINGS AND INVESTMENT PLANS
The Company sponsored savings and investment plans for substantially all
employees under which the Company matched a portion of employee contributions.
The Company contributed $2 million, for the years ended December 31, 2000 and
1999. The Company 401K Plan was merged into Metropolitan Life's SIP plan
effective January 1, 2001. All contributions to the SIP plan are made by
Metropolitan Life.
6. SEPARATE ACCOUNTS
Separate accounts reflect non-guaranteed separate accounts totaling $6,716
million and $6,948 million at December 31, 2001 and 2000, respectively, for
which the policyholder assumes the investment risk.
Fees charged to the separate accounts by the Company (including mortality
charges, policy administration fees and surrender charges) are reflected in the
Company's revenues as universal life and investment-type product policy fees and
totaled $146 million and $124 million for the years ended December 31, 2001 and
2000 respectively.
7. DEBT
Debt consisted of the following:
<Table>
<Caption>
DECEMBER 31,
-------------
2001 2000
----- -----
(DOLLARS IN
MILLIONS)
Surplus notes, interest rate 7.625%, maturity date 2024..... $ 97 $ 97
Fixed rate notes, interest rates ranging from 4.460% to 12%,
maturity dates ranging from 2004 to 2019.................. 30 103
Senior notes, interest rates ranging from 6.750% to 7.250%,
maturity dates ranging from 2006 to 2011.................. 298 98
Other notes with varying interest rates..................... -- 1
---- ----
Total long-term debt........................................ 425 299
Total short-term debt....................................... 9 --
---- ----
Total............................................. $434 $299
==== ====
</Table>
RGA maintains committed and unsecured credit facilities aggregating $180
million (one facility of $140 million, one facility of $18 million and one
facility of $22 million, all expiring in 2005). At December 31, 2001 RGA had
drawn approximately $24 million under these facilities at interest rates ranging
from 4.40% to 4.97%. At December 31, 2001, $342 million and $34 million in
letters of credit from various banks were outstanding between the subsidiaries
of RGA and unaffiliated entities, respectively.
On March 1, 2001, RGA entered into a term loan agreement and note whereby
it borrowed $75.0 million from MetLife Credit Corp., an affiliate of
Metropolitan Life at an interest rate of 75.5 basis points over the 30-day AA
financial discount rate on commercial paper. RGA used the proceeds to prepay and
terminate a $75.0 million term loan note with General American.
On December 19, 2001, RGA issued 6.75% Senior Notes with face value of
$200.0 million. These senior notes have been registered with the SEC. The net
proceeds from the offering were approximately $198.5 million and were used to
pay down a balance of $120 million on a revolving credit facility and to prepay
and terminate the $75 million term loan with MetLife Credit Corp. Capitalized
issuance costs were $2.1 million.
29
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The aggregate maturities of long-term debt for the Company are $15 million
in 2004, $11 million in 2005, $98 million in 2006 and $301 million thereafter.
Short-term debt of the Company consisted of short-term debt with a interest
rate of 6.50% and maturity of 30 days at December 31, 2001.
Interest expense related to the Company's indebtedness was $38 million and
$33 million for the years ended December 31, 2001 and 2000, respectively.
8. COMPANY-OBLIGATED MANDATORILY REDEEMABLE SECURITIES OF SUBSIDIARY TRUSTS
In December 2001, RGA through its wholly-owned trust RGA Capital Trust I
(the "Trust") issued 4,500,000 Preferred Income Equity Redeemable Securities
("PIERS") Units. Each PIERS unit consists of (i) a preferred security issued by
the Trust, having a stated liquidation amount of $50 per unit, representing an
undivided beneficial ownership interest in the assets of the Trust, which
consist solely of junior subordinated debentures issued by RGA which have a
principal amount at maturity of $50 and a stated maturity of March 18, 2051 and
(ii) a warrant to purchase, at any time prior to December 15, 2050, 1.2508
shares of RGA stock at an exercise price of $50. The fair market value of the
warrant on the issuance date was $14.87 and is detachable from the preferred
security. RGA fully and unconditionally guarantees, on a subordinated basis, the
obligations of the Trust under the preferred securities. The preferred
securities and subordinated debentures were issued at a discount (original issue
discount) to the face or liquidation value of $14.87 per security. The
securities will accrete to their $50 face/liquidation value over the life of the
security on a level yield basis. The weighted average effective interest rate on
the preferred securities and the subordinated debentures is 8.25% per annum.
Capital securities outstanding at December 31, 2001 were $158 million, net of
unamortized discount of $67 million.
9. COMMITMENTS AND CONTINGENCIES
Over the past several years the Company has faced numerous claims,
including class action lawsuits, alleging improper marketing and sales of
individual life insurance policies or annuities. These lawsuits are generally
referred to as "sales practices claims."
A sales practices class action against the Company has been settled and
approved by the United States District Court for the Eastern District of
Missouri, and affirmed by the appellate court in October 2001. This case
involves approximately 250,000 life insurance policies sold during the period
January 1, 1982 through December 31, 1996. A petition for writ of certiorari to
the United States Supreme Court has been filed by objectors to the settlement.
Implementation of the Company class action settlement is proceeding. The Company
expects that the total cost of its class action settlement will be approximately
$68 million.
Certain class members have opted out of the class action settlement
described above and have brought or continued non-class action sales practices
lawsuits. As of December 31, 2001, there are approximately 40 sales practices
lawsuits pending against the Company. The Company continues to defend itself
against these lawsuits vigorously. Some individual sales practices claims have
been resolved through settlement. Most of the current cases seek substantial
damages, including in some cases punitive and treble damages and attorneys'
fees. Additional litigation relating to the Company's marketing and sales of
individual life insurance may be commenced in the future.
The Company believes adequate provision has been made in its financial
statements for all reasonably probable and estimable losses for sales practices
claims.
Regulatory authorities in one state have had an investigation or inquiry
relating to the Company's sales of individual life insurance policies or
annuities. This investigation by regulatory authorities was resolved for
monetary payments and certain other relief.
30
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
The Company has received and responded to subpoenas for documents and other
information from the office of the U.S. Attorney for the Eastern District of
Missouri with respect to certain administrative services provided by its former
Medicare Unit during the period January 1, 1988 through December 31, 1998, which
services ended and which Unit was disbanded prior to MetLife's acquisition of
the Company. The subpoenas were issued as part of the Government's criminal
investigation alleging that the Company's former Medicare Unit engaged in
improper billing and claims payment practices. The Government is also conducting
a civil investigation under the federal False Claims Act. The Company is
cooperating fully with the Government's investigation. General American and the
Government have reached an agreement in principle to resolve all issues through
a civil settlement. The Company has recorded an accrual for this settlement. The
agreement is subject to approvals and there can be no assurance that it will be
approved.
Various litigation, claims, and assessments against the Company, in
addition to those discussed above and those otherwise provided for in the
Company's financial statements, have arisen in the course of the Company's
business, including, but not limited to, in connection with its activities as an
insurer, employer, investor, investment advisor, and taxpayer. Further, state
insurance regulatory authorities and other federal and state authorities
regularly make inquiries and conduct investigations concerning the Company's
compliance with applicable insurance and other laws and regulations.
It is not feasible to predict or determine the ultimate outcome of all
pending investigations and legal proceedings or provide reasonable ranges of
potential losses. In some of the matters referred to above, very large and/or
indeterminate amounts, including punitive and treble damages, are sought.
Although in light of these considerations it is possible that an adverse outcome
in certain cases could have a material adverse effect upon the Company's
financial position, based on information currently known by the Company's
management, in its opinion, the outcomes of such pending investigations and
legal proceedings are not likely to have such an effect. However, given the
large and/or indeterminate amounts sought in certain of these matters and the
inherent unpredictability of litigation, it is possible that an adverse outcome
in certain matters could, from time to time, have a material adverse effect on
the Company's financial position, operating results or cash flows.
10. ACQUISITIONS AND DISPOSITIONS
On July 2, 2001, the Company and MetLife completed the sale of Conning.
Conning specializes in asset management for insurance company investment
portfolios and investment research. The Company and MetLife received $84 million
in the transaction and the Company reported a gain of approximately $36 million,
net of income taxes of $14 million.
On April 18, 2000, MetLife completed its tender offer for all outstanding
shares of Conning common stock not already owned by General American for $73
million.
NaviSys, a wholly owned subsidiary of the Company was sold through two
transactions in June, 2000 and November, 2000. The first transaction was a sale
of a portion of the business to a business operated by former members of NaviSys
management. The proceeds from the sale were $47 million in cash and 2,000,000
shares of common stock of the buyer, representing 10% of the fully diluted
ownership of the buyer. The November transaction involved sale of certain assets
of the remaining NaviSys business to Liberty Insurance Services Corporation for
$10 million in cash before normal purchase price adjustments. There was a $1
million loss in the aggregate on the above mentioned transactions. The Company
continues to own the corporation that was formerly NaviSys, now known as
Krisman, Inc.
On January 1, 2000, the Company exited the Group Health business through
the Asset Purchase Agreement and related reinsurance arrangements with
Great-West Life & Annuity Insurance Company ("Great-West"). This agreement also
includes any life business that is directly associated with the health business.
The Company was required to reimburse Great-West for up to $10 million in net
operating losses incurred during 2000. Actual results of
31
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
operations exceeded the limitation and no reimbursement was required. The
Company has received $11 million from Great West in 2001 as a result of the
working capital adjustment in accordance with the terms of the Asset Purchase
Agreement, which was recorded as income.
On September 30, 1999, the Company sold its 100 percent ownership in
Consultec, LLC to ACS Enterprise Solutions, Inc. Proceeds received net of
expenses were $66 million and the realized gain, net of tax, on the sale was $28
million.
11. RELATED PARTY TRANSACTIONS
In October 2001, GenAmerica contributed GAMCO, which had a value of $37
million, to the Company.
In December 2001, the Company paid $8 million in dividends to GenAmerica.
In January 2000, GenAmerica contributed NaviSys, which had a value of $27
million, to GenAm Holding Company, a subsidiary of the Company.
In 1999, GenAmerica made capital contributions to the Company of $38
million, $10 million of NaviSys equity, and $20 million of NaviSys bonds. The
$38 million contribution consisted of a promissory note from an unrelated party,
and was expensed by the Company after it was forgiven under a settlement
agreement.
The following related party transactions occurred in the connection with
MetLife's acquisition of GenAmerica:
The Company paid $40 million to MetLife during 1999 which was returned to
GAMHC at the closing on January 6, 2000. This transaction was recorded as a
dividend by the Company to GAMHC in the accompanying financial statements.
GenAmerica contributed $15 million and $300 million of capital to the
Company on June 30 and December 26, 2000, respectively.
MetLife is to indemnify GAMHC for tax refunds attributable to the 1999 tax
year per the stock purchase agreement. At December 31, 1999, the Company had a
$86 million accrued tax receivable. During 2000, MetLife paid the Company $77
million. In addition, GAMHC is to indemnify MetLife for certain tax liabilities
relating to prior years.
During 1999, the Company paid and expensed approximately $20 million to
MetLife as consideration for MetLife's willingness to accept the funding
agreement business of the Company as described in Note 1.
During 1999, GenAmerica paid and expensed $12 million of investment
advisory fees related to its acquisition, for which GAMHC and GenAmerica were
jointly and severably liable. No costs were incurred in 2000.
RGA has reinsurance transactions between MetLife and certain of its
subsidiaries. Under these agreements, RGA reflected net assumed premiums of
approximately $112 million, $110 million, and $108 million in 2001, 2000 and
1999, respectively. The earned premiums reflect the net of business assumed from
and ceded to MetLife and its subsidiaries. The pre-tax underwriting gain on this
business was approximately $18 million, $17 million and $12 million in 2001,
2000 and 1999, respectively.
In 2001, the Company entered into a reinsurance agreement with Exeter
Reassurance Company, Limited, a subsidiary of MetLife. Under this agreement, the
Company reflected ceded premiums of approximately $22 million.
These transactions are based upon agreed-upon amounts that might differ
from amounts that would be charged if such transactions were among third
parties.
32
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
12. INCOME TAXES
The provision (benefit) for income taxes was as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
---------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
---- ---- -------------
(DOLLARS IN
MILLIONS)
Current:
Federal................................................... $46 $ 6 $(36)
Foreign................................................... 9 (1) 12
--- --- ----
55 5 (24)
--- --- ----
Deferred:
Federal................................................... 6 45 (68)
Foreign................................................... (1) 11 8
--- --- ----
5 56 (60)
--- --- ----
Provision (benefit) for income taxes........................ $60 $61 $(84)
=== === ====
</Table>
Reconciliations of the income tax provision (benefit) at the U.S. statutory
rate to the provision (benefit) for income taxes as reported were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
---------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
---- ---- -------------
(DOLLARS IN
MILLIONS)
Tax provision at U.S. statutory rate........................ $34 $61 $(83)
Tax effect of:
Foreign tax rate in excess of U.S. tax rate............... (3) 1 1
Tax preferred investment income........................... (2) 2 (4)
Tax credits............................................... (6) (7) (7)
Litigation related........................................ 14
State tax net of federal benefit.......................... 3 -- 2
Corporate owned life insurance............................ 4 (4) (3)
Goodwill amortization..................................... 7 4 2
Valuation allowance for carryforward items................ 4 -- 6
Sale of subsidiaries...................................... 5 5 --
Other, net................................................ -- (1) 2
--- --- ----
Provision for income taxes.................................. $60 $61 $(84)
=== === ====
</Table>
33
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
Deferred income taxes represent the tax effect of the differences between
the book and tax basis of assets and liabilities. Net deferred income tax assets
and liabilities consisted of the following:
<Table>
<Caption>
DECEMBER 31,
------------
2001 2000
----- ----
(DOLLARS IN
MILLIONS)
Deferred income tax assets:
Reserve for future policy benefits........................ $ 124 $ 2
Employee benefits......................................... 36 35
Investments............................................... 64 106
Loss and credit carryforwards............................. 255 196
Other, net................................................ 107 74
----- ----
586 413
Less: valuation allowance................................. 15 8
----- ----
571 405
----- ----
Deferred income tax liabilities:
Deferred policy acquisition costs......................... 510 398
Net unrealized investment gains........................... 59 7
Other..................................................... 105 71
----- ----
674 476
----- ----
Net deferred income tax liability........................... $(103) $(71)
===== ====
</Table>
The Company has not recognized a deferred tax liability for the
undistributed earnings of its wholly owned domestic and foreign subsidiaries
because the Company currently does not expect those unremitted earnings to
become taxable to the Company in the foreseeable future. This is due to the fact
that 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.
The Company believes that it is more likely than not that the deferred tax
assets established will be realized except for the amount of the valuation
allowance. As of December 31, 2001 and 2000, a valuation allowance for deferred
tax assets of approximately $15 million and $8 million respectively, was
provided on the capital losses of RGA, Inc. and the net operating losses of
RGA's Australian, Argentine, South African and U.K. subsidiaries. At December
31, 2001, the Company's subsidiaries had net operating loss carryforwards of
$521 million and capital loss carryforwards of $127 million. The remaining loss
carryforwards are expected to be utilized during the period allowed.
The Company has been audited by the Internal Revenue Service for the years
through and including 1994. The Company is being audited for the years
1995-2000. The Company believes that any adjustments that might be required for
open years will not have a material effect on the Company's consolidated
financial statements. During 2001, 2000 and 1999 the Company paid/(received
refunds of) taxes totalling approximately $38 million, ($64) million and $77
million respectively. The Company is party to a written tax sharing agreement.
13. REINSURANCE
The Company's life insurance operations participate in reinsurance in order
to limit losses, minimize exposure to large risks, and to provide additional
capacity for future growth. Risks in excess of $4 million on single
34
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
survivorship policies and joint survivorship policies are 100 percent coinsured.
Life reinsurance is accomplished through various plans of reinsurance, primarily
yearly renewable term and coinsurance. The Company uses excess of loss and quota
share reinsurance arrangements to limit its maximum loss, provide greater
diversification of risk and minimize exposure to larger risks. The Company is
contingently liable with respect to ceded reinsurance should any reinsurer be
unable to meet its obligations under these agreements.
The amounts in the consolidated statements of income are presented net of
reinsurance ceded. The effects of reinsurance were as follows:
<Table>
<Caption>
YEARS ENDED DECEMBER 31,
-------------------------------------
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
--------- --------- -------------
(DOLLARS IN MILLIONS)
Direct premiums......................................... $ 553 $ 705 $1,140
Reinsurance assumed..................................... 1,841 1,772 1,668
Reinsurance ceded....................................... (304) (527) (417)
------ ------ ------
Net premiums............................................ $2,090 $1,950 $2,391
====== ====== ======
Reinsurance recoveries netted against policyholder
benefits.............................................. $ 106 $ 117 $ 216
====== ====== ======
</Table>
Reinsurance recoverables, included in premiums and other receivables, were
$451 million and $456 million at December 31, 2001 and 2000, respectively.
Reinsurance and ceded commissions payables, included in other liabilities, were
$145 million and $50 million at December 31, 2001 and 2000, respectively.
14. STOCKHOLDER'S EQUITY
DIVIDEND RESTRICTIONS
The Company and its insurance subsidiaries are subject to limitations on
the payment of dividends to their parents. 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) ten percent of the insurance subsidiaries' statutory surplus as
of the preceding December 31 or (b) the insurance subsidiaries' statutory gain
from operations for the preceding year. As of December 31, 2001, the Company
could pay GenAmerica a stockholder dividend of $77 million without prior
approval of the Department.
35
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
15. STATUTORY EQUITY AND INCOME
The reconciliations of insurance subsidiaries' statutory capital and
surplus determined in accordance with accounting practices prescribed or
permitted by insurance regulatory authorities, with stockholder's equity
determined in conformity with generally accepted accounting principles were as
follows:
<Table>
<Caption>
DECEMBER 31,
---------------------
2001 2000
--------- ---------
(DOLLARS IN MILLIONS)
Statutory capital and surplus............................... $ 777 $ 986
GAAP adjustments for:
Future policy benefits and policyholders account
balances............................................... (710) (985)
Deferred policy acquisition costs......................... 1,864 1,588
Deferred income taxes..................................... (208) 137
Valuation of investments.................................. 494 220
Statutory asset valuation reserves........................ 83 67
Statutory interest maintenance reserve.................... 5 6
Surplus notes............................................. (107) (107)
Change in nonadmitted assets.............................. 201 147
Other, net................................................ (475) (252)
------ ------
Stockholder's Equity........................................ $1,924 $1,807
====== ======
</Table>
The National Association of Insurance Commissioners ("NAIC") adopted the
Codification of Statutory Accounting Principles (the "Codification"), which is
intended to standardize regulatory accounting and reporting to state insurance
departments and became effective January 1, 2001. However, statutory accounting
principles continue to be established by individual state laws and permitted
practices. The Department required adoption of the Codification, with certain
modifications, for the preparation of statutory financial statements effective
January 1, 2001. The impact of adoption did not materially impact statutory
capital and surplus. Further modifications by state insurance departments may
impact the effect of the Codification on the Company's statutory surplus and
capital.
Statutory net loss of the Company, as filed with the Missouri Insurance
Department, was $111 million, $42 million, and $121 million for the years ended
2001, 2000 and 1999, respectively; statutory capital and surplus, as filed was
$777 million and $986 million at December 31, 2001 and 2000, respectively.
36
GENERAL AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 2001, 2000 AND 1999
16. OTHER COMPREHENSIVE INCOME (LOSS)
The following table sets forth the reclassification adjustments required
for the years ended December 31, 2001 and 2000 to avoid double-counting in other
comprehensive income items that are included as part of net income for the
current year that have been reported as a part of other comprehensive income in
the current or prior year:
<Table>
<Caption>
PREDECESSOR'S
BASIS
-------------
2001 2000 1999
---- ---- -------------
(DOLLARS IN
MILLIONS)
Holding gains (losses) on investments arising during the
year.................................................... $133 $ 93 $(754)
Income tax effect of holding gains or losses.............. (55) (40) 267
Reclassification adjustments:
Recognized holding losses (gains) included in current
year income.......................................... 30 (40) 234
Amortization of premium and discount on investments..... (64) 16 (81)
Recognized holding losses allocated to other
policyholder amounts................................. (15) -- --
Income tax effect....................................... 20 -- --
Allocation of holding losses on investments relating to
other policyholder amounts.............................. 7 -- --
Income tax effect of allocation of holding losses to other
policyholder amounts.................................... (3) -- --
---- ---- -----
Net unrealized investment gains (losses).................. 53 29 (334)
---- ---- -----
Foreign currency translation adjustments arising during
the year................................................ 2 (10) 13
---- ---- -----
Other comprehensive income (loss)......................... $ 55 $ 19 $(321)
==== ==== =====
</Table>
37
GENERAL AMERICAN LIFE INSURANCE COMPANY
700 MARKET ST.
ST. LOUIS, MO 63101
RECEIPT
This is to acknowledge receipt of a American Vision Series VUL 2002 Prospectus
dated May 1, 2002. This Variable Life Policy is offered by General American Life
Insurance Company.
<Table>
- ----------------------------------------------------- -----------------------------------------------------
(Date) (Client's Signature)
</Table>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities and
Exchange Act of 1934, the undersigned registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore, or hereafter duly adopted pursuant to
authority conferred in that section.
RULE 484 UNDERTAKING
Section 351.355 of the Missouri General and Business Corporation Law, in brief,
allows a corporation to indemnify any person who is a party or is threatened to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative by reason
of the fact that he is or was a director, officer, employee, or agent of the
corporation, against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation. When
any person was or is a party or is threatened to be made a party in an action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the Fact that he is or was a director, officer, employee, or agent of
the corporation, indemnification may be paid unless such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the corporation. In the event of such a determination indemnification is
allowed if a court determines that the person is fairly and reasonably entitled
to indemnity. A corporation has the power to give any further indemnity to any
person who is or was a director, officer, employee, or agent, provided for in
the articles of incorporation or as authorized by any by-law which has been
adopted by vote of the shareholders, provided that no such indemnity shall
indemnify any person's conduct which was finally adjudged to have been knowingly
fraudulent, deliberately dishonest, or willful misconduct.
II-1
In accordance with Missouri law, General American's Board of Directors, at its
meeting on 19 November 1987, and the policyholders of General American at the
annual meeting held on 26 January 1988, adopted the following resolutions:
"BE IT RESOLVED THAT
1. The company shall indemnify any person who is, or was a director,
officer, or employee of the company, or is or was serving at the
request of the company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against any and all expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him or her in connection with any civil,
criminal, administrative, or investigative action, proceeding, or
claim (including an action by or in the right of the company), by
reason of the fact that he or she was serving in such capacity if
he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the
company; provided that such person's conduct is not finally
adjudged to have been knowingly fraudulent, deliberately dishonest,
or willful misconduct.
2. The indemnification provided herein shall not be deemed exclusive
of any other rights to which a director, officer or employee may
be entitled under any agreement, vote of policyholders or
disinterested directors, or otherwise, both as to action in his or
her official capacity and as to action in another capacity which
holding such office, and shall continue as to a person who has
ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such a
person."
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been
II-2
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.
REPRESENTATIONS PURSUANT TO SECTION 26(F)
General American Life Insurance Company hereby represents that the fees and
charges deducted under the Policies described in the prospectus are, in the
aggregate, reasonable in relation to the services rendered, the expenses
expected, and the risks assumed by General American Life Insurance Company.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet.
A reconciliation and tie-in of the information shown in the prospectus
with the items of Form N-8B-2.
The prospectus consisting of 172 pages.
The undertaking to file reports.
The undertaking pursuant to Rule 484(b) under the Securities Act of 1933.
Representations.
The signatures.
II-3
Written consents of the following persons:
Matthew P. McCauley, Esq. (see Exhibit 3(i) below)
James J. Reilly, Jr., FSA, MAAA (see Exhibit 3(ii) below)
Sutherland Asbill & Brennan LLP (see Exhibit 6 below)
Independent Auditors (see Exhibit 11 below)
The following exhibits:
1.A.(1) Resolution of the Board of Directors of General American
authorizing establishment of the Separate Account 3
(2) None
(3) (a) Principal Underwriting Agreement between General American
Distributors, Inc. and General American Life Insurance
Company 7
(b) Form of Selling Agreement between General American Life
Insurance Company, General American Distributors, Inc.
and other companies 7
(c) Commission Schedule for Policies
(4) None
(5) (a) Specimen of Policy 8
(b) Specimen of Policy (final)
(c) Riders to the Policy 8
(d) Riders to the Policy (final)
(6) (a) Amended Charter and Articles of Incorporation of General
American 1
(b) Amended and restated By-Laws of General American 1
(7) None
(8) None
(9) None
(10) Specimen of Application for Policy 8
2. See Exhibit 3(i)
3.(i) Opinion and Consent of Matthew P. McCauley, Esquire
(ii) Opinion and Consent of James J. Reilly, Jr., FSA, MAAA
4. None
5. Inapplicable
6. Consent of Sutherland Asbill & Brennan LLP
7.(i) Powers of Attorney 6
(ii) Powers of Attorney 9
8. Inapplicable
9. Inapplicable
10. Inapplicable
11. Consents of Independent Auditors
12. Inapplicable
II-4
13. (i) Memorandum describing General American's issuance, transfer, and
redemption procedures for the Policies pursuant to Rule
6e-3(T)(b)(13)(v)(B) and General American's procedure for conversion
to a fixed benefit policy pursuant to Rule 6e-3(T)(b)(13)(v)(B). 3
14. (i) Participation Agreement among Variable Insurance Products Fund,
Fidelity Distributors Corporation and General American Life Insurance
Company 4
(ii) Participation Agreement among Variable Insurance Products Fund II,
Fidelity Distributors Corporation and General American Life Insurance
Company 4
(iii) Participation Agreement among General American Life Insurance
Company, SEI Insurance Products Trust and SEI Investments
Distribution Company 4
(iv) Participation Agreement among Metropolitan Series Fund, Inc.,
Metropolitan Life Insurance Company and General American Life
Insurance Company 5
(v) Participation Agreement among New England Zenith Fund, New England
Investment Management, Inc., New England Securities Corporation and
General American Life Insurance Company 5
(vi) Form of Participation Agreement among Met Investors Series Trust, Met
Investors Advisory Corp., General American Distributors, Inc. and
General American Life Insurance Company 9
11-5
(viii) Form of Participation Agreement among American Funds Insurance
Series, Capital Research and Management Company, General American
Distributors, Inc. and General American Life Insurance Company 9
- -------------------
1 Incorporated by reference to the initial filing of the Registration
Statement, File No. 333-53477 (VUL 98), on May 22, 1998.
2 Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement, File No. 333-53477 (VUL 98), July 31, 1998.
3 Incorporated by reference to the Post-Effective Amendment No. 16 to the
Registration Statement, File No. 333-10146, (VUL 95), April 28, 2000.
4 Incorporated by reference to Post-Effective Amendment No. 3 to the
Registration Statement, File No. 333-53477 (VUL 98), April 28, 2000.
5 Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement, File No. 333-83625 (Destiny), May 1, 2001.
6 Incorporated by reference to Post-Effective Amendment No. 4 to the
Registration Statement, File No. 333-53477 (VUL 98), May 1, 2001.
7 Incorporated by reference to the Registration Statement, File No. 333-64216
(EBVUL), filed June 29, 2001.
8 Incorporated by reference to the Registration Statement, File No.
333-73672, filed November 19, 2001.
9 Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement, File No. 333-53477 (VUL 98), April 30, 2002.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, General American
Life Insurance Company and General American Separate Account Eleven have duly
caused this Registration Statement to be signed on their behalf by the
undersigned thereunto duly authorized, and the seal of General American Life
Insurance Company to be hereunto affixed and attested, all in the City of St.
Louis, State of Missouri, on the 30th day of April, 2002.
GENERAL AMERICAN SEPARATE
ACCOUNT ELEVEN (Registrant)
(SEAL) BY: GENERAL AMERICAN LIFE
INSURANCE COMPANY (for
Registrant and as Depositor)
Attest: /s/ Joyce W. Hillebrand By: /s/ Matthew P. McCauley
------------------------- --------------------------
Joyce W. Hillebrand Matthew P. McCauley
Assistant Secretary General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on April 30, 2002.
Signature Title
- --------- -----
** Chairman, President and Chief
- -------------------------------- Executive Officer (Principal
James M. Benson Executive Officer)
** Vice President and Chief
- -------------------------------- Financial Officer (Principal
Timothy J. Klopfenstein Accounting Officer)
* Director
- --------------------------------
William E. Cornelius
* Director
- --------------------------------
John C. Danforth
** Director
- --------------------------------
Arnold W. Donald
* Director
- --------------------------------
Jerald L. Kent
* Director
- --------------------------------
Stewart G. Nagler
* Director
_____________________
Craig D. Schnuck
* Director
_____________________
William P. Stiritz
* Director
_____________________
Andrew C. Taylor
* Director
_____________________
Robert L. Virgil, Jr.
* Director
_____________________
Lisa M. Weber
* Director
_____________________
Virginia V. Weldon
By: /s/ Matthew P. McCauley
__________________________
Matthew P. McCauley
* Original powers of attorney authorizing the Registrant's Secretary and
Assistant Secretaries as well as William L. Hutton, and Christopher A. Martin
to sign this Registration Statement and Amendments thereto on behalf of the
Board of Directors of General American Life Insurance Company were filed with
Post-Effective Amendment No. 4 to the Variable Account's Form S-6 Registration
Statement, File No. 333-53477, on May 1, 2001.
** Original powers of attorney authorizing the Registrant's Secretary and
Assistant Secretaries as well as William L. Hutton, and Christopher A. Martin
to sign this Registration Statement and Amendments thereto on behalf of the
Board of Directors of General American Life Insurance Company were filed with
Post-Effective Amendment No. 5 to the Variable Account's Form S-6 Registration
Statement, File No. 333-53477, on April 30, 2002.
Index to Exhibits
<Table>
<Caption>
Exhibit Number Description
- -------------- -----------
1.A.3(c) Commission Schedule
1.A. (5)(b) Form of American Vision Series VUL Policy (Final)
1.A. (5)(d) Riders to the Policy (Final)
3. (i) Opinion and Consent of Matthew P. McCauley, Esq.
3. (ii) Opinion and Consent of James J. Reilly, Jr., F.S.A.,
M.A.A.A.
6. Consent of Sutherland Asbill & Brennan LLP
11. Consents of the Independent Auditor
</Table>