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As filed with the Securities and Exchange Commission on February 11, 1998
Registration No. 33-87272
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
Registration Statement under The Securities Act of 1933
Amendment No. 9
GOLDEN AMERICAN LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 6355 41-0991508
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
(302) 576-3400
(Address and Telephone Number of registrant's principal executive office)
Marilyn Talman, Esq. COPY TO:
Golden American Life Insurance Company Stephen E. Roth, Esq.
1001 Jefferson Street, Suite 400 Sutherland, Asbill & Brennan LLP
Wilmington, DE 19801 1275 Pennsylvania Avenue, N.W.
(Name and Address of Agent for Service Washington, D.C. 20004-2404
of Process)
Approximate date of commencement of proposed sale to the public:
As soon as practical after the effective date of the Registration Statement
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box ...................................... [X]
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Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed Maximum Proposed
Title of Securities Amount Being Offering Price Maximum Aggregate Amount of
Being Registered Registered (1) Per Unit (1) Offering Price (1) Registration Fee (2)
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<S> <C> <C> <C> <C>
Annuity Contracts
(Interests in N/A N/A $300,000,000 $103,500
Fixed Account)
</TABLE>
(1) The maximum aggregate offering price is estimated solely for the
purpose of determining the registration fee. The amount to be registered
and the proposed maximum offering price per unit are not applicable since
these securities are not issued in predetermined amounts or units.
(2) Previously paid.
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CROSS REFERENCE SHEET
_____
Pursuant to Regulation S-K, Item 501(b)
S-1 Item Prospectus Heading
- ----------------------------- -------------------------
1. Forepart of Registration Cover Page
Statement and Outside
Front Cover Page
2. Inside Front and Outside Summary of the Contract;
Back Cover Table of Contents
3. Summary Information, Prospectus Cover; Facts
Risk Factors and Ratio Facts About the Company
of Earnings to Fixed and the Fixed Account;
Charges Summary of the Contract:
Definition of Terms
4. Use of Proceeds Facts About the Company
and the Fixed Account
5. Determination of Not Applicable
Offering Price
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Facts About the Contract
9. Description of Securities Summary of the Contract;
Being Offered Facts About the Contract
10. Interest of Named Experts Experts
and Counsel
11. Information with Respect More Information of
to the Registrant Golden American Life
Insurance Company;
Directors and Executive
Officers; Legal
Proceedings
12. Disclosure of Commission Part II, Item 14
Position on
Indemnification for
Securities Act Liabilities
<PAGE>
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PART I
The Prospectus contained herein does not contain all of the
information permitted by Securities and Exchange Commission
Regulations. Therefore, this Amendment No. 9 on Form S-1 for
Golden American Life Insurance Company ("Golden American")
incorporates by reference the Statement of Additional
Information for the GoldenSelect DVA PLUS Combination
Variable and Fixed Annuity, and Part C (Other Information)
contained the in Registration Statement on Form N-4 (post-
effective amendment No. 8, File Nos. 33-59261, 811-5626,
filed on or about the date hereof) for Golden American
Separate Account B. This information may be obtained free of
charge from Golden American Life Insurance Company by calling
Customer Service at 800-366-0066.
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PART A
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<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled in
Wilmington, Delaware
DEFERRED COMBINATION VARIABLE AND
FIXED ANNUITY PROSPECTUS
GOLDENSELECT DVA PLUS
____________________________________________________________________
This prospectus describes group and individual deferred variable annuity
Contracts (the "Contract") offered by Golden American Life Insurance
Company ("Golden American" "we" "our" or "us"). The Owner ("you" or
"your") purchases the Contract with an Initial Premium and is permitted
to make additional premium payments.
The Contract is funded by two accounts, Separate Account B ("Account B")
and the Fixed Account (collectively, the "Accounts").
Twenty-one Divisions of Account B are currently available under the
Contract. The investments available through the Divisions of Account B
include mutual fund portfolios (the "Series") of The GCG Trust (the "GCG
Trust") and the Equi-Select Series Trust (the "ESS Trust"). The
investments available through the Fixed Account include various Fixed
Allocations which we credit with fixed rates of interest for the
Guarantee Periods you select. We currently offer Guarantee Periods with
durations of 1, 3, 5, 7 and 10 years. We reserve the right at any time
to increase or decrease the number of Guarantee Periods offered. Not all
Guarantee Periods may be available.
This prospectus describes the Contract and provides background
information regarding Account B and the Fixed Account. The prospectuses
for the GCG Trust and the ESS Trust (individually, "a Trust," and
collectively, "the Trusts"), which must accompany this prospectus,
provide information regarding investment activities and policies of the
Trusts.
You may allocate your premiums among the twenty-one Divisions and the
Fixed Allocations available under the Contract in any way you choose,
subject to certain restrictions. You may change the allocation of your
Accumulation Value during a Contract Year free of charge. We reserve the
right, however, to assess a charge for each allocation change after the
twelfth allocation change in a Contract Year.
Your Accumulation Value in Account B will vary in accordance with the
investment performance of the Divisions selected by you. Therefore, you
bear the entire investment risk for all amounts allocated to Account B.
You also bear investment risk with respect to surrenders, partial
withdrawals, transfers and annuitization from a Fixed Allocation prior
to the end of the applicable Guarantee Period. Such surrender, partial
withdrawal, transfer or annuitization may be subject to a Market Value
Adjustment, which could have the effect of either increasing or
decreasing your Accumulation Value.
We will pay a death benefit to the Beneficiary if the Owner dies prior
to the Annuity Commencement Date or the Annuitant dies prior to the
Annuity Commencement Date when the Owner is other than an individual.
This prospectus describes your principal rights and limitations and sets
forth the information concerning the Accounts that investors should know
before investing. A Statement of Additional Information, dated February
12, 1998, about Account B has been filed with the Securities and Exchange
Commission ("SEC") and is available without charge upon request. To obtain
a copy of this document call or write our Customer Service Center. The
Table of Contents of the Statement of Additional Information may be found
on the last page of this prospectus. The Statement of Additional
Information is incorporated herein by reference.
____________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
CONTRACTS AND UNDERLYING SERIES SHARES WHICH FUND THE CONTRACTS ARE NOT
INSURED BY THE FDIC OR ANY OTHER AGENCY. THEY ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK AND ARE NOT BANK GUARANTEED. THEY ARE SUBJECT TO
MARKET FLUCTUATION, REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
PLEASE READ THIS PROSPECTUS AND KEEP IT FOR FUTURE REFERENCE. IT IS NOT VALID
UNLESS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE GCG TRUST AND THE ESS
TRUST.
THE FIXED ACCOUNT AND ENHANCED DEATH BENEFITS MAY NOT BE AVAILABLE IN ALL
STATES. YOU MAY CONTACT OUR CUSTOMER SERVICE CENTER TO FIND OUT ABOUT STATE
AVAILABILITY.
ISSUED BY: DISTRIBUTED BY: ADMINISTERED AT:
Golden American Life Directed Services, Inc. Customer Service Center
Insurance Company Wilmington, Delaware Mailing Address:
19801 P.O. Box 8794
Wilmington, Delaware
19899-8794
1-800-366-0066
PROSPECTUS DATED: FEBRUARY 12, 1998
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DEFINITION OF TERMS............................................... 3
SUMMARY OF THE CONTRACT........................................... 5
FEE TABLE......................................................... 7
CONDENSED FINANCIAL AND OTHER INFORMATION......................... 10
Index of Investment Experience
Financial Statements
Performance Related Information
INTRODUCTION...................................................... 12
FACTS ABOUT THE COMPANY AND THE ACCOUNTS.......................... 12
Golden American
The GCG Trust and the ESS Trust
Separate Account B
Account B Divisions
Changes Within Account B
The Fixed Account
FACTS ABOUT THE CONTRACT.......................................... 19
The Owner
The Annuitant
The Beneficiary
Change of Owner or Beneficiary
Availability of the Contract
Types of Contracts
Your Right to Select or Change Contract Options
Premiums
Making Additional Premium Payments
Crediting Premium Payments
Restrictions on Allocation of Premium Payments
Your Right to Reallocate
Dollar Cost Averaging
What Happens if a Division is Not Available
Your Accumulation Value
Accumulation Value in Each Division
Measurement of Investment Experience
Cash Surrender Value
Surrendering to Receive the Cash Surrender Value
Partial Withdrawals
Automatic Rebalancing
Proceeds Payable to the Beneficiary
Death Benefit Options
Reports to Owners
When We Make Payments
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
CHARGES AND FEES................................................... 29
Charge Deduction Division
Charges Deducted from the Accumulation Value
Charges Deducted from the Divisions
Trust Expenses
CHOOSING YOUR ANNUITIZATION OPTIONS................................ 31
Annuitization of Your Contract
Annuity Commencement Date Selection
Frequency Selection
The Annuitization Options
Payment When Named Person Dies
OTHER CONTRACT PROVISIONS.......................................... 33
In Case of Errors in Application Information
Contract Changes -- Applicable Tax Law
Your Right to Cancel or Exchange Your Contract
Other Contract Changes
Group or Sponsored Arrangements
Selling the Contract
REGULATORY INFORMATION............................................. 34
Voting Rights
State Regulation
Legal Proceedings
Legal Matters
Experts
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY...... 35
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Directors and Executive Officers
Compensation Tables and Other Information
FEDERAL TAX CONSIDERATIONS......................................... 50
Introduction
Tax Status of Golden American
Taxation on Non-Qualified Annuities
IRA Contracts and Other Qualified Retirement Plans
Federal Income Tax Withholding
UNAUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE
COMPANY....................................................... 58
AUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE
COMPANY....................................................... 68
STATEMENT OF ADDITIONAL INFORMATION................................ 93
APPENDIX A......................................................... A1
Market Value Adjustment Examples
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED
TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS.
2
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____________________________________________________________________
DEFINITION OF TERMS
ACCOUNTS
Separate Account B and the Fixed Account.
ACCUMULATION VALUE
The total amount invested under the Contract. Initially, this amount is
equal to the premium paid. Thereafter, the Accumulation Value will reflect
the premiums paid, investment experience of the Divisions and interest
credited to your Fixed Allocations, charges deducted and any partial
withdrawals.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION
An enhanced death benefit option that may be elected only at issue and
only if the Owner or Annuitant (when the Owner is other than an individual)
is age 79 or younger. The enhanced death benefit provided by this option
is the highest Accumulation Value on any Contract Anniversary on or prior
to the Owner turning age 80, as adjusted for additional premiums and
partial withdrawals.
ANNUITANT
The person designated by the Owner to be the measuring life in
determining Annuity Payments.
ANNUITY COMMENCEMENT DATE
The date on which Annuity Payments begin.
ANNUITY OPTIONS
Options the Owner selects that determine the form and amount of Annuity
Payments.
ANNUITY PAYMENT
The periodic payment an Owner receives. It may be either a fixed or a
variable amount based on the Annuity Option chosen.
ATTAINED AGE
The Issue Age of the Owner or Annuitant plus the number of full years
elapsed since the Contract Date.
BENEFICIARY
The person designated to receive benefits in the case of the death of
the Owner or the Annuitant (when the Owner is other than an individual).
BUSINESS DAY
Any day the New York Stock Exchange ("NYSE") is open for trading,
exclusive of Federal holidays, or any day on which the SEC requires that
mutual funds, unit investment trusts or other investment portfolios be
valued.
CASH SURRENDER VALUE
The amount the Owner receives upon surrender of the Contract, including
any Market ValueAdjustment.
CHARGE DEDUCTION DIVISION
The Division from which all charges are deducted if so designated by you.
The Charge Deduction Division currently is the Liquid Asset Division.
CONTINGENT ANNUITANT
The person designated by the Owner who, upon the Annuitant's death prior
to the Annuity Commencement Date, becomes the Annuitant.
CONTRACT
The entire Contract consisting of the basic Contract and any riders or
endorsements.
CONTRACT ANNIVERSARY
The anniversary of the Contract Date.
CONTRACT DATE
The date on which we have received the Initial Premium and upon which
we begin determining the Contract values. It may or may not be the same
as the Issue Date. This date is used to determine Contract months,
processing dates, years and anniversaries.
CONTRACT PROCESSING DATES
The days when we deduct certain charges from the Accumulation Value. If
the Contract Processing Date is not a Valuation Date, it will be on the
next succeeding Valuation Date. The Contract Processing Dates will be
once each year on the Contract Anniversary.
CONTRACT PROCESSING PERIOD
The first Contract processing period begins with the Contract Date and
ends at the close of business on the first Contract Processing Date. All
subsequent Contract processing periods begin at the close of business on
the most recent Contract Processing Date and extend to the close of
business on the next Contract Processing Date. There is one Contract
processing period each year.
CONTRACT YEAR
The period between Contract anniversaries.
CUSTOMER SERVICE CENTER
Where service is provided to you. The mailing address and telephone number
of the Customer Service Center are shown on the cover.
3
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DIVISIONS
The investment options available under Account B.
ENDORSEMENTS
An endorsement changes or adds provisions to the Contract.
EXCHANGE CONTRACTS
Contracts issued by insurance companies not affiliated with Golden
American.
EXPERIENCE FACTOR
The factor which reflects the investment experience of the portfolio
in which a Division invests and also reflects the charges assessed
against the Division for a Valuation Period.
FIXED ACCOUNT
An Account which contains all of our assets that support Owner Fixed
Allocations and any interest credited thereto.
FIXED ALLOCATION
An amount allocated to the Fixed Account that is credited with a
Guaranteed Interest Rate for a specified Guarantee Period.
FREE LOOK PERIOD
The period of time within which the Owner may examine the Contract and
return it for a refund.
GUARANTEED INTEREST RATE
The effective annual interest rate which we will credit for a specified
Guarantee Period. The Guaranteed Interest Rate will never be less than 3%.
GUARANTEE PERIOD
The period of time for which a rate of interest is guaranteed to be
credited to a Fixed Allocation. We currently offer Guarantee Periods
with durations of 1, 3, 5, 7 and 10 years.
INDEX OF INVESTMENT EXPERIENCE
The index that measures the performance of a Division.
INITIAL PREMIUM
The payment required to put a Contract into effect.
ISSUE AGE
The Owner's or Annuitant's age on his or her last birthday on or before
the Contract Date.
ISSUE DATE
The date the Contract is issued at our Customer Service Center.
MARKET VALUE ADJUSTMENT
A positive or negative adjustment made to a Fixed Allocation. It may
apply to certain withdrawals and transfers, whether in whole or in part,
and annuitizations of all or part of a Fixed Allocation prior to the end
of a Guarantee Period.
MATURITY DATE
The date on which a Guarantee Period matures.
OWNER
The person who owns the Contract and is entitled to exercise all rights
under the Contract. This person's death also initiates payment of the
death benefit.
RIDER
A rider amends the Contract, in certain instances adding benefits.
7% SOLUTION ENHANCED DEATH BENEFIT OPTION
An enhanced death benefit option that may be elected only at issue and
only if the Owner or Annuitant (when the Owner is other than an
individual) is age 80 or younger. The enhanced death benefit provided
by this option is equal to premiums paid accumulated at an annual rate
of return of 7%, except those premiums invested in the Liquid Asset
Division, Limited Maturity Bond Division, and the Fixed Account, as
adjusted for additional premiums and partial withdrawals. Each
accumulated initial or additional premium payment reduced by any partial
withdrawals taken will continue to grow at 7% until it reaches the
maximum enhanced death benefit.
SPECIALLY DESIGNATED DIVISION
The Division to which distributions from a portfolio underlying a
Division in which reinvestment is not available will be allocated unless
you specify otherwise. The Specially Designated Division currently is
the Liquid Asset Division.
STANDARD DEATH BENEFIT OPTION
The death benefit option that you will receive under the Contact unless
one of the enhanced death benefit options is elected. The death benefit
provided by this option is equal to the greatest of (i) Accumulation
Value; (ii) total premium payments less any partial withdrawals; and
(iii) Cash Surrender Value.
VALUATION DATE
The day at the end of a Valuation Period when each Division is valued.
VALUATION PERIOD
Each business day together with any non-business days before it.
4
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____________________________________________________________________
SUMMARY OF THE CONTRACT
This prospectus has been designed to provide you with information
regarding the Contract and the Accounts which fund the Contract.
Information concerning the Series underlying the Divisions of Account B
and the Fixed Account is set forth in the Trusts' prospectuses.
This summary is intended to provide only a very brief overview of the
more significant aspects of the Contract. Further detail is provided
in this prospectus and in the Contract. The Contract, together with any
riders or endorsements, constitutes the entire agreement between you and
us and should be retained.
This prospectus has been designed to provide you with the necessary
information to make a decision on purchasing the Contract. You have a
choice of investments. We do not promise that your Accumulation Value
will increase. Depending on the investment experience of the Divisions
and interest credited to the Fixed Allocations in which you are invested,
your Accumulation Value, Cash Surrender Value and death benefit may
increase or decrease on any day. You bear the investment risk.
DESCRIPTION OF THE CONTRACT
The Contract is designed to establish retirement benefits for two types
of purchasers. The first type of purchaser is one who is eligible to
participate in, and purchases a Contract for use with, an individual
retirement annuity ("IRA") meeting the requirements of section 408(b) of
the Internal Revenue Code of 1986 ("qualified plan"). For a Contract
funding a qualified plan, distributions may be made to you to satisfy
requirements imposed by Federal tax law. The second type of purchaser is
one who purchases a Contract outside of a qualified plan ("non-qualified
plan").
The Contract also offers a choice of Annuity Options to which you may
apply all or a portion of the Accumulation Value on the Annuity
Commencement Date or the Cash Surrender Value upon surrender of the
Contract. See Choosing Your Annuity Options.
AVAILABILITY
We can issue a Contract if both the Annuitant and the Owner are not
older than age 85 and accept additional premium payments until either
the Annuitant or Owner reaches the Attained Age of 85 for non-qualified
plans (age 70 for qualified plans, except for rollover contributions).
The minimum Initial Premium is $10,000 for a non-qualified plan and $1,500
for a qualified plan. We may change the minimum initial or additional
premium requirements for certain group or sponsored arrangements. See
Other Contract Provisions, Group or Sponsored Arrangements.
The minimum additional premium payment we will accept is $500 for a
non-qualified plan and $250 for a qualified plan. You must receive
our prior approval before making a premium payment that causes the
Accumulation Value of all annuities that you maintain with us to
exceed $1,000,000.
THE DIVISIONS
Each of the twenty-one Divisions of Account B offered under this
prospectus invests in a mutual fund portfolio with its own distinct
investment objectives and policies. Each Division of Account B invests
in a corresponding Series of the GCG Trust or a corresponding Series of
the ESS Trust. Both Trusts are managed by Directed Services, Inc.
("DSI"). From its inception through December 31, 1997, the ESS Trust was
managed by Equitable Investment Services, Inc. ("EISI"), an affiliate of
DSI. As of January 1, 1998, DSI assumed EISI's management
responsibilities of the ESS Trust. The Trusts and DSI have retained
several portfolio managers to manage the assets of each Series. See
Facts About the Company and the Accounts, Account B Divisions.
HOW THE ACCUMULATION VALUE VARIES
The Accumulation Value in the Divisions varies each day based on
investment results. You bear the risk of poor investment performance and
you receive the benefits from favorable investment performance. The
Accumulation Value also reflects premium payments, charges deducted and
partial withdrawals. See Facts About the Contract, Accumulation Value in
Each Division.
THE FIXED ACCOUNT
The investments available through the Fixed Account include various
Fixed Allocations which we credit with fixed rates of interest for
the Guarantee Periods you select. We reset the interest rates for new
Guarantee Periods periodically based on our sole discretion. We may
offer Guarantee Periods from one to ten years. We currently offer
Guarantee Periods with durations of 1, 3, 5, 7 and 10 years.
You bear investment risk with respect to surrenders, partial withdrawals,
transfers and annuitization from your Fixed Allocations. A surrender,
partial withdrawal, transfer or annuitization made prior to the end of
a Guarantee Period may be subject to a Market Value Adjustment, which
could have the effect of either increasing or decreasing your
Accumulation Value. We will not apply a Market Value Adjustment on a
surrender, partial withdrawal, transfer or annuitization made within 30
days prior to the Maturity Date of the applicable Guarantee Period or
certain transfers made in connection with the dollar cost averaging
program.
5
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Systematic withdrawals from a Fixed Allocation also are not subject to
a Market Value Adjustment.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, subject to certain exceptions,
to a surrender, partial withdrawal, transfer or annuitization from a
Fixed Allocation made prior to the end of a Guarantee Period. The Market
Value Adjustment does not apply to amounts invested in Account B.
SURRENDERING YOUR CONTRACT
You may surrender the Contract and receive its Cash Surrender Value at
any time while both the Annuitant and Owner are living and before the
Annuity Commencement Date. See Facts About the Contract, Cash Surrender
Value and Surrendering to Receive the Cash Surrender Value.
TAKING PARTIAL WITHDRAWALS
After the Free Look Period, prior to the annuity commencement date and
while the Contract is in effect, you may take partial withdrawals from
the Accumulation Value of your Contract. You may elect in advance to
take systematic partial withdrawals on a monthly, quarterly, or annual
basis. If you have an IRA Contract, you may elect IRA partial withdrawals
on a monthly, quarterly or annual basis.
Partial withdrawals are subject to certain restrictions as defined in
this prospectus, including a surrender charge and a Market Value
Adjustment. Partial withdrawals above a specified percentage of your
Accumulation Value may be subject to a surrender charge. See Facts
About the Contract, Partial Withdrawals.
DOLLAR COST AVERAGING
Under this program, you may choose to have a specified dollar amount
transferred from either the Limited Maturity Bond Division, Liquid
Asset Division or a Fixed Allocation with a one year Guarantee Period
to the other Divisions of Account B on a monthly basis with the
objective of shielding your investment from short-term price
fluctuations. See Facts About the Contract, Dollar Cost Averaging.
YOUR RIGHT TO CANCEL THE CONTRACT
You may cancel your Contract within the Free Look Period which is a
ten day period of time beginning once you receive the Contract. For
purposes of administering our allocation and certain other
administrative rules, we deem this period to end 15 days after the
Contract is mailed from our Customer Service Center. Some states may
require that we provide a longer free look period. In some states we
restrict the Initial Premium allocation during the Free Look Period.
See Other Contract Provisions, Your Right to Cancel or Exchange Your
Contract.
YOUR RIGHT TO CHANGE THE CONTRACT
The Contract may be changed to another annuity plan subject to our rules at
the time of the change. See Other Contract Provisions, Other Contract Changes.
DEATH BENEFIT OPTIONS
The Contract provides a death benefit to the beneficiary if the Owner
dies prior to the Annuity Commencement Date. Subject to our rules, there
are three death benefit options that may be available to you under the
Contract: the Standard Death Benefit Option; the 7% Solution Enhanced
Death Benefit Option; and the Annual Ratchet Enhanced Death Benefit
Option. See Facts About the Contract, Death Benefit Options. We may
offer a reduced death benefit under certain group and sponsored
arrangements. See Other Contract Provisions, Group or Sponsored
Arrangements.
DEDUCTIONS FOR CHARGES AND FEES
We invest the entire amount of the initial and any additional premium
payments in the Divisions and the Fixed Allocations you select, subject
to certain restrictions we impose. See Facts About the Contract,
Restrictions on Allocation of Premium Payments. We then may deduct an
annual Contract fee from your Accumulation Value. See Other Contract
Provisions, Charges and Fees. We may reduce certain charges under group
or sponsored arrangements. See Other Contract Provisions, Group or
Sponsored Arrangements. Unless you have elected the Charge Deduction
Division, charges are deducted proportionately from all Account B
Divisions in which you are invested. If there is no Accumulation Value
in these Divisions, charges will be deducted from your Fixed Allocations
starting with Guarantee Periods nearest their Maturity Dates until such
charges have been deducted.
6
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____________________________________________________________________
FEE TABLE
FEDERAL INCOME TAXES
The ultimate effect of Federal income taxes on the amounts held under an annu-
ity Contract, on Annuity Payments and on the economic benefits to the Owner,
Annuitant or Beneficiary depends on Golden American's tax status and upon the
tax status of the individuals concerned. In general, an Owner is not taxed on
increases in value under an annuity Contract until some form of distribution
is made under it. There may be tax penalties if you make a withdrawal or sur-
render the Contract before reaching age 59 1/2. See Federal Tax Considera-
tions.
TRANSACTION EXPENSES(/1/)
Contingent Deferred Sales Charge(/2/) (imposed as a percentage of premium pay-
ments withdrawn upon excess partial withdrawal or surrender):(/3/)
<TABLE>
<CAPTION>
COMPLETE YEARS ELAPSED SURRENDER
SINCE PREMIUM PAYMENT CHARGE
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 1%
7+ 0%
</TABLE>
<TABLE>
<S> <C>
Excess Allocation Charge.................................. $0(/4/)
</TABLE>
ANNUAL CONTRACT FEES:
<TABLE>
<S> <C>
Administrative Charge........................................ $40
(Waived if the Accumulation Value equals or exceeds $100,000 at the
end of the Contract Year, or once the sum of premiums paid equals or
exceeds $100,000.)
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES (percentage of assets in each Division)(/5/):
<TABLE>
<CAPTION>
STANDARD ENHANCED DEATH BENEFIT
DEATH --------------------------
BENEFIT ANNUAL RATCHET 7% SOLUTION
-------- -------------- -----------
<S> <C> <C> <C>
Mortality and Expense Risk Charge.... 1.10% 1.25% 1.40%
Asset Based Administrative Charge.... 0.15% 0.15% 0.15%
----- ----- -----
Total Separate Account Expenses...... 1.25% 1.40% 1.55%
</TABLE>
THE GCG TRUST ANNUAL EXPENSES (based on combined net assets of the indicated
groups of Series):
<TABLE>
<CAPTION>
OTHER TOTAL
SERIES FEES(/6/) EXPENSES(/7/) EXPENSES
------ --------- ----------------------- --------------
<S> <C> <C> <C>
Multiple Allocation,
Fully Managed, Capital
Appreciation, Rising
Dividends, All-Growth,
Real Estate, Hard 0.99% 0.01% 1.00%
Assets, Value Equity,
Strategic Equity, and
Small Cap Series:
Growth Opportunities
Series: 1.15% 0.01% 1.16%
Managed Global
Series:(/8/) 1.25% 0.01% 1.26%
Emerging Markets (/9/)
and Developing World
Series: 1.75% 0.05% 1.80%
Limited Maturity Bond 0.60% 0.01% 0.61%
and Liquid Asset Series:
THE ESS TRUST ANNUAL EXPENSES:
<CAPTION>
OTHER TOTAL
EXPENSES EXPENSES
AFTER EXPENSE AFTER EXPENSE
SERIES FEES(/6/) REIMBURSEMENTS (/10/) REIMBURSEMENTS
------ --------- ----------------------- --------------
<S> <C> <C> <C>
OTC, Research, and Total
Return Portfolios: 0.80% 0.40% 1.20%
Growth & Income and
Value + Growth 0.95% 0.40% 1.35%
Portfolios:
</TABLE>
7
<PAGE>
<PAGE>
- -------------------
(1) A Market Value Adjustment, which may increase or decrease your Accumula-
tion Value, may apply to certain transactions. See Market Value Adjust-
ment.
(2) We also deduct a charge for premium taxes (which can range from 0% to
3.5% of premium) from your Accumulation Value upon surrender, excess par-
tial withdrawals or on the Annuity Commencement Date. See Premium Taxes.
(3) For purposes of calculating the surrender charge for the excess partial
withdrawal, (i) we treat premium payments as being withdrawn on a first-
in first-out basis, and (ii) amounts withdrawn which are not considered
an excess partial withdrawal are not treated as a withdrawal of any pre-
mium payments. See Charges Deducted from the Accumulation Value, Surren-
der Charge for Excess Partial Withdrawals.
(4) We reserve the right to impose a charge in the future at a maximum of $25
for each allocation change in excess of twelve per Contract Year. See Ex-
cess Allocation Charge.
(5) See Facts About the Contract, Death Benefit Options, for a description of
the Contract's Standard and Enhanced Death Benefit Options.
(6) Fees decline as combined assets increase (see Account B Divisions and the
Trust prospectuses for details).
(7) Other Expenses generally consist of independent trustees
fees and expenses. Other Expenses are estimated for the Growth
Opportunities and Developing World Series, since as of December
31, 1997, these Series had not yet commenced operations.
(8) The expenses for the Managed Global Series are based on the actual expe-
rience of the Series together with that of its predecessor for accounting
purposes, the Managed Global Account of Separate Account D. On September
3, 1996, the Managed Global Account was reorganized into the Managed
Global Division of Account B and the Managed Global Series of the GCG
Trust.
(9) Expenses have been restated to reflect current fees.
(10)Other expenses shown take into account the effect of EISI's agreement to
reimburse the portfolios for all operating expenses, excluding management
fees, that exceed 0.40% of their average daily net assets. This reimburse-
ment agreement commenced February 1, 1997. Prior to February 1, 1997, EISI
reimbursed the portfolios for all operating expenses, excluding management
fees, that exceeded 0.75% of their average daily net assets. This reim-
bursement is voluntary and can be terminated at any time. In the absence of
the current reimbursement agreement, Other Expenses would have been 0.55%,
0.51%, 0.45%, 0.69%, and 0.95%, respectively, for the OTC, Research, Total
Return, Growth & Income, and Value + Growth Portfolios for the year ended
December 31, 1996.
Examples:
The examples do not take into account any deduction for premium taxes. Premium
taxes currently range from 0% to 3.5% of premium payments. There may be sur-
render charges if you choose to annuitize within the first three Contract
Years.
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you
surrender your Contract at the end of the applicable time period, you would
pay the following expenses for each $1,000 of Initial Premium assuming a 5%
annual return on assets:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation................... $ 96.43 $131.15 $168.46 $293.91
Fully Managed......................... $ 96.43 $131.15 $168.46 $293.91
Capital Appreciation.................. $ 96.43 $131.15 $168.46 $293.91
Rising Dividends...................... $ 96.43 $131.15 $168.46 $293.91
All-Growth............................ $ 96.43 $131.15 $168.46 $293.91
Real Estate........................... $ 96.43 $131.15 $168.46 $293.91
Hard Assets........................... $ 96.43 $131.15 $168.46 $293.91
Value Equity.......................... $ 96.43 $131.15 $168.46 $293.91
Strategic Equity...................... $ 96.43 $131.15 $168.46 $293.91
Small Cap............................. $ 96.43 $131.15 $168.46 $293.91
Emerging Markets...................... $104.39 $154.79 $207.41 $369.51
Managed Global........................ $ 99.02 $138.90 $181.30 $319.09
Growth Opportunities.................. $ 98.03 $135.92 $176.38 $309.49
Developing World...................... $104.39 $154.79 $207.41 $369.51
OTC................................... $ 98.42 $137.11 $178.35 $313.34
Research.............................. $ 98.42 $137.11 $178.35 $313.34
Total Return.......................... $ 98.42 $137.11 $178.35 $313.34
Growth & Income....................... $ 99.92 $141.56 $185.70 $327.64
Value + Growth........................ $ 99.92 $141.56 $185.70 $327.64
Limited Maturity Bond................. $ 92.52 $119.41 $148.87 $254.79
Liquid Asset.......................... $ 92.52 $119.41 $148.87 $254.79
</TABLE>
- -------------------------------------------------------------------------------
8
<PAGE>
<PAGE>
If at issue you elect the 7% Solution Enhanced Death Benefit Option and you do
not surrender your Contract or if you annuitize on the Annuity Commencement
Date, you would pay the following expenses for each $1,000 of initial premium
assuming a 5% annual return on assets:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVISION ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
<S> <C> <C> <C> <C>
Multiple Allocation................... $26.43 $ 81.15 $138.46 $293.91
Fully Managed......................... $26.43 $ 81.15 $138.46 $293.91
Capital Appreciation.................. $26.43 $ 81.15 $138.46 $293.91
Rising Dividends...................... $26.43 $ 81.15 $138.46 $293.91
All-Growth............................ $26.43 $ 81.15 $138.46 $293.91
Real Estate........................... $26.43 $ 81.15 $138.46 $293.91
Hard Assets........................... $26.43 $ 81.15 $138.46 $293.91
Value Equity.......................... $26.43 $ 81.15 $138.46 $293.91
Strategic Equity...................... $26.43 $ 81.15 $138.46 $293.91
Small Cap............................. $26.43 $ 81.15 $138.46 $293.91
Emerging Markets...................... $34.39 $104.79 $177.41 $369.51
Managed Global........................ $29.02 $ 88.90 $151.30 $319.09
Growth Opportunities.................. $28.03 $ 85.92 $146.38 $309.49
Developing World...................... $34.39 $104.79 $177.41 $369.51
OTC................................... $28.42 $ 87.11 $148.35 $313.34
Research.............................. $28.42 $ 87.11 $148.35 $313.34
Total Return.......................... $28.42 $ 87.11 $148.35 $313.34
Growth & Income....................... $29.92 $ 91.56 $155.70 $327.64
Value + Growth........................ $29.92 $ 91.56 $155.70 $327.64
Limited Maturity Bond................. $22.52 $ 69.41 $118.87 $254.79
Liquid Asset.......................... $22.52 $ 69.41 $118.87 $254.79
</TABLE>
- -------------------------------------------------------------------------------
The purpose of the Fee Table is to assist you in understanding the various
costs and expenses that you will bear directly or indirectly. For purposes of
computing the annual per Contract administrative charge, the dollar amounts
shown in the examples are based on an Initial Premium of $65,000.
The examples reflect the election at issue of the 7% Solution Enhanced Death
Benefit Option. If the Standard Death Benefit Option or the Annual Ratchet En-
hanced Death Benefit Option is elected, the actual expenses incurred will be
less than those represented in the Examples.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN, SUBJECT TO
THE GUARANTEES UNDER THE CONTRACT.
9
<PAGE>
<PAGE>
____________________________________________________________________
CONDENSED FINANCIAL AND OTHER INFORMATION
INDEX OF INVESTMENT EXPERIENCE
The upper table gives the index of investment experience for each
Division of Account B available under the Contract for each death
benefit option. Information for the Growth Opportunities and
Developing World Divisions is not available because they had not
commenced operations as of December 31, 1997. Except for the Small
Cap, OTC, Research, Total Return, Growth & Income, Value + Growth,
Growth Opportunities and Developing World Divisions, each Division
commenced operations on October 2, 1995 (The Managed Global Division
commenced operations initially as a division of another separate
account, the Managed Global Account of Separate Account D; however,
the index of investment experience is unchanged). The index of
investment experience is equal to the value of a unit for each
Division of the Accounts. The total investment value of each
Division as of the end of each period is shown in the lower table.
<TABLE>
<CAPTION>
------------------------------------------------
------------------------------------------------
STANDARD
----------------------------------------------
10/2/95 12/31/95 12/31/96 9/30/97
------- -------- -------- -------
<S> <C> <C> <C> <C>
Multiple Allocation..... $16.10 $16.72 $17.96 $20.71
Fully Managed........... 14.77 15.23 17.50 19.66
Capital Appreciation.... 14.31 14.71 17.46 22.05
Rising Dividends........ 12.16 13.24 15.77 19.29
All-Growth.............. 13.88 14.10 13.85 15.69
Real Estate............. 15.06 15.94 21.30 25.50
Hard Assets............. 14.86 15.11 19.89 24.16
Value Equity............ 12.43 13.37 14.61 18.73
Strategic Equity........ 10.00(/1/) 10.01 11.81 14.10
Small Cap............... --(/2/) --(/2/) 11.86 13.88
Emerging Markets........ 9.50 9.23 9.78 10.74
Managed Global.......... 9.32 9.58 10.62 12.55
OTC..................... --(/3/) --(/3/) 15.77 19.05
Research................ --(/4/) --(/4/) --(/4/) 19.33
Total Return............ --(/4/) --(/4/) --(/4/) 15.78
Growth & Income......... --(/3/) --(/3/) 12.50 15.92
Value + Growth.......... --(/4/) --(/4/) --(/4/) 15.23
Limited Maturity Bond... 14.49 14.86 15.31 15.90
Liquid Asset............ 12.89 13.03 13.51 13.88
<CAPTION>
INDEX OF INVESTMENT EXPERIENCE
------------------------------------------------
ENHANCED DEATH BENEFITS
------------------------------------------------
ANNUAL RACHET
------------------------------------------------
10/2/95 12/31/95 12/31/96 9/30/97
------- -------- -------- -------
<S> <C> <C> <C> <C>
Multiple Allocation..... $15.94 $16.55 $17.75 $20.44
Fully Managed........... 14.62 15.07 17.29 19.41
Capital Appreciation.... 14.23 14.63 17.34 21.87
Rising Dividends........ 12.12 13.19 15.69 19.18
All-Growth.............. 13.74 13.96 13.68 15.48
Real Estate............. 14.91 15.78 21.04 25.17
Hard Assets............. 14.71 14.96 19.65 23.85
Value Equity............ 12.41 13.36 14.57 18.66
Strategic Equity........ 10.00(/1/) 10.01 11.78 14.06
Small Cap............... --(/2/) --(/2/) 11.84 13.85
Emerging Markets........ 9.47 9.20 9.74 10.67
Managed Global.......... 9.28 9.53 10.55 12.46
OTC..................... --(/3/) --(/3/) 15.70 18.93
Research................ --(/4/) --(/4/) --(/4/) 19.25
Total Return............ --(/4/) --(/4/) --(/4/) 15.72
Growth & Income......... --(/3/) --(/3/) 12.49 15.88
Value + Growth.......... --(/4/) --(/4/) --(/4/) 15.19
Limited Maturity Bond... 14.35 14.71 15.13 15.69
Liquid Asset............ 12.76 12.89 13.35 13.70
<CAPTION>
----------------------------------------------
----------------------------------------------
7% SOLUTION
----------------------------------------------
10/2/95 12/31/95 12/31/96 9/30/97
------- -------- -------- -------
<S> <C> <C> <C> <C>
Multiple Allocation..... $15.78 $16.38 $17.54 $20.17
Fully Managed........... 14.47 14.91 17.08 19.16
Capital Appreciation.... 14.16 14.55 17.22 21.70
Rising Dividends........ 12.09 13.15 15.62 19.06
All-Growth.............. 13.60 13.81 13.52 15.28
Real Estate............. 14.76 15.61 20.79 24.85
Hard Assets............. 14.57 14.80 19.42 23.54
Value Equity............ 12.40 13.34 14.53 18.58
Strategic Equity........ 10.00(/1/) 10.01 11.76 14.02
Small Cap............... --(/2/) --(/2/) 11.82 13.81
Emerging Markets........ 9.44 9.17 9.69 10.61
Managed Global.......... 9.24 9.49 10.49 12.37
OTC..................... --(/3/) --(/3/) 15.66 18.88
Research................ --(/4/) --(/4/) --(/4/) 19.16
Total Return............ --(/4/) --(/4/) --(/4/) 15.64
Growth & Income......... --(/3/) --(/3/) 12.47 15.84
Value + Growth.......... --(/4/) --(/4/) --(/4/) 15.16
Limited Maturity Bond... 14.20 14.56 14.95 15.49
Liquid Asset............ 12.63 12.76 13.19 13.53
</TABLE>
<TABLE>
<CAPTION>
TOTAL INVESTMENT VALUE IN THOUSANDS
-------------------------------------------------------------------------------------------------
ENHANCED DEATH BENEFITS
----------------------------------------------------------------
STANDARD ANNUAL RACHET 7% SOLUTION
------------------------------- ---------------------------- --------------------------------
12/31/95 12/31/96 9/30/97 12/31/95 12/31/96 9/30/97 12/31/95 12/31/96 9/30/97
-------- -------- ------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Multiple Allocation..... $1,747 $5,207 $6,942 $349 $2,675 $4,368 $6,068 $19,593 $27,594
Fully Managed........... 748 3,568 7,650 211 2,999 6,238 2,750 16,273 28,962
Capital Appreciation.... 355 2,839 6,446 239 3,028 5,564 4,752 19,054 33,511
Rising Dividends........ 303 4,699 13,319 476 5,575 12,696 3,956 25,976 57,460
All-Growth.............. 309 1,795 3,185 231 2,000 3,198 3,479 10,173 14,355
Real Estate............. 43 1,155 3,997 46 899 2,517 955 8,004 19,517
Hard Assets............. 375 1,873 3,709 43 850 1,810 394 6,635 12,846
Value Equity............ 458 2,649 6,261 312 3,642 7,041 2,394 15,282 27,940
Strategic Equity........ 762(/1/) 4,374 5,294 475(/1/) 2,729 7,054 1,528(/1/) 11,396 17,939
Small Cap............... --(/2/) 2,352 5,015 --(/2/) 2,692 5,664 --(/2/) 15,569 24,848
Emerging Markets........ 145 957 2,436 115 995 2,094 1,475 6,581 11,043
Managed Global.......... 256 2,402 5,841 262 2,446 4,921 1,983 14,422 28,993
OTC..................... --(/3/) 471 1,082 --(/3/) 443 1,495 --(/3/) 880 6,843
Research................ --(/4/) --(/4/) 2,762 --(/4/) --(/4/) 2,085 --(/4/) --(/4/) 9,745
Total Return............ --(/4/) --(/4/) 2,543 --(/4/) --(/4/) 1,786 --(/4/) --(/4/) 5,814
Growth & Income......... --(/3/) 627 4,194 --(/3/) 475 3,003 --(/3/) 2,167 13,072
Value + Growth.......... --(/4/) --(/4/) 1,626 --(/4/) --(/4/) 1,119 --(/4/) --(/4/) 5,260
Limited Maturity Bond... 401 1,285 2,031 174 701 1,102 1,988 5,224 5,726
Liquid Asset............ 494 1,033 3,313 801 1,134 2,242 1,190 5,054 12,048
</TABLE>
- -------------------
(1) The Strategic Equity Division became available for investment on October
2, 1995, starting with an index of investment experience of $10.00.
(2) The Small Cap Equity Division became available for investment on January
2, 1996, starting with an index of investment experience of $10.00.
(3) The OTC Division and Growth & Income Divisions became available for in-
vestment on September 3, 1996, starting with indices of investment experi-
ence of $14.64 and $10.94, respectively.
(4) The Research, Total Return and Value + Growth Divisions became available
for investment on January 20, 1997, starting with indices of investment
experience of $16.43, $13.76, and $11.99, respectively.
10
<PAGE>
<PAGE>
FINANCIAL STATEMENTS
The unaudited financial statements of Separate Account B for the nine
months ended September 30, 1997,
the audited financial statements of Separate Account B for the years ended De-
cember 31, 1996 and 1995 (as well as the auditors' report thereon) and the au-
dited financial statements of the Managed Global Account of Separate Account
D, the predecessor entity of the Managed Global Series for accounting purpos-
es, for the years ended December 31, 1995 and 1994 (as well as the auditors'
report thereon) appear in the Statement of Additional Information. The
unaudited financial statements of Golden American
for the nine months ended September 30, 1997 and the audited
financial statements of Golden American prepared in accordance with generally
accepted accounting principles for the years ended December 31, 1996, 1995 and
1994 (as well as the auditors' report thereon) are contained in the Prospec-
tus.
PERFORMANCE RELATED INFORMATION
Performance information for the Divisions of Account B, including the yield
and effective yield of the Liquid Asset Division, the yield of the remaining
Divisions, and the total return of all Divisions may appear in reports and
promotional literature to current or prospective Owners.
Current yield for the Liquid Asset Division will be based on income received
by a hypothetical investment over a given 7-day period (less expenses accrued
during the period), and then "annualized" (i.e., assuming that the 7-day yield
would be received for 52 weeks, stated in terms of an annual percentage return
on the investment). "Effective yield" for the Liquid Asset Division is calcu-
lated in a manner similar to that used to calculate yield, but when
annualized, the income earned by the investment is assumed to be reinvested.
The "effective yield" will be slightly higher than the "yield" because of the
compounding effect of earnings.
For the remaining Divisions, quotations of yield will be based on all invest-
ment income per unit (Accumulation Value divided by the index of investment
experience, see Facts About the Contract, Measurement of Investment Experi-
ence, Index of Investment Experience and Unit Value) earned during a given 30-
day period, less expenses accrued during the period ("net investment income").
Quotations of average annual total return for any Division will be expressed
in terms of the average annual compounded rate of return on a hypothetical in-
vestment in a Contract over a period of one, five, and ten years (or, if less,
up to the life of the Division), and will reflect the deduction of the appli-
cable surrender charge, the administrative charge and the applicable mortality
and expense risk charge. See Charges and Fees. Quotations of total return may
simultaneously be shown for other periods that do not take into account cer-
tain contractual charges, such as the surrender charge. Quotations of yield
and average annual total return for the Managed Global Division take into ac-
count the period prior to September 3, 1996, during which it was maintained as
a division of Separate Account D.
Performance information for a Division may be compared, in reports and promo-
tional literature, to: (i) the Standard & Poor's 500 Stock Index ("S&P 500"),
Dow Jones Industrial Average ("DJIA"), Donoghue Money Market Institutional Av-
erages, or other indices measuring performance of a pertinent group of securi-
ties so that investors may compare a Division's results with those of a group
of securities widely regarded by investors as representative of the securities
markets in general; (ii) other variable annuity separate accounts or other in-
vestment products tracked by Lipper Analytical Services, a widely used inde-
pendent research firm which ranks mutual funds and other investment companies
by overall performance, investment objectives, and assets, or tracked by other
ratings services, including VARDS, companies, publications, or persons who
rank separate accounts or other investment products on overall performance or
other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Contract. Unmanaged
indices may assume the reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
Performance information for any Division reflects only the performance of a
hypothetical Contract under which the Accumulation Value is allocated to a Di-
vision during a particular time period on which the calculations are based.
Performance information should be considered in light of the investment objec-
tives and policies, characteristics and quality of the portfolio of the Series
of the respective Trust in which the Division invests and the market condi-
tions during the given time period, and should not be considered as a repre-
sentation of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Divisions, see the
Statement of Additional Information.
Reports and promotional literature may also contain other information includ-
ing the ranking of any Division derived from rankings of variable annuity sep-
arate accounts or other investment products tracked by Lipper Analytical Serv-
ices or by rating services, companies, publications, or other persons who rank
separate accounts or other investment products on overall performance or other
criteria.
11
<PAGE>
<PAGE>
____________________________________________________________________
INTRODUCTION
The following information describes the Contract and the Accounts which fund
the Contract, Account B and the Fixed Account. Account B invests in mutual
fund portfolios of the Trusts. The Fixed Account contains all of the assets
that support Owner Fixed Allocations which we credit with Guaranteed Interest
Rates for the Guarantee Periods you select.
____________________________________________________________________
FACTS ABOUT THE COMPANY AND THE ACCOUNTS
GOLDEN AMERICAN
Golden American Life Insurance Company ("Golden American" or the "Company") is
a stock life insurance company organized under the laws of the State of Dela-
ware and is a wholly owned subsidiary of Equitable of Iowa Companies, Inc.
("Equitable of Iowa")which, in turn, is a wholly owned subsidiary of ING
Groep, N.V. ("ING"). Prior to December 30, 1993, Golden American was a Minnesota
corporation. Prior to August 13, 1996, Golden American was a wholly owned in-
direct subsidiary of Bankers Trust Company. We are authorized to do business
in all jurisdictions except New York. In May 1996, we established a subsidi-
ary, First Golden American Life Insurance Company of New York, which is autho-
rized to do business in New York. We offer variable annuities and variable
life insurance. Administrative services for the Contract are provided at our
Customer Service Center, the address is shown on the cover.
Equitable of Iowa is the holding company for Equitable Life Insurance Company
of Iowa, USG Annuity & Life Company, Locust Street Securities, Inc., Equitable
American Insurance Company, Eq-
uitable of Iowa Securities Network, Inc., Directed Services, Inc. ("DSI"), and
Golden American.
On October 24, 1997, ING acquired all interest in Equitable of Iowa
Companies and its subsidiaries including Golden American.
ING, headquartered in the Netherlands, is a global financial
services holding company with over $289 billion in assets.
Equitable and another ING affiliate own ING Investment Management,
LLC, who assumed EISI's portfolio management responsibilities for
the GCG Trust and the ESS Trust as of January 1, 1998.
THE GCG TRUST AND THE ESS TRUST
The GCG Trust is an open-end management investment company, more commonly
called a mutual fund. The GCG Trust's shares may also be available to certain
separate accounts funding variable life insurance policies offered by Golden
American. This is called "mixed funding."
The GCG Trust may also sell its shares to separate accounts of other insurance
companies, both affiliated and not affiliated with Golden American. This is
called "shared funding." Although we do not anticipate any inherent difficul-
ties arising from either mixed or shared funding, it is theoretically possible
that, due to differences in tax treatment or other considerations, the inter-
est of Owners of various Contracts participating in the GCG Trust might at
sometime be in conflict. After the GCG Trust receives the requisite order from
the SEC, shares of the GCG Trust may also be sold to certain qualified pension
and retirement plans. The Board of Trustees of the GCG Trust, DSI,
and we and any other insurance companies participating in the GCG
Trust are required to monitor events to identify any material conflicts that
arise from the use of the GCG Trust for mixed and/or shared funding or between
various policy Owners and pension and retirement plans. For more information
about the risks of mixed and shared funding, please refer to the GCG Trust
prospectus.
The ESS Trust is also an open-end management investment company. Currently,
the ESS Trust's shares are not available to separate accounts of other insur-
ance companies other than insurance companies affiliated with Equitable of
Iowa such as Golden American.
You will find complete information about both the GCG Trust and the ESS Trust,
including the risks associated with each Series, in the accompanying Trusts'
prospectuses. You should read them carefully in conjunction with this prospec-
tus before investing. Additional copies of the Trusts' prospectuses may be ob-
tained by contacting our Customer Service Center.
SEPARATE ACCOUNT B
All obligations under the Contract are general obligations of Golden American.
Account B is a separate investment account used to support our variable annu-
ity Contracts and for other purposes as permitted by applicable laws and regu-
lations. The assets of Account B are kept separate from our general account
and any other separate accounts we may have. We may offer other variable annu-
ity Contracts investing in Account B which are not discussed in this prospec-
tus. Account B may also invest in other series which are not available to the
Contract described in this prospectus.
We own all the assets in Account B. Income and realized and unrealized gains
or losses from assets
12
<PAGE>
<PAGE>
in the account are credited to or charged against that account without regard
to other income, gains or losses in our other investment accounts. As
required, the assets in Account B are at least equal to the reserves and other
liabilities of that account. These assets may not be charged with liabilities
from any other business we conduct.
They may, however, be subject to liabilities arising from Divisions whose as-
sets are attributable to other variable annuity Contracts supported by Account
B. If the assets exceed the required reserves and other liabilities, we may
transfer the excess to our general account.
Account B was established on July 14, 1988 to invest in mutual funds, unit in-
vestment trusts or other investment portfolios which we determine to be suit-
able for the Contract's purposes. Account B is treated as a unit investment
trust under Federal securities laws. It is registered with the SEC under the
Investment Company Act of 1940 (the "1940 Act") as an investment company and
meets the definition of a separate account under the Federal securities laws.
It is governed by the laws of Delaware, our state of domicile, and may also be
governed by the laws of other states in which we do business. Registration
with the SEC does not involve any supervision by the SEC of the management or
investment policies or practices of Account B.
ACCOUNT B DIVISIONS
Account B is divided into Divisions. The Managed Global Division was a divi-
sion of Separate Account D of Golden American until September 3, 1996 when it
was converted to a division of Account B. Currently, each Division of Account
B offered under this prospectus invests in a portfolio of the GCG Trust or the
ESS Trust. DSI serves as the Manager to each Series of the GCG Trust and
the ESS Trust. See the Trusts' pro-
spectuses for details. The Trusts and DSI have retained several portfo-
lio managers to manage the assets of each Series as indicated below. There may
be restrictions on the amount of the allocation to certain Divisions based on
state laws and regulations. The investment objectives of the various Series in
the Trusts are described below. There is no guarantee that any portfolio or
Series will meet its investment objectives. Meeting objectives depends on var-
ious factors, including, in certain cases, how well the portfolio managers an-
ticipate changing economic and market conditions. Account B also has other Di-
visions investing in other series which are not available to the Contract
described in this prospectus.
DSI provides the overall business management and administrative serv-
ices necessary for the Series' operation and provide or procure the services
and information necessary to the proper conduct of the business of the Series.
See the Trusts' prospectuses for details.
DSI is responsible for providing or procuring, at DSI's expense, the services
reasonably necessary for the ordinary operation of the Series of the GCG
Trust. DSI does not bear the expense of brokerage fees and other transactional
expenses for securities or other assets (which are generally considered part
of the cost for assets), taxes (if any) paid by a Series of the GCG Trust, in-
terest on borrowing, fees and expenses of the independent trustees, and ex-
traordinary expenses, such as litigation or indemnification expenses. See the
GCG Trust prospectus for details.
Each Trust pays DSI for its services a fee, payable month-
ly, based on the annual rates of the average daily net assets of the Series
shown in the tables below. DSI (and not the Trusts) pays each portfo-
lio manager a monthly fee for managing the assets of the Series.
THE GCG TRUST
<TABLE>
<CAPTION>
FEES (based on combined
assets of the indicated
SERIES groups of Series)
------------------------------------------------ -----------------------------
<S> <C>
Multiple Allocation, Fully Managed, Capital 1.00% of first $750 million;
Appreciation, Rising Dividends, All-Growth, 0.95% of next $1.250 billion;
Real Estate, Hard Assets, Value Equity, 0.90% of next $1.5 billion;
Strategic Equity, and Small Cap Series: and
0.85% of amount in excess of
$3.5 billion
Growth Opportunities Series: 1.15% of first $250 million;
1.10% of next $400 million;
1.00% of next $450 million; and
0.95% of amount in excess of
$1.1 billion
Managed Global Series: 1.25% of first $500 million;
1.05% of amount in excess of
$500 million
Emerging Markets and Developing World 1.75% of average daily net
Series: assets
Limited Maturity Bond and 0.60% of first $200 million;
Liquid Asset Series: 0.55% of next $300 million;
and
0.50% of amount in excess of
$500 million
- -------------------------------------------------------------------------------
</TABLE>
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<PAGE>
THE ESS TRUST
<TABLE>
<CAPTION>
SERIES FEES
------------------------------------------------ ----------------------------
<C> <S>
OTC, Research, and Total Return Portfolios: 0.80% of first $300 million;
0.55% of amount in excess of
$300 million
Growth & Income and Value + Growth Portfolios: 0.95% of first $200 million;
0.75% of amount in excess of
$200 million
- ------------------------------------------------------------------------------
</TABLE>
The following Divisions invest in designated Series of the GCG Trust.
MULTIPLE ALLOCATION DIVISION
MULTIPLE ALLOCATION SERIES
OBJECTIVE
The highest total return, consisting of capital appreciation and current in-
come, consistent with the preservation of capital and elimination of unneces-
sary risk.
INVESTMENTS
Investment in equity and debt securities and the use of certain sophisticated
investment strategies and techniques.
PORTFOLIO MANAGER
Zweig Advisors Inc.
FULLY MANAGED DIVISION
FULLY MANAGED SERIES
OBJECTIVE
High total investment return over the long term, consistent with the preser-
vation of capital and prudent investment risk.
INVESTMENTS
Pursues an active asset allocation strategy whereby investments are allocat-
ed, based upon an evaluation of economic and market trends and the antici-
pated relative total return available, among three asset classes -- debt se-
curities, equity securities and money market instruments.
PORTFOLIO MANAGER
T. Rowe Price Associates, Inc.
CAPITAL APPRECIATION DIVISION
CAPITAL APPRECIATION SERIES
OBJECTIVE
Long-term capital growth.
INVESTMENTS
Invests in common stocks and preferred stock that will be allocated among
various categories of stocks referred to as "components" which consist of the
following: (i) The Growth Component -- Securities that the portfolio manager
believes have the following characteristics: stability and quality of earn-
ings and positive earnings momentum; dominant competitive positions; and dem-
onstrate above-average growth rates as compared to published S&P 500 earnings
projections; and (ii) The Value Component-Securities that the portfolio man-
ager regards as fundamentally undervalued, i.e., securities selling at a dis-
count to asset value and securities with a relatively low price/earnings
ratio. The securities eligible for this component may include real estate
stocks, such as securities of publicly-owned companies that, in the portfolio
manager's judgement, offer an optimum combination of current dividend yield,
expected dividend growth, and discount to current real estate value.
PORTFOLIO MANAGER
Chancellor LGT Asset Management, Inc.
RISING DIVIDENDS DIVISION
RISING DIVIDENDS SERIES
OBJECTIVE
Capital appreciation, with dividend income as a secondary objective.
INVESTMENTS
Investment in equity securities of high quality companies that meet the fol-
lowing four criteria: consistent dividend increases; substantial dividend in-
creases; reinvested profits; and an under-leveraged balance sheet.
PORTFOLIO MANAGER
Kayne Anderson Investment Management, LLC
ALL-GROWTH DIVISION
ALL-GROWTH SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment in securities selected for their long- term growth prospects.
PORTFOLIO MANAGER
Pilgrim Baxter & Associates, Ltd.
REAL ESTATE DIVISION
REAL ESTATE SERIES
OBJECTIVE
Capital appreciation, with current income as a secondary objective.
INVESTMENTS
Investment in publicly traded equity securities of companies in the real es-
tate industry listed on national exchanges or on the National Associa-
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<PAGE>
tion of Securities Dealers Automated Quotation System.
PORTFOLIO MANAGER
EII Realty Securities, Inc.
HARD ASSETS DIVISION (FORMERLY NATURAL RESOURCES)
HARD ASSETS SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment in equity and debt securities of companies engaged in the explora-
tion, development, production, management, and distribution of hard assets.
PORTFOLIO MANAGER
Van Eck Associates Corporation
VALUE EQUITY DIVISION
VALUE EQUITY SERIES
OBJECTIVE
Capital appreciation with a secondary objective of dividend income.
INVESTMENTS
Investment primarily in equity securities of U.S. and foreign issuers which,
when purchased, meet quantitative standards believed by the Portfolio Manager
to indicate above average financial soundness and high intrinsic value rela-
tive to price.
PORTFOLIO MANAGER
Eagle Asset Management, Inc.
STRATEGIC EQUITY DIVISION
STRATEGIC EQUITY SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities based on various equity market tim-
ing techniques. The amount of the Series' assets allocated to equities shall
vary from time to time to seek positive investment performance from advancing
equity markets and to reduce exposure to equities when risk/reward character-
istics are believed to be less attractive.
PORTFOLIO MANAGER
Zweig Advisors Inc.
SMALL CAP DIVISION
SMALL CAP SERIES
OBJECTIVE
Long-term capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies that, at the time of
purchase, have a total market capitalization -- present market value per
share multiplied by the total number of shares outstanding -- within the
range of companies included in the Russell 2000 Growth Index.
PORTFOLIO MANAGER
Fred Alger Management, Inc.
EMERGING MARKETS DIVISION
EMERGING MARKETS SERIES
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in equity securities of companies that are considered to
be in emerging market countries in the Pacific Basin, Latin America and else-
where. Income is not an objective, and any production of current income is
considered incidental to the objective of growth of capital.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
MANAGED GLOBAL DIVISION
MANAGED GLOBAL SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in common stocks of both domestic and foreign issuers.
PORTFOLIO MANAGER
Putnam Investment Management, Inc.
GROWTH OPPORTUNITIES DIVISION
GROWTH OPPORTUNITIES SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in equity securities of domestic
companies emphasizing companies with market capitalizations of $1
billion or more.
PORTFOLIO MANAGER
Montgomery Asset Management, LLC
DEVELOPING WORLD DIVISION
DEVELOPING WORLD SERIES
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in equity securities of companies
in countries having economies and markets generally considered to be
emerging or developing.
PORTFOLIO MANAGER
Montgomery Asset Management, LLC
LIMITED MATURITY BOND DIVISION
LIMITED MATURITY BOND SERIES
OBJECTIVE
Highest current income consistent with low risk to principal and liquidity.
Also seeks to enhance its total return through capital appreciation when mar-
ket factors indicate that capital appreciation may be available without sig-
nificant risk to principal.
INVESTMENTS
Investment primarily in a diversified portfolio of limited maturity debt se-
curities. No individual security will at the time of purchase have a remain-
ing maturity longer than seven years and the dollar-weighted average maturity
of the Series will not exceed five years.
PORTFOLIO MANAGER
ING Investment Management, LLC
LIQUID ASSET DIVISION
LIQUID ASSET SERIES
OBJECTIVE
High level of current income consistent with the preservation of capital and
liquidity.
15
<PAGE>
<PAGE>
INVESTMENTS
Obligations of the U.S. Government and its agencies and instrumentalities;
bank obligations; commercial paper and short-term corporate debt securities.
TERM
All issues maturing in less than one year.
PORTFOLIO MANAGER
ING Investment Management, LLC
The following Divisions invest in designated Series of the ESS Trust.
OTC DIVISION
OTC PORTFOLIO
OBJECTIVE
Long-term growth of capital.
INVESTMENTS
Investment primarily in securities of companies that are traded principally
on the over-the-counter (OTC) market.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
RESEARCH DIVISION
RESEARCH PORTFOLIO
OBJECTIVE
Long term growth of capital and future income.
INVESTMENTS
Investment primarily in common stocks or securities convertible into common
stocks of companies believed to possess better than average prospects for
long-term growth.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
TOTAL RETURN DIVISION
TOTAL RETURN PORTFOLIO
OBJECTIVE
Above-average income consistent with prudent employment of capital.
INVESTMENTS
Investment primarily in equity securities.
PORTFOLIO MANAGER
Massachusetts Financial Services Company
GROWTH & INCOME DIVISION
GROWTH & INCOME PORTFOLIO
OJECTIVE
Long-term total return.
INVESTMENTS
Investment primarily in equity and debt securities, focusing on small- and
mid-cap companies that offer potential appreciation, current income, or both.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
VALUE + GROWTH DIVISION
VALUE + GROWTH PORTFOLIO
OBJECTIVE
Capital appreciation.
INVESTMENTS
Investment primarily in mid-cap growth companies with favorable relationships
between price/earnings ratios and growth rates. Mid-cap companies are those
with market capitalizations ranging from $750 million to approximately $2
billion.
PORTFOLIO MANAGER
Robertson, Stephens & Company Investment Management, L.P.
CHANGES WITHIN ACCOUNT B
We may from time to time make additional Divisions available. These Divisions
will invest in investment portfolios we find suitable for the Contract. We
also have the right to eliminate investment Divisions from Account B, to com-
bine two or more Divisions, or to substitute a new portfolio for the portfolio
in which a Division invests. A substitution may become necessary if, in our
judgment, a portfolio no longer suits the purposes of the Contract. This may
happen due to a change in laws or regulations, or a change in a portfolio's
investment objectives or restrictions, or because the portfolio is no longer
available for investment, or for some other reason. In addition, we reserve
the right to transfer assets of Account B, which we determine to be associated
with the class of Contracts to which your Contract belongs, to another ac-
count. If necessary, we will get prior approval from the insurance department
of our state of domicile before making such a substitution or transfer. We
will also get any required approval from the SEC and any other required ap-
provals before making such a substitution or transfer. We will notify you as
soon as practicable of any proposed changes.
When permitted by law, We reserve the right to:
(1) deregister Account B under the 1940 Act;
(2) operate Account B as a management company under the 1940 Act if it is op-
erating as a unit investment trust;
(3) operate Account B as a unit investment trust under the 1940 Act if it is
operating as a managed separate account;
16
<PAGE>
<PAGE>
(4) restrict or eliminate any voting rights as to Account B; and
(5) combine Account B with other accounts.
THE FIXED ACCOUNT
Premium payments may be allocated to the Fixed Account at the time of the Ini-
tial Premium payment or as subsequently made. In addition, all or part of of
your Accumulation Value may be transferred to the Fixed Account. Assets sup-
porting amounts allocated to the Fixed Account are available to fund the
claims of all classes of our customers, Owners and other creditors. Interests
under your Contract relating to the Fixed Account are registered under the Se-
curities Act of 1933 but the Fixed Account is not registered under the 1940
Act.
SELECTING A GUARANTEE PERIOD
You may select one or more Fixed Allocations with specified Guarantee Periods
for investment. We currently offer Guarantee Periods with durations of 1, 3,
5, 7 and 10 years. We reserve the right at any time to decrease or increase
the number of Guarantee Periods offered. Not all Guarantee Periods may be
available for new allocations. Each Fixed Allocation will have a Maturity
Date corresponding to the last day of the calendar month of the applicable
Guarantee Period.
Your Accumulation Value in the Fixed Account equals the sum of your Fixed Al-
locations plus the interest credited thereto, as adjusted for any partial
withdrawals, reallocations or other charges we may impose. Your Fixed Alloca-
tion will be credited with the Guaranteed Interest Rate in effect on the date
we receive and accept your premium or reallocation of Accumulation Value. The
Guaranteed Interest Rate will be credited daily to yield the quoted Guaran-
teed Interest Rate.
GUARANTEED INTEREST RATES
Each Guarantee Period will have an interest rate that is guaranteed. We do
not have a specific formula for establishing the Guaranteed Interest Rates
for the different Guarantee Periods. The determination made will be influ-
enced by, but not necessarily correspond to, interest rates available on
fixed income investments which we may acquire with the amounts we receive as
premium payments or reallocations of Accumulation Value under the Contracts.
These amounts will be invested primarily in investment-grade fixed income se-
curities including: securities issued by the United States Government or its
agencies or instrumentalities, which issues may or may not be guaranteed by
the United States Government; debt securities that have an investment grade
rating, at the time of purchase, within the four highest grades assigned by
Moody's Investor Services, Inc. (Aaa, Aa, A or Baa), Standard & Poor's Rat-
ings Group (AAA, AA, A or BBB) or any other nationally recognized rating
service; mortgage-backed securities collateralized by the Federal Home Loan
Mortgage Association, the Federal National Mortgage Association or the Gov-
ernment National Mortgage Association, or that have an investment grade rat-
ing at the time of purchase within the four highest grades described above;
other debt investments; commercial paper; and cash or cash equivalents. You
will have no direct or indirect interest in these investments. We will also
consider other factors in determining the Guaranteed Interest Rates, includ-
ing regulatory and tax requirements, sales commissions and administrative ex-
penses borne by us, general economic trends and competitive factors. We can-
not predict or guarantee the level of future interest rates. However, no
Fixed Allocation will ever have a Guaranteed Interest Rate of less than 3%
per year.
While the foregoing generally describes our investment strategy with respect
to the Fixed Account, we are not obligated to invest according to any partic-
ular strategy, except as may be required by Delaware and other state insur-
ance laws.
TRANSFERS FROM A FIXED ALLOCATION
You may transfer your Accumulation Value from a Fixed Allocation to one or
more new Fixed Allocations with new Guarantee Periods of any length offered
by us or to the Divisions of Account B. Unless you specify in writing the
Fixed Allocations from which such transfers will be made, we will transfer
amounts from the Fixed Allocations starting with the Guarantee Period nearest
its Maturity Date, until we have honored your transfer request.
Transfers from a Fixed Allocation made within 30 days prior to the Maturity
Date of the applicable Guarantee Period or pursuant to the dollar cost aver-
aging program will not be subject to a Market Value Adjustment. All other
transfers from your Fixed Allocations will be subject to a Market Value Ad-
justment. The minimum amount that can be transferred to or from any Fixed Al-
location is $250. If a transfer request would reduce the Accumulation Value
remaining in your Fixed Allocation to less than $250, we will treat such
transfer request as a request to
17
<PAGE>
<PAGE>
transfer the entire Accumulation Value in such Fixed Allocation.
At the end of a Fixed Allocation's Guarantee Period, you may transfer amounts
in that Fixed Allocation to the Divisions and one or more new Fixed Alloca-
tions with Guarantee Periods of any length then offered by us. You may not,
however, transfer amounts to any Fixed Allocation with a Guarantee Period
that extends beyond your Annuity Commencement Date.
At least 30 calendar days prior to a Maturity Date of any of your Fixed Allo-
cations, or earlier if required by state law, we will send you a notice of
the Guarantee Periods then available. Prior to the Maturity Date of your
Fixed Allocations you must notify us as to which Division or new Guarantee
Period you have selected. If timely instructions are not received, we will
transfer your Accumulation Value in the maturing Fixed Allocation to a Fixed
Allocation with a Guarantee Period equal in length to the expiring Guarantee
Period. If such Guarantee Period is not available or extends beyond your an-
nuity commencement date, we will transfer your Accumulation Value in the ma-
turing Fixed Allocation to the next shortest Guarantee Period which does not
extend beyond the Annuity Commencement Date. If no such Guarantee Period is
available, we will transfer your Accumulation Value to the Specially Desig-
nated Division.
PARTIAL WITHDRAWALS FROM A FIXED ALLOCATION
Prior to the Annuity Commencement Date and while your Contract is in effect,
you may take partial withdrawals from the Accumulation Value in a Fixed Allo-
cation by sending satisfactory notice to our Customer Service Center. You may
make systematic withdrawals of interest earnings only from a Fixed Allocation
under our Systematic Partial Withdrawal Option. (See, Partial Withdrawals,
Systematic Partial Withdrawal Option.) Systematic withdrawals from a Fixed
Allocation are not permitted if such Fixed Allocation participates in the
dollar cost averaging program. Withdrawals from a Fixed Allocation taken
within 30 days prior to the Maturity Date and systematic withdrawals are not
subject to a Market Value Adjustment; however, a surrender charge may be im-
posed. Withdrawals may have federal income tax consequences, including a 10%
penalty tax. See Surrender Charge, Surrender Charge for Excess Partial With-
drawals and Federal Tax Considerations.
If you specify a Fixed Allocation from which your partial withdrawal will be
made, we will assess the partial withdrawal against that Fixed Allocation. If
you do not specify the investment option from which the partial withdrawal
will be taken, we will not assess your partial withdrawal against any Fixed
Allocations unless the partial withdrawal exceeds the Accumulation Value in
the Divisions of Account B. If there is no Accumulation Value in those Divi-
sions, partial withdrawals will be deducted from your Fixed Allocations
starting with the Guarantee Periods nearest their Maturity Dates until we
have honored your request.
MARKET VALUE ADJUSTMENT
We will apply a Market Value Adjustment, determined by application of the
formula described below, in the following circumstances: (i) whenever you
make a withdrawal or transfer from a Fixed Allocation, other than withdrawals
or transfers made within 30 days prior to the Maturity Date of the applicable
Guarantee Period, systematic partial withdrawals, or pursuant to the dollar
cost averaging program; and (ii) on the Annuity Commencement Date with re-
spect to any Fixed Allocation having a Guarantee Period that does not end on
or within 30 days after the annuity commencement date.
The Market Value Adjustment is determined by multiplying the amount with-
drawn, transferred or annuitized by the following factor:
( 1+I ) N/365
(---------) -1
(1+J+.0025)
Where "I" is the Index Rate for a Fixed Allocation as of the first day of the
applicable Guarantee Period; "J" is the Index Rate for new Fixed Allocations
with Guarantee Periods equal to the number of years (fractional years are
rounded up to the next full year except in Pennsylvania) remaining in the
Guarantee Period at the time of the withdrawal, transfer or annuitization;
and "N" is the remaining number of days in the Guarantee Period at the time
of the withdrawal, transfer or annuitization.
The Index Rate is the average of the Ask Yields for U.S. Treasury Strips as
reported by a national quoting service for the applicable maturity. The aver-
age currently is based on the period from the 22nd day of the calendar month
two months prior to the calendar month of the Index Rate determination to the
21st day of the calendar month
18
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immediately prior to the month of determination. The applicable maturity is
the maturity date for these U.S. Treasury Strips on or next following the
last day of the Guarantee Period. If the Ask Yields are no longer available,
the Index Rate will be determined using a suitable replacement method ap-
proved where required.
We currently calculate the Index Rate once each calendar month. However, we
reserve the right to calculate the Index Rate more frequently than monthly,
but in no event will such Index Rate be based upon a period of less than 28
days.
The Market Value Adjustment may result in either an increase or decrease in
the Accumulation Value of your Fixed Allocation. If a full surrender, trans-
fer or annuitization from the Fixed Allocation has been requested, the bal-
ance of the Market Value Adjustment will be added to or subtracted from the
amount surrendered, transferred or annuitized. If a partial withdrawal,
transfer or annuitization has been requested, the Market Value Adjustment
will be calculated on the total amount that must be withdrawn, transferred or
annuitized in order to provide the amount requested. If a negative Market
Value Adjustment exceeds the Accumulation Value in the Fixed Allocation, such
transaction will be considered a full surrender, transfer or annuitization.
The Appendix contains several examples which illustrate the application of
the Market Value Adjustment.
____________________________________________________________________
FACTS ABOUT THE CONTRACT
THE OWNER
You are the Owner. You are also the Annuitant unless another Annuitant is
named in the application or enrollment form. You have the rights and options
described in the Contract. One or more persons may own the Contract. If there
are multiple Owners named, the age of the oldest Owner shall determine the ap-
plicable death benefit.
Death of an Owner activates the death benefit provision. In the case of a sole
Owner who dies prior to the annuity commencement date, we will pay the Benefi-
ciary the death benefit when due. The sole Owner's estate will be the Benefi-
ciary if no Beneficiary designation is in effect, or if the designated Benefi-
ciary has predeceased the Owner. In the case of a joint Owner of the Contract
dying prior to the annuity commencement date, we will designate the surviving
Owner(s) as the Beneficiary(ies). This supersedes any previous Beneficiary
designation.
In the case where the Owner is a trust and a beneficial Owner of the trust has
been designated, the beneficial Owner will be treated as the Owner of the Con-
tract solely for the purpose of determining the death benefit provisions. If a
beneficial Owner is changed or added after the Contract Date, this will be
treated as a change of Owner for purposes of determining the death benefit.
See Change of Owner or Beneficiary. If no beneficial Owner of the Trust has
been designated, the availability of enhanced death benefits will be deter-
mined by the age of the Annuitant at issue.
THE ANNUITANT
The Annuitant is the person designated by the Owner to be the measuring life
in determining Annuity Payments. The Owner will receive the annuity benefits
of the Contract if the Annuitant is living on the Annuity Commencement Date.
If the Annuitant dies before the Annuity Commencement Date, and a contingent
Annuitant has been named, the contingent Annuitant becomes the Annuitant (un-
less the Owner is not an individual, in which case the death benefit becomes
payable). Once named, the Annuitant may not be changed at any time.
If there is no contingent Annuitant when the Annuitant dies prior to the Annu-
ity Commencement Date, the Owner will become the Annuitant. The Owner may des-
ignate a new Annuitant within 60 days of the death of the Annuitant.
If there is no contingent Annuitant when the Annuitant dies prior to the Annu-
ity Commencement Date and the Owner is not an individual, we will pay the Ben-
eficiary the death benefit then due. The Beneficiary will be as provided in
the Beneficiary designation then in effect. If no Beneficiary designation is
in effect, or if there is no designated Beneficiary living, the Owner will be
the Beneficiary. If the Annuitant was the sole Owner and there is no Benefi-
ciary designation, the Annuitant's estate will be the Beneficiary.
Regardless of whether a death benefit is payable, if the Annuitant dies and
any Owner is not an individual, such death will trigger application of the
distribution rules imposed by Federal tax law.
THE BENEFICIARY
The Beneficiary is the person to whom we pay death benefit proceeds and who
becomes the succes-
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sor Owner if the Owner dies prior to the annuity commencement date. We pay
death benefit proceeds to the primary Beneficiary (unless there are joint
Owners, in which case death proceeds are payable to the surviving Owner(s)).
See Proceeds Payable to the Beneficiary.
If the Beneficiary dies before the Annuitant or Owner, the death benefit pro-
ceeds are paid to the contingent Beneficiary, if any. If there is no surviving
Beneficiary, we pay the death benefit proceeds to the Owner's estate.
One or more persons may be named as Beneficiary or contingent Beneficiary. In
the case of more than one Beneficiary, unless otherwise specified, we will as-
sume any death benefit proceeds are to be paid in equal shares to the surviv-
ing beneficiaries.
You have the right to change beneficiaries during the Annuitant's lifetime un-
less you have designated an irrevocable Beneficiary. When an irrevocable Bene-
ficiary has been designated, you and the irrevocable Beneficiary may have to
act together to exercise certain rights and options under the Contract.
CHANGE OF OWNER OR BENEFICIARY
During the Annuitant's lifetime and while your Contract is in effect, you may
transfer ownership of the Contract (if purchased in connection with a non-
qualified plan) subject to our published rules at the time of the change. A
change in Ownership may affect the amount of the death benefit and the
guaranteed death benefit. You may also change the Beneficiary. To make either
of these changes, you must send us written notice of the change in a form
satisfactory to us. The change will take effect as of the day the notice is
signed. The change will not affect any payment made or action taken by us
before recording the change at our Customer Service Center. See Federal Tax
Considerations, Transfer of Annuity Contracts, and Assignments.
AVAILABILITY OF THE CONTRACT
We can issue a Contract if both the Annuitant and the Owner are not older than
age 85.
TYPES OF CONTRACTS
QUALIFIED CONTRACTS
The Contract may be issued as an Individual Retirement Annuity or in connec-
tion with an individual retirement account. In the latter case, the Contract
will be issued without an Individual Retirement Annuity endorsement, and the
rights of the participant under the Contract will be affected by the terms
and conditions of the particular individual retirement trust or custodial ac-
count, and by provisions of the Code and the regulations thereunder. For ex-
ample, the individual retirement trust or custodial account will impose mini-
mum distribution rules, which may require distributions to commence not later
than April 1st of the calendar year following the calendar year in which you
attain age 70 1/2. For both Individual Retirement Annuities and individual
retirement accounts, the minimum Initial Premium is $1,500.
IF THE CONTRACT IS PURCHASED TO FUND A QUALIFIED PLAN, DISTRIBUTION MUST
COMMENCE NOT LATER THAN APRIL 1ST OF THE CALENDAR YEAR FOLLOWING THE CALENDAR
YEAR IN WHICH YOU ATTAIN AGE 70 1/2. IF YOU OWN MORE THAN ONE QUALIFIED PLAN,
YOU SHOULD CONSULT YOUR TAX ADVISOR.
NON-QUALIFIED CONTRACTS
The Contract may fund any non-qualified plan. Non-qualified Contracts do not
qualify for any tax-favored treatment other than the benefits provided for by
annuities.
YOUR RIGHT TO SELECT OR CHANGE CONTRACT OPTIONS
Before the Annuity Commencement Date, you may change the Annuity Commencement
Date, frequency of Annuity Payments or the Annuity Option by sending a written
request to our Customer Service Center. The Annuitant may not be changed at
any time.
PREMIUMS
You purchase the Contract with an Initial Premium. After the end of the Free
Look Period, you may make additional premium payments. See Making Additional
Premium Payments. The minimum Initial Premium is $10,000 for a non-qualified
Contract and $1,500 for a qualified Contract.
You must receive our prior approval before making a premium payment that
causes the Accumulation Value of all annuities that you maintain with us to
exceed $1,000,000. We may change the minimum initial or additional premium re-
quirements for certain group or sponsored arrangements. See Group or Sponsored
Arrangements.
QUALIFIED PLANS
For IRA Contracts, the annual premium on behalf of any individual Contract
may not exceed
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$2,000. Provided your spouse does not make a contribution to
an IRA, you may set up a spousal IRA even if your spouse has earned some com-
pensation during the year. The maximum deductible amount for a spousal IRA
program is the lesser of $2,250 or 100% of your compensation reduced by the
contribution (if any) made by you for the taxable year to your own IRA. How-
ever, no more than $2,000 can go to either your or your spouse's IRA in any
one year. For example, $1,750 may go to your IRA and $500 to your spouse's
IRA. These maximums are not applicable if the premium is the result of a
rollover from another qualified plan.
WHERE TO MAKE PAYMENTS
Remit premium payments to our Customer Service Center. The address is shown
on the cover. We will send you a confirmation notice.
MAKING ADDITIONAL PREMIUM PAYMENTS
You may make additional premium payments after the end of the Free Look Peri-
od. We can accept additional premium payments until either the Annuitant or
Owner reaches the Attained Age of 85 under non-qualified plans. For qualified
plans, no contributions may be made to an IRA Contract for the taxable year in
which you attain age 70 1/2 and thereafter (except for rollover contribu-
tions). The minimum additional premium payment we will accept is $500 for a
non-qualified plan and $250 for a qualified plan.
CREDITING PREMIUM PAYMENTS
The Initial Premium will be accepted or rejected within two business days of
receipt by us if accompanied by information sufficient to permit us to deter-
mine if we are able to issue a Contract. We may retain an Initial Premium for
up to five business days while attempting to obtain information sufficient to
enable us to issue the Contract. If we are unable to do so within five busi-
ness days, the applicant or enrollee will be informed of the reasons for the
delay and the Initial Premium will be returned immediately unless the appli-
cant or enrollee consents to our retaining the Initial Premium until we have
received the information we require. Thereafter, all additional premiums will
be accepted on the day received.
In certain states we will also accept, by agreement with broker-dealers,
transmittal of initial and additional premium payments by wire order from the
broker-dealer to our Customer Service Center. Such transmittals must be accom-
panied by a simultaneous telephone facsimile or other electronic data trans-
mission containing the essential information we require to open an account and
allocate the premium payment. Contact our Customer Service Center to find out
about state availability and broker-dealer requirements.
Upon our acceptance of premium payments received via wire order and accompa-
nied by sufficient electronically transmitted data, we will issue the Con-
tract, allocate the premium payment according to your instructions, and invest
the payment at the value next determined following receipt. See Restrictions
on Allocation of Premium Payments. Wire orders not accompanied by sufficient
data to enable us to accept the premium payment may be retained for up to five
business days while we attempt to obtain information sufficient to enable us
to issue the Contract. If we are unable to do so, our Customer Service Center
will inform the broker-dealer, on behalf of the applicant or enrollee, of the
reasons for the delay and return the premium payment immediately to the bro-
ker-dealer for return to the applicant or enrollee, unless the applicant or
enrollee specifically consents to allow us to retain the premium payment until
our Customer Service Center receives the required information.
On the date we receive and accept your initial or additional premium payment:
(1) We allocate the Initial Premium among the Divisions and Fixed Allocations
according to your instructions, subject to any restrictions. See Restric-
tions on Allocation of Premium Payments. For additional premium payments,
the Accumulation Value will increase by the amount of the premium. If we
do not receive instructions from you, the increase in the Accumulation
Value will be allocated among the Divisions in proportion to the amount
of Accumulation Value in each Division as of the date we receive and accept
the additional premium payment. If there is no Accumulation Value in the
Divisions, the increase in the Accumulation Value will be allocated to a
Fixed Allocation with the shortest Guarantee Period then available.
(2) For an Initial Premium, we calculate your applicable death benefit. When
an additional premium payment is made, we increase your applicable death
benefit in accordance with the death benefit option in effect for your
Contract.
Following receipt and acceptance of the wire order and accompanying data, and
investment of the premium payment, we will follow one of the two procedures
set forth below. The one we follow is deter-
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ined by state availability and the
procedures of the broker-dealer which submitted the wire order.
(1) We will issue the Contract. However, until we have received and accepted a
properly completed application or enrollment form, we reserve the right to
rescind the Contract. If the form is not received within fifteen days of
receipt of the premium payment, we will refund the Accumulation Value plus
any charges we deducted, and the Contract will be voided. Some states re-
quire that we return the premium paid. In these states, different rules
will apply.
(2) Based on the information provided, we will issue the Contract. We will
mail the Contract to you, together with an Application Acknowledgement
Statement. You must execute the Application Acknowledgement Statement and
return it to us at our Customer Service Center. Until we receive the exe-
cuted Application Acknowledgement Statement, neither you nor the broker-
dealer may execute any financial transactions with respect to the Contract
unless such transactions are appropriately requested in writing by you.
RESTRICTIONS ON ALLOCATION OF PREMIUM PAYMENTS
We may require that an Initial Premium designated for a Division of Account B
be allocated to the Specially Designated Division during the Free Look Period
for Initial Premiums received from some states. After the free look period, if
your Initial Premium was allocated to the Specially Designated Division, we
will transfer the Accumulation Value to the Divisions you previously selected
based on the index of investment experience next computed for each Division.
See Facts About the Contract, Measurement of Investment Experience, Index of
Investment Experience and Unit Value. Initial premiums designated for the
Fixed Account will be allocated to a Fixed Allocation with the Guarantee Pe-
riod you have chosen.
YOUR RIGHT TO REALLOCATE
You may reallocate your Accumulation Value among the Divisions and Fixed Allo-
cations at the end of the free look period. We currently do not assess a
charge for allocation changes made during a Contract Year. We reserve the
right, however, to assess a $25 charge for each allocation change after the
twelfth allocation change in a Contract Year. We require that each realloca-
tion of your Accumulation Value equal at least $250 or, if less, your entire
Accumulation Value within a Division or Fixed Allocation. We reserve the right
to limit, upon notice, the maximum number of reallocations you may make within
a Contract Year. In addition, we reserve the right to defer the reallocation
privilege at any time we are unable to purchase or redeem shares of the GCG
Trust or the ESS Trust. We also reserve the right to modify or terminate your
right to reallocate your Accumulation Value at any time in accordance with ap-
plicable law. Reallocations from the Fixed Account are subject to the Market
Value Adjustment unless taken as part of the dollar cost averaging program or
within 30 days prior to the Maturity Date of the applicable Guarantee Period.
To make a reallocation change, you must provide us with satisfactory notice at
our Customer Service Center.
We reserve the right to limit the number of reallocations of your Accumulation
Value among the Divisions and Fixed Allocations or refuse any reallocation re-
quest if we believe that: (a) excessive trading by you or a specific realloca-
tion request may have a detrimental effect on unit values or the share prices
of the underlying Series; or (b) we are informed by the GCG Trust or the ESS
Trust that the purchase or redemption of shares is to be restricted because of
excessive trading or a specific reallocation or group of reallocations is
deemed to have a detrimental effect on share prices of the GCG Trust or the
ESS Trust.
Where permitted by law, we may accept your authorization of third party real-
location on your behalf, subject to our rules. We may suspend or cancel such
acceptance at any time. We will notify you of any such suspension or cancella-
tion. We may restrict the Divisions and Fixed Allocations that will be avail-
able to you for reallocations of premiums during any period in which you au-
thorize such third party to act on your behalf. We will give you prior
notification of any such restrictions. However, we will not enforce such re-
strictions if we are provided evidence satisfactory to us that: (a) such third
party has been appointed by a court of competent jurisdiction to act on your
behalf; or (b) such third party has been appointed by you to act on your be-
half for all your financial affairs.
Some restrictions may apply based on the free look provisions of the state
where the Contract is issued. See Your Right to Cancel or Exchange Your
Contract.
DOLLAR COST AVERAGING
If you have at least $10,000 of Accumulation Value in the Limited Maturity
Bond Division, the Liquid
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Asset Division or a Fixed Allocation with a one year
Guarantee Period, you may elect the dollar cost averaging program and have a
specified dollar amount transferred from those Divisions or such Fixed Alloca-
tion on a monthly basis.
The main objective of dollar cost averaging is to attempt to shield your in-
vestment from short-term price fluctuations. Since the same dollar amount is
transferred to other Divisions each month, more units are purchased in a Divi-
sion if the value per unit is low and less units are purchased if the value
per unit is high.
Therefore, a lower than average value per unit may be achieved over the long
term. This plan of investing allows investors to take advantage of market
fluctuations but does not assure a profit or protect against a loss in declin-
ing markets.
Dollar cost averaging may be elected at issue or at a later date. The minimum
amount that may be transferred each month is $250. The maximum amount which
may be transferred is equal to your Accumulation Value in the Limited Maturity
Bond Division, the Liquid Asset Division or a Fixed Allocation with a one year
Guarantee Period when you elect the dollar cost averaging program, divided by
12.
The transfer date will be the same calendar day each month as the Contract
Date. The dollar amount will be allocated to the Divisions in which you are
invested in proportion to your Accumulation Value in each Division unless you
specify otherwise. If, on any transfer date, your Accumulation Value is equal
to or less than the amount you have elected to have transferred, the entire
amount will be transferred and the program will end. You may change the trans-
fer amount once each Contract Year, or cancel this program by sending satis-
factory notice to our Customer Service Center at least seven days before the
next transfer date. Any allocation under this program will not be included in
determining if the excess allocation charge will apply. We currently do not
permit transfers under the dollar cost averaging program from Fixed Alloca-
tions with other than one year Guarantee Periods. Transfers from a Fixed Allo-
cation under the dollar cost averaging program will not be subject to a Market
Value Adjustment. See, Market Value Adjustment. A Fixed Allocation may not
participate simultaneously in both the dollar cost averaging program and the
Systematic Partial Withdrawal Option.
WHAT HAPPENS IF A DIVISION IS NOT AVAILABLE
When a distribution is made from an investment portfolio supporting a Division
of Account B in which reinvestment is not available, we will allocate the dis-
tribution, unless you specify otherwise, to the Specially Designated Division.
Such a distribution can occur when (a) an investment portfolio matures, or (b)
a distribution from a portfolio or Division cannot be reinvested in the port-
folio or Division due to the unavailability of securities for acquisition.
When an investment portfolio matures, we will notify you in writing 30 days in
advance of that date. To elect an allocation of the distribution to other than
the Specially Designated Division, you must provide satisfactory notice to us
at least seven days prior to the date the portfolio matures. Such allocations
are not counted for purposes of the number of free allocation changes permit-
ted. When a distribution from a portfolio or Division cannot be reinvested in
the portfolio due to the unavailability of securities for acquisition, we will
notify you promptly after the allocation has occurred. If within 30 days you
allocate the Accumulation Value from the Specially Designated Division to
other Divisions or Fixed Allocations of your choice, such allocations will not
be included in determining if the excess allocation charge will apply.
YOUR ACCUMULATION VALUE
Your Accumulation Value is the sum of the amounts in each of the Divisions and
the Fixed Allocations in which you are invested, and is the amount available
for investment at any time. You select the Divisions and Fixed Allocations to
which to allocate your Accumulation Value. We adjust your Accumulation Value
on each Valuation Date to reflect the Divisions' investment performance and
interest credited to your Fixed Allocations, any additional premium payments
or partial withdrawals since the previous Valuation Date, and on each Contract
processing date to reflect any deduction of the annual Contract fee. Your
Accumulation Value is applied to your choice of an Annuity Option on the
Annuity Commencement Date subject to our published rules at such time. See
Choosing an Income Plan.
ACCUMULATION VALUE IN EACH DIVISION
ON THE CONTRACT DATE
On the Contract Date, your Accumulation Value is allocated to each Division
as you have specified, unless the Contract is issued in a state that requires
the return of premium payments during the Free Look Period, in which case,
the portion
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of your Initial Premium not allocated to a Fixed Allocation will
be allocated to the Specially Designated Division during the Free Look Peri-
od. See Your Right to Cancel or Exchange Your Contract.
ON EACH VALUATION DATE
At the end of each subsequent Valuation Period, the amount of Accumulation
Value in each Division will be calculated as follows:
(1) We take the Accumulation Value in the Division at the end of the preced-
ing Valuation Period.
(2) We multiply (1) by the Division's net rate of return for the current Val-
uation Period.
(3) We add (1) and (2).
(4) We add to (3) any additional premium payments allocated to the Division
during the current Valuation Period.
(5) We add or subtract allocations to or from that Division during the cur-
rent Valuation Period.
(6) We subtract from (5) any partial withdrawals and any associated charges
allocated to that Division during the current Valuation Period.
(7) We subtract from (6) the amounts allocated to that Division for:
(a)any Contract fees; and
(b)any charge for premium taxes.
All amounts in (7) are allocated to each Division in the proportion that (6)
bears to the Accumulation Value in Account B, unless the Charge Deduction Di-
vision has been specified. See Charges Deducted from the Accumulation Value.
MEASUREMENT OF INVESTMENT EXPERIENCE
INDEX OF INVESTMENT EXPERIENCE AND UNIT VALUE
The investment experience of a Division is determined on each Valuation Date.
We use an index to measure changes in each Division's experience during a
Valuation Period. We set the index at $10 when the first investments in a Di-
vision are made, except for the OTC, Research, Total Return, Growth and In-
come, and Value + Growth Divisions, which started with indices of $14.64,
$16.43, $13.76, $10.94, and $11.99, respectively. The index for a current
Valuation Period equals the index for the preceding Valuation Period multi-
plied by the experience factor for the current Valuation Period.
We may express the value of amounts allocated to the Divisions in terms of
units. We determine the number of units for a given amount on a Valuation
Date by dividing the dollar value of that amount by the index of investment
experience for that date. The index of investment experience is equal to the
value of a unit.
HOW WE DETERMINE THE EXPERIENCE FACTOR
For Divisions of Account B the experience factor reflects the investment ex-
perience of the Series of the Trust in which a Division invests as well as
the charges assessed against the Division for a Valuation Period. The factor
is calculated as follows:
(1) We take the net asset value of the portfolio in which the Division in-
vests at the end of the current Valuation Period.
(2) We add to (1) the amount of any dividend or capital gains distribution
declared for the investment portfolio and reinvested in such portfolio
during the current Valuation Period. We subtract from that amount a
charge for our taxes, if any.
(3) We divide (2) by the net asset value of the portfolio at the end of the
preceding Valuation Period.
(4) We subtract the applicable daily mortality and expense risk charge from
each Division for each day in the valuation period.
(5) We subtract the daily asset based administrative charge from each Divi-
sion for each day in the valuation period.
Calculations for Divisions investing in a Series are made on a per share ba-
sis.
NET RATE OF RETURN FOR A DIVISION
The net rate of return for a Division during a valuation period is the expe-
rience factor for that Valuation Period minus one.
CASH SURRENDER VALUE
Your Contract's Cash Surrender Value fluctuates daily with the investment re-
sults of the Divisions, interest credited to Fixed Allocations and any Market
Value Adjustment. We do not guarantee any minimum Cash Surrender Value. On any
date before the Annuity Commencement Date while the
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Contract is in effect, the cash surrender value is calculated as follows:
(1) We take the Contract's Accumulation Value;
(2) We deduct from (1) any surrender charge and any charge for premium taxes;
(3) We deduct from (2) any charges incurred but not yet deducted; and
(4) We adjust (3) for any Market Value Adjustment.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
The Contract may be surrendered by the Owner at any time while the Annuitant
is living and before the Annuity Commencement Date.
A surrender will be effective on the date your written request and the Con-
tract are received at our Customer Service Center. The Cash Surrender Value is
determined and all benefits under the Contract will then be terminated, as of
that date. You may receive the Cash Surrender Value in a single sum payment or
apply it under one or more Annuity Options. See The Annuity Options. We will
usually pay the Cash Surrender Value within seven days but we may delay pay-
ment. See When We Make Payments.
PARTIAL WITHDRAWALS
Prior to the Annuity Commencement Date, while the Annuitant is living and the
Contract is in effect, you may take partial withdrawals from the Accumulation
Value by sending satisfactory notice to our Customer Service Center. Unless
you specify otherwise, the amount of the withdrawal, including any surrender
charge and Market Value Adjustment, will be taken in proportion to the amount
of Accumulation Value in each Division in which you are invested. If there is
no Accumulation Value in those Divisions, partial withdrawals will be deducted
from your Fixed Allocations starting with the Guarantee Periods nearest their
Maturity Dates until we have honored your request.
There are three options available for selecting partial withdrawals, the Con-
ventional Partial Withdrawal Option, the Systematic Partial Withdrawal Option
and the IRA Partial Withdrawal Option. All three options are described below.
The maximum amount you may withdraw each Contract Year without incurring a
surrender charge is 15% of your Accumulation Value. See Surrender Charge for
Excess Partial Withdrawals. Partial withdrawals may not be repaid. A partial
withdrawal request for an amount in excess of 90% of the Cash Surrender Value
will be treated as a request to surrender the Contract.
CONVENTIONAL PARTIAL WITHDRAWAL OPTION
After the Free Look Period, you may take conventional partial withdrawals.
The minimum amount you may withdraw under this option is $1,000. A conven-
tional partial withdrawal from a Fixed Allocation may be subject to a Market
Value Adjustment.
SYSTEMATIC PARTIAL WITHDRAWAL OPTION
This option may be elected at the time you apply for a Contract, or at a
later date. This option may be elected to commence in a Contract Year where a
conventional partial withdrawal has been taken. However, it may not be
elected while the IRA Partial Withdrawal Option is in effect.
You may choose to receive systematic partial withdrawals on a monthly, quar-
terly, or annual basis from your Accumulation Value in the Divisions or the
Fixed Allocations. The commencement of payments under this option may not be
elected to start sooner than 28 days after the Contract Issue Date. You se-
lect the date when the withdrawals will be made but no later than the 28th
day of the month. If no date is selected, the withdrawals will be made on the
same calendar day of each month as the Contract Date.
You may select a dollar amount or a percentage of the Accumulation Value from
the Divisions in which you are invested as the amount of your withdrawal sub-
ject to the following maximums, but in no event can a payment be less than
$100:
<TABLE>
<CAPTION>
FREQUENCY MAXIMUM PERCENTAGE
--------- ------------------
<S> <C>
Monthly 1.25%
Quarterly 3.75%
Annual 15.00%
</TABLE>
If a dollar amount is selected and the amount to be systematically withdrawn
would exceed the applicable maximum percentage of your Accumulation Value on
the withdrawal date, the amount withdrawn will be reduced so that it equals
such percentage. For example, if a $500 monthly withdrawal was elected and on
the withdrawal date 1.25% of the Accumulation Value equaled $300, the with-
drawal amount would be reduced to $300. If a percentage is selected and the
amount to be systematically withdrawn based on that percentage would be less
than the minimum of $100, we would increase the amount to $100 provided it
does not exceed the maximum percentage. If it is below the maximum percentage
we will send the minimum. If it is above the maxi-
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mum percentage we will send
the amount and then cancel the option. For example, if you selected 1.0% to
be systematically withdrawn on a monthly basis and that amount equaled $90,
and since $100 is less than 1.25% of the Accumulation Value, we would send
$100. If 1.0% equaled $75, and since $100 is more than 1.25% of the Accumula-
tion Value we would send $75 and then cancel the option. In such a case, in
order to receive systematic partial withdrawals in the future, you would be
required to submit a new notice to our Customer Service Center.
Systematic Partial Withdrawals from Fixed Allocations are limited to interest
earnings during the prior month, quarter, or year, depending on the frequency
chosen. Systematic withdrawals are not subject to a Market Value Adjustment.
A Fixed Allocation, however, may not participate simultaneously in both the
dollar cost averaging program and the Systematic Partial Withdrawal Option.
You may change the amount or percentage of your withdrawal once each Contract
Year or cancel this option at any time by sending satisfactory notice to our
Customer Service Center at least seven days prior to the next scheduled with-
drawal date. However, you may not change the amount or percentage of your
withdrawals in any Contract Year during which you have previously taken a
conventional partial withdrawal.
IRA PARTIAL WITHDRAWAL OPTION
If you have an IRA Contract and will attain age 70 1/2 in the current calen-
dar year, distributions may be made to you to satisfy requirements imposed by
Federal tax law. IRA partial withdrawals provide payout of amounts required
to be distributed by the Internal Revenue Service rules governing mandatory
distributions under qualified plans. See Federal Tax Considerations. We will
send you a notice before your distributions commence, and you may elect this
option at that time, or at a later date. You may not elect IRA partial with-
drawals while the Systematic Partial Withdrawal Option is in effect. If you
do not elect the IRA Partial Withdrawal Option, and distributions are re-
quired by Federal tax law, distributions adequate to satisfy the requirements
imposed by Federal tax law may be made. Thus, if the Systematic Partial With-
drawal Option is in effect, distributions under that option must be adequate
to satisfy the mandatory distribution rules imposed by Federal tax law.
You may choose to receive IRA partial withdrawals on a monthly, quarterly or
annual frequency. You select the day of the month when the withdrawals will
be made, but it cannot be later than the 28th day of the month. If no date is
selected, the withdrawals will be made on the same calendar day of the month
as the Contract Date.
At your request, we will determine the amount that is required to be with-
drawn from your Contract each year based on the information you give us and
various choices you make. For information regarding the calculation and
choices you have to make, see the Statement of Additional Information. The
minimum dollar amount you can withdraw is $100. At the time we determine the
required partial withdrawal amount for a taxable year based on the frequency
you select, if that amount is less than $100, we will pay $100. At any time
where the partial withdrawal amount is greater than the Accumulation Value,
we will cancel the Contract and send you the amount of the Cash Surrender
Value.
You may change the payment frequency of your withdrawals once each Contract
Year or cancel this option at any time by sending us satisfactory notice to
our Customer Service Center at least seven days prior to the next scheduled
withdrawal date.
An IRA partial withdrawal in excess of the amount allowed under the System-
atic Partial Withdrawal Option may be subject to a Market Value Adjustment.
PARTIAL WITHDRAWALS IN GENERAL
CONSULT YOUR TAX ADVISOR REGARDING THE TAX CONSEQUENCES ASSOCIATED WITH TAK-
ING PARTIAL WITHDRAWALS. A partial withdrawal made before the taxpayer
reaches age 59 1/2 may result in imposition of a tax penalty of 10% of the
taxable portion withdrawn. See Federal Tax Considerations for more details.
AUTOMATIC REBALANCING
If you have at least $10,000 of Accumulation Value invested in the Divisions,
you may elect to participate in our automatic rebalancing program. Automatic
rebalancing provides you with an easy way to maintain the particular asset al-
location that you and your financial advisor have determined are most suitable
for your individual long-term investment goals. We do not charge a fee for
participating in our automatic rebalancing program.
Under the program you may elect to have all your allocations among the Divi-
sions rebalanced on a quarterly, semi-annual, or annual calendar basis.
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The minimum size of an allocation to a Division must be in full percentage
points. Rebalancing does not affect any amounts that you have allocated to the
Fixed Account. The program may be used in conjunction with the systematic
partial withdrawal option only where such withdrawals are taken pro rata.
Automatic rebalancing is not available if you participate in dollar cost
averaging. Automatic rebalancing will not take place during the free look
period.
To participate in automatic rebalancing you must submit to our Customer Serv-
ice Center written notice in a form satisfactory to us. We will begin the pro-
gram on the last Valuation Date of the applicable calendar period in which we
receive the notice. You may cancel the program at any time. The program will
automatically terminate if you choose to reallocate your Accumulation Value
among the Divisions or if you make an additional premium payment or partial
withdrawal on other than a pro rata basis. Additional premium payments and
partial withdrawals effected on a pro rata basis will not cause the automatic
rebalancing program to terminate.
PROCEEDS PAYABLE TO THE BENEFICIARY
If the Owner or the Annuitant (when the Owner is other than an individual)
dies prior to the annuity commencement date, we will pay the Beneficiary the
death benefit proceeds under the Contract. Such amount may be received in a
single sum or applied to any of the Annuity Options. See The Annuity Options.
If we do not receive a request to apply the death benefit proceeds to an Annu-
ity Option, a single sum distribution will be made. Any distributions from
non-qualified Contracts must comply with applicable Federal tax law distribu-
tion requirements.
DEATH BENEFIT OPTIONS
Subject to our rules, there are three death benefit options that may be
elected by you at issue under the Contract: the Standard Death Benefit Option;
the 7% Solution Enhanced Death Benefit Option; and the Annual Ratchet Enhanced
Death Benefit Option.
The 7% Solution Enhanced Death Benefit Option may only be elected at issue and
only if the Owner or Annuitant (when the Owner is other than an individual) is
age 80 or younger at issue. The 7% Solution Enhanced Death Benefit Option may
not be available where a Contract is held by joint Owners. The Annual Ratchet
Enhanced Death Benefit Option may only be elected at issue and only if the
Owner or Annuitant (when the Owner is other than an individual) is age 79 or
younger at issue.
If an enhanced death benefit is elected, the death benefit under the Contract
is equal to the greatest of: (i) the Accumulation Value; (ii) total premium
payments less any partial withdrawals; (iii) the Cash Surrender Value; and
(iv) the enhanced death benefit (see below).
We may offer a reduced death benefit under certain group and sponsored ar-
rangements. See Other Contract Provisions, Group or Sponsored Arrangements.
STANDARD DEATH BENEFIT OPTION
You will automatically receive the Standard Death Benefit Option unless you
elect one of the enhanced death benefits. The Standard Death Benefit Option
for the Contract is equal to the greatest of: (i) your Accumulation Value;
(ii) total premiums less any partial withdrawals; and (iii) the Cash Surren-
der Value.
7% SOLUTION ENHANCED DEATH BENEFIT OPTION
(1) We take the enhanced death benefit from the prior Valuation Date. On the
Contract Date, the enhanced death benefit is equal to the Initial Premium.
(2) We calculate interest on (1) for the current Valuation Period at the en-
hanced death benefit interest rate, which rate is an annual rate of 7%;
except that with respect to amounts in the Liquid Asset Division and Lim-
ited Maturity Bond Division, the interest rate applied to such amounts
will be the respective net rate of return for such Divisions during the
current Valuation Period, if it is less than an annual rate of 7%; and ex-
cept with respect to amounts in a Fixed Allocation, the interest rate ap-
plied to such amounts will be the interest credited to such Fixed
Allocation during the current Valuation Period, if it is less than an
annual rate of 7%.
Each accumulated initial or additional premium payment reduced by any par-
tial withdrawals (including any associated Market Value Adjustment and sur-
render charge incurred) allocated to such premium will continue to grow at
the enhanced death benefit interest rate until reaching the maximum en-
hanced death benefit. Such maximum enhanced death benefit is equal to two
times the initial or each additional premium paid, as reduced by partial
withdrawals. Each partial withdrawal reduces the maximum enhanced
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death benefit as follows: first, the maximum enhanced death benefit is
reduced by the amount of any partial withdrawal of earnings; second, the
maximum enhanced death benefit is reduced in proportion to the reduction in
the Accumulation Value for any partial withdrawal of premium (in each case,
including any associated market value adjustment and surrender charge
incurred). To the extent that partial withdrawals in a contract year do not
exceed 7% of cumulative premiums and did not exceed 7% of cumulative premiums
in any prior contract year, such withdrawals will be treated as withdrawals
of earnings for the purpose of calculating the maximum enhanced death benefit.
(3) We add (1) and (2).
(4) We add to (3) any additional premiums paid during the current Valuation Pe-
riod.
(5) We subtract from (4) any partial withdrawals (including any Market Value
Adjustments and surrender charges incurred) made during the current Valua-
tion Period.
ANNUAL RATCHET ENHANCED DEATH BENEFIT OPTION
(1) We take the enhanced death benefit from the prior Valuation Date. On the
Contract Date, the enhanced death benefit is equal to the Initial Premium.
(2) We add to (1) any additional premiums paid since the prior Valuation Date
and subtract from (1) any partial withdrawals (including any Market Value
Adjustments and surrender charges incurred) taken since the prior Valuation
Date.
(3) On a Valuation Date that occurs on or prior to the Owner's Attained Age 80
which is also a Contract Anniversary, we set the enhanced death benefit
equal to the greater of (2) or the Accumulation Value as of such date.
On all other Valuation Dates, the enhanced death benefit is equal to (2).
HOW TO CLAIM PAYMENTS TO BENEFICIARY
We must receive due proof of the death of the Owner or the Annuitant (if the
Owner is other than an individual) (such as an official death certificate) at
our Customer Service Center before we will make any payments to the Benefi-
ciary. We will calculate the death benefit as of the date we receive due
proof of death. The Beneficiary should contact our Customer Service Center
for instructions.
REPORTS TO OWNERS
We will send you a report once each calendar quarter within 31 days after the
end of each calendar quarter. The report will show the Accumulation Value, the
Cash Surrender Value, and the death benefit as of the end of the calendar quar-
ter. The report will also show the allocation of your Accumulation Value as of
such date and the amounts deducted from or added to the Accumulation Value
since the last report. The report will also include any other information that
may be currently required by the insurance supervisory official of the juris-
diction in which the Contract is delivered.
We will also send you copies of any shareholder reports of the portfolios or
securities in which Account B invests, as well as any other reports, notices or
documents required by law to be furnished to Owners.
WHEN WE MAKE PAYMENTS
We will generally pay death benefit proceeds and the cash surrender value
within seven days after our Customer Service Center receives all the informa-
tion needed to process the payment.
However, we may delay payment of amounts derived from the Divisions if it is
not practical for us to value or dispose of shares of Account B because:
(1) The NYSE is closed for trading;
(2) The SEC determines that a state of emergency exists;
(3) An order or pronouncement of the SEC permits a delay for the protection of
Owners; or,
(4) The check used to pay the premium has not cleared through the banking sys-
tem. This may take up to 15 days.
During such times, as to amounts allocated to the Divisions, we may delay:
(1) Determination and payment of any Cash Surrender Value;
(2) Determination and payment of any death benefit if death occurs before the
Annuity Commencement Date;
(3) Allocation changes of the Accumulation Value; or,
(4) Application under an Annuity Option of the Accumulation Value.
We reserve the right to delay payment of amounts from the Fixed Account for up
to six months.
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____________________________________________________________________
CHARGES AND FEES
We deduct the charges described below to cover our cost and expenses, services
provided and risks assumed under the Contracts. We incur certain costs and ex-
penses for the distribution and administration of the Contracts, for providing
the benefits payable thereunder and for bearing various risks thereunder. The
amount of a charge will not necessarily correspond to the costs associated
with providing the services or benefits indicated by the designation of the
charge. For example, the Surrender Charge collected may not fully cover all of
the distribution expenses incurred by us.
CHARGE DEDUCTION DIVISION
You may specify at issue if you wish to have all charges against the Accumula-
tion Value deducted from the Liquid Asset Division. We call this the Charge
Deduction Division Option, and within this context refer to the Liquid Asset
Division as the Charge Deduction Division. If you do not elect this option, or
if the amount of the charges is greater than the amount in the Division, the
charges will be deducted as discussed below. You may also choose to elect or
cancel this option while the Contract is in force by sending satisfactory no-
tice to our Customer Service Center.
CHARGES DEDUCTED FROM THE ACCUMULATION VALUE
We invest the entire amount of the initial and any additional premium payments
in the Divisions and the Fixed Allocations you select, subject to certain re-
strictions. See Restrictions on Allocation of Premium Payments. We then may
deduct certain amounts from your Accumulation Value. We may reduce certain
fees and charges, including any surrender, administration, and mortality and
expense risk charges, under group or sponsored arrangements. See Group or
Sponsored Arrangements. Unless you have elected the Charge Deduction Division,
charges are deducted proportionately from all affected Divisions in which you
are invested. If there is no Accumulation Value in those Divisions, we will
deduct charges from your Fixed Allocations starting with the Guarantee Periods
nearest their Maturity Dates until such charges have been paid. The charges we
deduct are:
SURRENDER CHARGE
A contingent deferred sales charge ("Surrender Charge") is imposed as a per-
centage of each premium payment if the Contract is surrendered or an excess
partial withdrawal is taken during the seven year period from the date we re-
ceive and accept such premium payment. The percentage of premium payments de-
ducted at the time of surrender or excess partial withdrawal depends upon the
number of complete years that have elapsed since that premium payment was
made. We determine the surrender charge as a percentage of each premium pay-
ment as follows:
<TABLE>
<CAPTION>
Complete Years Elapsed Surrender
Since Premium Payment Charge
------------------- ---------
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 1%
7+ 0%
</TABLE>
Subject to our rules and as described in the Contract, the surrender charge
arising from a surrender or excess partial withdrawal will be waived in the
following events:
(1) you begin receiving qualified extended medical care on or after the first
Contract anniversary for at least 45 days during any continuous sixty-day
period, and your request for the surrender or withdrawal, together with
all required proof of such qualified extended medical care, must be re-
ceived at our Customer Service Center during the term of such care or
within ninety days after the last day upon which you received such care.
(2) you are first diagnosed by a qualifying medical professional, on or after
the first Contract Anniversary, as having a Qualifying Terminal Illness.
Written proof of terminal illness, satisfactory to us, must be received
at our Customer Service Center. We reserve the right to require an
examination by a physician of our choice.
See your Contract for more information. The waiver of surrender charge may
not be available in all states.
SURRENDER CHARGE FOR EXCESS PARTIAL WITHDRAWALS
There is considered to be an excess partial withdrawal in any Contract Year
in which the amount withdrawn exceeds 15% of your Accumulation Value on the
date of the withdrawal minus any amount withdrawn during that Contract Year.
Where you are receiving systematic partial withdrawals, any combination of
conventional partial withdrawals taken and any systematic partial withdrawals
expected to be received in a Contract Year will be considered in determining
29
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<PAGE>
the amount of the excess partial withdrawal. Such a withdrawal will be con-
sidered a partial surrender of the Contract and we will impose a surrender
charge and any associated premium tax. See Facts About the Contract, The
Fixed Account, Market Value Adjustment. Such charges will be deducted from
the Accumulation Value in proportion to the Accumulation Value in each Divi-
sion or Fixed Allocation from which the excess partial withdrawal was taken.
In instances where the excess partial withdrawal equals the entire Accumula-
tion Value in each such Division or Fixed Allocation, charges will be de-
ducted proportionately from all other Divisions and Fixed Allocations in
which you are invested.
For purposes of calculating the surrender charge for the excess partial with-
drawal, (i) we treat premium payments as being withdrawn on a first-in first-
out basis, and (ii) amounts withdrawn which are not considered an excess par-
tial withdrawal are not treated as a withdrawal of any premium payments.
Although we treat premium payments as being withdrawn before earnings for
purposes of calculating the surrender charge for excess partial withdrawals,
the Federal income tax law treats earnings as withdrawn first. See Federal
Tax Considerations, Taxation of Non-Qualified Annuities.
For example, the following assumes an Initial Premium payment of $10,000 and
additional premium payments of $10,000 in each of the second and third Con-
tract Years, for total premium payments under the Contract of $30,000. It
also assumes a partial withdrawal at the beginning of the fourth Contract
Year of 20% of the Accumulation Value of $35,000.
In this example, $5,250 ($35,000 x .15) is the maximum partial withdrawal
that may be withdrawn during the Contract Year without the imposition of a
surrender charge. The total partial withdrawal would be $7,000 ($35,000 x
.2). Therefore, $1,750 ($7,000-$5,250) is considered an excess partial with-
drawal of a part of the Initial Premium payment of $10,000 and would be sub-
ject to a 5% surrender charge of $87.50 ($1,750 x .05). This example does not
take into account any Market Value Adjustment or deduction of any premium
taxes.
PREMIUM TAXES
We make a charge for state and local premium taxes in certain states which
can range from 0% to 3.5% of premium. The charge depends on the Owner's state
of residence. We reserve the right to change this amount to conform with
changes in the law or if the Owner changes state of residence.
Premium taxes are generally incurred on the annuity commencement date and a
charge for such premium taxes is then deducted from your Accumulation Value
on such date. However, some jurisdictions impose a premium tax at the time
that initial and additional premiums are paid, regardless of the Annuity Com-
mencement Date. In those states we may initially defer collection of the
amount of the charge for premium taxes from your Accumulation Value and de-
duct it against Accumulation Value on surrender of the Contract, excess par-
tial withdrawals or on the Annuity Commencement Date.
ADMINISTRATIVE CHARGE
The administrative charge is incurred at the beginning of the Contract
processing period and deducted at the end of each Contract processing period.
We deduct this charge when determining the Cash Surrender Value payable if
you surrender the Contract prior to the end of a Contract processing period.
If the Accumulation Value at the end of the Contract processing period equals
or exceeds $100,000 or the sum of the premiums paid equals or exceeds
$100,000, the charge is zero. Otherwise, the amount deducted is $40 per Con-
tract Year.
EXCESS ALLOCATION CHARGE
We currently do not assess a charge for allocation changes made during a Con-
tract Year. We reserve the right, however, to assess a $25 charge for each
allocation change after the twelfth allocation change in a Contract Year.
This amount represents the maximum we will charge. The charge would be
deducted from the Divisions and the Fixed Allocations from which each such
reallocation is made in proportion to the amount being transferred from each
such Division and Fixed Allocation unless you have chosen to use the Charge
Deduction Division. The excess allocation charge is set at a level that is
not designed to produce profit for Golden American or any affiliate. Any
allocations or transfers due to the election of dollar cost averaging and
reallocation under the provision What Happens if a Division is Not Available
will not be included in determining if the excess allocation charge should
apply.
CHARGES DEDUCTED FROM THE DIVISIONS
MORTALITY AND EXPENSE RISK CHARGE
The amount of the mortality and expense risk charge depends on the death ben-
efit option that has been elected. If the Standard Death Benefit
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<PAGE>
Option is elected, the charge is equivalent, on an annual basis, to 1.10% of
the assets in each Division. The charge is deducted on each Valuation Date at
the rate of .003030% for each day in the Valuation Period. If an enhanced
death benefit is elected, the charge is equivalent, on an annual basis, to
1.25% for the Annual Ratchet Death Benefit Option, or 1.40% for the 7%
Solution Death Benefit Option, of the assets in each Division. The charge is
deducted on each Valuation Date at the rate of .003446% or .003863%,
respectively, for each day in the Valuation Period.
ASSET BASED ADMINISTRATIVE CHARGE
We will deduct a daily charge from the assets in each Division, to compensate
us for a portion of the administrative expenses under the Contract. The daily
charge is at a rate of 0.000411% (equivalent to an annual rate of 0.15%) on
the assets in each Division.
TRUST EXPENSES
There are fees and charges deducted from each Series of the GCG Trust and the
ESS Trust. Please read the respective Trust prospectus for details.
____________________________________________________________________
CHOOSING YOUR ANNUITIZATION OPTIONS
ANNUITIZATION OF YOUR CONTRACT
If the Annuitant and Owner are living on the Annuity Commencement Date, we
will begin making payments to the Owner under an income plan. We will make
these payments under the Annuity Option chosen. You may change an Annuity Op-
tion by making a written request to us at least 30 days prior to the Annuity
Commencement Date of the Contract. The amount of the payments will be deter-
mined by applying your Accumulation Value adjusted for any applicable Market
Value Adjustment on the Annuity Commencement Date in accordance with The Annu-
ity Options section below, subject to our published rules at such time. See
When We Make Payments.
You may also elect an Annuity Option on surrender of the Contract for its Cash
Surrender Value or you may choose one or more Annuity Options for the payment
of death benefit proceeds while it is in effect and before the Annuity Com-
mencement Date. If, at the time of the Owner's death or the Annuitant's death
(if the Owner is not an individual), no option has been chosen for paying
death benefit proceeds, the Beneficiary may choose an option within 60 days.
In all events, payments of death benefit proceeds must comply with the distri-
bution requirements of applicable Federal tax law.
The minimum monthly annuity income payment that we will make is $20. We may
require that a single sum payment be made if the Accumulation Value is less
than $2,000 or if the calculated monthly annuity income payment is less than
$20.
For each option we will issue a separate written agreement putting the option
into effect. Before we pay any annuity benefits, we require the return of the
Contract. If your Contract has been lost, we will require that you complete
and return the applicable Contract form. Various factors will affect the level
of annuity benefits including the Annuity Option chosen, the applicable pay-
ment rate used and the investment results of the Divisions and interest cred-
ited to the Fixed Allocations in which the Accumulation Value has been invest-
ed.
Some annuity options may provide only for fixed payments. Fixed Annuity Pay-
ments are regular payments, the amount of which is fixed and guaranteed by us.
The amount of the payments will depend only on the form and duration of pay-
ments chosen, the age of the Annuitant or Beneficiary (and sex, where
appropriate), the total Accumulation Value applied to purchase the fixed op-
tion, and the applicable payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the Owner or Beneficia-
ry;
(2) The person named is not a natural person, such as a corporation; or
(3) Any income payment would be less than the minimum annuity income payment
allowed.
ANNUITY COMMENCEMENT DATE SELECTION
You select the Annuity Commencement Date. You may select any date following
the third Contract Anniversary but before the Contract Processing Date in the
month following the Annuitant's 90th birthday, or 10 years from the contract
date, if later. If, on the Annuity Commencement Date, a Surrender Charge
remains, the elected Annuity Option must include a period certain of at least
five years duration. If you do not select a date, the annuity commencement
date will be in the month following the Annuitant's 90th birthday, or 10
years from the contract date, if later. If
31
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<PAGE>
the Annuity Commencement Date occurs when the Annuitant is at an advanced age,
such as over age 85, it is possible that the Contract will not be considered an
annuity for Federal tax purposes. See Federal Tax Considerations. For a
Contract purchased in connection with a qualified plan, distribution must
commence not later than April 1st of the calendar year following the calendar
year in which you attain age 70 1/2. Consult your tax advisor.
FREQUENCY SELECTION
You choose the frequency of the Annuity Payments. They may be monthly, quar-
terly, semi-annually or annually. If we do not receive written notice from
you, the payments will be made monthly. There may be certain restrictions on
minimum payments that we will allow.
THE ANNUITIZATION OPTIONS
There are four options to choose from as shown below. Options 1 through 3 are
fixed and option 4 may be fixed or variable. For a fixed option, the Accumula-
tion Value in the Divisions is transferred to the general account.
OPTION 1. INCOME FOR A FIXED PERIOD
Payment is made in equal installments for a fixed number of years based on
the Accumulation Value as of the annuity commencement date. We guarantee that
each monthly payment will be at least the amount set forth in the Contract.
Guaranteed amounts for annual, semi-annual and quarterly payments are avail-
able upon request. Illustrations are available upon request. If the Cash Sur-
render Value or Accumulation Value is applied under this option, a 10% pen-
alty tax may apply to the taxable portion of each income payment until the
Owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE
Payment is made in equal monthly installments and guaranteed for at least a
period certain. The period certain can be 10 or 20 years. Other periods cer-
tain may be available on request. A refund certain may be chosen instead. Un-
der this arrangement, income is guaranteed until payments equal the amount
applied. If the person named lives beyond the guaranteed period, payments
continue until his or her death. We guarantee that each payment will be at
least the amount set forth in the Contract corresponding to the person's age
on his or her last birthday before the option's effective date. Amounts for
ages not shown in the Contract are available upon request.
OPTION 3. JOINT LIFE INCOME
This option is available if there are two persons named to receive payments.
At least one of the persons named must be either the Owner or Beneficiary of
the Contract. Monthly payments are guaranteed and are made as long as at
least one of the named persons is living. There is no minimum number of pay-
ments. Monthly payment amounts are available upon request.
OPTION 4. ANNUITY PLAN
An amount can be used to buy any single premium annuity we offer on the op-
tion's effective date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any amounts still
due as provided by the option agreement. The amounts still due are determined
as follows:
(1) For option 1, or any remaining guaranteed payments under option 2, pay-
ments will be continued. Under options 1 and 2, the discounted values of
the remaining guaranteed payments may be paid in a single sum. This means
we deduct the amount of the interest each remaining guaranteed payment
would have earned had it not been paid out early. The discount interest
rate is never less than 3% for option 1 and 3.50% for option 2 per year.
We will, however, base the discount interest rate on the interest rate
used to calculate the payments for options 1 and 2 if such payments were
not based on the tables in the Contract.
(2) For option 3, no amounts are payable after both named persons have died.
(3) For option 4, the annuity agreement will state the amount due, if any.
32
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____________________________________________________________________
OTHER CONTRACT PROVISIONS
IN CASE OF ERRORS IN APPLICATION INFORMATION
If an age or sex given in the application or enrollment form is misstated, the
amounts payable or benefits provided by the Contract shall be those that the
premium payment would have bought at the correct age or sex.
SENDING NOTICE TO US
Any written notices, inquiries or requests should be sent to our Customer
Service Center. Please include your name, your Contract number and, if you
are not the Annuitant, the name of the Annuitant.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified Contract as collateral security for a loan or
other obligation. This does not change the Ownership. However, your rights
and any Beneficiary's rights are subject to the terms of the assignment. See
Transfer of Annuity Contracts, and Assignments. An assignment may have Fed-
eral tax consequences. See Federal Tax Considerations.
You must give us satisfactory written notice at our Customer Service Center
in order to make or release an assignment. We are not responsible for the va-
lidity of any assignment.
NON-PARTICIPATING
The Contract does not participate in the divisible surplus of Golden Ameri-
can.
AUTHORITY TO MAKE AGREEMENTS
All agreements made by us must be signed by our president or a vice president
and by our secretary or an assistant secretary. No other person, including an
insurance agent or broker, can change any of the Contract's terms, make any
can change any of the Contract's terms, make any agreements binding on us or
extend the time for premium payments.
CONTRACT CHANGES -- APPLICABLE TAX LAW
We reserve the right to make changes in the Contract to the extent we deem it
necessary to continue to qualify the Contract as an annuity. Any such changes
will apply uniformly to all Contracts that are affected. You will be given ad-
vance written notice of such changes.
YOUR RIGHT TO CANCEL OR EXCHANGE YOUR CONTRACT
CANCELLING YOUR CONTRACT
You may cancel your Contract within your Free Look Period, which is ten days
after you receive your Contract. For purposes of administering our allocation
and administrative rules, we deem this period to expire 15 days after the
Contract is mailed to you. Some states may require a longer Free Look Period.
If you decide to cancel, you may mail or deliver the Contract to our Customer
Service Center. We will refund the Accumulation Value plus any charges we de-
ducted, and the Contract will be voided as of the date we receive the Con-
tract and your request. Some states require that we return the premium paid.
In these states, we require your premiums designated for investment in the
Divisions of Account B be allocated to the Specially Designated Division dur-
ing the Free Look Period. Premiums designated for the Fixed Account will be
allocated to a Fixed Allocation with the Guarantee Period you have chosen. If
you do not choose to exercise your right to cancel during the Free Look Peri-
od, then at the end of the Free Look Period your money will be invested in
the Divisions chosen by you, based on the index of investment experience next
computed for each Division. See Facts About the Contract, Measurement of In-
vestment Experience, Index of Experience and Unit Value.
EXCHANGING YOUR CONTRACT
For information regarding exchanges under Section 1035 of the Internal Reve-
nue Code of 1986, as amended, see Federal Tax Considerations.
OTHER CONTRACT CHANGES
You may change the Contract to another annuity plan subject to our rules at
the time of the change.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any surrender, ad-
ministration, and mortality and expense risk charges. We may also change the
minimum initial and additional premium requirements, or offer a reduced death
benefit. Group arrangements include those in which a trustee or an employer,
for example, purchases Contracts covering a group of individuals on a group
basis. Sponsored arrangements include those in which an employer allows us to
sell Contracts to its employees on an individual basis.
Our costs for sales, administration, and mortality generally vary with the
size and stability of the group among other factors. We take all these factors
into account when reducing charges. To qualify for reduced charges, a group or
sponsored arrangement must meet certain requirements, including our require-
ments for size and number of years in existence. Group or sponsored arrange-
ments that have been set up solely to buy Contracts or that
33
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have been in existence less than six months will not qualify for reduced
charges.
We will make these and any similar reductions according to our rules in effect
when an application or enrollment form for a Contract is approved. We may
change these rules from time to time. Any variation in the administrative
charge will reflect differences in costs or services and will not be unfairly
discriminatory.
SELLING THE CONTRACT
DSI is principal underwriter and distributor of the Contract as well as for
other Contracts issued through Account B and other separate accounts of Golden
American. We pay DSI for acting as principal underwriter under a distribution
agreement. The offering of the Contract will be continuous.
DSI has entered into and will continue to enter into sales agreements with
broker-dealers to solicit for the sale of the Contract through registered rep-
resentatives who are licensed to sell securities and variable insurance prod-
ucts including variable annuities. These agreements provide that applications
for Contracts may be solicited by registered representatives of the broker-
dealers appointed by Golden American to sell its variable life insurance and
variable annuities. These broker-dealers are registered with the SEC and are
members of the National Association of Securities Dealers, Inc. ("NASD"). The
registered representatives are authorized under applicable state regulations
to sell variable life insurance and variable annuities. The writing agent will
receive commissions of up to 6.5% of any initial or additional premium pay-
ments made.
____________________________________________________________________
REGULATORY INFORMATION
VOTING RIGHTS
ACCOUNT B. We will vote the shares of a Trust owned by Account B
according to your instructions. However, if the Investment Company
Act of 1940 or any related regulations should change, or if
interpretations of it or related regulations should change, and we
decide that we are permitted to vote the shares of a Trust in our
own right, we may decide to do so.
We determine the number of shares that you have in a Division by
dividing the Contract's Accumulation Value in that Division by the
net asset value of one share of the portfolio in which a Division
invests. Fractional votes will be counted. We will determine the
number of shares you can instruct us to vote 180 days or less before
a Trust's meeting. We will ask you for voting instructions by mail
at least 10 days before the meeting.
If we do not get your instructions in time, we will vote the shares
in the same proportion as the instructions received from all
Contracts in that Division. We will also vote shares we hold in
Account B which are not attributable to Owners in the same
proportion.
STATE REGULATION
We are regulated and supervised by the Insurance Department of the
State of Delaware, which periodically examines our financial
condition and operations. We are also subject to the insurance laws
and regulations of all jurisdictions where we do business. The
variable Contract offered by this prospectus has been approved by
the Insurance Department of the State of Delaware and by the
Insurance Departments of other jurisdictions. We are required to
submit annual statements of our operations, including financial
statements, to the Insurance Departments of the various
jurisdictions in which we do business to determine solvency and
compliance with state insurance laws and regulations.
LEGAL PROCEEDINGS
Golden American, as an insurance company, is ordinarily involved in
litigation. We do not believe that any current litigation is
material and we do not expect to incur significant losses from such
actions.
LEGAL MATTERS
The legal validity of the Contract described in this prospectus has
been passed on by Myles R. Tashman, Esquire, Executive Vice
President, General Counsel and Secretary of Golden American.
Sutherland, Asbill & Brennan LLP of Washington, D.C. has provided
advice on certain matters relating to Federal securities laws.
EXPERTS
The audited financial statements of Golden American Life Insurance
Company, Separate Account B and The Managed Global Account of
Separate Account D appearing or incorporated by reference in the
Statement of Additional Information and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set
forth in
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<PAGE>
their reports thereon appearing or incorporated by
reference in the Statement of Additional Information and in the
Registration Statement and are included or incorporated by reference
in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
____________________________________________________________________
MORE INFORMATION ABOUT GOLDEN AMERICAN LIFE INSURANCE COMPANY
SELECTED FINANCIAL DATA
The following selected financial data prepared in accordance with
generally accepted accounting principles ("GAAP") for Golden
American should be read in conjunction with the financial statements
and notes thereto included in this Prospectus.
On August 13, 1996, Equitable of Iowa acquired all the outstanding
capital stock of BT Variable, Inc., the parent of Golden American.
For GAAP financial statement purposes, the change in control of
Golden American through the acquisition was accounted for as a
purchase acquisition. As a result, the GAAP financial data presented
below for periods subsequent to August 13, 1996, are presented on
the Post-Acquisition new basis of accounting while the financial
statement data prior to August 14, 1996 is presented on a Pre-
Acquisition historical basis of accounting.
<TABLE>
<CAPTION>
SELECTED GAAP BASIS FINANCIAL DATA
(IN THOUSANDS)
----------------------------------------------------------------------------------------
POST-ACQUISITION | PRE-ACQUISITION
------------------------------- | --------------------------------------------------------
FOR THE 9 FOR THE PERIOD | FOR THE PERIOD
MONTHS ENDED AUGUST 14, 1996 | JANUARY 1, 1996
SEPTEMBER 30, THROUGH | THROUGH FOR THE FISCAL YEARS ENDED DECEMBER 31
1997 DECEMBER 31, | AUGUST 13, ----------------------------------------
(UNAUDITED) 1996 | 1996 1995 1994 1993 1992(a)
--------------- --------------- | --------------- ---------- ---------- -------- --------
<S> <C> <C> | <C> <C> <C> <C> <C>
Annuity and Interest |
Sensitive Life Product |
Charges................ $ 15,937 $ 8,768 | $12,259 $ 18,388 $ 17,519 $ 10,192 $ 694
Net Income before |
Federal Income Tax..... $ 343 $ 570 | $ 1,736 $ 3,364 $ 2,222 $ (1,793) $ (508)
Net Income (Loss)....... $ 342 $ 350 | $ 3,199 $ 3,364 $ 2,222 $ (1,793) $ (508)
Total Assets............ $2,194,532 $1,677,899 | N/A $1,203,057 $1,044,760 $886,155 $320,539
Total Liabilities....... $2,050,911 $1,537,415 | N/A $1,104,932 $ 955,254 $857,558 $306,197
Total Stockholder's |
Equity................. $ 143,621 $ 140,484 | N/A $ 98,125 $ 89,506 $ 28,597 $ 14,342
</TABLE>
________________
(a)Results for 1992 are for the period September 30, 1992 (date of
acquisition) to December 31, 1992.
The following selected financial data was prepared on the basis of
statutory accounting practices ("SAP"), which have been prescribed
by the Department of Insurance of the State of Delaware and the
National Association of Insurance Commissioners. These practices
differ in certain respects from GAAP. The selected financial data
should be read in conjunction with the financial statements and
notes thereto included in this Prospectus, which describe the
differences between SAP and GAAP. See the Company's Annual Report
for more detail.
<TABLE>
<CAPTION>
SELECTED STATUTORY FINANCIAL DATA
(IN THOUSANDS)
----------------
FOR THE 9 MONTHS ------------------------------------------------------
ENDED SEPTEMBER 30, FOR THE FISCAL YEARS ENDED DECEMBER 31
1997 ------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
---------------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Premiums & Annuity
Considerations......... $ 387,606 $ 442,852 $ 124,687 $294,550 $505,465 $191,039
Net Income (Loss) before
Federal Income Tax..... $ 314 $ (9,137) $ (4,117) $(11,260) $ (9,417) $ (4,225)
Net Income (Loss)....... $ 510 $ (9,188) $ (4,117) $(11,260) $ (9,401) $ (3,986)
Total Assets............ $2,036,172 $1,544,931 $1,124,840 $988,180 $834,123 $302,200
Total Liabilities....... $1,956,544 $1,464,502 $1,058,483 $921,888 $815,301 $289,995
Total Capital &
Surplus................ $ 79,628 $ 80,430 $ 66,357 $ 66,292 $ 18,822 $ 12,205
</TABLE>
35
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's
condensed consolidated results of operations. In addition, some
analysis and information regarding financial condition and liquidity
and capital resources has also been provided. This analysis should
be read in conjunction with the condensed consolidated financial
statements and related notes which appear elsewhere in this report.
The Company reports financial results on a consolidated basis. The
consolidated condensed financial statements include the accounts of
Golden American Life Insurance Company ("Golden American") and its
subsidiary, First Golden American Life Insurance Company of New York
("First Golden," and collectively with Golden American the
"Company").
RESULTS OF OPERATIONS
CHANGE IN CONTROL. On August 13, 1996, Equitable of Iowa Companies
("Equitable") acquired all of the outstanding capital stock of BT
Variable, Inc. ("BT Variable") and its wholly owned subsidiaries
Golden American and Directed Services Inc. ("DSI") for $144 million.
The purchase price consisted of $93 million in cash paid to
Whitewood (parent of BT Variable) and $51 million in cash paid to
Bankers Trust (parent of Whitewood) to retire certain debt owed by
BT Variable to Bankers Trust. Subsequent to the acquisition, the BT
Variable, Inc. name was changed to EIC Variable, Inc. On April 30,
1997, EIC Variable, Inc. was liquidated and its investments in Golden
American and DSI were transferred to Equitable while the remainder
of its net assets were contributed to Golden American.
For financial statement purposes, the change in control of Golden
American through the acquisition of BT Variable was accounted for as
a purchase acquisition effective August 14, 1996. This acquisition
resulted in a new basis of accounting reflecting estimated fair
values of assets and liabilities at that date. As a result, the
Company's financial statements for periods subsequent to August 13,
1996, are presented on the Post-Acquisition new basis of accounting,
while the financial statements prior to August 13, 1996 are
presented on the Pre-Acquisition historical cost basis of
accounting.
The purchase price was allocated to the three companies purchased -
BT Variable, DSI, and Golden American. Goodwill of $41.1 million
was established for the excess of the acquisition cost over the fair
value of the assets and liabilities and pushed down to Golden
American. The acquisition cost was preliminary with respect to the
final settlement of taxes with Bankers Trust and estimated expenses.
At June 30, 1997, goodwill was increased by $1.8 million to adjust
the value of a receivable existing at the acquisition date. The
allocation of the purchase price to Golden American was
approximately $139.9 million. Goodwill resulting from the
acquisition is being amortized over 25 years on a straight line
basis. The carrying value will be reviewed periodically for any
indication of impairment in value.
BUSINESS ENVIRONMENT. The current business and regulatory
environment remains challenging for the insurance industry.
Increasing competition from traditional insurance carriers as well
as banks and mutual fund companies offer consumers many choices.
However, overall demand for variable products remains strong for
several reasons including: strong stock market performance over the
last 3 years; relatively low interest rates; an aging U.S.
population that is increasingly concerned about retirement and
estate planning, as well as maintaining their standard of living in
retirement; and potential reductions in government and employer-
provided benefits at retirement as well as lower public confidence
in the adequacy of those benefits.
In 1995, Golden American experienced a significant decline in sales,
due to a number of factors. First, some portfolio managers performed
poorly in 1993 and 1994. Second, as more products came to market the
cost structure of the DVA product became less competitive. Third,
because no fixed interest rate options were available in 1994 during
a time of rising interest rates and flat or declining equity
markets, market share was lost. Consequently, the Company took steps
to respond to these business challenges. Several portfolio managers
were replaced and new funds were added to give contract holders more
options. In October of 1995, the Company introduced the Combination
Deferred Variable and Fixed Annuity (GoldenSelect DVA PLUS) and the
GoldenSelect Genesis I and Genesis Flex life insurance products.
In October of 1997, Golden American introduced three new variable
annuity products which are expected to contribute significantly to
sales.
36
<PAGE>
<PAGE>
THE FIRST NINE MONTHS OF 1997 COMPARED TO THE SAME PERIOD OF 1996.
PREMIUMS
<TABLE>
<CAPTION>
POST-ACQUISITION COMBINED PRE-ACQUISITION
------------------------------------------------------------
|For the Period| Nine Months | For the Period
Nine Months | August 14, | ended | January 1,
ended | 1996 through |September 30,| 1996 through
September 30, |September 30, | 1996 | August 13,
1997 | 1996 | Combined | 1996
- ----------------------------------|--------------|-------------|----------------
| (Dollars in thousands) |
<S> <C> | <C> | <C> | <C>
Variable annuity | | |
premiums: | | |
Separate account $149,726 | $13,911 | $140,930 | $127,019
Fixed account 228,524 | 16,075 | 147,428 | 131,353
--------------|--------------|-------------|----------------
Total variable annuity | | |
premiums 378,250 | 29,986 | 288,358 | 258,372
Variable life | | |
premiums 13,639 | 1,451 | 11,957 | 10,506
--------------|--------------|-------------|----------------
Total premiums $391,889 | $31,437 | $300,315 | $268,878
============================================================
</TABLE>
Variable annuity separate account and variable life premiums
increased 6.2% and 14.1%, respectively, during the first nine months
of 1997. The fixed account portion of the Company's variable
annuity premiums increased 55.0% during the first nine months of
1997 due to the Company's marketing emphasis on fixed rates during
the second and third quarters of 1997. Premiums, net of
reinsurance, for variable products from six significant sellers
totaled $299.2 million or 76% of total premiums for the first nine
months of 1997.
REVENUES
<TABLE>
<CAPTION>
POST-ACQUISITION COMBINED PRE-ACQUISITION
--------------------------------------------------------------
|For the Period | Nine Months | For the Period
Nine Months | August 14, | ended | January 1,
ended | 1996 through |September 30, | 1996 through
September 30, | September 30, | 1996 | August 13,
1997 | 1996 | Combined | 1996
- -------------------------------|---------------|--------------|----------------
| (Dollars in thousands) |
<S> <C> | <C> | <C> | <C>
Annuity and | | |
interest sensi- | | |
tive life | | |
product charges $15,937 | $2,397 | $14,656 | $12,259
Management fee | | |
revenue 2,014 | 280 | 1,670 | 1,390
Net investment | | |
income 18,955 | 1,656 | 6,646 | 4,990
Realized gains | | |
(losses) on | | |
investments 58 | -- | (420)| (420)
Other income 427 | 143 | 213 | 70
--------------|---------------|--------------|----------------
$37,391 | $4,476 | $22,765 | $18,289
==============================================================
</TABLE>
Total revenues increased 64.3% in the first nine months of 1997.
Annuity and interest sensitive life product charges increased 8.7%
in the first nine months of 1997 due to additional fees earned from
the increasing block of business under management in the Separate
Accounts and an increase in the collection of surrender charges.
Golden American provides certain managerial and supervisory services
to DSI. This fee, calculated as a percentage of average assets in
the variable separate accounts, was $2.0 million for the first nine
months of 1997 ($0.3 million and $1.4 million for the periods August 14,
1996 through September 30, 1996 and January 1, 1996 through August
13, 1996, respectively).
Net investment income increased 185.2% in the first nine months of
1997 due to the increase in invested assets. The company had
$58,000 of realized gains on the sale of investments in the first
nine months of 1997, compared a loss of $0.4 million in the same period
of 1996.
Other income increased 100.8% in the first nine months of 1997
primarily as a result of increased income from a modified
coinsurance agreement with an unaffiliated reinsurer.
EXPENSES
Total insurance benefits and expenses increased $14.6 million, or
70.9%, to $35.2 million in the first nine months of 1997. Interest
credited to account balances increased $10.9 million, or 181.7% to
$16.8 million
37
<PAGE>
<PAGE>
in the first nine months of 1997 as a result of higher
account balances associated with the Company's fixed account option
within its variable products. Benefit claims incurred in excess of
account balances decreased $0.8 million, or 86.8%, to $0.1 million in the
first nine months of 1997.
Commissions increased $4.7 million or 24.9%, to $23.3 million, in
the first nine months of 1997. Insurance taxes increased $0.3 million or
22.3%, to $1.7 million, in the first nine months of 1997. Increases
and decreases in commissions and insurance taxes are generally
related to changes in the level of variable product sales. Insurance
taxes are impacted by several other factors as well as the level of
variable product sales. These factors include an increase in FICA
taxes primarily due to bonuses and an increase in state licenses and
fees. Most costs incurred as the result of new sales have been
deferred, thus having very little impact on earnings.
General expenses increased $0.6 million or 5.6%, to $11.6 million, in
the first nine months of 1997. The Company uses a network of
wholesalers to distribute its products and the salaries of these
wholesalers are included in general expenses. The portion of these
salaries and related expenses which vary with sales production
levels are deferred, thus having little impact on earnings.
Management expects general expenses to continue to increase in 1997
as a result of the emphasis on expanding the salaried wholesaler
distribution network and certain expenses associated with the merger
occurring on October 24, 1997.
The Company's deferred policy acquisition costs ("DPAC"), previous
balance of present value of in force acquired ("PVIF") and unearned
revenue reserve were eliminated as of the purchase date, and an
asset of $85.8 million representing the PVIF was established for all
policies in force at the acquisition date. The amortization of PVIF
and DPAC increased $1.4 million, or 31.7%, in the first nine months
of 1997. During the second quarter of 1997, PVIF was unlocked by
$2.3 million to reflect narrower current spreads than the gross
profit model assumed. Based on current conditions and assumptions
as to the impact of future events on acquired policies in force,
amortization of PVIF is expected to be approximately $2.3 million
for the remainder of 1997, $10.1 million in 1998, $9.6 million in
1999, $8.3 million in 2000, $7.2 million in 2001 and $6.1 million in
2002. Actual amortization may vary based upon changes in assumptions
and experience. The elimination of the unearned revenue reserve,
related to in force acquired at the acquisition date, will result in
lower annuity and interest sensitive life product charges compared
to pre-acquisition levels on the in force acquired.
Amortization of goodwill during the first nine months of 1997
totaled $1.3 million. Goodwill resulting from the acquisition is
being amortized on a straight-line basis over 25 years and is
expected to approximate $1.6 million annually. The amount of goodwill
and corresponding amortization will change as a result of the
merger which occurred on October 24, 1997.
Interest expense on the surplus note issued in December 1996, was
$1.5 million, in the first nine months of 1997. The Company also
paid $0.3 million in the first nine months of 1997 to Equitable for
interest on the line of credit.
INCOME
Net income for the first nine months of 1997 was $0.3 million, a
decrease of $3.1 million, or 90.2%, from the same period of 1996.
38
<PAGE>
<PAGE>
1996 COMPARED TO 1995.
The following analysis combines the post-acquisition and pre-
acquisition activity for 1996 in order to compare the results to
1995. Such a comparison does not recognize the impact of the
purchase accounting and goodwill amortization except for the period
after August 13, 1996.
PREMIUMS
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | ----------------------------
FOR THE PERIOD | FOR THE YEAR |
AUGUST 14, 1996 | ENDED | FOR THE PERIOD FOR THE YEAR
THROUGH | DECEMBER 31, | JANUARY 1,1996 ENDED
DECEMBER 31, | 1996 | THROUGH DECEMBER 31,
1996 | COMBINED | AUGUST 13, 1996 1995
--------------- | ------------ | --------------- ------------
| (DOLLARS IN | THOUSANDS)
<S> <C> | <C> | <C> <C>
Variable annuity | |
premiums............... $169,258 | $427,630 | $258,372 $110,587
Variable life premiums.. 3,619 | 14,125 | 10,506 5,114
-------- | -------- | -------- --------
Total premiums......... $172,877 | $441,755 | $268,878 $115,701
======== | ======== | ======== ========
</TABLE>
Variable annuity premiums increased 286.4%, or $317.0 million, in
1996, and variable life premiums increased 176.2%, or $9.0 million,
in 1996. Strong stock market returns, a relatively low interest rate
environment and flat yield curve have made returns provided by
variable annuities and mutual funds more attractive than fixed rate
products such as certificates of deposits and fixed annuities.
During 1995, the fund offerings underlying Golden American's
variable products were improved and a fixed account option was
added. These changes and the current environment have contributed to
the significant growth in the Company's variable annuity premiums
from 1995. Premiums, net of reinsurance, for variable products from
two significant sellers for the year ended December 31, 1996,
totaled $298.0 million, or 67% of premiums.
REVENUES
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | ----------------------------
FOR THE PERIOD | FOR THE YEAR |
AUGUST 14, 1996 | ENDED | FOR THE PERIOD FOR THE YEAR
THROUGH | DECEMBER 31, | JANUARY 1, 1996 ENDED
DECEMBER 31, | 1996 | THROUGH DECEMBER 31,
1996 | COMBINED | AUGUST 13, 1996 1995
--------------- | ------------ | --------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Annuity and interest | |
sensitive life product | |
charges................ $ 8,768 | $21,027 | $12,259 $18,388
Management fee revenue.. 877 | 2,267 | 1,390 987
Net investment income... 5,795 | 10,785 | 4,990 2,818
Realized gains (losses) | |
on investments......... 42 | (378) | (420) 297
Other income............ 486 | 556 | 70 63
------- | ------- | ------- -------
$15,968 | $34,257 | $18,289 $22,553
======= | ======= | ======= =======
</TABLE>
Total revenues increased 51.9%, or $11.7 million, to $34.3 million
in 1996. Annuity and interest sensitive life product charges
increased 14.4%, or $2.6 million in 1996. The increase is due to
additional fees earned from the increasing block of business under
management in the Separate Accounts and an increase in the
collection of surrender charges partially offset by a decrease in
the revenue recognition of net distribution fees.
Golden American provides certain managerial and supervisory services
to DSI. This fee, calculated as a percentage of average assets in
the variable separate accounts, was $2.3 million for 1996 and $1.0
million for 1995.
Net investment income increased 282.7%, or $8.0 million, to $10.8
million in 1996 from $2.8 million in 1995. This increase resulted
from growth in invested assets. During 1996, the Company had
realized losses on the disposal of investments, which were the
result of voluntary sales, of $0.4 million compared to realized
gains of $0.3 million in 1995.
39
<PAGE>
<PAGE>
EXPENSES
<TABLE>
<CAPTION>
POST- |
ACQUISITION | COMBINED | PRE-ACQUISITION
--------------- | ------------ | -----------------------------
FOR THE PERIOD | FOR THE YEAR | FOR THE PERIOD
AUGUST 14, 1996 | ENDED | JANUARY 1, 1996 FOR THE YEAR
THROUGH | DECEMBER 31, | THROUGH ENDED
DECEMBER 31, | 1996 | AUGUST 13, DECEMBER 31,
1996 | COMBINED | 1996 1995
--------------- | ------------ | --------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Insurance benefits and expenses: | |
Annuity and interest sensitive | |
life benefits: | |
Interest credited to account balances.... $ 5,741 | $ 10,096 | $ 4,355 $ 1,322
Benefit claims incurred in excess of | |
account balances....................... 1,262 | 2,177 | 915 1,824
Underwriting, acquisition, and insurance | |
expenses: | |
Commissions.............................. 9,866 | 26,415 | 16,549 7,983
General expenses......................... 5,906 | 15,328 | 9,422 12,650
Insurance taxes.......................... 672 | 1,897 | 1,225 952
Policy acquisition costs deferred........ (11,712) | (31,012) | (19,300) (9,804)
Amortization: | |
Deferred policy acquisition costs....... 244 | 2,680 | 2,436 2,710
Present value of in force acquired...... 2,745 | 3,696 | 951 1,552
Goodwill................................ 589 | 589 | -- --
-------- | -------- | -------- -------
$ 15,313 | $ 31,866 | $ 16,553 $19,189
======== | ======== | ======== =======
</TABLE>
Total insurance benefits and expenses increased 66.1%, or $12.7
million, in 1996 from $19.2 million in 1995. Interest credited to
account balances increased 663.6%, or $8.8 million, in 1996 as a
result of higher account balances associated with the Company's
fixed account option within its variable products. Benefit claims
incurred in excess of account balances increased 19.4%, or $0.4
million, in 1996 from $1.8 million in 1995.
Commissions increased 230.9%, or $18.4 million, in 1996 from $8.0
million in 1995. Insurance taxes increased 99.3%, or $0.9 million,
in 1996 from $1.0 million in 1995. Increases and decreases in
commissions and insurance taxes are generally related to changes in
the level of variable product sales. Most costs incurred as the
result of new sales have been deferred, thus having very little
impact on earnings.
General expenses increased 21.2%, or $2.7 million, in 1996 from
$12.7 million in 1995. The Company uses a network of wholesalers to
distribute its products and the salaries of these wholesalers are
included in general expenses. The portion of these salaries and
related expenses which vary with sales production levels are
deferred, thus having little impact on earnings. Management expects
general expenses to continue to increase in 1997 as a result of the
emphasis on expanding the salaried wholesaler distribution network.
The Company's deferred policy acquisition costs ("DPAC"), previous
balance of present value of in force acquired ("PVIF") and unearned
revenue reserve, as of the purchase date, were eliminated and an
asset of $85.8 million representing the PVIF was established for all
policies in force at the acquisition date. The amortization of PVIF
and DPAC increased $2.1 million, or 49.6%, in 1996. Based on current
conditions and assumptions as to the impact of future events on
acquired policies in force, amortization of PVIF is expected to be
approximately $9.7 million in 1997, $10.1 million in 1998, $9.2
million in 1999, $7.9 million in 2000 and $6.8 million in 2001. The
elimination of the unearned revenue reserve, related to in force
acquired at the acquisition date, will result in lower annuity and
interest sensitive life product charges compared to 1995 levels.
Amortization of goodwill during the period from the acquisition date
to December 31, 1996 totaled $0.6 million. Goodwill resulting from
the acquisition is being amortized on a straight-line basis over 25
years and is expected to total $1.6 million annually.
INCOME. Net income on a combined basis for 1996 was $3.5 million,
an increase of $0.2 million, or 5.5%, from 1995.
1995 COMPARED TO 1994.
Net income for 1995 was $3.4 million, an increase of $1.1 million or
51% from 1994.
Variable life and annuity product fees and policy charges were $18.4
million in 1995, an increase of $0.9 million or 5% from 1994. This
increase was due to an additional $0.9 million in fees
40
<PAGE>
<PAGE>
earned from
the increasing block of business under management in the separate
accounts, an increase of $1.5 million in the collection of surrender
charges, and a decrease of $1.5 million in the revenue recognition
of net distribution fees.
Net investment income was $2.8 million for 1995, an increase of $2.3
million or 403% over the comparable 1994 period. Approximately $1.5
million of the increase was due to the additional investment income
earned on invested assets held to back the fixed interest divisions
that were introduced in 1995. The balance of the increase in
investment income was attributable to an increase in the investment
income on surplus.
In 1995, the service agreement between DSI and Golden American was
amended to provide for a management fee from DSI to Golden American
for certain managerial and supervisory services provided by Golden
American. This fee, calculated as a percentage of average assets in
the variable separate accounts, was $1.0 million for 1995.
Policy benefits were $3.2 million for 1995, an increase of $3.1
million from 1994. In 1995, benefit expenses increased $1.3 million
as a result of interest credited to policyholders related to the
fixed interest divisions introduced in 1995. Additionally, death
benefit costs net of reinsurance increased by $0.3 million in 1995 as
compared to 1994. Additionally, 1994 policy benefits reflected a
$1.5 million decrease in mortality reserves.
Commissions and overrides were $7.7 million in 1995, a decrease of
$9.1 million or 54% from 1994. The decrease in commissions resulted
from the decrease in new business premium receipts which went from
$310.7 million in 1994 to $130.5 million in 1995, a decrease of 55%.
Employee related expenses and general administrative and operating
expenses were a combined $13.7 million for 1995, an increase of $0.3
million or 2.5% from 1994.
Interest expense was $0 for 1995 as compared to $2.0 million in
1994. The elimination of interest expense in 1995 resulted from the
retirement of the Company's debt in December 1994 with the proceeds
from the issuance of preferred stock. In 1995, the Company paid
dividends on preferred stock of $3.4 million. There were no
preferred stock dividends in 1994.
Amortization of intangible assets, deferred policy acquisition costs
and unamortized cost assigned to insurance contracts in force, was
$4.3 million for 1995, a decrease of $2.5 million or 37% from the
prior year. The intangible assets are being amortized over the lives
of the policies in relation to the present value of estimated future
gross profits. The relatively strong performance of the funds in
1995 has slowed the amortization in 1995 as compared to 1994.
Additionally, amortization was increased in 1994 due to the decrease
in mortality reserves during 1994.
FINANCIAL CONDITION
INVESTMENTS
The financial statement carrying value of the Company's total
investment portfolio grew 46.0% in the first nine months of 1997 and
381.9% in 1996. The amortized cost basis of the Company's total
investment portfolio grew 44.8% and 388.3% during the same respective
periods. All of the Company's investments, other than mortgage loans,
are carried at fair value in the Company's financial statements. As
such, growth in the carrying value of the Company's investment
portfolio included changes in unrealized appreciation and depreciation
of fixed maturity and equity securities as well as growth in the cost
basis of these securities. Growth in the cost basis of the Company's
investment portfolio resulted from the investment of premiums from the
sale of the Company's fixed account option. The Company manages the
growth of its insurance operations in order to maintain adequate
capital ratios.
To support the fixed account option of the Company's variable
insurance products, cash flow was invested primarily in fixed
maturity securities and mortgage loans. At September 30, 1997, the
Company's investment portfolio at amortized cost was $455.8 million
with a yield of 7.1% and carrying value of $460.1 million. At
December 31, 1996, the Company's investment portfolio at amortized
cost was $314.7 million with a yield of 6.9% and carrying value of
$315.1 million.
FIXED MATURITY SECURITIES: At September 30, 1997, the company had
fixed maturities with an amortized cost of $384.8 million and an
estimated fair value of $389.2 million and at December 31, 1996,
an amortized cost of $275.2 million and a market value of $275.6
million. At September 30, 1997, the ratings assigned by
Standard & Poor's Corporation ("Standard & Poor's") to the
individual securities in the Company's fixed maturities portfolio
(at amortized cost) include investment grade securities comprising
U.S. governments, agencies and AAA to BBB- corporates ($340.9
million or 88.6%), and below investment grade securities BB+ to BB-
($41.1 million or 10.7%). Securities not rated by
41
<PAGE>
<PAGE>
Standard & Poor's
had an NAIC rating of 1 or 3 ($2.8 million or 0.7%).
The Company classifies 100% of its securities as available for sale.
On September 30, 1997, fixed income securities with an amortized cost
of $384.8 million and an estimated fair value of $389.2 million were
designated as available for sale, and on December 31, 1996, fixed
income securities with an amortized cost of $275.2 million and an
estimated fair value of $275.6 million were designated as available
for sale. At September 30, 1997, net unrealized appreciation of fixed
maturity securities of $4.4 million was comprised of gross
appreciation of $4.6 million and gross depreciation of $0.2 million.
At December 31, 1997, net unrealized appreciation of fixed maturity
securities of $0.4 million was comprised of gross appreciation of
$1.2 million and gross depreciation of $0.8 million. Unrealized
holding gains on these securities, net of adjustments to deferred
policy acquisition costs, present value of in force acquired and
deferred income taxes, increased stockholder's equity by $2.0 million
and $0.3 million at September 30, 1997 and December 30, 1997,
respectively.
The Company began investing in below investment grade securities
during 1996. At September 30, 1997, the amortized cost value of the
Company's total investment in below investment grade securities was
$39.0 million, or 8.5%, of the Company's investment portfolio. The
Company intends to purchase additional below investment grade
securities, but it does not expect the percentage of its portfolio
invested in below investment grade securities to exceed 10% of its
investment portfolio. At September 30, 1997, the yield at amortized
cost on the Company's below investment grade portfolio was 8.7%
compared to 6.8% for the Company's investment grade corporate bond
portfolio. The Company estimates the fair value of its below
investment grade portfolio was $39.8 million, or 102.2% of amortized
cost value, at September 30, 1997.
Below investment grade securities have different characteristics
than investment grade corporate debt securities. Risk of loss upon
default by the borrower is significantly greater with respect to
below investment grade securities than with other corporate debt
securities. Below investment grade securities are generally
unsecured and are often subordinated to other creditors of the
issuer. Also, issuers of below investment grade securities usually
have higher levels of debt and are more sensitive to adverse
economic conditions, such as recession or increasing interest rates,
than are investment grade issuers. The Company attempts to reduce
the overall risk in its below investment grade portfolio, as in all
of its investments, through careful credit analysis, strict
investment policy guidelines, and diversification by company and by
industry.
The Company analyzes its investment portfolio, including below
investment grade securities, at least quarterly in order to
determine if its ability to realize its carrying value on any
investment has been impaired. For debt and equity securities, if
impairment in value is determined to be other than temporary (i.e.
if it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the security), the
cost basis of the impaired security is written down to fair value,
which becomes the security's new cost basis. The amount of the write-
down is included in earnings as a realized loss. Future events may
occur, or additional or updated information may be received, which
may necessitate future write-downs of securities in the Company's
portfolio. Significant write-downs in the carrying value of
investments could materially adversely affect the Company's net
income in future periods.
During the first nine months of 1997, fixed maturity securities
designated as available for sale with a combined amortized cost of
$23.8 million were called or repaid by their issuers. In total, net
pre-tax gains from sales, calls and repayments of fixed maturity
investments amounted to $58,000 in the first nine months of 1997.
At September 30, 1997, no fixed maturity securities were deemed to
have impairments in value that are other than temporary. The
Company's fixed maturity investment portfolio had a combined yield
at amortized cost of 7.1% at September 30, 1997.
EQUITY SECURITIES: At September 30, 1997, the Company owned
equity securities with a combined cost of $4.9 million and an
estimated fair value of $4.8 million. Gross unrealized depreciation
of equity securities totaled $0.1 million. Equity securities are
primarily comprised of the Company's investment in shares of the
mutual funds underlying the Company's registered separate accounts.
MORTGAGE LOANS: Mortgage loans represent 14.1% of the Company's
investment portfolio. Mortgages outstanding were $64.5 million at
September 30, 1997, with an estimated fair value of $66.5 million.
The Company's mortgage loan portfolio includes 39 loans with an
average size of $1.7 million and average seasoning of 1.2 years if
weighted by the number of loans, and .5 years if weighted by
mortgage loan carrying values. The Company's mortgage loans are
typically secured by occupied buildings in major metropolitan
locations and not speculative developments, and are diversified by
type of property and geographic location. At September 30, 1997, the
yield on the Company's mortgage loan portfolio was 7.8%.
At September 30, 1997, no mortgage loans were delinquent by 90 days
or more. The Company does not expect to incur material losses from
its mortgage loan portfolio. The Company's loan investment strategy
is consistent with other life insurance subsidiaries of its ultimate
parent, Equitable. Equitable has experienced a historically low
default rate in its mortgage loan portfolio and has been able to
recover 100.8% of the principal amount of problem mortgages resolved
in the last three years.
42
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<PAGE>
At September 30, 1997, the Company had no investments in default.
The Company estimates its total investment portfolio, excluding
policy loans, had a fair value approximately equal to 101.4% of its
amortized cost value for accounting purposes at September 30, 1997.
OTHER ASSETS
Accrued investment income increased $2.8 million during the first
nine months of 1997 due to an increase in the overall size of the
portfolio resulting from the investment of premiums allocated to the
fixed account option of the Company's variable products.
The Company's DPAC and previous balance of PVIF were eliminated as
of the purchase date, and an asset representing the PVIF was
established for all policies in force at the acquisition date. PVIF
is amortized into income in proportion to the expected gross profits
of the in force acquired in a manner similar to DPAC amortization.
Any expenses which vary with the sales of the Company's products are
deferred and amortized. At September 30, 1997, the Company had DPAC
and PVIF balances of $34.6 million and $78.2 million, respectively.
Goodwill totaling $41.1 million, representing the excess of the
acquisition cost over the fair value of net assets acquired, was
established at the acquisition date. At June 30, 1997, goodwill was
increased by $1.8 million to adjust the value of a receivable
existing at the acquisition date. Amortization of goodwill through
September 30, 1997, was $1.3 million.
At September 30, 1997, the Company had $1.5 billion of separate
account assets compared to $1.2 billion at December 31, 1996. The
increase in separate account assets is due to growth in sales of the
Company's variable annuity and variable life separate account
products.
At September 30, 1997, the Company had total assets of $2.2 billion,
a 30.8% increase from December 31, 1996.
LIABILITIES
In conjunction with the volume of variable insurance sales, the
Company's total liabilities increased $513.5 million, or 33.4%,
during the first nine months of 1997 and totaled $2.1 billion at
September 30, 1997. Future policy benefits for annuity and interest
sensitive life products increased $155.2 million, or 54.4%, to
$440.4 million reflecting premium growth in the Company's fixed
account option of its variable products. Premium growth, net of
redemptions and market appreciation also accounted for the $332.6
million, or 27.6%, increase in separate account liabilities to $1.5
billion at September 30, 1997.
On December 17, 1996, Golden American issued a $25 million, 8.25%
surplus note to Equitable. The note matures on December 17, 2026.
During the nine months ended September 30, 1997, Golden American
made interest payments totaling $1.5 million. On December 17, 1996,
Golden American contributed the $25 million to First Golden,
acquiring 200,000 shares of common stock (100% of shares
outstanding) of First Golden.
Golden American maintained a line of credit agreement with Equitable
to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Under the current agreement, which became
effective December 1, 1996 and expired on December 31, 1997, Golden
American could borrow up to $25 million. Interest on any borrowings is
charged at the rate of Equitable's monthly average aggregate cost of
short-term funds plus 1.00%. The Company incurred interest expense
of $0.3 million during the first nine months of 1997 under this
agreement. At September 30, 1997, $17.0 million was outstanding
under this agreement. As of the date of this prospectus, the
Company anticipates funding its short term capital needs for 1998
and beyond through a credit facility with an ING affiliate.
The effects of inflation and changing prices on the Company are not
material since insurance assets and liabilities are both primarily
monetary and remain in balance. An effect of inflation, which has
been low in recent years, is a decline in purchasing power when
monetary assets exceed monetary liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the Company are met by cash flow from
variable insurance premiums, investment income and maturities of
fixed maturity investments and mortgage loans. The Company
primarily uses funds for the payment of insurance benefits,
commissions, operating expenses and the purchase of new investments.
The Company's home office operations are currently housed in a
leased location in Wilmington, Delaware and a leased location in New
York, New York. The Company intends to spend $1.2 million on
capital needs during 1997.
The ability of Golden American to pay dividends to its parent is
restricted because prior approval of insurance regulatory
authorities is required for payment of dividends to the stockholder
which exceed an annual limitation. During the remainder of 1997,
Golden American could pay dividends to its parent of approximately
$2.2 million without prior approval of statutory authorities. The
Company has maintained adequate statutory capital and surplus and
has not used surplus relief or financial reinsurance, which have
come under scrutiny by many state insurance departments.
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<PAGE>
The NAIC's risk-based capital requirements require insurance
companies to calculate and report information under a risk-based
capital formula. These requirements are intended to allow insurance
regulators to identify inadequately capitalized insurance companies
based upon the type and mixture of risks inherent in the company's
operations. The formula includes components for asset risk,
liability risk, interest rate exposure and other factors. Golden
American and First Golden have complied with the NAIC's risk-based
capital reporting requirements. Amounts reported indicate that
Golden American and First Golden have total adjusted capital well
above all required capital levels.
SURPLUS NOTE: On December 17, 1996, Golden American issued a
surplus note in the amount of $25 million to Equitable. The note
matures on December 17, 2026 and accrues interest of 8.25% per annum
until paid. The note and accrued interest thereon shall be
subordinate to payments due to policyholders, claimant and
beneficiary claims, as well as debts owed to all other classes of
debtors of Golden American. Any payment of principal made shall be
subject to the prior approval of the Delaware Insurance
Commissioner. On December 17, 1996, Golden American contributed the
$25 million to First Golden acquiring 200,000 shares of common stock
(100% of shares outstanding) of First Golden.
LINE OF CREDIT: Golden American maintained a line of credit
agreement with Equitable to facilitate the handling of unusual
and/or unanticipated short-term cash requirements. The maximum
borrowing allowed under this facility is $25 million which expired on
December 31, 1997. At September 30, 1997, $17.0 million was
outstanding under this agreement. As of the date of this
prospectus, the Company anticipates funding its short term
capital needs for 1998 and beyond through a credit facility with
an ING affiliate.
YEAR 2000 PROJECT: The Company has studied its computer software
and hardware to determine its exposure to the change of the century
date issue (year 2000 date problem). Management believes the
systems are compliant and has engaged third-party consultants to
validate this assumption. The only system known to be affected by
this issue is a system maintained by an affiliate who will incur the
related costs.
MERGER: On October 23, 1997, Equitable of Iowa Companies
("Equitable") shareholders approved the Agreement and Plan of Merger
("Merger Agreement") dated as of July 7, 1997, among Equitable, PFHI
Holdings, Inc. ("PFHI"), and ING Groep N.V ("ING"). On October 24,
1997, PFHI, a Delaware corporation, acquired all of the outstanding
capital stock of Equitable pursuant to the Merger Agreement. PFHI
is a wholly owned subsidiary of ING, a global financial services
holding company based in The Netherlands. Equitable, an Iowa
corporation, in turn, owns all the outstanding capital stock of
Equitable Life Insurance Company of Iowa and Golden American Life
Insurance Company and their wholly owned subsidiaries. Equitable
also owns all the outstanding capital stock of Locust Street
Securities, Inc., Equitable Investment Services, Inc. ("EISI"), Directed
Services, Inc., Equitable of Iowa Companies Capital Trust, Equitable
of Iowa Companies Capital Trust II and Equitable of Iowa Securities
Network, Inc. In exchange for the outstanding capital stock of
Equitable, ING paid total consideration of approximately $2.1
billion in cash and stock plus the assumption of approximately $400
million in debt according to the Merger Agreement. As a result of
the merger, Equitable of Iowa Companies was merged into PFHI which
was simultaneously renamed Equitable of Iowa Companies, Inc.
Subsequent to the merger, during 1998, the remainder of EISI's
net assets will be liquidated and transferred to various Equitable
of Iowa Companies, Inc. subsidiaries and ING Investment Management,
LLC, another ING affiliate, and its investment management
responsibilities were assumed in part by DSI.
ACCOUNTING TREATMENT: The merger will be accounted for as a
purchase resulting in a new basis of accounting, reflecting
estimated fair values for assets and liabilities for Equitable and
its subsidiaries as of the date of the merger. The excess of the
total acquisition cost over the fair value of the net assets
acquired will be recorded as goodwill.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statement contained herein or in any other oral
or written statement by the Company or any of its officers,
directors or employees is qualified by the fact that actual results
of the Company may differ materially from such statement due to the
following important factors, among other risks and uncertainties
inherent in the Company's business:
1. Prevailing interest rate levels and stock market performance,
which may affect the ability of the Company to sell its
products, the market value of the Company's investments and the
lapse rate of the Company's policies, notwithstanding product
design features intended to enhance persistency of the Company's
products.
2. Changes in the federal income tax laws and regulations which may
affect the relative tax advantages of the Company's products.
3. Changes in the regulation of financial services, including bank
sales and underwriting of insurance products, which may affect
the competitive environment for the Company's products.
4. Increasing competition in the sale of the Company's products.
5. Other factors affecting the performance of the Company,
including, but not limited to, market conduct claims and other
litigation, insurance industry insolvencies, investment
performance of the underlying portfolios of the variable
products, variable product design and sales volume by
significant sellers of the Company's variable products.
SEGMENT INFORMATION. During the period since the acquisition by
Bankers Trust, September 30, 1992 to date of this Prospectus, Golden
American's operations consisted of one business segment, the sale of
annuity and life insurance products. Golden American and its
affiliate Directed Services, Inc. are party to in excess of 140
sales agreements with broker-dealers, two of whom, Locust Street
Securities, Inc. and Vestax Securities Coproration, are affiliates
of Golden American. Six broker-dealers, including Locust Street
Securities, Inc., sell a substantial portion of its business.
REINSURANCE. Golden American reinsures its mortality risk
associated with the Contract's guaranteed death benefit with one or
more appropriately licensed insurance companies. Golden American
also, effective June 1, 1994, entered into a reinsurance agreement
on a modified coinsurance basis with an affiliate of a broker-dealer
which distributes Golden American's products with respect to 25% of
the business produced by that broker-dealer.
RESERVES. In accordance with the life insurance laws and
regulations under which Golden American operates, it is obligated to
carry on its books, as liabilities, actuarially determined reserves
to meet its obligations on outstanding Contracts. Reserves, based on
valuation mortality tables in general use in the United States,
where applicable, are computed to equal amounts which, together with
44
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interest on such reserves computed annually at certain assumed
rates, make adequate provision according to presently accepted
actuarial standards of practice, for the anticipated cash flows
required by the contractual obligations and related expenses of
Golden American.
COMPETITION. Golden American is engaged in a business that is
highly competitive because of the large number of stock and mutual
life insurance companies and other entities marketing insurance
products comparable to those of Golden American. There are
approximately 2,350 stock, mutual and other types of insurers in the
life insurance business in the United States, a substantial number
of which are significantly larger than Golden American.
CERTAIN AGREEMENTS. Beginning in 1994 and continuing until August
13, 1996, Bankers Trust (Delaware), a subsidiary of Bankers Trust
New York Corporation ("BT New York Corporation"), and Golden
American became parties to a service agreement pursuant to which
Bankers Trust (Delaware) agreed to provide certain accounting,
actuarial, tax, underwriting, sales, management and other services
to Golden American. Expenses incurred by Bankers Trust (Delaware) in
relation to this service agreement were reimbursed by Golden
American on an allocated cost basis. Charges billed to Golden
American by Bankers Trust (Delaware) pursuant to the service
agreement for 1996 through its termination as of August 13, 1996,
1995 and 1994 were $0.5 million, $0.8 million and $0.3 million
respectively.
Prior to 1994, Golden American had arranged with EIC Variable to
perform services related to the development and administration of
its products. For the year 1993, fees earned by EIC Variable from
Golden American for these services aggregated $2.7 million. The
agreement was terminated as of January 1, 1994.
In addition, one or more affiliates of Equitable of Iowa provided to
Golden American certain personnel to perform management,
administrative and clerical services and the use of certain of its
facilities. Golden American was charged for such expenses and all
other general and administrative costs, first on the basis of direct
charges when identifiable, and second allocated based on the
estimated amount of time spent by an affiliate's employees on behalf
of Golden American. For the year 1993, EIC Variable allocated to
Golden American $1.5 million. The agreement was terminated on
January 1, 1994. During 1994, such expenses were allocated directly
by BT New York Corporation to Golden American and totaled $1.4
million for the year.
DISTRIBUTION AGREEMENT. Prior to 1994, Golden American had entered
into agreements with DSI to perform services related to the
management of its investments and the distribution of its products.
For the year 1993, Golden American incurred $0.3 million,
respectively, for such services. The agreement was terminated as of
January 1, 1994.
Under a distribution agreement, DSI acts as the principal
underwriter (as defined in the Securities Act of 1933 and the
Investment Company Act of 1940, as amended) of the variable
insurance products issued by Golden American which as of December
31, 1996, are sold primarily through two broker/dealer institutions.
For the first nine months of 1997 and the years 1996, 1995 and 1994,
commissions paid by Golden American to DSI aggregated $23.3 million,
$27.1 million, $8.4 million and $17.6 million, respectively.
Golden American provided to DSI certain of its personnel to perform
management, administrative and clerical services and the use of
certain facilities. Golden American charged DSI for such expenses
and all other general and administrative costs, first on the basis
of direct charges when identifiable, and the remainder allocated
based on the estimated amount of time spent by Golden American's
employees on behalf of DSI. In the opinion of management, this
method of cost allocation is reasonable. For the years ended
December 31, 1994 and 1993, expenses allocated to DSI were $2.0
million and $2.0 million, respectively, which were comprised of
allocated salary charges, premise and equipment charges, and other
expenses.
In 1995, the service agreement between DSI and Golden American was
amended to provide for a management fee from DSI to Golden American
for managerial and supervisory services provided by Golden American.
This fee, calculated as a percentage of average assets in the
variable separate accounts, was $2.0 million, $2.3 million and $1.0
million for the first nine months of 1997 and the years 1996 and 1995,
respectively.
EMPLOYEES. Golden American, as a result of its Service Agreements
with each of Bankers Trust (Delaware) and EIC Variable had very few
direct employees. Instead, various management services were provided
by Bankers Trust (Delaware), EIC Variable and Bankers Trust New York
Corporation, as described above under "Certain Agreements." The
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<PAGE>
cost
of these services were allocated to Golden American. Since August
14, 1996, Golden American has looked to Equitable of Iowa and its
affiliates for management services.
Certain officers of Golden American are also officers of EIC
Variable and DSI, and their salaries are allocated among the three
companies. Certain officers of Golden American are also officers of
Equitable of Iowa. See "Directors and Executive Officers."
PROPERTIES. Golden American's principal office is located at 1001
Jefferson Street, Suite 400, Wilmington, Delaware 19801, where all
of Golden American's records are maintained. This office space is
leased.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
POSITION(S) WITH THE
NAME (AGE) COMPANY
- ----------------------------- ---------------------------
<S> <C>
Terry L. Kendall (51) Director, President and
Chief Executive Officer
Myles R. Tashman (55) Director, Executive Vice
President, General
Counsel and Secretary
Susan B. Watson (31) Director, Senior Vice
President and Chief
Financial Officer
Beth B. Neppl (40) Director and Vice President
Paul E. Larson (45) Director
Paul R. Schlaack (51) Director and Chairman
Barnett Chernow (48) Executive Vice President
James R. McInnis (49) Executive Vice President
Dennis D. Hargens (55) Treasurer
David L. Jacobson (48) Senior Vice President
and Assistant Secretary
Stephen J. Preston (40) Senior Vice President
and Chief Actuary
William B. Lowe (33) Senior Vice President
Edward M. Syring, Jr. (59) Senior Vice President
</TABLE>
Each director is elected to serve for one year or until the next
annual meeting of shareholders or until his or her successor is
elected. Most directors are directors of insurance company
subsidiaries of Golden American's parent, Equitable of Iowa
Companies, Inc.
The principal positions of Golden American's directors and senior
executive officers for the past five years are listed below:
Mr. Terry L. Kendall became Director, President and Chief Executive
Officer of Golden American in September, 1993. From September 1993
through September 1996, he also served as Chairman of Golden
American. Since June, 1996, he has also served as President, Chief
Executive Officer and Chairman of First Golden American Life
Insurance Company of New York, Golden American's New York
subsidiary. From 1982 through June 1993, he was President and Chief
Executive Officer of United Pacific Life Insurance Company.
Mr. Myles R. Tashman joined Golden American in August 1994 as Senior
Vice President and was named Executive Vice President, General
Counsel and Secretary effective January 1, 1996. He was elected to
serve as a director of Golden American in January, 1998. From 1986
through 1993, he was Senior Vice President and General Counsel of
United Pacific Life Insurance Company.
Ms. Susan B. Watson joined Equitable Life Insurance Company of
Iowa ("Equitable Life") in 1991 as an Assistant Vice Presidant and
Corporate Actuary and is currently Senior Vice President and Chief
Financial Officer for Equitable of Iowa and its subsidiaries. She
was elected to serve as a director of Golden American in
January, 1998.
Ms. Beth B. Neppl joined Equitable of Iowa in 1987 and is currently
a Vice President. She was elected to serve as a director of Golden
American in August 1996.
Mr. Paul E. Larson joined Equitable of Iowa in 1977 and is currently
President of Equitable Life.
He was elected to serve as a director of Golden American in
August, 1996. He also served as Executive Vice President, CFO, and
Assistant Secretary of Golden American from December, 1996 through
December, 1997.
Mr. Paul R. Schlaack joined Equitable Investment Services, Inc. in
1984. He currently serves as the Chairman or as a director of many
of the Equitable of Iowa Companies. He was elected to serve as a
director of Golden American in August, 1996 and as Chairman of the
Board in January, 1998.
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<PAGE>
Mr. Barnett Chernow joined Golden American in October 1993 as
Executive Vice President. From 1977 through 1993, he held various
positions with Reliance Insurance Companies and was Senior Vice
President and Chief Financial Officer of United Pacific Life
Insurance Company from 1984 through 1993.
Mr. James R. McInnis joined Golden American in December, 1997 as
Executive Vice President. From 1982 through November, 1997,
he was with the Endeavor Group and was President upon
leaving.
Mr. Dennis D. Hargens was elected Treasurer of Golden American in
December, 1996. He joined Equitable Life Insurance Company of Iowa in
1961 and is currently Treasurer and was elected Treasurer of USG
Annuity & Life Company in 1996.
Mr. David L. Jacobson joined Golden American in November, 1993 as
Senior Vice President and Assistant Secretary. From April, 1974
through November, 1993, he held various positions with United Pacific
Life Insurance Company and was Vice President upon leaving.
Mr. Stephen J. Preston joined Golden American in December, 1993 as
Senior Vice President, Chief Actuary and Controller. He currently
serves as Senior Vice President and Chief Actuary. From September
1993 through November, 1993, he was Senior Vice President and Actuary
for Mutual of America Insurance Company. From July, 1987 through
August 1993, he held various positions with United Pacific Life
Insurance Company and was Vice President and Actuary upon leaving.
Mr. William B. Lowe joined Equitable Life as Vice President, Sales
& Marketing in January, 1994. He became a Senior Vice President, Sales
& Marketing, of Golden American in August, 1997. He is also President
of Equitable of Iowa Securities Network, Inc. Prior to joining
Equitable Life, he was an Associate Vice President of Lincoln Benefit
Life from July, 1990 through December, 1993.
Mr. Edward Syring, Jr. joined Golden American in February as a Senior
Vice President, Sales & Marketing. Prior to joining Golden American,
he was with Putnam Mutual Funds form April, 1991 through February, 1995.
COMPENSATION TABLES AND OTHER INFORMATION
The following sets forth information with respect to the Chief
Executive Officer of Golden American as well as the annual salary
and bonus for the next five highly compensated executive officers
for the fiscal year ended December 31, 1996. Certain executive
officers of Golden American are also officers of DSI. The salaries
of such individuals are allocated between Golden American and DSI.
Executive officers of Golden American are also officers of DSI. The
salaries of such individuals are allocated between Golden American
and DSI pursuant to an arrangement among these companies. Throughout
1995 and until August 13, 1996, Mr. Kendall served as a Managing
Director at Bankers Trust New York Corporation. Compensation amounts
for Mr. Kendall which are reflected throughout these tables prior to
August 14, 1996 were not charged to Golden American, but were
instead absorbed by Bankers Trust New York Corporation.
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EXECUTIVE COMPENSATION TABLE
The following table sets forth information with respect to the
annual salary and bonus for Golden American's Chief Executive
Officer and the next five most highly compensated executive officers
for the fiscal year ended December 31, 1996. (Information for 1997
is not yet available.)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------- ------------------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS (/1/) OPTIONS (/2/) OPTIONS COMPENSATION
- ------------------ ---- -------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall,...... 1996 $288,298 $400,000 $ 11,535(/4/)
President and Chief 1995 $250,000 $400,000 8,000 $ 6,706(/4/)
Executive Officer(/3/) 1994 $250,000 $200,000 $103,551 8,000
(September 1993 to
Present)
Barnett Chernow,....... 1996 $207,526 $150,000 $ 7,755(/4/)
Executive Vice 1995 $190,000 $165,000 $ 15,444(/4/)(/5/)
President 1994 $185,000 $ 35,000 500 $ 98,212(/5/)
Edward C. Wilson,...... 1996 $190,582 $327,473
Executive Vice
President
Myles R. Tashman,...... 1996 $176,138 $ 90,000 $ 5,127(/4/)
Executive Vice 1995 $160,000 $ 25,000
President, General 1994 $ 66,667
Counsel and Secretary
Mitchell R. Katcher,... 1996 $116,667 $150,000 $130,068(/4/)(/6/)
Former Executive Vice 1995 $175,000 $150,000 $ 9,389(/4/)
President 1994 $175,000 $ 62,500
Stephen J. Preston,.... 1996 $156,937 $ 58,326 $ 9,734(/4/)
Senior Vice President 1995 $140,000 $ 50,000 $ 4,721(/5/)
and Chief Actuary and 1994 $131,667
Controller
</TABLE>
________________
(1) The amount shown relates to bonuses paid in 1996, 1995 and
1994. $50,000 of Mr. Wilson's bonus paid in 1996 and Mr.
Chernow's bonus paid in 1994 represent signing bonuses.
(2) The number of shares underlying the restricted stock award
granted in 1994 represented 1,870 shares of Bankers Trust New
York Corporation at the end of 1994. The value shown above was
computed using the price of common stock of Bankers Trust New
York Corporation at the end of 1994. As of 1996, none of the
executive officers listed above had any restricted stock
holdings of Bankers Trust New York Corporation. During 1996,
Bankers Trust New York Corporation redeemed the following
restricted stock holdings: Mr. Kendall 3,000 shares, value
$233,062; Mr. Chernow 500 shares, value $38,844.
(3) Mr. Kendall has served as President and Chief Executive
Officer of Golden American since September of 1993. From that
time until September of 1996, he also served as Chairman of
Golden American. Until August 14, 1996, Mr. Kendall's salary and
bonuses were paid directly by Bankers Trust New York
Corporation.
(4) Contributions were made by the Company on behalf of the
employee to PartnerShare, the deferred compensation plan
sponsored by Bankers Trust New York Corporation and its
affiliates for the benefit of all Bankers Trust employees, in
February of the current year to employees on record as of
December 31 of the previous year, after the employee completes
one year of service with the company. This contribution may be
in the form of deferred compensation and/or a cash payment. In
1996, Mr. Kendall received $9,000 of deferred compensation and
$2,535 of cash payment from the plan; Mr. Chernow received
$6,000 of deferred compensation and $1,755 of cash payment from
the plan; Mr. Tashman received $4,000 of deferred compensation
and $1,127 of cash payment from the plan; Mr. Preston received
$5,433 of deferred compensation and $4,301 of cash payment from
the plan; Mr. Katcher received $9,000 of deferred compensation
and $2,535 of cash payment from the plan. Mr. Wilson was not
eligible for contributions to the PartnerShare Plan in 1996. In
1995, Mr. Kendall received $2,956 of deferred compensation and
$3,750 of cash payment from the plan; Mr. Chernow received
$1,013 of deferred compensation and $1,267 of cash payment from
the plan; Mr. Katcher received $4,139 of deferred compensation
and $5,250 of cash payment from the plan. Mr. Wilson, Mr.
Tashman and Mr. Preston were not eligible for contributions to
the PartnerShare Plan in 1995. In 1994, all executives listed
above were not eligible for contributions to the PartnerShare
Plan in 1994.
(5) Amounts shown for 1994 and 1995 represent relocation
expenses paid on behalf of the employee.
(6) Amount shown for 1996 includes $118,533 severance
compensation.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR (1996)
On October 24, 1997, in conjunction with the acquisition of
Equitable of Iowa, all outstanding options vested and were
cashed out for the difference between $68.00 and the strike
price. The table below represents the options granted in
1996. Information for 1997 is not yet available.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES TERM (/4/)
OPTIONS IN FISCAL EXERCISE EXPIRATION -------------------
NAME GRANTED (/1/) YEAR PRICE (/2/) DATE (/3/) 5% 10%
- ---- ------------- ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Kendall........ 20,000 36.4 $37.50 8/13/2006 $471,671 $1,195,307
Barnett Chernow......... 8,000 14.5 $37.50 8/13/2006 $188,668 $ 478,123
Edward C. Wilson........ 8,000 14.5 $37.50 8/13/2006 $188,668 $ 478,123
Myles Tashman........... 6,000 10.9 $37.50 8/13/2006 $141,501 $ 358,592
Stephen J. Preston...... 2,000 3.6 $37.50 8/13/2006 $ 47,167 $ 119,531
</TABLE>
________________
(1) Stock options granted on August 13, 1996 by Equitable of
Iowa to the officers of Golden American have a five-year vesting
period with 20% exercisable after 3rd year, an additional 30%
after 4th year, and the final 50% after 5th year. The options
will vest in the event of a change of control of Equitable of
Iowa.
(2) The exercise price was equal to the fair market value of
the Common Stock on the date of grant.
(3) Incentive Stock Options have a term of ten years. They are
subject to earlier termination in certain events related to
termination of employment.
(4) Total dollar gains based on indicated rates of appreciation
of share price over a ten-year term.
Directors of Golden American receive no additional compensation for
serving as a director.
49
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____________________________________________________________________
FEDERAL TAX CONSIDERATIONS
INTRODUCTION
The following discussion of the federal income tax treatment of the
Contract is not exhaustive, does not purport to cover all
situations, and is not intended as tax advice. The federal income
tax treatment of the Contract is unclear in certain circumstances,
and a qualified tax adviser should always be consulted with regard
to the application of the tax law to individual circumstances. This
discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Department regulations, and interpretations
existing on the date of this prospectus. These authorities, however,
are subject to change by Congress, the Treasury Department, and
judicial decisions.
This discussion does not address state or local tax consequences
associated with the purchase of the contract. In addition, GOLDEN
AMERICAN MAKES NO GUARANTEE REGARDING ANY TAX TREATMENT - FEDERAL,
STATE OR LOCAL - OF ANY CONTRACT OR OF ANY TRANSACTION INVOLVING A
CONTRACT.
TAX STATUS OF GOLDEN AMERICAN
Golden American is taxed as a life insurance company under the Code.
Since the operations of Account B are a part of, and are taxed with,
the operations of Golden American, Account B is not separately taxed
as a "regulated investment company" under the Code. Under existing
federal income tax laws, investment income and capital gains of
Account B are not taxed to Golden American to the extent they are
applied to increase reserves under a contract. Since, under the
contracts, investment income and realized capital gains of Account B
attributable to contract obligations are automatically applied to
increase reserves, Golden American does not anticipate that it will
incur any federal income tax liability in Account B attributable to
contract obligations, and therefore Golden American does not intend
to make provision for any such taxes. If Golden American is taxed on
investment income or capital gains of Account B, then Golden
American may impose a charge against Account B, as appropriate, in
order to make provision for such taxes.
TAXATION OF NON-QUALIFIED ANNUITIES
TAX DEFERRAL DURING ACCUMULATION PERIOD. Under existing provisions
of the Code, except as described below, any increase in an owner's
Accumulation Value is generally not taxable to the owner until
amounts are received from the Contract, either in the form of
annuity payments as contemplated by the Contract, or in some other
form of distribution. However, this rule allowing deferral applies
only if (1) the investments of Account B are "adequately
diversified" in accordance with Treasury Department regulations, (2)
Golden American, rather than the owner, is considered the owner of
the assets of Account B for federal income tax purposes, and (3) the
owner is an individual. In addition to the foregoing, if the
Contract's Annuity Commencement Date occurs at a time when the
annuitant is at an advanced age, such as over age 85, it is possible
that the owner will be taxable currently on the annual increase in
the Accumulation Value.
Diversification Requirements. The Code and Treasury Department
regulations prescribe the manner in which the investments of a
segregated asset account, such as the Divisions of Account B, are to
be "adequately diversified." If a Division of Account B failed to
comply with these diversification standards, contracts based on that
segregated asset account would not be treated as an annuity contract
for federal income tax purposes and the Owner would generally be
taxable currently on the income on the contract (as defined in the
tax law) beginning with the period of non-diversification. Golden
American expects that the Divisions of Account B will comply with
the diversification requirements prescribed by the Code and Treasury
Department regulations.
Ownership Treatment. In certain circumstances, variable annuity
contract owners may be considered the owners, for federal income tax
purposes, of the assets of a segregated asset account, such as the
Divisions of Account B, used to support their contracts. In those
circumstances, income and gains from the segregated asset account
would be includible in the contract owners' gross income. The
Internal Revenue Service (the "IRS") has stated in published rulings
that a variable contract owner will be considered the owner of the
assets of a segregated asset account if the owner possesses
incidents of ownership in those assets, such as the ability to
exercise investment control over the assets. In addition, the
Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in
which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company,
to be treated as the owner of the assets in the
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account." This
announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may
direct their investments to particular sub-accounts (of a segregated
asset account) without being treated as owners of the underlying
assets." As of the date of this prospectus, no such guidance has
been issued.
The ownership rights under the Contract are similar to, but
different in certain respects from, those described by the IRS in
rulings in which it was determined that contract owners were not
owners of the assets of a segregated asset account. For example, the
Owner of this Contract has the choice of more investment options to
which to allocate purchase payments and the Accumulation Value, and
may be able to transfer among investment options more frequently,
than in such rulings. These differences could result in the Owner
being treated as the owner of all or a portion of the assets of
Account B. In addition, Golden American does not know what standards
will be set forth in the regulations or rulings which the Treasury
Department has stated it expects to issue. Golden American therefore
reserves the right to modify the Contract as necessary to attempt to
prevent Contract Owners from being considered the owners of the
assets of Account B. However, there is no assurance that such
efforts would be successful.
Frequently, if the IRS or the Treasury Department sets forth a new
position which is adverse to taxpayers, the position is applied on a
prospective basis only. Thus, if the IRS or the Treasury Department
were to issue regulations or a ruling which treated an Owner of this
Contract as the owner of Account B, that treatment might apply on a
prospective basis. However, if the regulations or ruling were not
considered to set forth a new position, an owner might retroactively
be determined to be the owner of the assets of Account B.
Non-Natural Owner. As a general rule, contracts held by "non-natural
persons" such as a corporation, trust or other similar entity, as
opposed to a natural person, are not treated as annuity contracts
for federal tax purposes. The income on such contracts (as defined
in the tax law) is taxed as ordinary income that is received or
accrued by the Owner of the Contract during the taxable year. There
are several exceptions to this general rule for non-natural Owners.
First, contracts will generally be treated as held by a natural
person if the nominal Owner is a trust or other entity which holds
the Contract as an agent for a natural person. However, this special
exception will not apply in the case of any employer who is the
nominal Owner of a contract under a non-qualified deferred
compensation arrangement for its employees.
In addition, exceptions to the general rule for non-natural Owners
will apply with respect to (1) Contracts acquired by an estate of a
decedent by reason of the death of the decedent, (2) certain
Contracts issued in connection with qualified retirement plans, (3)
certain Contracts purchased by employers upon the termination of
certain qualified retirement plans, (4) certain Contracts used in
connection with structured settlement agreements, and (5) Contracts
purchased with a single purchase payment when the annuity starting
date (as defined in the tax law) is no later than a year from
purchase of the Contract and substantially equal periodic payments
are made, not less frequently than annually, during the annuity
period.
The remainder of this discussion assumes that the Contract will be
treated as an annuity contract for federal income tax purposes.
TAXATION OF PARTIAL WITHDRAWALS AND SURRENDERS. In the case of a
partial withdrawal prior to the Annuity Commencement Date, amounts
received generally are includible in income to the extent the
Owner's Accumulation Value (determined without regard to any
surrender charge, within the meaning of the tax law) before the
surrender exceeds his or her "investment in the contract." In the
case of a surrender of the Contract for the Cash Surrender Value,
amounts received are includible in income to the extent they exceed
the "investment in the contract." For these purposes, the investment
in the Contract at any time equals the total of the premium payments
made under the Contract to that time (to the extent such payments
were neither deductible when made nor excludable from income as, for
example, in the case of certain contributions to IRAs and other
qualified retirement plans) less any amounts previously received
from the Contract which were not includible in income.
In the case of systematic partial withdrawals, the amount of each
withdrawal will generally be taxed in the same manner as a partial
withdrawal made prior to the Annuity Commencement Date, as described
above. However, there is some uncertainty
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regarding the tax
treatment of systematic partial withdrawals, and it is possible that
additional amounts may be includible in income.
The Contract provides a Death Benefit that in certain circumstances
may exceed the greater of the premium payments and the Accumulation
Value. As described elsewhere in this prospectus, Golden American
imposes certain charges with respect to the Death Benefit. It is
possible that some portion of those charges could be treated for
federal tax purposes as a partial withdrawal from the Contract.
In certain circumstances, surrender charges may be waived because of
the Owner's need for extended medical care or because of the Owner's
terminal illness. Distributions made in respect of which surrender
charges are waived are treated as partial withdrawals or surrenders,
as the case may be, for income tax purposes.
TAXATION OF ANNUITY PAYMENTS. Normally, the portion of each annuity
payment taxable as ordinary income is equal to the excess of the
payment over the exclusion amount. In the case of fixed annuity
payments, the exclusion amount is the amount determined by
multiplying (1) the fixed annuity payment by (2) the ratio of the
"investment in the contract" (defined above), adjusted for any
period certain or refund feature, allocated to the fixed annuity
option to the total expected amount of fixed annuity payments for
the period of the Contract (determined under Treasury Department
regulations). In the case of variable annuity payments, the
exclusion amount for each variable annuity payment is a specified
dollar amount equal to the investment in the Contract allocated to
the variable annuity option when payments begin divided by the
number of variable payments expected to be made (determined by
Treasury Department regulations).
Once the total amount of the investment in the Contract is excluded
using these formulas, annuity payments will be fully taxable. If
annuity payments cease because of the death of the Annuitant and
before the total amount of the investment in the Contract is
recovered, the unrecovered amount generally will be allowed as a
deduction to the annuitant or beneficiary (depending upon the
circumstances).
TAXATION OF DEATH BENEFIT PROCEEDS. Prior to the Annuity
Commencement Date, amounts may be distributed from a Contract
because of the death of an Owner or, in certain circumstances, the
death of the Annuitant. Such Death Benefit proceeds are includible
in income as follows: (1) if distributed in a lump sum, they are
taxed in the same manner as a surrender, as described above, or (2)
if distributed under an annuity option, they are taxed in the same
manner as annuity payments, as described above. After the Annuity
Commencement Date, where a guaranteed period exists under an annuity
option and the Annuitant dies before the end of that period,
payments made to the Beneficiary for the remainder of that period
are includible in income as follows: (1) if received in a lump sum,
they are includible in income to the extent that they exceed the
unrecovered investment in the contract at that time, or (2) if
distributed in accordance with the existing annuity option selected,
they are fully excludable from income until the remaining investment
in the contract is deemed to be recovered, and all annuity payments
thereafter are fully includible in income.
If certain amounts become payable in a lump sum from a Contract,
such as the Death Benefit, it is possible that such amounts might be
viewed as constructively received and thus subject to tax, even
though not actually received. A lump sum will not be constructively
received if it is applied under an annuity option within 60 days
after the date on which it becomes payable. (Any annuity option
selected must comply with applicable minimum distribution
requirements imposed by the Code.)
ASSIGNMENTS, PLEDGES, AND GRATUITOUS TRANSFERS. Other than in the
case of Contracts issued as IRAs or in connection with certain other
qualified retirement plans (which generally cannot be assigned or
pledged), any assignment or pledge (or agreement to assign or
pledge) of any portion of the value of the Contract is treated for
federal income tax purposes as a partial withdrawal of such amount
or portion. The investment in the Contract is increased by the
amount includible as income with respect to such assignment or
pledge, though it is not affected by any other aspect of the
assignment or pledge (including its release). If an Owner transfers
a Contract without adequate consideration to a person other than the
Owner's spouse (or to a former spouse incident to divorce), the
Owner will be taxed on the difference between the cash surrender
value (within the meaning of the tax law) and the investment in the
contract at the time of transfer. In such case, the transferee's
investment in the contract will be increased to reflect the increase
in the transferor's income.
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SECTION 1035 EXCHANGES. Code section 1035 provides that no gain or
loss is recognized when an annuity contract is received in exchange
for a life, endowment, or annuity contract, provided that no cash or
other property is received in the exchange transaction. Special
rules and procedures apply in order for an exchange to meet the
requirements of section 1035. Also, there are additional tax
considerations involved when the contracts are issued in connection
with qualified retirement plans. Prospective Owners of this Contract
should consult a tax advisor before entering into a section 1035
exchange (with respect to non-qualified annuity contracts) or a
trustee-to-trustee transfer or rollover (with respect to qualified
annuity contracts).
PENALTY TAX ON PREMATURE DISTRIBUTIONS. Where a contract has not
been issued as an IRA or in connection with another qualified
retirement plan, there generally is a 10% penalty tax on the taxable
amount of any payment from the Contract unless the payment is: (a)
received on or after the Owner reaches age 59 1/2; (b) attributable to
the Owner's becoming disabled (as defined in the tax law); (c) made
on or after the death of the Owner or, if the Owner is not an
individual, on or after the death of the primary annuitant (as
defined in the tax law); (d) made as a series of substantially equal
periodic payments (not less frequently than annually) for the life
(or life expectancy) of the Owner or the joint lives (or joint life
expectancies) of the Owner and a designated beneficiary (as defined
in the tax law), or (e) made under a Contract purchased with a
single purchase payment when the annuity starting date (as defined
in the tax law) is no later than a year from purchase of the
Contract and substantially equal periodic payments are made, not
less frequently than annually, during the annuity period.
In the case of systematic partial withdrawals, it is unclear whether
such withdrawals will qualify for exception (d) above. (For
reporting purposes, we currently treat such withdrawals as if they
do not qualify for this exception). In addition, if withdrawals are
of interest amounts only, as is the case with systematic partial
withdrawals from a Fixed Allocation, exception (d) will not apply.
AGGREGATION OF CONTRACTS. In certain circumstances, the amount of
an annuity payment, withdrawal or surrender from a Contract that is
includible in income is determined by combining some or all of the
annuity contracts owned by an individual not issued in connection
with qualified retirement plans. For example, if a person purchases
two or more deferred annuity contracts from the same insurance
company (or its affiliates) during any calendar year, all such
contracts will be treated as one contract for purposes of
determining whether any payment not received as an annuity
(including withdrawals and surrenders prior to the Annuity
Commencement Date) is includible in income. In addition, if a person
purchases a Contract offered by this prospectus and also purchases
at approximately the same time an immediate annuity, the IRS may
treat the two contracts as one contract. The effects of such
aggregation are not clear, however, it could affect the time when
income is taxable and the amount which might be subject to the 10%
penalty tax described above.
IRA CONTRACTS AND OTHER QUALIFIED RETIREMENT PLANS
IN GENERAL. In addition to issuing the Contracts as non-qualified
annuities, Golden American also currently issues the Contracts as
IRAs. (As indicated above, in this prospectus, IRAs are referred to
as "qualified plans.") Golden American may also issue the Contracts
in connection with certain other types of qualified retirement plans
which receive favorable treatment under the Code. Numerous special
tax rules apply to the owners under IRAs and other qualified
retirement plans and to the contracts used in connection with such
plans. These tax rules vary according to the type of plan and the
terms and conditions of the plan itself. For example, for both
surrenders and annuity payments under certain contracts issued in
connection with qualified retirement plans, there may be no
"investment in the contract" and the total amount received may be
taxable. Also, special rules apply to the time at which
distributions must commence and the form in which the distributions
must be paid. Therefore, no attempt is made to provide more than
general information about the use of Contracts with the various
types of qualified retirement plans. A qualified tax advisor should
be consulted before purchase of a Contract in connection with a
qualified retirement plan.
When issued in connection with a qualified retirement plan, a
Contract will be amended as necessary to conform to the requirements
of the plan. However, Owners, Annuitants, and Beneficiaries are
cautioned that the rights of any person to any benefits under
qualified retirement
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plans may be subject to the terms and
conditions of the plans themselves, regardless of the terms and
conditions of the Contract. In addition, Golden American is not
bound by terms and conditions of qualified retirement plans to the
extent such terms and conditions contradict the Contract, unless
Golden American consents.
INDIVIDUAL RETIREMENT ANNUITIES. As indicated above, Golden
American currently issues the Contract as an IRA. If the Contract is
used for this purpose, the Owner must be the Annuitant.
Premium Payments. Both the premium payments that may be paid, and
the tax deduction that the owner may claim for such premium
payments, are limited under an IRA. In general, the premium payments
that may be made for an IRA for any year are limited to the lesser
of $2,000 or 100% of the individual's earned income for the year.
Also, in the case of an individual who has less income than his or
her spouse, premium payments may be made by that individual into an
IRA to the extent of (1) $2,000, or the (2) sum of (i) the
compensation includible in the gross income of the individual's
spouse for the taxable year and (ii) the compensation includible in
the gross income of the individual's spouse for the taxable year
reduced by the amount allowed as a deduction for IRA contributions
to such spouse. An excise tax is imposed on IRA contributions that
exceed the law's limits.
The deductible amount of the premium payments made for an IRA for
any taxable year (including a contract for a noncompensated spouse)
is limited to the amount of premium payments that may be paid for
the contract for that year, or a lesser amount where the individual
or his or her spouse is an active participant in certain qualified
retirement plans. For a single person who is an active participant
in a qualified retirement plan (including a qualified pension,
profit-sharing, or annuity plan, a simplified employee pension plan,
or a "section 403(b)" annuity plan, as discussed below) and who has
adjusted gross income in excess of $35,000 may not deduct premium
payments, and such a person with adjusted gross income between
$25,000 and $35,000 may deduct only a portion of such payments.
Also, married persons who file a joint return, one of whom is an
active participant in a qualified retirement plan, and who have
adjusted gross income in excess of $50,000 may not deduct premium
payments, and those with adjusted gross income between $40,000 and
$50,000 may deduct only a portion of such payments. Married persons
filing separately may not deduct premium payments if either the
taxpayer or the taxpayer's spouse is an active participant in a
qualified retirement plan.
In applying these and other rules applicable to an IRA, all
individual retirement accounts and IRAs owned by an individual are
treated as one contract, and all amounts distributed during any
taxable year are treated as one distribution.
Tax Deferral During Accumulation Period. Until distributions are
made from an IRA, increases in the Accumulation Value of the
Contract are not taxed.
IRAs and individual retirement accounts (that may invest in this
contract) generally may not invest in life insurance contracts, but
an annuity contract that is issued as an IRA (or that is purchased
by an individual retirement account) may provide a death benefit
that equals the greater of the premiums paid and the contract's cash
value. The Contract provides a Death Benefit that in certain
circumstances may exceed the greater of the premium payments and the
Accumulation Value.
Taxation of Distributions and Rollovers. If all premium payments
made to an IRA were deductible, all amounts distributed from the
Contract are included in the recipient's income when distributed.
However, if nondeductible premium payments were made to an IRA
(within the limits allowed by the tax laws), a portion of each
distribution from the Contract typically is includible in income
when it is distributed. In such a case, any amount distributed as an
annuity payment or in a lump sum upon death or surrender is taxed as
described above in connection with such a distribution from a non-
qualified contract, treating as the investment in the contract the
sum of the nondeductible premium payments at the end of the taxable
year in which the distribution commences or is made (less any
amounts previously distributed that were excluded from income).
Also, in such a case, any amount
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distributed upon a partial
withdrawal is partially includible in income. The includible amount
is the excess of the distribution over the exclusion amount, which
in turn generally equals the distribution multiplied by the ratio of
the investment in the Contract to the Accumulation Value.
In any event, subject to the direct rollover and mandatory
withholding requirements (discussed below), amounts may be "rolled
over" from certain qualified retirement plans to an IRA (or from one
IRA or individual retirement account to an IRA) without incurring
current income tax if certain conditions are met. Only certain types
of distributions to eligible individuals from qualified retirement
plans, individual retirement accounts, and IRAs may be rolled over.
Penalty Taxes. Subject to certain exceptions, a penalty tax is
imposed on distributions from an IRA equal to 10% of the amount of
the distribution includible in income. (Amounts rolled over from an
IRA generally are excludable from income.) The exceptions provide,
however, that this penalty tax does not apply to distributions made
to the Owner (1) on or after age 59 1/2, (2) on or after death or
because of disability (as defined in the tax law), or (3) as part of
a series of substantially equal periodic payments over the life (or
life expectancy) of the Owner or the joint lives (or joint life
expectancies) of the Owner and his or her beneficiary (as defined in
the tax law). In addition to the foregoing, failure to comply with a
minimum distribution requirement will result in the imposition of a
penalty tax of 50% of the amount by which a minimum required
distribution exceeds the actual distribution from an IRA. Under this
requirement, distributions of minimum amounts from an IRA as
specified in the tax law must generally commence by April 1 of the
calendar year following the calendar year in which the Owner attains
age 70 1/2.
OTHER TYPES OF QUALIFIED RETIREMENT PLANS. The following sections
describe tax considerations of Contracts used in connection with
various types of qualified retirement plans other than IRAs. Golden
American does not currently offer all of the types of qualified
retirement plans described and may not offer them in the future.
Prospective purchasers of Contracts for use in connection with such
qualified retirement plans should therefore contact Golden
American's Customer Service Center to ascertain the availability of
the Contract for qualified retirement plans at any given time.
Simplified Employee Pensions (SEP-IRAs). Section 408(k) of the Code
allows employers to establish simplified employee pension plans for
their employees, using the employees' IRAs for such purposes, if
certain criteria are met. Under these plans the employer may, within
specified limits, make deductible contributions on behalf of the
employees to IRAs. Employers intending to use the contract in
connection with such plans should seek competent advice.
SIMPLE IRAs. Section 408(p) of the Code permits certain small
employers to establish "SIMPLE retirement accounts," including
SIMPLE IRAs, for their employees. Under SIMPLE IRAs, certain
deductible contributions are made by both employees and employers.
SIMPLE IRAs are subject to various requirements, including limits on
the amounts that may be contributed, the persons who may be
eligible, and the time when distributions may commence. Employers
intending to use the Contract in connection with a SIMPLE retirement
account should seek competent advice.
Roth IRAs. Effective immediately, Golden American is offering
Contracts in connection with Roth Individual Retirement Annuities
("Roth IRAs"). New Section 408A of the Code permits eligible
individuals to contribute to Roth IRAs. Under applicable
limitations, certain amounts may be contributed to a Roth IRA. The
contributions are not deductible from the individual's gross income,
but if certain qualifications are met, distributions of earnings are
not included in taxable income. Rollovers from regular IRAs or
conversions of regular IRAs to Roth IRAs are permitted, but the
owner must include the amount rolled over or converted in taxable
income (with the ability to spread the tax liability over four years
if the rollover or conversion takes place in 1998). Roth IRAs are
subject to limitations on eligibility, contributions,
transferability, and distributions. Purchasers of Contracts who
intend for them to be qualified as Roth IRAs should seek competent
tax advice. Please check with Golden American's Customer Service
Center for state availability.
Generally, earnings on a ROTH IRA accrue federally tax-deferred, and
distributions are not subject to federal income tax or 10% penalty
tax if five years have passed since the first contribution was made
or any conversion from a traditional IRA was effected, and the
distribution is made (a) once the owner is 59 1/2 or older, (b) upon
the death or disability of the owner, or (c) for a limited amount,
for qualified first-time home buyer expenses. Distributions that do
not meet these conditions would be subject to ordinary federal income
tax and may be subject to the 10% penalty tax. Roth IRAs are not
subject to required distributions at age 70 1/2.
Corporate and Self-Employed ("H.R. 10" or "Keogh") Pension and
Profit-Sharing Plans. Sections 401(a) and 403(a) of the Code permit
corporate employers to establish various types of tax-favored
retirement plans for employees. The Self-Employed Individuals' Tax
Retirement Act of 1962, as amended, commonly referred to as "H.R.
10" or "Keogh," permits self-employed individuals also to establish
such tax-favored retirement plans for themselves and their
employees. Such retirement plans may permit the purchase of the
Contract in order to provide benefits under the plans. The Contract
provides a Death Benefit that in certain circumstances may exceed
the greater of the premium payments and the Accumulation Value. It
is possible that such Death Benefit could be characterized as an
incidental death benefit. There are limitations on the amount of
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incidental benefits that may be provided under pension and profit
sharing plans. In addition, the provision of such benefits may
result in currently taxable income to participants. Employers
intending to use the Contract in connection with such plans should
seek competent advice.
Section 403(b) Annuity Contracts. Section 403(b) of the Code permits
public school employees, employees of certain types of charitable,
educational and scientific organizations exempt from tax under
section 501(c)(3) of the Code, and employees of certain types of
State educational organizations specified in section
170(b)(l)(A)(ii), to have their employers purchase annuity contracts
for them and, subject to certain limitations, to exclude the amount
of premium payments from gross income for federal income tax
purposes. Purchasers of the contracts for use as a "Section 403(b)
Annuity Contract" should seek competent advice as to eligibility,
limitations on permissible amounts of premium payments and other tax
consequences associated with such contacts. In particular,
purchasers and their advisors should consider that this Contract
provides a Death Benefit that in certain circumstances may exceed
the greater of the premium payments and the Accumulation Value. It
is possible that such Death Benefit could be characterized as an
incidental death benefit. If the Death Benefit were so
characterized, this could result in currently taxable income to
purchasers. In addition, there are limitations on the amount of
incidental death benefits that may be provided under a Section
403(b) Annuity Contract. Even if the Death Benefit under the
contract were characterized as an incidental death benefit, it is
unlikely to violate those limits unless the purchaser also purchases
a life insurance contract as part of his or her Section 403(b)
Annuity Contract.
Section 403(b) Annuity Contracts contain restrictions on withdrawals
of (i) contributions made pursuant to a salary reduction agreement
in years beginning after December 31, 1988, (ii) earnings on those
contributions, and (iii) earnings after 1988 on amounts attributable
to salary reduction contributions (and earnings on those
contributions) held as of the last year beginning before January 1,
1989. These amounts can be paid only if the employee has reached age
59 1/2, separated from service, died, become disabled (within the
meaning of the tax law), or in the case of hardship. Amounts
permitted to be distributed in the event of hardship are limited to
actual contributions; earnings thereon cannot be distributed on
account of hardship. (These limitations on withdrawals do not apply
to the extent Golden American is directed to transfer some or all of
the Accumulation Value as a tax-free direct transfer to the issue of
another Section 403(b) Annuity Contract or into a section 403(b)(7)
custodial account subject to withdrawal restrictions which are at
least as stringent.)
Eligible Deferred Compensation Plans of State and Local Governments
and Tax-Exempt Organizations. Section 457 of the Code permits
employees of state and local governments and tax-exempt
organizations to defer a portion of their compensation without
paying current federal income taxes. The employees must be
participants in an eligible deferred compensation plan. Generally, a
Contract purchased by a state or local government or a tax-exempt
organization will not be treated as an annuity contract for federal
income tax purposes. Those who intend to use the contracts in
connection with such plans should seek competent advice.
DIRECT ROLLOVERS AND FEDERAL INCOME TAX WITHHOLDING FOR "ELIGIBLE
ROLLOVER DISTRIBUTIONS." In the case of an annuity contract used in
connection with a pension, profit-sharing, or annuity plan qualified
under sections 401(a) or 403(a) of the Code, or that is a Section
403(b) Annuity Contract, any "eligible rollover distribution" from
the contract will be subject to direct rollover and mandatory
withholding requirements. An eligible rollover distribution
generally is the taxable portion of any distribution from a
qualified pension plan under section 401(a) of the Code, qualified
annuity plan under Section 403(a) of the Code, or Section 403(b)
Annuity or custodial account, excluding certain amounts (such as
minimum distributions required under section 401(a)(9) of the Code
and distributions which are part of a "series of substantially equal
periodic payments" made for the life (or life expectancy) of the
employee, or for the joint lives (or joint life expectancies) of the
employee and the employee's designated beneficiary (within the
meaning of the tax law), or for a specified period of 10 years or
more).
Under these new requirements, federal income tax equal to 20% of the
eligible rollover distribution will be withheld from the amount of
the distribution. Unlike withholding on certain other amounts
distributed from the Contract, discussed below, the taxpayer cannot
elect out of
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withholding with respect to an eligible rollover
distribution. However, this 20% withholding will not apply to that
portion of the eligible rollover distribution which, instead of
receiving, the taxpayer elects to have directly transferred to
certain eligible retirement plans (such as to this Contract when
issued as an IRA).
If this Contract is issued in connection with a pension, profit-
sharing, or annuity plan qualified under sections 401(a) or 403(a)
of the Code, or is a Section 403(b) Annuity Contract, then, prior to
receiving an eligible rollover distribution, the owner will receive
a notice (from the plan administrator or Golden American) explaining
generally the direct rollover and mandatory withholding requirements
and how to avoid the 20% withholding by electing a direct transfer.
FEDERAL INCOME TAX WITHHOLDING
Golden American will withhold and remit to the federal government a
part of the taxable portion of each distribution made under the
Contract unless the distributee notifies Golden American at or
before the time of the distribution that he or she elects not to
have any amounts withheld. In certain circumstances, Golden American
may be required to withhold tax, as explained above. The withholding
rates applicable to the taxable portion of periodic annuity payments
(other than eligible rollover distributions) are the same as the
withholding rates generally applicable to payments of wages. In
addition, the withholding rate applicable to the taxable portion of
non-periodic payments (including surrenders prior to the Annuity
Commencement Date) is 10%. Regardless of whether you elect to have
federal income tax withheld, you are still liable for payment of
federal income tax on the taxable portion of the payment. As
discussed above, the withholding rate applicable to eligible
rollover distributions is 20%.
57
<PAGE>
<PAGE>
____________________________________________________________________
UNAUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
58
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
--------------------------------------| ----------------
For the Period | For the Period
For the Nine August 14, 1996 | January 1, 1996
Months ended through | through
September 30, 1997 September 30, 1996| August 13, 1996
--------------------------------------| ----------------
(Current Year) (Preceding Year) | (Preceding Year)
|
(Dollars in thousands) |
<S> <C> <C> | <C>
REVENUES: |
Annuity and interest |
sensitive life |
product charges $15,937 $2,397 | $12,259
Management fee revenue 2,014 280 | 1,390
Net investment income 18,955 1,656 | 4,990
Realized gains (losses) |
on investments 58 -- | (420)
Other income 427 143 | 70
------------------ ------------------| ----------------
37,391 4,476 | 18,289
|
INSURANCE BENEFITS AND |
EXPENSES: |
Annuity and interest |
sensitive life benefits: |
Interest credited to |
account balances 16,840 1,624 | 4,355
Benefit claims incurred |
in excess of |
account balances 118 (25)| 915
Underwriting, acquisition, |
and insurance expenses: |
Commissions 23,323 2,118 | 16,549
General expenses 11,552 1,517 | 9,422
Insurance taxes 1,693 160 | 1,225
Policy acquisition |
costs deferred (25,464) (2,625)| (19,300)
Amortization: |
Deferred policy |
acquisition costs 1,433 176 | 2,436
Present value of in |
force acquired 4,465 915 | 951
Goodwill 1,261 196 | --
------------------ ------------------| ----------------
35,221 4,056 | 16,553
Interest expense 1,827 -- | --
------------------ ------------------|----------------
37,048 4,056 | 16,553
------------------ ------------------|----------------
343 420 | 1,736
|
Income taxes expense |
(benefit): |
Current 54 147 | --
Deferred (53) -- | (1,463)
------------------ ------------------|----------------
1 147 | (1,463)
------------------ ------------------|----------------
NET INCOME $342 $273 | $3,199
================== ==================|================
</TABLE>
See accompanying notes.
59
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------- -----------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale,
at fair value (cost: 1997 - $384,765;
1996 - $275,153) $389,172 $275,563
Equity securities, at fair value
(cost: 1997 - $4,901; 1996 - $36) 4,766 33
Mortgage loans 64,500 31,459
Policy loans 8,316 4,634
Short-term investments 1,478 12,631
------------------- -----------------
Total Investments 468,232 324,320
Cash and cash equivalents 18,672 5,839
Due from affiliates 246 --
Accrued investment income 6,901 4,139
Deferred policy acquisition costs 34,638 11,468
Present value of in force acquired 78,156 83,051
Current income taxes recoverable 229 --
Property and equipment, less allowances
for depreciation of $624 in 1997 and
$63 in 1996 1,262 699
Goodwill, less accumulated amortization
of $1,850 in 1997 and $589 in 1996 39,263 38,665
Other assets 7,074 2,471
Separate account assets 1,539,859 1,207,247
------------------- -----------------
TOTAL ASSETS $2,194,532 $1,677,899
=================== =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Annuity and interest sensitive life
products $440,441 $285,287
Unearned revenue reserve 5,092 2,063
------------------- -----------------
445,533 287,350
Deferred income taxes 1,210 365
Line of credit with affiliate 16,960 --
Surplus note 25,000 25,000
Due to affiliates 720 1,504
Accrued expenses and other liabilities 21,629 15,949
Separate account liabilities 1,539,859 1,207,247
------------------- -----------------
TOTAL LIABILITIES 2,050,911 1,537,415
Commitments and contingencies
Stockholder's equity:
Redeemable preferred stock, par value
$5,000 per share, 50,000 shares
authorized -- --
Common stock, par value $10 per share,
authorized, issued and outstanding
250,000 shares 2,500 2,500
Additional paid-in capital 138,492 137,372
Unrealized appreciation of securities
at fair value 1,937 262
Retained earnings 692 350
------------------- -----------------
TOTAL STOCKHOLDER'S EQUITY 143,621 140,484
------------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDER'S
EQUITY $2,194,532 $1,677,899
=================== =================
</TABLE>
See accompanying notes.
60
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
-----------------------------------| -----------------
For the Nine For the Period | For the Period
Months ended August 14, 1996 | January 1, 1996
September 30, through | through
1997 September 30, 1996| August 13, 1996
-----------------------------------| -----------------
(Current Year) (Preceding Year) | (Preceding Year)
|
(Dollars in thousands)|
<S> <C> <C> | <C>
NET CASH USED IN |
OPERATING ACTIVITIES ($1,659) ($1,440)| ($4,320)
|
INVESTING ACTIVITIES |
Sale, maturity or |
repayment of investments: |
Fixed maturities |
- available for sale 35,590 391 | 55,091
Mortgage loans on real |
estate 5,017 -- | --
Short-term investments |
- net 11,153 -- | 354
--------------- ------------------| -----------------
51,760 391 | 55,445
|
Acquisition of investments: |
Fixed maturities |
- available for sale (146,376) -- | (184,589)
Equity securities (4,864) -- | --
Mortgage loans on real |
estate (38,058) -- | --
Policy loans - net (3,682) (161)| (1,977)
Short-term investments |
- net -- (12,626)| --
--------------- ------------------| -----------------
(192,980) (12,787)| (186,566)
Purchase of property and |
equipment (659) (15)| --
--------------- ------------------| -----------------
NET CASH USED IN |
INVESTING ACTIVITIES (141,879) (12,411)| (131,121)
|
FINANCING ACTIVITIES |
Issuance of notes |
payable 86,522 -- | --
Repayment of notes |
payable (69,562) -- | --
Receipts from annuity and |
interest sensitive life |
policies credited to |
policyholder account |
balances 232,635 18,930 | 149,750
Return of policyholder |
account balances on |
annuity and interest |
sensitive life |
policies (12,674) (1,061)| (2,695)
Net reallocations to |
Separate Accounts (81,561) (2,144)| (8,286)
Dividends paid on |
preferred stock -- -- | (719)
Contribution from parent 1,011 -- | --
--------------- ------------------| -----------------
NET CASH PROVIDED BY |
FINANCING ACTIVITIES 156,371 15,725 | 138,050
|
INCREASE IN CASH AND |
CASH EQUIVALENTS 12,833 1,874 | 2,609
|
CASH AND CASH EQUIVALENTS |
AT BEGINNING OF PERIOD 5,839 7,655 | 5,046
--------------- ------------------| -----------------
CASH AND CASH EQUIVALENTS |
AT END OF PERIOD $18,672 $9,529 | $7,655
=============== ==================| =================
SUPPLEMENTAL DISCLOSURE |
OF CASH FLOW INFORMATION |
|
Cash paid during the period
for income taxes $283 -- --
Non-cash financing activities:
Contribution of property,
plant and equipment from
EIC Variable, Inc. net of
$353 of accumulated
depreciation $110 -- --
</TABLE>
See accompanying notes.
61
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. This
form is being filed with the reduced disclosure format specified in
General Instruction H (1)(a) and (b) of Form 10-Q. Accordingly, the
financial statements do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included. All adjustments were of a normal recurring nature, unless
otherwise noted in Management's Discussion and Analysis and the
Notes to Financial Statements. Operating results for the nine months
ended September 30, 1997 are not necessarily indicative of the
results that may be expected for periods reported at December 31,
1997. For further information, refer to the financial statements
and footnotes thereto included in the Golden American Life Insurance
Company Annual Report on Form 10-K for the year ended December 31,
1996.
Consolidation
The condensed consolidated financial statements include Golden
American Life Insurance Company ("Golden American") and its wholly
owned subsidiary, First Golden American Life Insurance Company of
New York ("First Golden" and collectively the "Company"). First
Golden was capitalized by Golden American on December 17, 1996. All
significant intercompany accounts and transactions have been
eliminated.
Organization
Golden American offers variable insurance products and is
licensed as a life insurance company in the District of Columbia and
all states except New York. On January 2, 1997, First Golden became
licensed to sell insurance products in the state of New York. The
Company's products are marketed by broker/dealers, financial
institutions and insurance agents. The Company's primary customers
are individuals and families.
On August 13, 1996, Equitable of Iowa Companies ("Equitable")
acquired all of the outstanding capital stock of BT Variable, Inc.
("BT Variable") and its wholly owned subsidiaries, Golden American
and Directed Services, Inc. ("DSI") from Whitewood Properties
Corporation ("Whitewood") pursuant to the terms of a Stock Purchase
Agreement between Equitable and Whitewood (the "Purchase
Agreement"). Subsequent to the acquisition, the BT Variable, Inc.
name was changed to EIC Variable, Inc. On April 30, 1997, EIC
Variable, Inc. was liquidated and its investment in Golden American
and DSI were transferred to Equitable while the remainder of its net
assets were contributed to Golden American. Refer to Note 3 for additional
information.
For financial statement purposes, the change in control of Golden
American through the acquisition of BT Variable was accounted for as
a purchase acquisition effective August 14, 1996. This acquisition
resulted in a new basis of accounting reflecting estimated fair
values of assets and liabilities at that date. As a result, the
Company's financial statements for periods subsequent to August 13,
1996, are presented on the Post-Acquisition new basis of accounting,
while the financial statements prior to August 13, 1996 are
presented on the Pre-Acquisition historical cost basis of
accounting.
For purposes of the condensed consolidated statements of cash
flows, the Company considers all demand deposits and interest
bearing accounts not related to the investment function to be cash
equivalents. All interest-bearing accounts classified as cash
equivalents have original maturities of three months or less.
62
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION -- (CONTINUED)
Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1997 financial statement
presentation.
2. INVESTMENTS
At September 30, 1997 and December 31, 1996, amortized cost, gross
unrealized gains and losses and estimated fair values of fixed
maturity securities, all of which are designated as available for
sale, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
September 30, 1997 Cost Gains Losses Value
- ------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $65,243 $517 ($104) $65,656
Other 3,069 7 -- 3,076
Foreign governments 2,050 30 -- 2,080
Public utilities 26,717 258 (4) 26,971
Investment grade corporate 213,422 2,750 (79) 216,093
Below investment grade
corporate 38,951 884 (22) 39,813
Mortgage-backed securities 35,313 199 (29) 35,483
-----------------------------------------------
Total $384,765 $4,645 ($238) $389,172
===============================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
- ------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed securities $70,902 $122 ($247) $70,777
Other 3,082 2 (4) 3,080
Public utilities 35,893 193 (38) 36,048
Investment grade corporate 134,487 586 (466) 134,607
Below investment grade
corporate 25,921 249 (56) 26,114
Mortgage-backed securities 4,868 69 -- 4,937
-----------------------------------------------
Total $275,153 $1,221 ($811) $275,563
===============================================
</TABLE>
No fixed maturity securities were designated as held for
investment at September 30, 1997 or December 31, 1996. Short-term
investments with maturities of 30 days or less have been excluded
from the above schedules. Amortized cost approximates fair value for
these securities.
Amortized cost and estimated fair value of fixed maturity
securities designated as available for sale, by contractual
maturity, at September 30, 1997, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or
prepayment penalties.
63
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1997
2. INVESTMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
Estimated
Amortized Fair
September 30, 1997 Cost Value
- -----------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
Due within one year $10,926 $10,947
Due after one year through five years 131,585 133,293
Due after five years through ten years 131,544 133,196
Due after ten years 10,154 10,597
------------- -------------
284,209 288,033
Mortgage-backed securities 100,556 101,139
------------- -------------
Total $384,765 $389,172
============= =============
</TABLE>
During the first nine months of 1997, fixed maturity securities
designated as available for sale with a combined amortized cost of
$23,792,000 were called or repaid by their issuers. In total, net
pre-tax gains from sales, calls and repayments of fixed maturity
investments amounted to $58,000 in the first nine months of 1997.
During the first nine months of 1997, no investments were
identified as having an impairment other than temporary.
Investment Diversifications: The Company's investment policies
related to its investment portfolio require diversification by asset
type, company and industry and set limits on the amount which can be
invested in an individual issuer. Such policies are at least as
restrictive as those set forth by regulatory authorities. The
following percentages relate to holdings at September 30, 1997 and
December 31, 1996, respectively. Fixed maturity investments included
investments in various government bonds and government or agency
mortgage-backed securities (18% in 1997, 27% in 1996), public
utilities (7% in 1997, 13% in 1996), basic industrials (31% in 1997,
30% in 1996) and financial companies (24% in 1997, 18% in 1996).
Mortgage loans on real estate have been analyzed by geographical
location with concentrations by state identified as Utah (14% in
1997, 4% in 1996) and California (12% in 1997, 7% in 1996), and
Georgia (8% in 1997, 17% in 1996). There are no other
concentrations of mortgage loans in any state exceeding ten percent
at September 30, 1997 and December 31, 1996. Mortgage loans on real
estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (41% in 1997, 36% in
1996), industrial buildings (37% in 1997, 31% in 1996), multi-family
residential buildings (12% in 1997, 27% in 1996) and retail
facilities (10% in 1997, 6% in 1996). Equity securities (which
represent 1.1% of the Company's investments) consists primarily of
investments in the Company's registered separate accounts. Equity
securities and investments accounted for by the equity method are
not significant to the Company's overall investment portfolio.
3. ACQUISITION
Transaction: On August 13, 1996, Equitable acquired all of the
outstanding capital stock of BT Variable from Whitewood, a wholly
owned subsidiary of Bankers Trust, pursuant to the terms of the
Purchase Agreement dated as of May 3, 1996 between Equitable and
Whitewood. In exchange for the outstanding capital stock of BT
Variable, Equitable paid $93,000,000 in cash to Whitewood in
accordance with the terms of the Purchase Agreement. Equitable also
paid $51,000,000 in cash to Bankers Trust to retire certain debt
owed by BT Variable to Bankers Trust pursuant to a revolving credit
arrangement. Subsequent to the acquisition, the BT Variable, Inc.
name was changed to EIC Variable, Inc. On April 30, 1997, EIC
Variable, Inc. was liquidated and its investments in Golden American
and DSI were transferred to Equitable while the remainder of its net
assets were contributed to Golden American.
64
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1997
3. ACQUISITION -- (CONTINUED)
Accounting Treatment: The acquisition was accounted for as a
purchase resulting in a new basis of accounting, reflecting
estimated fair values for assets and liabilities at August 13, 1996.
The purchase price was allocated to the three companies purchased -
BT Variable, DSI and Golden American. Goodwill was established for
the excess of the acquisition cost over the fair value of the net
assets acquired and pushed down to Golden American. The acquisition
cost was preliminary with respect to the final settlement of taxes
with Bankers Trust and estimated expenses. The allocation of the
purchase price to Golden American was approximately $139,872,000.
The amount of goodwill relating to the acquisition was $41,113,000
at the acquisition date, and is being amortized over 25 years on a
straight line basis. At June 30, 1997, goodwill was increased by
$1,848,000 to adjust the value of a receivable existing at the
acquisition date. The carrying value of goodwill will be reviewed
periodically for any indication of impairment in value.
Present Value of In Force Acquired: As part of the acquisition,
a portion of the acquisition cost was allocated to the right to
receive future cash flows from the insurance contracts existing with
Golden American at the date of acquisition. This allocated cost
represents the present value of in force acquired ("PVIF") which
reflects the value of those purchased policies calculated by
discounting the actuarially determined expected future cash flows at
the discount rate determined by Equitable.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
For the Nine
Months ended
September 30, 1997
-----------------------
(Dollars in thousands)
<S> <C>
Beginning balance $83,051
Imputed interest 4,653
Amortization (9,118)
Adjustment for unrealized gains
on available for sale securities (430)
-----------------------
Ending balance $78,156
=======================
</TABLE>
Interest is imputed on the unamortized balance of PVIF at rates
of 7.70% to 7.80%. Amortization of PVIF is charged to expense and
the asset is adjusted for the change in unrealized gains (losses) on
available for sale securities. During the second quarter of 1997,
PVIF was unlocked by $2,293,000 to reflect narrower current spreads than the
gross profit model assumed. Based on current conditions and
assumptions as to the effect of future events on acquired policies
in force, the expected approximate net amortization for the next
five years, relating to the balance of the PVIF as of September
30, 1997, is as follows:
<TABLE>
<CAPTION>
Year Amount
- ----------------------------------------------------
(Dollars in thousands)
<S> <C>
Remainder of 1997 $2,300
1998 10,100
1999 9,600
2000 8,300
2001 7,200
2002 6,100
</TABLE>
Actual amortization may vary from the schedule above based upon
changes in assumptions and experience.
65
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1997
4. MERGER
Transaction: On October 23, 1997, Equitable shareholders approved
the Agreement and Plan of Merger ("Merger Agreement")
dated as of July 7, 1997, between Equitable, PFHI Holdings, Inc.
("PFHI"), and ING Groep, N.V. ("ING").
On October 24, 1997, PFHI, a Delaware corporation, acquired all of
the outstanding capital stock of Equitable pursuant to the Merger
Agreement. PFHI is a wholly owned subsidiary of ING, a global
financial services holding company based in The Netherlands.
Equitable, an Iowa corporation, in turn, owns all the outstanding
capital stock of
Equitable Life Insurance Company of Iowa and Golden American Life
Insurance Company and their wholly owned subsidiaries. Equitable
also owns all the outstanding capital stock of Locust Street
Securities, Inc., Equitable Investment Services, Inc., Directed
Services, Inc., Equitable of Iowa Companies Capital Trust, Equitable
of Iowa Companies Capital Trust II, and Equitable of Iowa Securities
Network, Inc. In
exchange for the outstanding capital stock of Equitable, ING will
pay total consideration of approximately $2,100,000,000 in cash and
stock plus the assumption of approximately $400,000,000 in debt
according to the Merger Agreement. As a result of the merger,
Equitable of Iowa Companies was merged into PFHI which was
simultaneously renamed Equitable of Iowa Companies, Inc.
Accounting Treatment: The merger will be accounted for as a
purchase resulting in a new basis of accounting, reflecting
estimated fair values for assets and liabilities for Equitable and
its subsidiaries as of the date of the merger. The excess of the
total acquisition cost over the fair value of the net assets
acquired will be recorded as goodwill.
5. RELATED PARTY TRANSACTIONS
DSI acts as the principal underwriter (as defined in the
Securities Act of 1933 and the Investment Company Act of 1940, as
amended) of the variable insurance products issued by the Company,
which as of September 30, 1997, are sold primarily through six
broker/dealer institutions. The Company paid commissions to DSI
totaling $8,849,000 in the third quarter and $23,113,000 for the
first nine months of 1997, ($17,070,000 for the period January 1,
1996 through August 13, 1996 and $1,955,000 for the period August 14,
1996 through September 30, 1996).
Golden American provides certain managerial and supervisory
services to DSI. The fee for these services is calculated as a
percentage of average assets in the variable separate accounts. For
the third quarter and the first nine months of 1997, the fee was
$736,000 and $2,014,000, respectively ($1,390,000 for the period
January 1, 1996 through August 13, 1996 and $280,000 for the period
August 14, 1996 through September 30, 1996).
On August 14, 1996, the Company began purchasing investment
management services from an affiliate. Payments for these services
totaled $263,000 for the third quarter and $673,000 for the first
nine months of 1997 ($3,000 for the period August 14, 1996 through
September 30, 1996). On August 14, 1996, all employees of Golden
American, except wholesalers, became statutory employees of
Equitable Life Insurance Company of Iowa ("Equitable Life"), an
affiliate.
Golden American has a guaranty agreement with Equitable Life. In
consideration of an annual fee, payable June 30, Equitable Life
guarantees to Golden American that it will make funds available, if
needed, to Golden American to pay the contractual claims made under
the provisions of Golden American's life insurance and annuity
contracts. The agreement is not, and nothing contained therein or
done pursuant thereto by Equitable Life shall be deemed to
constitute, a direct or indirect guaranty by Equitable Life of the
payment of any debt or other obligation, indebtedness or liability,
of any kind or character whatsoever, of Golden American. The
agreement does not guarantee the value of the underlying assets held
in separate accounts in which funds of variable life insurance and
variable annuity policies have been invested. The calculation of
the annual fee is based on risk based capital. As Golden American's
risk based capital level was above required amounts, no annual fee
was payable.
Surplus Note: On December 17, 1996, Golden American issued an
8.25% surplus note in the amount of $25,000,000 to Equitable.
Golden American made interest payments totaling $510,000 during the
third quarter and $1,548,000 during the first nine months of 1997.
On December 17, 1996, Golden American contributed the $25,000,000 to
First Golden acquiring 200,000 shares of common stock (100% of
outstanding stock) of First Golden.
Line of Credit: Golden American maintains a line of credit
agreement with Equitable to facilitate the handling of unusual
and/or unanticipated short-term cash requirements. Under the
current agreement, which became effective December 1, 1996 and
expires on December 31, 1997, Golden
66
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
SEPTEMBER 30, 1997
5. RELATED PARTY TRANSACTIONS -- (CONTINUED)
American can borrow up to
$25,000,000. Interest on any borrowings is charged at the rate of
Equitable's monthly average aggregate cost of short-term funds plus
1.00%. The Company incurred interest expense of $165,000 during the
third quarter and $279,000 during the first nine months of 1997
under this agreement. At September 30, 1997, $16,960,000 was outstanding
under this agreement.
6. COMMITMENTS AND CONTINGENCIES
Reinsurance: At September 30, 1997, Golden American had reinsurance
treaties with 5 unaffiliated reinsurers covering a significant
portion of the mortality risks under its variable contracts. Golden
American remains liable to the extent its reinsurers do not meet
their obligations under the reinsurance agreements. At September 30,
1997, the Company has a net payable of $4,000 for reserve
credits, reinsurance claims or other receivables from these
reinsurers comprised of $199,000 for claims recoverable from
reinsurers and a payable of $203,000 for reinsurance premiums.
Included in the accompanying financial statements are net
considerations to reinsurers of $467,000 during the third quarter
and $1,318,000 for the first nine months of 1997 ($467,000 and
$600,000, for the periods August 14, 1996 through September 30, 1996
and for January 1, 1996 through August 13, 1996, respectively). Also
included in the accompanying financial statements are net policy
benefits of $142,000 during the third quarter and $571,000 for the
first nine months of 1997 ($206,000 and $1,267,000, for the periods
August 14, 1996 through September 30, 1996, and for January 1, 1996
through August 13, 1996, respectively).
Effective June 1, 1994, Golden American entered into a modified
coinsurance agreement with an unaffiliated reinsurer. The
accompanying financial statements are presented net of the effects
of the treaty which resulted in other income of $430,000 in 1997.
Investment Commitments: At September 30, 1997, outstanding
commitments to fund mortgage loans on real estate totaled
$9,175,000.
Guaranty Fund Assessments: Assessments are levied on the Company
by life and health guaranty associations in most states in which the
Company is licensed to cover losses of policyholders of insolvent or
rehabilitated insurers. In some states, these assessments can be
partially recovered through a reduction in future premium taxes.
The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. The associated cost for
a particular insurance company can vary significantly based upon its
fixed account premium volume by line of business and state premiums
levels as well as its potential for premium tax offset. The Company
has established a reserve to cover such assessments and regularly
reviews information regarding known failures and revises its
estimates of future guaranty fund assessments. Accordingly, the
Company accrued and charged to expense an additional $135,000 for
the third quarter and $417,000 for the first nine months of 1997.
At September 30, 1997, the Company has an undiscounted reserve of
$1,188,000 to cover estimated future assessments (net of related
anticipated premium tax credits) and has established an asset
totaling $22,000 for assessments paid which may be recoverable
through future premium tax offsets. The Company believes this
reserve is sufficient to cover expected future insurance guaranty
fund assessments, based upon previous premium levels, and known
insolvencies at this time.
Litigation: The Company is not involved in any legal proceeding as
of the date of this report.
Vulnerability from Concentrations: The Company has various
concentrations in its investment portfolio (see Note 2 for further
information). The Company's asset growth, net investment income and
cash flow are primarily generated from the sale of variable products
and associated future policy benefits and separate account
liabilities. A significant portion of the Company's sales are
generated by six broker/dealers. Substantial changes in tax laws
that would make these products less attractive to consumers, extreme
fluctuations in interest rates or stock market returns which may
result in higher lapse experience than assumed, could cause a severe
impact to the Company's financial condition.
67
<PAGE>
<PAGE>
____________________________________________________________________
AUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE
COMPANY
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Golden American Life Insurance Company
We have audited the accompanying consolidated balance sheets of
Golden American Life Insurance Company as of December 31, 1996 and
1995, and the related consolidated statements of income, changes in
stockholder's equity, and cash flows for the post-acquisition period
from August 14, 1996 to December 31, 1996 and the pre-acquisition
period from January 1, 1996 to August 13, 1996 and for each of the
years ended December 31, 1995 and 1994. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Golden American Life Insurance Company at
December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for the post-acquisition period from
August 14, 1996 to December 31, 1996 and the pre-acquisition period
from January 1, 1996 to August 13, 1996 and for each of the years
ended December 31, 1995 and 1994, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
68
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------
DECEMBER 31, 1996 | DECEMBER 31, 1995
----------------- | -----------------
<S> <C> <C>
ASSETS: |
Investments: |
Fixed maturities, available for sale, at fair value |
(cost: 1996 -- $275,153; 1995 -- $48,671).................... $ 275,563 | $ 49,629
Equity securities, at fair value (cost: 1996 -- $36; |
1995 -- $27)................................................. 33 | 29
Mortgage loans on real estate................................. 31,459 | --
Policy loans.................................................. 4,634 | 2,021
Short-term investments........................................ 12,631 | 15,614
---------- | ----------
Total Investments............................................ 324,320 | 67,293
Cash and cash equivalents...................................... 5,839 | 5,046
Accrued investment income...................................... 4,139 | 768
Deferred policy acquisition costs.............................. 11,468 | 67,314
Present value of in force acquired............................. 83,051 | 6,057
Property and equipment, less allowances for depreciation of |
$63 in 1996 and $86 in 1995.................................. 699 | 490
Goodwill, less accumulated amortization of $589 in 1996........ 38,665 | --
Other assets................................................... 2,471 | 7,136
Separate account assets........................................ 1,207,247 | 1,048,953
---------- | ----------
Total Assets................................................. $1,677,899 | $1,203,057
========== | ==========
LIABILITIES AND STOCKHOLDER'S EQUITY: |
Policy liabilities and accruals: |
Future policy benefits: |
Annuity and interest sensitive life products................. $ 285,287 | $ 33,673
Unearned revenue reserve..................................... 2,063 | 6,556
---------- | ----------
287,350 | 40,229
Deferred income taxes.......................................... 365 | --
Surplus note................................................... 25,000 | --
Due to affiliates.............................................. 1,504 | 675
Other liabilities.............................................. 15,949 | 15,075
Separate account liabilities................................... 1,207,247 | 1,048,953
---------- | ----------
Total Liabilities............................................ 1,537,415 | 1,104,932
Commitments and contingencies |
STOCKHOLDER'S EQUITY: |
Common stock, par value $10 per share, authorized, issued and |
outstanding 250,000 shares.................................. 2,500 | 2,500
Redeemable preferred stock, par value $5,000 per share, 50,000 |
shares authorized (1995 -- 10,000 shares issued and |
outstanding)................................................ -- | 50,000
Additional paid-in capital.................................... 137,372 | 45,030
Unrealized appreciation (depreciation) of securities at fair |
value....................................................... 262 | 658
Retained earnings (deficit)................................... 350 | (63)
---------- | ----------
Total Stockholder's Equity................................... 140,484 | 98,125
---------- | ----------
Total Liabilities and Stockholder's Equity................... $1,677,899 | $1,203,057
========== | ==========
</TABLE>
See accompanying notes.
69
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | --------------------------------------------------
FOR THE PERIOD | FOR THE PERIOD
AUGUST 14, 1996 | JANUARY 1, 1996 FOR THE YEAR FOR THE YEAR
THROUGH | THROUGH ENDED ENDED
DECEMBER 31, 1996 |AUGUST 13, 1996 DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- |--------------- ----------------- -----------------
<S> <C> <C> <C> <C>
REVENUES: |
Annuity and interest |
sensitive life product |
charges..................... $ 8,768 | $ 12,259 $18,388 $ 17,519
Management fee revenue........ 877 | 1,390 987 --
Net investment income......... 5,795 | 4,990 2,818 560
Realized gains (losses) on |
investments................. 42 | (420) 297 65
Other income.................. 486 | 70 63 --
-------- | -------- ------- --------
15,968 | 18,289 22,553 18,144
|
INSURANCE BENEFITS AND EXPENSES: |
Annuity and interest |
sensitive life benefits: |
Interest credited to account |
balances.................... 5,741 | 4,355 1,322 40
Benefit claims incurred in |
excess of account balances.. 1,262 | 915 1,824 (5)
Underwriting, acquisition, |
and insurance expenses: |
Commissions.................. 9,866 | 16,549 7,983 16,978
General expenses............. 5,906 | 9,422 12,650 12,921
Insurance taxes.............. 672 | 1,225 952 373
Policy acquisition costs |
deferred.................... (11,712) | (19,300) (9,804) (23,119)
Amortization: |
Deferred policy acquisition |
costs..................... 244 | 2,436 2,710 4,608
Present value of in force |
acquired.................. 2,745 | 951 1,552 2,164
Goodwill.................... 589 | -- -- --
-------- | -------- ------- --------
15,313 | 16,553 19,189 13,960
Interest expense............... 85 | -- -- 1,962
-------- | -------- ------- --------
15,398 | 16,553 19,189 15,922
-------- | -------- ------- --------
570 | 1,736 3,364 2,222
Income taxes................... 220 | (1,463) -- --
-------- | -------- ------- --------
Net Income..................... $ 350 | $ 3,199 $ 3,364 $ 2,222
======== | ======== ======= ========
</TABLE>
See accompanying notes.
70
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-ACQUISITION
-------------------------------------------------------------------
UNREALIZED
APPRECIATION
REDEEMABLE ADDITIONAL (DEPRECIATION) RETAINED TOTAL
COMMON PREFERRED PAID-IN OF SECURITIES EARNINGS STOCKHOLDER'S
STOCK STOCK CAPITAL AT FAIR VALUE (DEFICIT) EQUITY
------ ---------- ---------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994........ $2,500 $ 28,336 $ 62 $(2,301) $ 28,597
Issuance of 10,000 shares of
preferred stock.................. -- $ 50,000 -- -- -- 50,000
Contribution of capital.......... -- -- 8,750 -- -- 8,750
Net income for 1994.............. -- -- -- -- 2,222 2,222
Unrealized depreciation of
securities at fair value......... -- -- -- (63) -- (63)
------ -------- -------- ------- ------- --------
Balance at December 31, 1994...... 2,500 50,000 37,086 (1) (79) 89,506
Contribution of capital.......... -- -- 7,944 -- -- 7,944
Net income for 1995.............. -- -- -- -- 3,364 3,364
Preferred stock dividends........ -- -- -- -- (3,348) (3,348)
Unrealized appreciation of
securities at fair value......... -- -- -- 659 -- 659
------ -------- -------- ------- ------- --------
Balance at December 31, 1995...... 2,500 50,000 45,030 658 (63) 98,125
Net income for the period
January 1, 1996 to August 13,
1996............................. -- -- -- -- 3,199 3,199
Preferred stock dividends........ -- -- -- -- (719) (719)
Unrealized depreciation of
securities at fair value......... -- -- -- (1,175) -- (1,175)
------ -------- -------- ------- ------- --------
Balance at August 13, 1996........ $2,500 $ 50,000 $ 45,030 $ (517) $ 2,417 $ 99,430
====== ======== ======== ======= ======= ========
<CAPTION>
POST-ACQUISITION
-------------------------------------------------------------------
UNREALIZED
APPRECIATION
REDEEMABLE ADDITIONAL (DEPRECIATION) RETAINED TOTAL
COMMON PREFERRED PAID-IN OF SECURITIES EARNINGS STOCKHOLDER'S
STOCK STOCK CAPITAL AT FAIR VALUE (DEFICIT) EQUITY
------ ---------- ---------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 14, 1996........ $2,500 $ 50,000 $ 87,372 -- -- $139,872
Contribution of preferred
stock to additional paid-in
capital.......................... -- (50,000) 50,000 -- -- --
Net income for the period
August 14, 1996 to December
31, 1996......................... -- -- -- -- $ 350 350
Unrealized appreciation of
securities at fair value......... -- -- -- $ 262 -- 262
------ -------- -------- ------- ------- --------
Balance at December 31, 1996...... $2,500 $ -- $137,372 $ 262 $ 350 $140,484
====== ======== ======== ======= ======= ========
</TABLE>
See accompanying notes.
71
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 | AUGUST 13, 1996 1995 1994
----------------- | --------------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES |
Net income........................ $ 350 | $ 3,199 $ 3,364 $ 2,222
Adjustments to reconcile net |
income to net cash provided by |
(used in) operations: |
Adjustments related to annuity |
and interest sensitive life products: |
Change in annuity and interest |
sensitive life product |
reserves...................... 5,106 | 4,472 4,664 (1,370)
Change in unearned revenues..... 2,063 | 2,084 4,949 1,594
Increase in accrued investment |
income......................... (877) | (2,494) (676) (24)
Policy acquisition costs |
deferred....................... (11,712) | (19,300) (9,804) (23,119)
Amortization of deferred policy |
acquisition costs.............. 244 | 2,436 2,710 4,608
Amortization of present value |
of in force acquired........... 2,745 | 951 1,552 2,164
Change in other assets, other |
liabilities and accrued |
income taxes................... (96) | 4,672 4,686 (4,543)
Provision for depreciation and |
amortization................... 1,242 | 703 (142) 13
Provision for deferred income |
taxes.......................... 220 | (1,463) -- --
Realized (gains) losses on |
investments.................... (42) | 420 (297) (65)
-------- | -------- ------- --------
Net cash provided by (used in) |
operating activities........... (757) | (4,320) 11,006 (18,520)
INVESTING ACTIVITIES |
Sale, maturity or repayment of |
investments: |
Fixed maturities--available |
for sale....................... 47,453 | 55,091 24,026 --
Fixed maturities--held for |
investment..................... -- | -- -- 321
Equity securities................ -- | -- -- 313
Mortgage loans on real estate.... 40 | -- -- --
Short-term investments--net...... 2,629 | 354 -- 1,299
-------- | -------- ------- --------
50,122 | 55,445 24,026 1,933
Acquisition of investments: |
Fixed maturities--available |
for sale....................... (147,170) | (184,589) (61,723) --
Fixed maturities--held for |
investment..................... -- | -- -- (857)
Equity securities................ (5) | -- (10) (7)
Mortgage loans on real estate.... (31,499) | -- -- --
Policy loans--net................ (637) | (1,977) (1,508) (369)
Short-term investments--net...... -- | -- (1,681) --
-------- | -------- ------- --------
(179,311) | (186,566) (64,922) (1,233)
Funds held in escrow pursuant |
to an Exchange Agreement....... -- | -- (1,242) (1,382)
Purchase of property and |
equipment...................... (137) | -- -- --
-------- | -------- ------- --------
Net cash used in investing |
activities..................... (129,326) | (131,121) (42,138) (682)
</TABLE>
See accompanying notes.
72
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 | AUGUST 13, 1996 1995 1994
----------------- | --------------- ------------ ------------
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES |
Retirement of short-term debt........... -- | -- -- $(40,000)
Proceeds from issuance of surplus note.. $ 25,000 | -- -- --
Receipts from annuity and interest |
sensitive life policies credited to |
policyholder account balances......... 116,819 | $ 149,750 $ 29,501 --
Return of policyholder account balances |
on annuity and interest sensitive |
life policies......................... (3,315) | (2,695) (1,543) --
Net reallocations (to) from Separate |
Accounts.............................. (10,237) | (8,286) -- --
Contributions of capital by parent...... -- | -- 7,944 8,750
Issuance of preferred stock............. -- | -- -- 50,000
Dividends paid on preferred stock....... -- | (719) (3,348) --
--------- | --------- -------- --------
Net cash provided by financing |
activities............................ 128,267 | 138,050 32,554 18,750
--------- | --------- -------- --------
Increase (decrease) in cash and |
cash equivalents...................... (1,816) | 2,609 1,422 (452)
Cash and cash equivalents at beginning |
of period............................. 7,655 | 5,046 3,624 4,076
--------- | --------- -------- --------
Cash and cash equivalents at end of |
period................................ $ 5,839 | $ 7,655 $ 5,046 $ 3,624
========= | ========= ======== ========
</TABLE>
See accompanying notes.
73
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The consolidated financial statements include Golden American
Life Insurance Company ("Golden American") and its wholly owned
subsidiary, First Golden American Life Insurance Company of New York
("First Golden") collectively the "Company." First Golden was
capitalized by Golden American on December 17, 1996. All significant
intercompany accounts and transactions have been eliminated.
Organization
Golden American offers variable insurance products and is
licensed as a life insurance company in the District of Columbia and
all states except New York. On January 2, 1997, First Golden became
licensed to sell insurance products in the state of New York. The
Company's products are marketed by broker/dealers, financial
institutions and insurance agents. The Company's primary customers
are individuals and families.
On August 13, 1996, Equitable of Iowa Companies ("Equitable")
acquired all of the outstanding capital stock of BT Variable, Inc.
("BT Variable") and its wholly owned subsidiaries, Golden American
and Directed Services, Inc. ("DSI") from Whitewood Properties
Corporation ("Whitewood") pursuant to the terms of a Stock Purchase
Agreement between Equitable and Whitewood (the "Purchase
Agreement"). See Note 5 for additional information.
For financial statement purposes, the change in control of Golden
American through the acquisition of BT Variable was accounted for as
a purchase acquisition effective August 14, 1996. This acquisition
resulted in a new basis of accounting reflecting estimated fair
values of assets and liabilities at that date. As a result, the
Company's financial statements for periods subsequent to August 13,
1996, are presented on the Post-Acquisition new basis of accounting,
while the financial statements for August 13, 1996 and prior periods
are presented on the Pre-Acquisition historical cost basis of
accounting.
Investments
Fixed Maturities: Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" requires fixed maturity securities to be
designated as either "available for sale," "held for investment" or
"trading." Sales of fixed maturities designated as "available for
sale" are not restricted by SFAS No. 115. Available for sale
securities are reported at fair value and unrealized gains and
losses on these securities are included directly in stockholder's
equity, after adjustment for related changes in deferred policy
acquisition costs, present value of in force acquired, policy
reserves and deferred income taxes. At December 31, 1996 and 1995,
all of the Company's fixed maturity securities are designated as
available for sale although the Company is not precluded from
designating fixed maturity securities as held for investment or
trading at some future date. Securities the Company has the positive
intent and ability to hold to maturity are designated as "held for
investment." Held for investment securities are reported at cost
adjusted for amortization of premiums and discounts. Changes in the
fair value of these securities, except for declines that are other
than temporary, are not reflected in the Company's financial
statements. Sales of securities designated as held for investment
are severely restricted by SFAS No. 115. Securities that are bought
and held principally for the purpose of selling them in the near
term are designated as trading securities. Unrealized gains and
losses on trading securities are included in current earnings.
Transfers of securities between categories are restricted and are
recorded at fair value at the time of the transfer. Securities that
are determined to have a decline in value that is other than
temporary are written down to estimated fair value which becomes the
security's new cost basis by a
74
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
charge to realized losses in the
Company's Statements of Income. Premiums and discounts are
amortized/accrued utilizing the scientific interest method which
results in a constant yield over the security's expected life.
Amortization/accrual of premiums and discounts on mortgage-backed
securities incorporates a prepayment assumption to estimate the
securities' expected lives.
Equity Securities: Equity securities are reported at estimated
fair value if readily marketable or at cost if not readily
marketable. The change in unrealized appreciation and depreciation
of marketable equity securities (net of related deferred income
taxes, if any) is included directly in stockholder's equity. Equity
securities that are determined to have a decline in value that is
other than temporary are written down to estimated fair value which
becomes the security's new cost basis by a charge to realized losses
in the Company's Statement of Income.
Mortgage loans: Mortgage loans on real estate are reported at
cost adjusted for amortization of premiums and accrual of discounts.
If the value of any mortgage loan is determined to be impaired
(i.e., when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the
loan agreement), the carrying value of the mortgage loan is reduced
to the present value of expected future cash flows from the loan,
discounted at the loan's effective interest rate, or to the loan's
observable market price, or the fair value of the underlying
collateral. The carrying value of impaired loans is reduced by the
establishment of a valuation allowance which is adjusted at each
reporting date for significant changes in the calculated value of
the loan. Changes in this valuation allowance are charged or
credited to income.
Other investments: Policy loans are reported at unpaid principal.
Short-term investments are reported at cost adjusted for
amortization of premiums and accrual of discounts.
Fair Values: Estimated fair values, as reported herein, of
publicly traded fixed maturity securities are as reported by an
independent pricing service. Fair values of conventional mortgage-
backed securities not actively traded in a liquid market are
estimated using a third party pricing system. This pricing system
uses a matrix calculation assuming a spread over U.S. Treasury bonds
based upon the expected average lives of the securities. Fair values
of private placement bonds are estimated using a matrix that assumes
a spread (based on interest rates and a risk assessment of the
bonds) over U.S. Treasury bonds. Estimated fair values of equity
securities which consists of the Company's investment in its
registered separate accounts are based upon the quoted fair value of
the securities comprising the individual portfolios underlying the
separate accounts. Realized gains and losses are determined on the
basis of specific identification and average cost methods for
manager initiated and issuer initiated disposals, respectively.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the
Company considers all demand deposits and interest-bearing accounts
not related to the investment function to be cash equivalents. All
interest-bearing accounts classified as cash equivalents have
original maturities of three months or less.
Deferred Policy Acquisition Costs
Certain costs of acquiring new insurance business, principally
commissions and other expenses related to the production of new
business, have been deferred. Acquisition costs for variable annuity
and life products are being amortized generally in proportion to the
present value (using the assumed crediting rate) of expected future
gross profits. This amortization is adjusted retrospectively, or
"unlocked," when the Company revises its estimate of current or
future gross profits to be realized from a group of products.
Deferred policy acquisition costs are adjusted to reflect the pro
forma impact of unrealized gains and losses on fixed maturity
securities the Company has designated as "available for sale" under
SFAS No. 115.
75
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Present Value of in Force Acquired
As a result of the acquisition of Golden American, a portion of
the acquisition cost was allocated to the right to receive future
cash flows from the existing insurance contracts. This allocated
cost represents the present value of in force acquired ("PVIF")
which reflects the value of those purchased policies calculated by
discounting actuarially determined expected cash flows at the
discount rate determined by the purchaser. Interest is imputed on
the unamortized balance of PVIF at rates of 7.70% to 7.80%.
Amortization of PVIF is charged to expense in proportion to expected
gross profits. This amortization is adjusted retrospectively, or
"unlocked," when the Company revises its estimate of current or
future gross profits to be realized from the insurance contracts
acquired. PVIF is adjusted to reflect the pro forma impact of
unrealized gains (losses) on available for sale fixed maturities.
Property and Equipment
Property and equipment primarily represent leasehold improvements
at the Golden American headquarters, office furniture and equipment
and capitalized computer software and are not considered to be
significant to the Company's overall operations. Property and
equipment are reported at cost less allowances for depreciation.
Depreciation expense is computed primarily on the basis of straight-
line method over the estimated useful lives of the assets.
Goodwill
Goodwill was established as a result of the acquisition discussed
above and is being amortized over 25 years on a straight line basis.
See Note 5 for additional information.
Future Policy Benefits
Future policy benefits for fixed interest divisions of the
variable products, are established utilizing the retrospective
deposit accounting method. Policy reserves represent the premiums
received plus accumulated interest, less mortality and
administration charges. Interest credited to these policies ranged
from 4.00% to 7.25% during 1996.
The unearned revenue reserve represents unearned distribution
fees discussed below. These distribution fees have been deferred and
are amortized over the life of the contract in proportion to its
expected gross profits.
Separate Accounts
Assets and liabilities of the separate accounts reported in the
accompanying balance sheets represent funds that are separately
administered principally for variable annuity and variable life
contracts. Contractholders, rather than the Company, bear the
investment risk for variable products. At the direction of the
contractholders, the separate accounts invest the premiums from the
sale of variable annuity and variable life products in shares of
specified mutual funds. The assets and liabilities of the separate
accounts are clearly identified and segregated from other assets and
liabilities of the Company. The portion of the separate account
assets applicable to variable annuity and variable life contracts
cannot be charged with liabilities arising out of any other business
the Company may conduct.
Variable separate account assets carried at fair value of the
underlying investments generally represent contractholder investment
values maintained in the accounts. Variable separate account
liabilities represent account balances for the variable annuity and
variable life contracts invested in the separate accounts. Net
investment income and realized and unrealized capital gains and
losses related to separate account assets are not reflected in the
accompanying Statement of Income.
76
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Product charges recorded by the Company from variable annuity and
variable life products consist of charges applicable to each
contract for mortality and expense risk, cost of insurance, contract
administration and surrender charges. In addition, some variable
annuity and all variable life contracts provide for a distribution
fee collected for a limited number of years after each premium
deposit. Revenue recognition of collected distribution fees is
amortized over the life of the contract in proportion to its
expected gross profits. The balance of unrecognized revenue related
to the distribution fees is reported as an unearned revenue reserve.
Deferred Income Taxes
Deferred tax assets or liabilities are computed based on the
difference between the financial statement and income tax bases of
assets and liabilities using the enacted marginal tax rate. Deferred
tax assets or liabilities are adjusted to reflect the pro forma
impact of unrealized gains and losses on equity securities and fixed
maturity securities the Company has designated as available for sale
under SFAS No. 115. Changes in deferred tax assets or liabilities
resulting from this SFAS No. 115 adjustment are charged or credited
directly to stockholder's equity. Deferred income tax expenses or
credits reflected in the Company's Statement of Income are based on
the changes in the deferred tax asset or liability from period to
period (excluding the SFAS No. 115 adjustment).
Dividend Restrictions
Golden American's ability to pay dividends to its parent is
restricted because prior approval of insurance regulatory
authorities is required for payment of dividends to the stockholder
which exceed an annual limitation. During 1997, Golden American
could pay dividends to its parent of approximately $2,186,000
without prior approval of statutory authorities. The Company has
maintained adequate statutory capital and surplus and has not used
surplus relief or financial reinsurance, which have come under
scrutiny by many state insurance departments.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the preparation period. Actual results
could differ from those estimates.
Management is required to utilize historical experience and
assumptions about future events and circumstances in order to
develop estimates of material reported amounts and disclosures.
Included among the material (or potentially material) reported
amounts and disclosures that require extensive use of estimates and
assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values
of policyholder liabilities, (2) policyholder liabilities, (3)
deferred policy acquisition costs and present value of in force
acquired, (4) fair values of assets and liabilities recorded as a
result of acquisition transactions, (5) asset valuation allowances,
(6) guaranty fund assessment accruals, (7) deferred tax benefits
(liabilities) and (8) estimates for commitments and contingencies
including legal matters, if a liability is anticipated and can be
reasonably estimated. Estimates and assumptions regarding all of the
preceding are inherently subject to change and are reassessed
periodically. Changes in estimates and assumptions could materially
impact the financial statements.
Reclassification
Certain amounts in the 1995 and 1994 financial statements have
been reclassified to conform to the 1996 financial statement
presentation.
77
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related
statutory-basis financial statements principally as follows: (1)
acquisition costs of acquiring new business are deferred and
amortized over the life of the policies rather than charged to
operations as incurred; (2) an asset representing the present value
of future cash flows from insurance contracts acquired was
established as a result of an acquisition and is amortized and
charged to expense; (3) future policy benefit reserves for the fixed
interest divisions of the variable products are based on full
account values, rather than the greater of cash surrender value or
amounts derived from discounting methodologies utilizing statutory
interest rates; (4) reserves are reported before reduction for
reserve credits related to reinsurance ceded and a receivable is
established, net of an allowance for uncollectible amounts, for
these credits rather than presented net of these credits; (5) fixed
maturity investments are designated as "available for sale" and
valued at fair value with unrealized appreciation/depreciation, net
of adjustments to deferred income taxes (if applicable) and deferred
policy acquisition costs, credited/charged directly to stockholder's
equity rather than valued at amortized cost; (6) the carrying value
of fixed maturity securities is reduced to fair value by a charge to
realized losses in the Statements of Income when declines in
carrying value are judged to be other than temporary, rather than
through the establishment of a formula-determined statutory
investment reserve (carried as a liability), changes in which are
charged directly to surplus; (7) deferred income taxes are provided
for the difference between the financial statement and income tax
bases of assets and liabilities; (8) net realized gains or losses
attributed to changes in the level of interest rates in the market
are recognized when the sale is completed rather than deferred and
amortized over the remaining life of the fixed maturity security;
(9) a liability is established for anticipated guaranty fund
assessments, net of related anticipated premium tax credits, rather
than capitalized when assessed and amortized in accordance with
procedures permitted by insurance regulatory authorities; (10)
revenues for variable annuity and variable life products consist of
policy charges for the cost of insurance, policy administration
charges, amortization of policy initiation fees and surrender
charges assessed rather than premiums received; and (11) assets and
liabilities are restated to fair values when a change in ownership
occurs, with provisions for goodwill and other intangible assets,
rather than continuing to be presented at historical cost.
Net income (loss) for Golden American, as determined in
accordance with statutory accounting practices was $(9,188,000) in
1996, $(4,117,000) in 1995 and $(11,260,000) in 1994. Total
statutory capital and surplus was $80,430,000 at December 31, 1996
and $66,357,000 at December 31, 1995.
78
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
3. INVESTMENT OPERATIONS
Investment Results
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD FOR THE FOR THE
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 | 13, 1996 1995 1994
----------------- | --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities..................... $5,083 | $4,507 $1,610 $142
Equity securities.................... 103 | -- -- 1
Mortgage loans on real estate........ 203 | -- -- --
Policy loans......................... 78 | 73 56 11
Short-term investments............... 441 | 341 899 226
Other, net........................... 2 | 22 148 99
Funds held in escrow................. -- | 145 166 83
------ | ------ ------ ----
Gross investment income.............. 5,910 | 5,088 2,879 562
Less investment expenses............. (115) | (98) (61) (2)
------ | ------ ------ ----
Net investment income................ $5,795 | $4,990 $2,818 $560
====== | ====== ====== ====
</TABLE>
Realized gains (losses) are as follows:
<TABLE>
<CAPTION>
REALIZED*
-------------------------------------------------------------
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 | 13, 1996 1995 1994
----------------- | --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities: |
Available for sale.................. $42 | $(420) $297
Held for investment................. -- | -- -- $ 2
Equity securities.................... -- | -- -- 63
--- | ----- ---- ---
Realized gains (losses) on |
investments........................ $42 | $(420) $297 $65
=== | ===== ==== ===
</TABLE>
________________
* See Note 6 for the income tax effects attributable to
realized gains and losses on investments.
79
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
The change in unrealized appreciation (depreciation) on
securities at fair value is as follows:
<TABLE>
<CAPTION>
UNREALIZED
--------------------------------------------------------------
POST-ACQUISITION | PRE-ACQUISITION
------------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996** | 13, 1996 1995 1994
------------------- | --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed maturities: |
Available for sale................ $410 | $(2,087) $ 958 $ (65)
Held for investment............... -- | -- 90 --
Equity securities.................. (3) | 1 3 (63)
---- | ------- ------ -----
Unrealized appreciation |
(depreciation) of securities..... $407 | $(2,086) $1,051 $(128)
==== | ======= ====== =====
</TABLE>
________________
** On August 13, 1996, all fixed maturities and equity
securities in the Company's investment portfolio were marked to
market.
At December 31, 1996 and December 31, 1995, amortized cost, gross
unrealized gains and losses and estimated fair values of fixed
maturity securities, all of which are designated as available for
sale, are as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1996 COST GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government and governmental
agencies and authorities:
Mortgage-backed securities.... $ 70,902 $ 122 $(247) $ 70,777
Other......................... 3,082 2 (4) 3,080
Public utilities................. 35,893 193 (38) 36,048
Investment grade corporate....... 134,487 586 (466) 134,607
Below investment grade
corporate....................... 25,921 249 (56) 26,114
Mortgage-backed securities....... 4,868 69 -- 4,937
-------- ------ ----- --------
Total............................ $275,153 $1,221 $(811) $275,563
======== ====== ===== ========
</TABLE>
<TABLE>
<CAPTION>
PRE-ACQUISITION
-----------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
DECEMBER 31, 1995 COST GAINS LOSSES VALUE
----------------- --------- ---------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. government and governmental
agencies and authorities--Other $13,334 $176 $13,510
Public utilities................. 5,276 26 5,302
Investment grade corporate....... 27,042 700 $(31) 27,711
Mortgage-backed securities....... 3,019 87 -- 3,106
------- ---- ---- -------
Total............................ $48,671 $989 $(31) $49,629
======= ==== ==== =======
</TABLE>
At December 31, 1996, net unrealized investment gains on fixed
maturities designated as available for sale totaled $410,000. This
appreciation caused an increase to stockholder's equity of $265,000
80
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
at December 31, 1996 (net of deferred income taxes of $145,000). No
fixed maturity securities were designated as held for investment at
December 31, 1996 or 1995. Short-term investments with maturities of
30 days or less have been excluded from the above schedules.
Amortized cost approximates fair value for these securities.
Amortized cost and estimated fair value of fixed maturities
designated as available for sale, by contractual maturity, at
December 31, 1996, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
POST-ACQUISITION
-------------------
ESTIMATED
AMORTIZED FAIR
DECEMBER 31, 1996 COST VALUE
----------------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Due within one year...................................... $ 15,908 $ 15,930
Due after one year through five years.................... 122,958 123,487
Due after five years through ten years................... 60,517 60,432
-------- --------
199,383 199,849
Mortgage-backed securities............................... 75,770 75,714
-------- --------
Total.................................................... $275,153 $275,563
======== ========
</TABLE>
An analysis of sales, maturities and principal repayments of the
Company's fixed maturities portfolio is as follows:
<TABLE>
<CAPTION>
GROSS GROSS PROCEEDS
AMORTIZED REALIZED REALIZED FROM
COST GAINS LOSSES SALE
--------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
For the period August 14, 1996 through
December 31, 1996:
Scheduled principal repayments, calls
and tenders......................... $ 1,612 $ 1,612
Sales................................. 45,799 $115 $ (73) 45,841
------- ---- ----- -------
Total.................................. $47,411 $115 $ (73) $47,453
======= ==== ===== =======
For the period January 1, 1996 through
August 13, 1996:
Scheduled principal repayments, calls
and tenders......................... $ 1,801 $ 1,801
Sales................................. 53,710 $152 $(572) 53,290
------- ---- ----- -------
Total.................................. $55,511 $152 $(572) $55,091
======= ==== ===== =======
Year ended December 31, 1995:
Scheduled principal repayments, calls
and tenders......................... $20,279 $305 $ (16) $20,568
Sales................................. 3,450 8 -- 3,458
------- ---- ----- -------
Total.................................. $23,729 $313 $ (16) $24,026
======= ==== ===== =======
Year ended December 31, 1994:
Scheduled principal repayments,
tenders (available for sale only) and
calls--held for investment.......... $ 319 $ 2 $ -- $ 321
------- ---- ----- -------
Total.................................. $ 319 $ 2 $ -- $ 321
======= ==== ===== =======
</TABLE>
Investment Valuation Analysis: The company analyzes its
investment portfolio at least quarterly in order to determine if the
carrying value of any of its investments has been impaired. The
carrying
81
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
value of debt and equity securities is written down to fair
value by a charge to realized losses when an impairment in value
appears to be other than temporary. During 1996 and 1995, no
investments were identified as having an impairment other than
temporary.
Investments on Deposit: At December 31, 1996 and 1995, affidavits
of deposits covering bonds with a par value of $6,605,000 and
$2,695,000, respectively, were on deposit with regulatory
authorities pursuant to certain statutory requirements.
Investment Diversifications: The Company's investment policies
related to its investment portfolio require diversification by asset
type, company and industry and set limits on the amount which can be
invested in an individual issuer. Such policies are at least as
restrictive as those set forth by regulatory authorities. Fixed
maturity investments included investments in various government
bonds and government or agency mortgage-backed securities (27% in
1996 and 1995), public utilities (13% in 1996, 11% in 1995), basic
industrials (30% in 1996, 20% in 1995) and financial companies (18%
in 1996, 30% in 1995). Mortgage loans on real estate have been
analyzed by geographical location and 17% of all mortgage loans are
in Georgia. There are no other concentrations of mortgage loans in
any state exceeding ten percent in 1996. Mortgage loans on real
estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (36% in 1996),
industrial buildings (31% in 1996) and multi-family residential
buildings (27% in 1996). Equity securities and investments accounted
for by the equity method are not significant to the Company's
overall investment portfolio.
No investment in any person or its affiliates (other than bonds
issued by agencies of the United States government) exceeded ten
percent of stockholder's equity at December 31, 1996.
4. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments" requires disclosure of estimated fair value of all
financial instruments, including both assets and liabilities
recognized and not recognized in a Company's balance sheet, unless
specifically exempted. SFAS No. 119, "Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments"
requires additional disclosures about derivative financial
instruments. Most of the Company's investments, insurance
liabilities and debt fall within the standards' definition of a
financial instrument. Although the Company's insurance liabilities
are specifically exempted from this disclosure requirement,
estimated fair value disclosure of these liabilities is also
provided in order to make the disclosures more meaningful.
Accounting, actuarial and regulatory bodies are continuing to study
the methodologies to be used in developing fair value information,
particularly as it relates to such things as liabilities for
insurance contracts. Accordingly, care should be exercised in
deriving conclusions about the Company's business or financial
condition based on the information presented herein.
The Company closely monitors the composition and yield of its
invested assets, the duration and interest credited on insurance
liabilities and resulting interest spreads and timing of cash flows.
These amounts are taken into consideration in the Company's overall
management of interest rate risk, which attempts to minimize
exposure to changing interest rates through the matching of
investment cash flows with amounts expected to be due under
insurance contracts. As discussed below, the Company has used
discount rates in its determination of fair values for its
liabilities which are consistent with market yields for related
assets. The use of the asset market yield is consistent with
management's opinion that the risks inherent in its asset and
liability portfolios are similar. This assumption, however, might
not result in values consistent with those obtained through an
actuarial appraisal of the Company's business or values that might
arise in a negotiated transaction.
82
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
The following compares carrying values as shown for financial
reporting purposes with estimated fair values.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
CARRYING ESTIMATED
VALUE FAIR VALUE
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Assets
Balance sheet financial assets:
Fixed maturities available for sale................. $ 275,563 $ 275,563
Equity securities................................... 33 33
Mortgage loans on real estate....................... 31,459 30,979
Short-term investments.............................. 12,631 12,631
Cash and cash equivalents........................... 5,839 5,839
Other receivables................................... 4,214 4,214
Separate account assets............................. 1,207,247 1,207,247
---------- ----------
1,536,986 1,536,506
Deferred policy acquisition costs.................... 11,468 --
Present value of in force acquired................... 83,051 --
Goodwill............................................. 38,665 --
Deferred income taxes on fair value adjustments...... -- 7,741
Non-financial assets................................. 3,095 3,095
---------- ----------
Total assets......................................... $1,673,265 $1,547,342
========== ==========
Liabilities and Stockholder's Equity
Balance sheet financial liabilities:
Future policy benefits (net of related policy
loans):
Annuity products................................... $ 280,076 $ 253,012
Interest sensitive life products................... 2,640 2,368
---------- ----------
282,716 255,380
Surplus note......................................... 25,000 28,878
Separate account liabilities......................... 1,207,247 1,119,158
---------- ----------
1,514,963 1,403,416
Non-financial liabilities............................ 17,818 17,818
---------- ----------
Total liabilities.................................... 1,532,781 1,421,234
Stockholder's equity................................. 140,484 126,108
---------- ----------
Total liabilities and stockholder's equity........... $1,673,265 $1,547,342
========== ==========
</TABLE>
The following methods and assumptions were used by the Company in
estimating fair values.
Fixed maturities: Estimated fair values of publicly traded
securities are as reported by an independent pricing service.
Estimated fair values of conventional mortgage-backed securities not
actively traded in a liquid market are estimated using a third party
pricing system. This pricing system uses a matrix calculation
assuming a spread over U.S. Treasury bonds based upon the expected
average lives of the securities.
Equity securities: Estimated fair values of equity securities,
which consist of the Company's investment in the portfolios
underlying its separate accounts, are based upon the quoted fair
value of the individual securities comprising the individual
portfolios underlying the separate accounts. For equity securities
not actively traded, estimated fair values are based upon values of
issues of comparable yield and quality.
Mortgage loans on real estate: Fair values are estimated by
discounting expected cash flows, using interest rates currently
offered for similar loans.
83
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Short-term investments, cash and cash equivalents, and other
receivables: Carrying values reported in the Company's historical
cost basis balance sheet approximate estimated fair value for these
instruments, due to their short-term nature.
Deferred policy acquisition costs, present value of in force
acquired and goodwill: For historical cost purposes, the recovery of
policy acquisition costs and present value of in force acquired is
based on the realization, among other things, of future interest
spreads and gross premiums on in force business. Because these cash
flows are considered in the computation of the future policy benefit
cash flows, the deferred policy acquisition cost and present value
of in force acquired balances do not appear on the estimated fair
value balance sheet. Goodwill does not appear in the estimated fair
value balance sheet because no cash flows are related to this asset.
Separate account assets: Separate account assets represent the
estimated fair values of the underlying securities in the Company's
historical cost and estimated fair value basis balance sheets.
Future policy benefits: Estimated fair values of the Company's
liabilities for future policy benefits for the fixed interest
division of the variable products are based upon discounted cash
flow calculations. Cash flows of future policy benefits are
discounted using the market yield rate of the assets supporting
these liabilities. Estimated fair values are presented net of the
estimated fair value of corresponding policy loans due to the
interdependent nature of the cash flows associated with these items.
Surplus note: Estimated fair value of the Company's surplus note
was based upon discounted future cash flows using a discount rate
approximating the Company's return on invested assets.
Separate account liabilities: Separate account liabilities are
reported at full account value in the Company's historical cost
balance sheet. Estimated fair values of separate account liabilities
are based upon assumptions using an estimated long-term average
market rate of return to discount future cash flows. The reduction
in fair values for separate account liabilities reflect the present
value of future revenue from product charges, distribution fees or
surrender charges.
Deferred income taxes on fair value adjustments: Deferred income
taxes have been reported at the statutory rate for the differences
(except for those attributed to permanent differences) between the
carrying value and estimated fair value of assets and liabilities
set forth herein.
Non-financial assets and liabilities: Values are presented at
historical cost. Non-financial assets consist primarily of property
and equipment, receivable from the Separate Accounts and restricted
stock assets. Non-financial liabilities consist primarily of
outstanding checks, guaranty fund assessments payable, payables for
investments and suspense accounts.
At December 31, 1995, the carrying amounts reported for the
financial instruments consisting primarily of short-term
investments, policy loans, the adjustable principal amount
promissory note and insurance and annuity reserves approximate fair
value.
SFAS No. 107 and SFAS No. 119 require disclosure of estimated
fair value information about financial instruments, whether or not
recognized in the consolidated balance sheets, for which it is
practicable to estimate that value. In cases where quoted market
prices are not available, estimated fair values are based on
estimates using present value or other valuation techniques. Those
techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many
cases, could not be realized in immediate settlement of the
instrument. The above presentation should not be viewed as an
appraisal as there are several factors, such as the fair value
associated with customer or agent relationships and other intangible
items, which
84
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
have not been considered. In addition, interest rates
and other assumptions might be modified if an actual appraisal were
to be performed. Accordingly, the aggregate estimated fair value
-----------------------------------------------
amounts presented herein are limited by each of these factors and do
- --------------------------------------------------------------------
not purport to represent the underlying value of the Company.
- -------------------------------------------------------------
5. ACQUISITION
Transaction: On August 13, 1996, Equitable acquired all of the
outstanding capital stock of BT Variable from Whitewood, a wholly
owned subsidiary of Bankers Trust, pursuant to the terms of the
Purchase Agreement dated as of May 3, 1996 between Equitable and
Whitewood. In exchange for the outstanding capital stock of BT
Variable, Equitable paid the sum of $93,000,000 in cash to Whitewood
in accordance with the terms of the Purchase Agreement. Equitable
also paid the sum of $51,000,000 in cash to Bankers Trust to retire
certain debt owed by BT Variable to Bankers Trust pursuant to a
revolving credit arrangement. Subsequent to the acquisition, the BT
Variable, Inc. name was changed to EIC Variable, Inc.
Accounting Treatment: The acquisition was accounted for as a
purchase resulting in a new basis of accounting, reflecting
estimated fair values for assets and liabilities at August 13, 1996.
The purchase price was allocated to the three companies purchased--
BT Variable, DSI and Golden American. Goodwill was established for
the excess of the acquisition cost over the fair value of the net
assets acquired and pushed down to Golden American. The acquisition
cost is preliminary with respect to the final settlement of taxes
with Bankers Trust and estimated expenses and, as a result, goodwill
may change. The allocation of the purchase price to Golden American
was approximately $139,872,000. The amount of goodwill relating to
the acquisition was $39,254,000 at the acquisition date and is being
amortized over 25 years on a straight line basis. The carrying value
of goodwill will be reviewed periodically for any indication of
impairment in value.
Pro Forma Information (Unaudited): The following pro forma
information is presented as if the acquisition had occurred on
January 1, 1995. The information is combined to reflect the purchase
accounting in the pre-acquisition periods of January 1, 1996 through
August 13, 1996 and for the year ended December 31, 1995. This
information is intended for informational purposes only and may not
be indicative of the Company's future results of operations.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1996 1995
------- -------
(DOLLARS IN
THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Revenues..................................................... $35,955 $25,149
Net income................................................... 799 1,093
</TABLE>
The primary pro forma effects are revised amortization of
deferred policy acquisition costs, present value of in force
acquired, unearned revenue, goodwill and the elimination of deferred
tax benefits.
Present Value of In Force Acquired: As part of the acquisition, a
portion of the acquisition cost was allocated to the right to
receive future cash flows from the insurance contracts existing with
Golden American at the date of acquisition. This allocated cost
represents the present value of in force acquired ("PVIF") which
reflects the value of those purchased policies calculated by
discounting the actuarially determined expected future cash flows at
the discount rate determined by Equitable.
85
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
-----------------|-----------------------------------------
FOR THE PERIOD |FOR THE PERIOD
AUGUST 14, 1996 |JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996|AUGUST 13, 1996 1995 1994
-----------------|--------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Beginning balance.................... $85,796 | $ 6,057 $ 7,620 $ 9,784
Imputed interest..................... 2,465 | 273 548 696
Amortization......................... (5,210) | (1,224) (2,100) (2,860)
Adjustment for unrealized gains on |
available for sale securities...... -- | 11 (11) --
------- | ------- ------- -------
Ending balance....................... $83,051 | $ 5,117 $ 6,057 $ 7,620
======= | ======= ======= =======
</TABLE>
Pre-Acquisition PVIF represents the remaining value assigned to
in force contracts when Bankers Trust purchased Golden American from
Mutual Benefit on September 30, 1992. See Note 8, contingent
liability for additional information.
Interest is imputed on the unamortized balance of PVIF at rates
of 7.70% to 7.80% for the period August 14, 1996 through December
31, 1996. PVIF is charged to expense and adjusted for the unrealized
gains (losses) on available for sale securities. Based on current
conditions and assumptions as to the future events on acquired
policies in force, the expected approximate net amortization for the
next five years, relating to the balance of the PVIF as of December
31, 1996, is as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
1997.................................................. $9,664
1998.................................................. 10,109
1999.................................................. 9,243
2000.................................................. 7,919
2001.................................................. 6,798
</TABLE>
6. INCOME TAXES
The Company files a federal income tax return separate from its
parent company. Under the Internal Revenue Service Code, a newly
acquired insurance company must file a separate return for 5 years.
Deferred income taxes have been established based upon the temporary
differences, the reversal of which will result in taxable or
deductible amounts in future years when the related asset or
liability is recovered or settled.
At December 31, 1995 and 1994, Golden American had net operating
loss ("NOL") carryforwards for federal income tax purposes of
approximately $22,600,000 and $17,400,000, respectively. As a result
of the election made in connection with the acquisition, the Company
will be treated as a new taxpayer commencing on August 14, 1996. For
the period August 14, 1996 through December 31, 1996, the Company
incurred a NOL of $4,725,000.
86
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Income Tax Expense: Income tax expenses (credits) are included in
the consolidated financial statements as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | ---------------
FOR THE PERIOD | FOR THE PERIOD
AUGUST 14, 1996 | JANUARY 1, 1996
THROUGH | THROUGH AUGUST
DECEMBER 31, 1996 | 13, 1996
----------------- | ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Taxes provided in consolidated statements of income--deferred.. $220 | $(1,463)
Taxes provided in consolidated statement of changes in |
stockholder's equity on unrealized gains--deferred........... 145 | --
---- | -------
$365 | $(1,463)
==== | =======
</TABLE>
Income tax expense (credits) attributed to realized gains and
losses on investments amounted to $15,000 and $(147,000) and for the
periods August 14, 1996 through December 31, 1996, and January 1,
1996 through August 13, 1996, respectively. The effective tax rate
on income before income taxes and equity income (loss) is different
from the prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
----------------- | -----------------------------------------
FOR THE PERIOD | FOR THE PERIOD
AUGUST 14, 1996 | JANUARY 1, 1996 YEAR ENDED YEAR ENDED
THROUGH | THROUGH AUGUST DECEMBER 31, DECEMBER 31,
DECEMBER 31, 1996 | 13, 1996 1995 1994
----------------- | --------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Income before income taxes........... $570 | $ 1,736 $3,364 $2,222
Income tax at federal statutory rate. 200 | 607 1,177 778
Tax effect (decrease) of: |
Realization of NOL carryforwards.... -- | (1,214) -- --
Dividends received deduction........ -- | -- (350) (368)
Other items......................... 20 | -- 17 (210)
Valuation allowance................. -- | (856) (844) (200)
---- | ------- ------ ------
Income tax expense (benefit)......... $220 | $(1,463) $ -- $ --
==== | ======= ====== ======
</TABLE>
87
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Deferred Income Taxes: The tax effect of temporary differences
giving rise to the Company's deferred income tax assets and
liabilities at December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION | PRE-ACQUISITION
---------------- | ---------------
December 31, 1996 | 1995
- ------------ ----------------- |----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets: |
Future policy benefits......................................... $19,102 | $15,520
Deferred policy acquisition costs.............................. 1,985 | 3,666
Goodwill....................................................... 5,918 | --
Net operating loss carryforwards............................... 1,653 | 7,891
Other.......................................................... 235 | 57
------- | -------
28,893 | 27,134
Deferred tax liabilities: |
Net unrealized appreciation of available for sale fixed |
maturity securities......................................... 145 | --
Deferred policy acquisition costs.............................. -- | 23,560
Unamortized cost assigned to present value of in force acquired 29,068 | 2,120
Other.......................................................... 45 | 598
------- | -------
29,258 | 26,278
Valuation allowance, for deferred tax assets.................... -- | (856)
------- | -------
Deferred income tax liability................................... $ 365 | $ --
======= | =======
</TABLE>
7. RELATED PARTY TRANSACTIONS
DSI acts as the principal underwriter (as defined in the
Securities Act of 1933 and the Investment Company Act of 1940, as
amended) of the variable insurance products issued by Golden
American which as of December 31, 1996 are sold primarily through
two broker/dealer institutions. For the periods August 14, 1996,
through December 31, 1996 and January 1, 1996 through August 13,
1996, Golden American paid commissions to DSI totaling $9,995,000
and $17,070,000, respectively. For the years ended December 31,
1995, and 1994, commissions paid by Golden American to DSI
aggregated $8,440,000 and $17,569,000, respectively.
Golden American charged DSI for various expenses and all other
general and administrative costs, first on the basis of direct
charges when identifiable, with the remainder allocated based on the
estimated amount of time spent by Golden American's employees on
behalf of DSI. For the year ended December 31, 1994 expenses
allocated to DSI were $1,983,000.
Golden American provides certain managerial and supervisory
services to DSI. In 1996 and 1995, this fee was calculated as a
percentage of average assets in the variable separate accounts. For
the periods August 14, 1996 through December 31, 1996 and January 1,
1996 through August 13, 1996 the fee was $877,000 and $1,390,000,
respectively. This fee was $987,000 for 1995.
On August 14, 1996, the Company began purchasing investment
management services from an affiliate. Payments for these services
totaled $72,000 through December 31, 1996. On August 14, 1996, all
employees of Golden American, except wholesalers, became statutory
employees of Equitable Life Insurance Company of Iowa, an affiliate.
Surplus Note: On December 17, 1996, Golden American issued a
surplus note in the amount of $25,000,000 to Equitable. The note
matures on December 17, 2026 and will accrue interest of 8.25% per
88
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
annum until paid. The note and accrued interest thereon shall be
subordinate to payments due to policyholders, claimant and
beneficiary claims, as well as debts owed to all other classes of
debtors of Golden American. Any payment of principal made shall be
subject to the prior approval of the Delaware Insurance
Commissioner. On December 17, 1996, Golden American contributed the
$25,000,000 to First Golden acquiring 200,000 shares of common stock
(100% of outstanding stock) of First Golden.
Line of Credit: Golden American maintains a line of credit
agreement with Equitable to facilitate the handling of unusual
and/or unanticipated short-term cash requirements. Under the current
agreement, which became effective December 1, 1996 and expires on
December 31, 1997, Golden American can borrow up to $25,000,000.
Interest on any borrowings is charged at the rate of Equitable's
monthly average aggregate cost of short-term funds plus 1.00%. For
the period August 14 through December 31, 1996, the Company paid
$85,000 of interest under this agreement. At December 31, 1996, no
amounts were outstanding under this agreement.
Short-term Debt: All short-term debt was repaid as of December
30, 1994. Interest paid during 1994 was $1,962,000. The repayment of
amounts under this loan had been guaranteed by Bankers Trust.
Stockholder's Equity: On September 23, 1996, EIC Variable, Inc.
(formally known as BT Variable, Inc.) contributed $50,000,000 of
Preferred Stock to the Company's additional paid-in capital.
8. COMMITMENTS AND CONTINGENCIES
Contingent Liability: In a transaction that closed on September
30, 1992, Bankers Trust Company ("Bankers Trust") acquired from
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual
Benefit"), in accordance with the terms of an Exchange Agreement,
all of the issued and outstanding capital stock of Golden American
and DSI and certain related assets for consideration with an
aggregate value of $13,200,000 and contributed them to BT Variable.
The transaction involved settlement of pre-existing claims of
Bankers Trust against Mutual Benefit. The ultimate value of these
claims has not yet been determined by the Superior Court of New
Jersey and, prior to August 13, 1996, was contingently supported by
a $5,000,000 note payable from Golden American and a $6,000,000
letter of credit from Bankers Trust. Bankers Trust had estimated
that the contingent liability due from Golden American amounted to
$439,000 at August 13, 1996 and December 31, 1995. At August 13,
1996 the balance of the escrow account established to fund the
contingent liability was $4,293,000 ($4,150,000 at December 31,
1995).
On August 13, 1996, Bankers Trust made a cash payment to Golden
American in an amount equal to the balance of the escrow account
less the $439,000 contingent liability discussed above. In exchange,
Golden American irrevocably assigned to Bankers Trust all of Golden
American's rights to receive any amounts to be disbursed from the
escrow account in accordance with the terms of the Exchange
Agreement. Bankers Trust also irrevocably agreed to make all
payments becoming due under the Golden American note and to
indemnify Golden American for any liability arising from the note.
Reinsurance: At December 31, 1996, Golden American had
reinsurance treaties with reinsurers covering a significant portion
of the mortality risks under its variable contracts with
unaffiliated reinsurers. Golden American remains liable to the
extent its reinsurers do not meet their obligations under the
reinsurance agreements. Reinsurance in force for life mortality
risks were $58,368,000 and $24,709,000 at December 31, 1996 and
1995. Included in the accompanying financial statements are net
considerations to reinsurers of $875,000, $600,000, $2,800,000 and
$2,400,000 and net policy benefits recoveries of $654,000,
$1,267,000, $3,500,000 and $1,900,000 for the periods August 14,
1996 through December 31, 1996, and January 1, 1996 through August
13, 1996 and the years ended 1995 and 1994, respectively.
89
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996
Effective June 1, 1994, Golden American entered into a modified
coinsurance agreement with an unaffiliated reinsurer. The
accompanying financial statements are presented net of the effects
of the treaty which increased income by $10,000 and $56,000 for the
periods August 14, 1996 through December 31, 1996 and January 1,
1996 through December 31, respectively. In 1995 and 1994, net income
was reduced by $109,000 and $27,000, respectively.
Guaranty Fund Assessments: Assessments are levied on the Company
by life and health guaranty associations in most states in which the
Company is licensed to cover losses of policyholders of insolvent or
rehabilitated insurers. In some states, these assessments can be
partially recovered through a reduction in future premium taxes. The
Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based upon information
currently available from the National Organization of Life and
Health Insurance Guaranty Associations (NOLHGA), the Company
believes that it is probable these insolvencies will result in
future assessments which could be material to the Company's
financial statements if the Company's reserve is not sufficient. The
Company regularly reviews its reserve for these insolvencies and
updates its reserve based upon the Company's interpretation of
information from the NOLHGA annual report. The associated cost for a
particular insurance company can vary significantly based upon its
fixed account premium volume by line of business and state premiums
levels as well as its potential for premium tax offset. Accordingly,
the Company accrued and charged to expense an additional $291,000
for the period August 14, 1996 through December 31, 1996 and
$480,000 for the period January 1, 1996 through August 13, 1996. At
December 31, 1996, the Company has an undiscounted reserve of
$771,000 to cover estimated future assessments (net of related
anticipated premium tax credits) and has established an asset
totaling $3,000 for assessments paid which may be recoverable
through future premium tax offsets. The Company believes this
reserve is sufficient to cover expected future insurance guaranty
fund assessments, based upon previous premium levels, and known
insolvencies at this time.
Litigation: In the ordinary course of business, the Company is
engaged in litigation, none of which management believes is
material.
Vulnerability from Concentrations: The Company has various
concentrations in its investment portfolio (see Note 3 for further
information). The Company's asset growth, net investment income and
cash flow are primarily generated from the sale of variable products
and associated future policy benefits and separate account
liabilities. A significant portion of the Company's sales are
generated by two broker/dealers. Substantial changes in tax laws
that would make these products less attractive to consumers, extreme
fluctuations in interest rates or stock market returns which may
result in higher lapse experience than assumed, could cause a severe
impact to the Company's financial condition.
Other Commitments: At December 31, 1996, outstanding commitments
to fund mortgage loans on real estate totaled $14,250,000.
90
<PAGE>
<PAGE>
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91
<PAGE>
<PAGE>
(This page has been intentionally left blank.)
92
<PAGE>
<PAGE>
____________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
____________________________________________________________________
TABLE OF CONTENTS
ITEM PAGE
Introduction . . . . . . . . . . . . . . . . 1
Description of Golden American Life
Insurance Company . . . . . . . . . . . . 1
Safekeeping of Assets . . . . . . . . . . . 1
The Administrator . . . . . . . . . . . . . 1
Independent Auditors . . . . . . . . . . . . 2
Distribution of Contracts . . . . . . . . . 2
Performance Information . . . . . . . . . . 3
IRA Partial Withdrawal Option . . . . . . . 9
Other Information . . . . . . . . . . . . . 9
Unaudited Financial Statements of Separate
Account B . . . . . . . . . . . . . . . . 10
Financial Statements of Separate Account B . 10
Financial Statements of The Managed Global
Account of Separate Account D . . . . . . 10
Appendix - Description of Bond Ratings . . . A-1
STATEMENT OF ADDITIONAL INFORMATION
____________________________________________________________________
Please tear off, complete and return the form below to order a free
statement of additional information for the contracts offered under
the prospectus. Address the form to our customer service center; the
address is shown on the cover.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please send me a free copy of the Statement of Additional
Information for Separate Account B
PLEASE PRINT OR TYPE:
NAME: _________________________________________
SOCIAL SECURITY NUMBER: _________________________________________
STREET ADDRESS: _________________________________________
CITY, STATE, ZIP: _________________________________________
(IN 3306 DVA PLUS (2/98)
93
<PAGE>
<PAGE>
(This page has been intentionally left blank.)
<PAGE>
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.50%,
an initial Index Rate ("I") of 7.00%; that a full surrender is
requested three years into the Guarantee Period; that the then Index
Rate for a seven year Guarantee Period ("J") is 8.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of
surrender is $124,230
( $100,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0825 ) ^ ( 2,555 / 365 ) - 1 ) = $9,700
Therefore, the amount paid to you on full surrender is $114,530
( $124,230 - $9,700 ).
EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE
ADJUSTMENT
Assume $100,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate ("I") of 7.00%; that a full surrender is
requested three years into the Guarantee Period; that the then Index
Rate for a seven year Guarantee Period ("J") is 6.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The Accumulation Value of the Fixed Allocation on the date of
surrender is $124,230
( $100,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0625 ) ^ ( 2,555 / 365 ) - 1 ) = $6,270
Therefore, the amount paid to you on full surrender is $130,500
( $124,230 + $6,270 ).
EXAMPLE #3: PARTIAL WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate ("I") of 7.00%; that a partial withdrawal of
$114,530 is requested three years into the Guarantee period; that
the then Index Rate ("J") for a seven year Guarantee Period is 8.0%;
and that no prior transfers or partial withdrawals affecting this
Fixed Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed
Allocation to provide the amount requested.
1. The Accumulation Value of the Fixed Allocation on the date of
withdrawal is $248,459
( $200,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Amount that must be withdrawn =
(( $114,530 / ( 1.07 / 1.0825 ) ^ ( 2,555 / 365 )) = $124,230
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0825 ) ^ ( 2,555 / 365 ) - 1 ) = $9,700
Therefore, the amount of the partial withdrawal paid to you is
$114,530, as requested. The Fixed Allocation will be reduced by the
amount of the partial withdrawal, $114,530, and also reduced by the
Market Value Adjustment of $9,700, for a total reduction in the
Fixed Allocation of $124,230.
A1
<PAGE>
<PAGE>
EXAMPLE #4: PARTIAL WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE
ADJUSTMENT
Assume $200,000 was allocated to a Fixed Allocation with a
Guarantee Period of ten years, a Guaranteed Interest Rate of 7.5%,
an initial Index Rate of 7.0%; that a partial withdrawal of $130,500
requested three years into the Guarantee Period; that the then Index
Rate ("J") for a seven year Guarantee Period is 6.0%; and that no
prior transfers or partial withdrawals affecting this Fixed
Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed
Allocation to provide the amount requested.
1. The Accumulation Value of Fixed Allocation on the date of
surrender is $248,459
( $200,000 X 1.075 ^ 3 )
2. N = 2,555 ( 365 X 7 )
3. Amount that must be withdrawn =
(( $130,500 / ( 1.07 / 1.0625 ) ^ ( 2,555 / 365 )) = $124,230
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0625 ) ^ ( 2,555 / 365 ) - 1 ) = $6,270
Therefore, the amount of the partial withdrawal paid to you is
$130,500, as requested. The Fixed Allocation will be reduced by the
amount of the partial withdrawal, $130,500, but increased by the
Market Value Adjustment of $6,270, for a total reduction in the
Fixed Allocation of $124,230.
A2
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a
stock company domiciled in Wilmington, Delaware
IN 3306 DVA PLUS 2/98
<PAGE>
<PAGE>
<PAGE>
<PAGE>
PART II
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Not applicable.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following provisions regarding the Indemnification of
Directors and Officers of the Registrant are applicable:
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
INCORPORATORS
Delaware General Corporation Law, Title 8, Section 145
provides that corporations incorporated in Delaware may
indemnify their officers, directors, employees or agents
for threatened, pending or past legal action by reason
of the fact he/she is or was a director, officer,
employee or agent. Such indemnification is provided for
under the Company's By-Laws under Article VI.
Indemnification includes all liability and loss suffered
and expenses (including attorneys' fees) reasonably
incurred by such indemnitee. Prepayment of expenses is
permitted, however, reimbursement is required if it is
ultimately determined that indemnification should not
have been given.
DIRECTORS' AND OFFICERS' INSURANCE
The directors, officers, and employees of the
registrant, in addition to the indemnifications
described above, are indemnified through the blanket
liability insurance policy of Registrant's ultimate
parent, ING Groep, N.V., or directly by Equitable of
Iowa Companies, Inc. for liabilities not covered through
the indemnification provided under the By-Laws.
SECURITIES AND EXCHANGE COMMISSION POSITION ON
INDEMNIFICATION
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
<PAGE>
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
1 Underwriting Agreement Between Golden American Life
Insurance Company and Directed Services, Inc.
3(a) Articles of Incorporation of Golden American Life
Insurance Company.
3(b) (i) By-laws of Golden American Life Insurance
Company.
(ii) By-laws of Golden American Life Insurance
Company, as amended.
(iii) Certificate of Amendment of the By-laws of MB
Variable Life Insurance Company, as amended.
(iv) By-laws of Golden American, as amended
(12/21/93).
4(a) Withdrawn/Not Applicable.
4(b) Withdrawn/Not Applicable.
4(c) Withdrawn/Not Applicable.
4(d) Withdrawn/Not Applicable.
4(e) Individual Deferred Combination Variable and Fixed
Annuity Contract. (2)
4(f) Discretionary Group Deferred Combination Variable
and Fixed Annuity Contract. (2)
4(g) Individual Deferred Variable Annuity Contract. (2)
4(h) External Exchange Program Endorsement. (1)
4(i) DVA Update Program Schedule Page. (1)
4(j) Individual Retirement Annuity Rider Page. (1)
4(k) Individual Deferred Combination Variable and Fixed
Annuity Application. (2)
4(l) Group Deferred Combination Variable and Fixed
Annuity Enrollment Form. (2)
4(m) Individual Deferred Variable Annuity Application. (2)
4(n) ROTH Individual Retirement Annuity Rider.
5 Opinion and Consent of Myles R. Tashman, Esq.
23(a) Consent of Sutherland, Asbill & Brennan LLP
23(b) Consent of Ernst & Young LLP, independent auditors.
24(a) Powers of Attorney.
27 Financial Data Schedule
_______________
(1) Incorporated herein by reference to Amendment No. 3 of
this registration statement filed with the Securities
and Exchange Commission on September 7, 1995.
(2) Incorporated herein by reference to Amendment No. 4 of
this registration statement filed with the Securities
and Exchange Commission on May 1, 1996.
<PAGE>
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE.
(1) All financial statements are included in the Prospectus
as indicated therein
(2) Schedules I, III and IV follow:
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1996 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States Government and govern-
mental agencies and authorities $73,984 $73,857 $73,857
Public utilities 35,893 36,048 36,048
Investment grade corporate 134,487 134,607 134,607
Below investment grade corporate 25,921 26,114 26,114
Mortgage-backed securities 4,868 4,937 4,937
___________ ___________ ___________
Total fixed maturities, available
for sale 275,153 275,563 275,563
Equity securities:
Common stocks: industrial, miscel-
laneous and all other 36 33 33
Mortgage loans on real estate 31,459 31,459
Policy loans 4,634 4,634
Short-term investments 12,631 12,631
___________ ___________
Total investments $323,913 $324,320
=========== ===========
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal for policy loans and
mortgage loans on real estate, adjusted for amortization of premiums
and accrual of discounts.
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A B C D E F
________________________________________________________________________________
Future
Policy Other
De- Benefits, Policy
ferred Losses, Claims Insur-
Policy Claims Un- and ance
Acqui- and earned Bene- Premiums
sition Loss Revenue fits and
Segment Costs Expenses Reserve Payable Charges
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION
________________________________________________________________________________
Period August 14, 1996
through December 31, 1996:
Life insurance $11,469 $285,287 $2,063 -- $8,768
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance 85,265 176,914 8,826 -- 12,259
Year ended December 31, 1995:
Life insurance 67,314 33,673 6,556 -- 18,388
Year ended December 31, 1994:
Life insurance 60,662 1,051 1,759 -- 17,519
</TABLE>
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION - CONTINUED
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A G H I J K
________________________________________________________________________________
Amorti-
Benefits zation
Claims, of
Losses Deferred
Net and Policy Other
Invest- Settle- Acqui- Opera-
ment ment sition ting Premiums
Segment Income Expenses Costs Expenses Written
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
POST-ACQUISITION
________________________________________________________________________________
Period August 14, 1996
through December 31, 1996:
Life insurance $5,795 $7,003 $244 $8,066 --
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance 4,990 5,270 2,436 8,847 --
Year ended December 31, 1995:
Life insurance 2,818 3,146 2,710 13,333 --
Year ended December 31, 1994:
Life insurance 560 35 4,608 9,317 --
</TABLE>
SCHEDULE IV
REINSURANCE
GOLDEN AMERICAN LIFE INSURANCE COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
_______________________________________________________________________________
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
At December 31, 1996:
Life insurance in
force $86,192,000 $58,368,000 -- $27,824,000 --
============ ============ ========= ============ ==========
At December 31, 1995:
Life insurance in
force $38,383,000 $24,709,000 -- $13,674,000 --
============ ============ ========= ============ ==========
At December 31, 1994:
Life insurance in
force $30,227,000 $23,061,000 -- $7,166,000 --
============ ============ ========= ============ ==========
</TABLE>
<PAGE>
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement
shall be deemed to be a new registration statement
relating to the securities offered therein, and the
offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
<PAGE>
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant has
duly caused this amendment to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilmington and State of Delaware,
on the 11th day of February, 1998.
GOLDEN AMERICAN LIFE
INSURANCE COMPANY
(Registrant)
By:
------------------------
Terry L. Kendall*
President and Chief
Executive Officer
Attest: /s/Marilyn Talman
----------------------
Marilyn Talman
Vice President, Associate General Counsel
and Assistant Secretary
As required by the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in
the capacities indicated on February 12, 1998.
Signature Title
President, Director
- -------------------- and Chief Executive
Terry L. Kendall* Officer of Depositor
Senior Vice President,
- -------------------- Director and Chief
Susan B. Watson* Financial Officer
DIRECTORS OF DEPOSITOR
- ---------------------- -----------------------
Paul E. Larson* Beth B. Neppl*
- ---------------------- -----------------------
Myles R. Tashman* Paul R. Schlaack*
By: /s/ Marilyn Talman, Attorney-in-Fact
------------------------------------------
Marilyn Talman
_________________________
*Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
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EXHIBIT INDEX
ITEM EXHIBIT PAGE #
1 Underwriting Agreement Between Golden American Life
Insurance Company and Directed Services, Inc.. . . . . . . EX-1
3(a) Articles of Incorporation of Golden American Life
Insurance Company. . . . . . . . . . . . . . . . . . . . . EX-3.A
3(b)(i) By-laws of Golden American Life Insurance
Company.. . . . . . . . . . . . . . . . . . . . . . .. . . EX-3.Bi
3(b)(ii) By-laws of Golden American Life Insurance
Company, as amended. . . . . . . . . . . . . . . . . . . . EX-3.Bii
3(b)(iii) Certificate of Amendment of the By-laws of MB
Variable Life Insurance Company, as amended. . . . . . . . EX-3.Biii
3(b)(iv) By-laws of Golden American, as amended
(12/21/93) . . . . . . . . . . . . . . . . . . . . . . . . EX-3.Biv
4(n) ROTH Individual Retirement Annuity Rider . . . . . . . . . EX-4.N
5 Opinion and Consent of Myles R. Tashman, Esq.. . . . . . . EX-5
23(a) Consent of Sutherland, Asbill & Brennan LLP. . . . . . . . EX-23.A
23(b) Consent of Ernst & Young LLP, Independent Auditors . . . . EX-23.B
24 Powers of Attorney . . . . . . . . . . . . . . . . . . . . EX-24
27 Financial Data Schedule. . . . . . . . . . . . . . . . . . EX-27
<PAGE>
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<PAGE>
<PAGE>
EXHIBIT 1
DISTRIBUTION AGREEMENT
AGREEMENT dated __________, 1988, by and between Golden American Life
Insurance Company, ("Golden American") a Minnesota corporation, on its own
behalf and on behalf of the Western Capital Specialty Managers Separate
Account B ("Account") and Directed Services, Inc., ("DSI"), a New York
corporation wholly owned by Golden Financial Group ("GFG"), a Delaware
corporation.
WHEREAS, Golden American and GFG entered into an agreement effective
____________________, 1988 (the "Golden American-GFG Agreement"), pursuant to
which Golden American may market Deferred Variable Annuity and Variable
Annuity Certain Contracts ("Annuity Contracts") designed by GFG; and
WHEREAS, the Account is a separate account established and maintained by
Golden American pursuant to the laws of the State of Minnesota for variable
annuity contracts issued by Golden American under which income, gains, and
losses, whether or not realized, from assets allocated to such Account, are
credited to or charged against such Account without regard to other income,
gains or losses of Golden American; and
WHEREAS, Golden American proposes to issue and sell Annuity Contract
through the Account to suitable purchasers; and
WHEREAS, DSI is duly registered as a broker-dealer under the Securities
Exchange Act of 1934 ("1934 Act") and is a member of the National Association
of Securities Dealers, Inc. ("NASD"); and
WHEREAS, Golden American and DSI desire to enter into an agreement
pursuant to which DSI will act as a principal underwriter for the sale of the
Annuity Contracts and may distribute the Annuity Contracts through one or more
organizations as set forth in Section 2. below.
NOW, THEREFORE, GOLDEN AMERICAN AND DSI HEREBY AGREE AS FOLLOWS:
1. TERM.
This Agreement shall remain in force until it is terminated in accordance
with the provisions of paragraph 13.
2. PRINCIPAL UNDERWRITER.
Golden American hereby appoints DSI and DSI accepts such appointment,
during the term of this Agreement, subject to any registration
requirements of The Securities Act of 1933 ("1933 Act"), The Investment
Company Act of 1940 ("1940 Act"), and the provisions of the 1934 Act, to
be a distributor and principal underwriter of the Annuity Contracts
issued though the Account. DSI shall offer the Annuity Contracts for
sale and distribution at premium rates to be set by Golden American and
GFG. Annuity Contracts may be sold only by persons who are duly licensed
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annuity agents appointed by Golden American and NASD registered
representatives as set forth in Section 3 below. Golden American hereby
appoints DSI as its agent for the sale of Annuity Contracts in such
jurisdictions as Golden American is properly licensed to sell Annuity
Contracts.
3. SALE AGREEMENTS.
DSI is hereby authorized to enter into separate written agreements,
("Sales Agreements"), on such terms and conditions as DSI may determine
not to be inconsistent with this Agreement, with broker/dealers which
agree to participate in the distribution of and to use their best efforts
to solicit applications for Annuity Contracts. Such broker/dealers and
their agents or representatives soliciting applications for Annuity
Contracts shall be duly and appropriately licensed, registered or
otherwise qualified for the sale of Annuity Contracts under the insurance
laws and any applicable securities laws of each state or other
jurisdiction in which the Annuity Contracts may be lawfully sold and in
which Golden American is licensed to sell Annuity Contracts. Each such
broker/dealer shall be both registered as a broker-dealer under the 1934
Act and a member of the NASD, or if not so registered or not such a
member, then the agents and representatives of such organization
soliciting applications for Annuity Contracts shall be agents and
registered representatives of a registered broker/dealer and NASD member
which is the parent or other affiliate of such organization and which
maintains full responsibility for the training, supervision, and control
of the agents and representatives selling Annuity Contracts.
DSI shall have the responsibility for the supervision of all such
broker/dealers to the extent required by law and shall assume any legal
responsibilities of Golden American for the acts, commissions or
defalcations of any such broker/dealers. Applications materials for
Annuity Contracts solicited by such broker/dealers through their agents
or representatives shall be forwarded to DSI. All payments for Annuity
Contracts shall be remitted promptly by such broker/dealers directly to
Golden American.
If held at any time by DSI or a broker/dealer, such payments shall be
held in a fiduciary capacity as agent for Golden American and shall be
remitted promptly to Golden American. All such payments, whether by
check, money order, or wire order, shall be the property of Golden
American. Anything in this Distribution Agreement to the contrary
notwithstanding, Golden American shall retain the rights to control the
sale of Annuity Contracts and to appoint and discharge annuity agents for
the sale of Annuity Contracts. DSI shall be held to the exercise of
reasonable care in carrying out the provisions of this Distribution
Agreement.
4. ANNUITY AGENTS.
DSI is authorized to appoint the broker/dealer described in paragraph 3.
above as agents of Golden American for the sale of Annuity Contracts.
Golden American will undertake to appoint such agents authorized to
represent Golden American in the appropriate states or jurisdictions;
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provided that Golden American reserves the right to refuse to appoint any
proposed agent, or once appointed to terminate the same without notice.
5. SUITABILITY.
Golden American wishes to ensure that the Annuity Contracts distributed
by DSI will be issued to purchasers for whom the Annuity Contracts shall
be suitable. DSI shall take reasonable steps to ensure that the various
agents appointed by it to sell Annuity Contracts shall not make
recommendations to an applicant to purchase Annuity Contracts in the
absence of reasonable grounds to believe that the purchase of Annuity
Contracts is suitable for such applicant. While not limited to the
following, a determination of suitability shall be based on information
furnished to an agent after reasonable inquiry concerning the applicant's
insurance and investment objectives and financial situation and needs.
6. SALES MATERIALS.
The responsibility of the parties hereto for consulting with respect to
the design and the drafting and legal review and filing of sales
materials, and for the preparation of sales proposals related to the sale
of Annuity Contracts shall be as the parties hereto agree in writing.
DSI shall ensure, in its Sales Agreements, that organizations appointed
by it, and registered representatives of such organizations, shall not
use, develop or distribute any sales materials which have not been
approved by GFG and Golden American.
7. REPORTS.
DSI shall have the responsibility for, with respect to agents appointed
by it, maintaining the records of agents licensed, registered and
otherwise qualified to sell Annuity Contracts, and for furnishing
periodic reports to Golden American as to the sale of Annuity Contracts
made pursuant to this Agreement.
8. RECORDS.
DSI shall maintain and preserve for the periods prescribed by law or
other agreement, such accounts, books, and other documents as are
required of it by applicable laws and regulations. The books, accounts
and records of Golden American, the Account and DSI as to all
transactions hereunder shall be maintained so as to clearly and
accurately disclose the nature and details of the transactions, including
such accounting information as necessary to support the reasonableness of
the amounts to be paid by Golden American hereunder.
9. COMPENSATION.
Golden American shall pay DSI the compensation due it as set forth in the
attached Exhibit, as such Exhibit may from time to time be amended.
10. INDEPENDENT CONTRACTOR.
DSI shall act as an independent contractor and nothing herein contained
shall constitute DSI or its agents or employees as employees of Golden
American in connection with the sale of Annuity Contracts.
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<PAGE>
11. INVESTIGATION AND PROCEEDINGS.
(a) DSI and Golden American agree to cooperate fully in insurance
regulatory investigations or proceedings or judicial proceedings
arising in connection with the offering, sale or distribution of
Annuity Contracts distributed under this Agreement. DSI and Golden
American further agree to cooperate fully in any securities
regulatory investigation or proceeding or judicial proceeding with
respect to Golden American, DSI, their affiliates and their agents
or representatives to the extent that such investigation or
proceedings is in connection with the Annuity Contracts offered,
sold or distributed under this Agreement. Without limiting the
forgoing:
(i) DSI will be notified promptly of any customer
complaint or notice of any regulatory investigation or
proceeding or judicial proceeding received by Golden
American with respect to DSI or any agent or representative
or which may affect Golden American's issuance of Annuity
Contracts marketed under this Agreement.
(ii) DSI will promptly notify Golden American of any
customer complaint or notice of any regulatory investigation
or proceeding received by DSI or its affiliates with respect
to DSI or any agent or representative in connection with any
Annuity Contracts distributed under this Agreement or any
activity in connection with Annuity Contracts.
(b) In the case of a substantive customer complaint, DSI and Golden
American will cooperate in investigating such complaint and any
response to such complaint will be sent to the other party to the
Agreement for approval not less than five business days prior to its
being sent to the customer or regulatory authority, except that if a
more prompt response is required, the proposed response shall be
communicated by telephone or telegraph.
12. INDEMNIFICATION.
(a) Golden American agrees to indemnify and hold harmless DSI and
its affiliates and each officer and director thereof against any
losses, claims, damages or liabilities, joint or several, to which
DSI or its affiliates or such officer or director may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue
statement of a material fact, required to be stated therein or
necessary to make the statements therein not misleading, contained
(i) in any prospectus, or any amendment thereof, or
(ii) in any blue-sky application or other document
executed by Golden American specifically for the purpose of
qualifying Annuity Contracts for sale under the securities
laws of any jurisdiction.
Golden American will reimburse DSI and each officer or director,
for any legal or other expenses reasonably incurred by DSI or such
officer or director in connection with investigating or defending
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<PAGE>
any such loss, claim, damage, liability or action; provided
that Golden American will not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or
is based upon, an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity
with information (including, without limitation, negative responses
to inquiries) furnished to Golden American by or on behalf of DSI
specifically for use in the preparation of any prospectus or ant
amendment thereof or any such blue-sky application or any amendment
thereof or supplement thereto.
(b) DSI agrees to indemnify and hold harmless Golden American and
its directors, each of its officers who has signed the registration
statement and each person, if any, who controls Golden American
within the meaning of the 1933 Act or the 1934 Act, against any
losses, claims, damages or liabilities to which Golden American and
any such director or officer or controlling person may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon:
(i) Any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission to state
a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not misleading,
contained (a) in any prospectus or any amendments thereof,
or, (b) in any blue-sky application, in each case to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with information
(including without limitation, negative responses to
inquiries) furnished to Golden American by DSI specifically
for use in the preparation of any prospectus or any
amendments thereof or any such blue-sky application or any
such amendment thereof or supplement thereto; or
(ii) Any unauthorized use of sales materials or any
verbal or written misrepresentations or any unlawful sales
practices concerning Annuity Contracts by DSI; or
(iii) Claims by agents or representatives or employees of DSI for
commissions, service fees, expense allowances or other
compensation or remuneration of any type.
DSI will reimburse Golden American and any
director or officer or controlling person for any legal or
other expenses reasonably incurred by Golden American, such
director or controlling person in connection with
investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in
addition to any liability which DSI may otherwise have.
(c) Promptly after receipt by a party entitled to indemnification
("indemnified party") under this paragraph 12 of notice of the
commencement of any action, if a claim in respect thereof is to be
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<PAGE>
made against any person obligated to provide indemnification
under this paragraph 12 ("indemnifying party"), such indemnified
party will notify the indemnifying party in writing of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability under this paragraph
12, except to the extent that the omission results in a failure of
actual notice to the indemnifying party and such indemnifying party
is damaged solely as a result of the failure to give such notice.
In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to participate therein, and
to the extent that it may wish, to assume the defense thereof, with
separate counsel satisfactory to the indemnified party. Such
participation shall not relieve such indemnifying party of the
obligation to reimburse the indemnified party for reasonable legal
and other expenses incurred by such indemnified party in defending
himself, except for such expenses incurred after the indemnifying
party has deposited funds sufficient to the effect the settlement,
with prejudice, of the claim in respect of which indemnity is
sought. Any such indemnifying party shall not be liable to any such
indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party.
The indemnity agreements contained in this paragraph 12 shall
remain operative and in full force and effect, regardless of:
(i) any investigation made by or on behalf of DSI or
any officer or director thereof or by or on behalf of Golden
American;
(ii) delivery of any Annuity Contracts and payments
therefore; and
(iii) any termination of this Agreement.
A successor by law of DSI or any of the parties to this
Agreement, as the case may be, shall be entitled to the benefits of
the indemnity agreement contained in this paragraph 12.
13. TERMINATION.
a. This Agreement may be terminated at any time by mutual consent
of the parties.
b. Either party may terminate of the other materially breaches any
of the terms of this Agreement and fails to cure the breach within
sixty days of notification by the other party of such breach.
c. This Agreement shall terminate automatically upon the
termination of the Golden American-GFG Agreement.
d. Upon termination of this Agreement all authorizations, rights
and obligations shall cease except;
(i) the obligation to settle accounts hereunder,
including commissions for Annuity Contracts in effect at the
time of termination;
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(ii) the agreements contained in paragraph 11 hereof; and
(iii) the indemnity set for in paragraph 12 hereof.
14. REGULATION.
This Agreement shall be subject to the provisions of the 1940 Act and the
1934 Act and the rules, regulations, and rulings thereunder and of the
NASD, from time to time in effect, including such exemptions from the
1940 Act as the SEC may grant, and the terms thereof shall be interpreted
and construed in accordance therewith.
DSI shall submit to all regulatory and administrative bodies having
jurisdiction over the operations of Golden American or the Account,
present or future, any information, reports or other material which any
such body by reason of this Agreement may request or require pursuant to
applicable laws or regulations.
15. SEVERABILITY.
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
16. GENERAL.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York.
A. Force Majeure
Either party may be excused for delay or failure to perform under this
Agreement if such delay or failure is due to the direct or indirect
result of acts of God or government, war or national emergency, or for
any cause beyond the reasonable control of either party.
B. Entire Agreement
This Agreement and any attachments hereto and the material incorporated
herein by reference set forth the entire agreement between the parties,
and supercede all prior representations, agreements and understandings,
written or oral. Changes in the Agreement may be made only in a writing
signed by both the parties hereto.
C. Notices
All notices or other communications under this Agreement shall be in
writing and, unless otherwise specifically provided for herein, shall be
deemed given when addressed
(a) if to GFG:
Mr. Jerome S. Golden
The Golden Financial Group:
909 Third Avenue
New York, NY 10022
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With a copy to Bernard R. Beckerlegge
(b) if to Golden American:
Mr. Fred H. Davidson
Golden American Life Insurance Company
909 Third Avenue
New York, NY 10022
(c) if to DSI:
Mr. James G. Kaiser
Directed Services, Inc.
909 Third Avenue
New York, NY 10022
D. Successors, Assigns
This Agreement shall be binding upon and shall insure to the benefit of
the parties and their respective successors and assigns. Neither this
Agreement nor any right hereunder may be assigned without the written
consent of the other parties.
E. Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
F. Severability
If any term or provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of terms
and provisions of this Agreement shall remain in full force and effect
and shall not be affected or impaired thereby.
G. Counterparts
This Agreement may be executed in one or more counterparts, each of which
shall constitute an original and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Attest: GOLDEN AMERICAN LIFE INSURANCE COMPANY
____________________ ____________________________
Attest: DIRECTED SERVICES, INC.
____________________ ____________________________
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<PAGE>
EXHIBIT 3(a)
ARTICLES OF INCORPORATION
OF
ST. PAUL LIFE INSURANCE COMPANY
WE, the undersigned incorporators, all natural persons of full
age; for the purpose of forming a corporation, under and pursuant
to the general corporation laws of the State of Minnesota,
Chapter 300, Minnesota's Statutes Annotated, do hereby adopt the
following Articles of Incorporation.
ARTICLE I.
The name of this Company is St. Paul Life Insurance Company.
ARTICLE II.
The nature of the business and the objects and purposes to be
transferred, performed and carried on by the Company are those of
an insurance company. To this end it shall have the power:
(1) To engage in the general business of life insurance
company, and to effect all forms, types, variations and
combinations of life insurance, endowment or annuity
contracts or policies on a group of individuals fixed or
variable basis, for the payment of money in a single sum or
in installations upon the contingencies of death, disability
or survivorship. To provide in such policies or contracts
supplemental thereto, for additional benefits in the event
of the death of the insured by accident, total and permanent
disability of the insured, or specific dismemberment or
disablement suffered by the insured.
(2) To engage in the general business of an accident and
health insurance company for the purpose of effecting
insurance against loss or damage by the sickness, bodily
injury or death accident of the insured or dependents on a
group of individual basis; to effect all forms, types,
variations and combinations of policies or contracts of
insurance providing for indemnities in the event of death,
sickness or disability.
(3) To effect contracts of reinsurance or co-insurance of
any individual or group risk underwritten by this company,
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to reinsure risks of this company or any part thereof with
any other company or to reinsure the whole of any portion of
the risks of any other company.
(4) To effect any kinds of classes of insurance business
which companies of its kind are now or any hereafter be
permitted by law to transact, whether or not such kinds or
classes of insurance are specifically enumerated elsewhere
in these Articles of Incorporation r existing amendments
thereto.
(5) To conduct business in any state or territory of the
United States in the Dominion of Canada and in any foreign
country.
(6) To acquire, hold and dispose of shares of stock,
notes, bonds or other evidences of indebtedness or
securities of any other corporation or corporations.
(7) To transact all business and to do all other things
necessary or incidental to the foregoing purpose.
(8) The powers herein conferred upon the company are in
furtherance and not in limitation to the powers conferred by
the statutes of the State of Minnesota as from time to time
in force and effect, and the Corporation shall have in
addition to such authorized statutory powers as are in these
Articles of Incorporation recited; all other powers and
privileges conferred by the statutes of the State of
Minnesota now existing or hereinafter enacted.
(9) The Company hall have the power and authority to
acquire, own, and hold stock in any other insurance company;
whether previously existing or in the process of being
organized, and whether or not engaged in the type of
insurance heretofore specified.
ARTICLE III.
The principal place of transacting the business of this Company
shall be 385 Washington Street, St. Paul, Minnesota 55102.
ARTICLE IV.
The duration of this Company shall be perpetual.
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ARTICLE V.
The government of the Company and the management of its affairs
shall be vested in a Board of Directors of not less than three
(3) nor more than eighteen (18) members, all of whom shall be
shareholders and shall be elected annually by the shareholders at
each annual meeting. The annual meeting shall be held, unless
otherwise designated by the Board of Directors, on the Friday
preceding the first Tuesday of February of each year at such time
and place within or without the State of Minnesota as the Board
shall determine. The first Board of Directors of this Company
who shall hold office until their respective successors are
elected and qualified, shall consist of:
R. B. Richardson 600 Park Avenue
Helena, Montana 59601
R. E. Young 385 Washington Street
St. Paul, Minnesota 55102
Lee Wiegard 385 Washington Street
St. Paul, Minnesota 55102
W. G. Smith 385 Washington Street
St. Paul, Minnesota 55102
ARTICLE VI.
The authorized amount of capital stock of this Company shall be
One Million, Five Hundred Thousand Dollars ($1,500,000) divided
into One Hundred Fifty Thousand (150,000) shares of common stock
of the par value of Ten Dollars ($10.00) each. Each share of
stock shall entitle the holder to one vote, and shareholders
shall not be entitled to cumulate their votes for the election of
directors. The Board of Directors of the Company shall have the
power to cause to be issued from time to time any and all of the
authorized but unissued share of the stock of the Company at such
prices and for such consideration as they in their unrestricted
discretion deem wise and advisable. Shareholders shall not have
any preemptive right to subscribe for any shares of such unissued
stock.
ARTICLE VII.
The highest amount of indebtedness or liability to which the
Company shall at any time be subject, including bank loans and
similar borrowing but exclusive of liability under insurance
polices and other obligations routinely incurred in the ordinary
course of the Company's business shall be Two Million Two Hundred
Fifty Thousand Dollars ($2,250,000)
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ARTICLE VIII.
The name sand post office address of the incorporators forming
this company are:
R. M. Hubbs 385 Washington Street
St. Paul, Minnesota 55102
C. B. Drake, Jr. 385 Washington Street
St. Paul, Minnesota 55102
R. E. Young 385 Washington Street
St. Paul, Minnesota 55102
IN WITNESS WHEREOF, the undersigned incorporators have hereunto
set their hands this 2nd day if January, 1973.
In the presence of:
/s/ R. M. Hubbs
- ------------------------ ------------------------
R. M. Hubbs, Incorporator
- ------------------------
/s/ C. B. Drake, Jr.
- ------------------------ ------------------------
C. B. Drake, Jr., Incorporator
- ------------------------
/s/ R. E. Young
- ------------------------ ------------------------
R. E. Young, Incorporator
- ------------------------
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<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF _________________________)
) SS
COUNTRY OF _______________________)
On this, the 2nd day of January, 1973 before me, the
undersigned officer, personally appeared R. M. Hubbs, C. B.
Drake, Jr., R. E. Young, known to me to be the persons whose
names are subscribed to the within instrument and acknowledge to
me that the same was executed for the purpose therein contained.
IN WITNESS WHEREOF, I have hereunto set my hand and official
seal.
/s/
----------------------------
Notary Public
My Commission Expires ________
______________________________
The foregoing Articles of Incorporation of St. Paul Life
Insurance Company are hereby approved the 2ND day if January,
1973.
/s/
----------------------------
Commissioner of Insurance
State of Minnesota
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STATE OF MINNESOTA-DEPARTMENT OF STATE
I hereby certify that the within
instrument was filed for record in this
office on the 2nd day of January, 1973
at 1:00 P.M. and was recorded in book
2:39 of incorporated on page 1.
Arlen I. Erdahl, Secretary of State.
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ST. PAUL LIFE INSURANCE COMPANY/ 385 Washington Street, Box 40,
St. Paul, Minnesota 55102
August 22, 1973
St. Paul Life Fund, Inc.
P.O. Box 1386
Minneapolis, Minnesota 55440
Re: St. Paul Life Fund, Inc. - Name
Gentlemen:
This letter is to officially authorize the use of the name St.
Paul Life Fund, Inc. by your company in connection with the new
mutual fund being organized. Since St. Paul Life Fund, Inc. is
an organization within our corporate family, we have no objection
to the use of the name.
You may use a copy of this letter for filing with the Secretary
of State in the State of Minnesota when the Articles of
Incorporation are filed in that office.
If there is anything further you need in connection with this
matter, please so inform me.
Very truly your,
/s/ George M. Hof
-----------------
George M. Hof
General Counsel
[STAMP]
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
AUGUST 30, 1973
/S/ Arlen I. Erdahl
<PAGE>
<PAGE>
This agreement of Merger made and executed in duplicate this 6th
day of December, 1973, by and between ST., PAUL LIFE INSURANCE
COMPANY, Minnesota corporation, hereinafter referred to as "St.
Paul", and the directors thereof, parties of the first part, and
ST., PAUL LIFE AND CASUALTY COMPANY, a Minnesota corporation, and
wholly owned subsidiary of St. Paul, hereinafter referred to as
"Life and Casualty", and the directors thereof, parties of the
second part, said corporations being hereinafter sometimes
collectively called the "constituent corporations".
WHERE AS, after full consideration by their respective Boards of
Directors, both companies have concluded that a statutory merger
of the companies would be advisable and generally to the
advantage and welfare or said corporations and their respective
stockholders and policyholders.
NOW, THEREFORE, in consideration of the premises an mutual
agreement, covenants and undertakings herein contained by each
party to be faithfully kept and performed, it is hereby agreed by
and between the parties hereto, each acting pursuant to and under
authority of the laws of the State of Minnesota, as follows:
SECTION 1
Life and Casualty shall be merged with and into St. Paul as of
the close of business DECEMBER 10, 1973, and that thereupon the
corporate existence of Life and Casualty shall cease and the
corporate existence of St. Paul shall continue under the same of
St. Paul Life Insurance Company, a stock life insurance
corporation organized and existing under the laws of the State of
Minnesota (said surviving corporation being sometimes hereinafter
called the "Company").
SECTION 2
It is in the intent hereof that the identity, existence,
purposes, and powers of St. Paul shall continue unaffected and
unimpaired by the merger herein provided for and that the
Articles of Incorporation under which the business of the Company
is to be conducted and which shall be the Articles of
Incorporation of the Company shall be the Articles of
Incorporation of St. Paul, subject to amendment from time to time
in the manner now or hereafter prescribed by law.
SECTION 3
Upon this Agreement of Merger becoming effective, St. Paul as the
surviving corporation shall:
1. Possess all the rights, privileges, powers, franchises
and interests of Life and Casualty.
2. Possess all property and all rights to and interests in
all property, real, personal and all debts and
<PAGE>
<PAGE>
obligations due to the constituent corporations or
either of them including, without limiting the
foregoing general language, payments due under any
mortgages. interests under any and all reinsurance
agreements, premiums on existing policies and all
chooses in action belonging to either of them and all
of the foregoing shall be seemed to be sold, assigned,
transferred and set over to and invested in St. Paul as
the surviving corporation without further deed,
instrument or act of transfer.
3. Assume and be responsible for all the liabilities,
obligations and duties of the constituent corporations
including, without limiting the foregoing general
language, all liabilities and obligations which have
arisen under or by virtue of any and all policies of
insurance or other reinsurance, agreements including
those involving reinsurance, or endorsements issued or
entered into by Life and Casualty on or before the
effective date of this Merger Agreement. All rights of
creditors and all liens upon he property of either of
said constituent corporations shall be preserved
unimpaired, limited in lien to the property affected by
such lien at the time of the merger, and all debts,
liabilities an duties of the respective constituent
corporations shall thenceforth attach to said surviving
corporation, and may be enforced against it to the same
extent as if said debts, liabilities and duties had
been incurred or contracted by it. The liability of
the constituent corporations or of the stockholders or
officers, thereof, or of persons doing or transacting
business with such corporation, shall not, in any way,
be lessened or impaired by this merger.
4. Be responsible for all the liabilities and obligations
of Life and Casualty; provided, however, the rights of
the creditors of the constituent corporations or any
persons dealing with such corporations shall not me
impaired by such merger and any claim existing or
action or proceeding pending by or against any of the
constituent corporations may be prosecuted to judgment
as of the merger had not taken place or the surviving
corporation may be proceeded against or substituted in
its place.
5. Assume all the rights and obligations of life and
Casualty under contracts, bonds, policies and other
undertakings executed by Life and Casualty before the
effective date of this Agreement of Merger whether such
contracts, bonds, policies and other undertakings are
effective before or after the effective date of this
Agreement of merger. More specifically, Life and
Casualty shall and does hereby cede to St. Paul, and
St. Paul shall and does hereby reinsure and assume, of
<PAGE>
<PAGE>
the outstanding insurance contracts together with all
contracts and agreements, arising under and out of all
such contracts issued or assumed by Life and Casualty
and in force according to their terms on the nooks and
records of Life and Casualty as of the effective date
and time of the merger or which may be reinstated
thereafter in accordance with their terms, subjects,
however, to the same rights and privileges which would
have been possessed by the constituent corporations if
such reinsurance had not been effective. In addition,
St. Paul assumes subject to Life and Casualty's
defenses thereon, and agrees to be bound by the
obligations of Life and Casualty, if any as of the sate
and time of the merger, arising out of insurance
transactions effected prior to that date.
6. Assume all of the tights and obligations of Life and
casualty under all written powers of attorney executed
in the name of and filed by Life and casualty with all
federal,state and other governmental authorities.
7. Assume all the rights and obligations of Life and
Casualty under all federal and state franchises,
permits and licenses granted to or acquire by Life and
Casualty.
8. Assume all the rights and obligations of Life and
Casualty with respect to deposits, rates or forms
deposited or filed by Life and Casualty with all
deferral and state regulatory authorities for any
purpose whatsoever.
SECTION 4
The By-Laws of St. Paul shall remain and by the By-Laws of the
Company until they shall be altered or amended in the manner
presently or hereafter provided.
SECTION 5
All persons who shall be officers of St. Paul upon the merger
becoming effect shall be and remain like officers of the Company
until the Board of Directors of the Company shall elect their
respective successors.
SECTION 6
St. Paul shall pay all expenses of carrying this Agreement into
effect and accomplishing the merger.
SECTION 7
All persons who shall be directors of St. Paul upon the merger
becoming effective shall be and remain like directors of the
Company until the stockholders of the Company shall elect their
respective successors.
<PAGE>
<PAGE>
1. From and after the effective date of this Agreement ____ of
stock of Life and Casualty shall be canceled upon presentation to
the Secretary of St. Paul. All shares of stock of Life and
Casualty, except directors qualifying shares, are held by St.
Paul; therefore an exchange of stock is to not deemed necessary
by the signatories to this Agreement for Merger.
2. If any stockholder of either constituent corporation is
dissatisfied with the terms of the merger and objects thereto in
writing, he shall have the rights to have the value of his stock
appraised and paid for, and to appeal; to the courts, as provided
for dissatisfied stockholders by Minnesota Statutes Section
60A.16(5).
3. Any stockholder of either constituent corporation who does
not vote against the merger shall be deemed to have assented to
the merger as specified in this Agreement. Moreover, any
stockholders of either constituent corporation who votes against
this merger or objects thereto in writing within twenty (20) days
after filing of this Agreement but who fails to demand or apply
for payment of his stock shall be deemed to have assented to said
merger.
SECTION 9
Following the effective date of the merger, the Certificate of
Authority of Life and Casualty shall be surrendered to the
Commissioner of Insurance of the State of Minnesota.
SECTION 10
Life and Casualty agrees from time to time and when requested by
the Company that it will execute and deliver or cause to be
executed and delivered all such deeds, agreements and other
instruments and will take or cause to be taken all such further
action as the Company may deem necessary or desirable in order to
vest in and confirm to the Company title to and possession of all
property, rights, privileges, powers, franchises, and immunities
of Life and casualty and otherwise to carry out the intended
purposes of this Agreement and to that and the proper officers
and directors of the constituent corporations are fully
authorized in the name of Life and Casualty or otherwise to take
all such action and sign all such documents as mat be deemed
necessary or advisable.
SECTION 11
The constituent corporations shall do all things reasonably
within their respective powers to cause all statutory and other
procedures to be completed in time for the merger to become
effective as of the close of business on December 10,1973. If,
notwithstanding, the procedures cannot be completed in time for
the merger to become effective on December 10, 1973, as
aforesaid, in such event the effective date and time of the
merger shall be as of the close of business on the day on which a
copy of this Agreement of merger, having been duly adopted,
certified and acknowledged as required by law, is duly approved
and filed with the Commissioner of insurance of the State of
Minnesota, as provided in Section 60A.16(3)92) of the Minnesota
Statutes.
<PAGE>
<PAGE>
____________________________________________________________ This
Agreement, have caused these presents to be executed by their
respective President and their corporate seals to be affixed and
attested by the Corporate Secretaries and members of the Board of
Directors of each of the constituent corporations have joined
herein as of the day and year first above written.
ST. PAUL LIFE INSURANCE COMPANY
(Corporate Seal) A Minnesota Corporation
Attest:
/s/ /s/ R. E. Young
- ------------------------- -------------------------
Secretary R. E. Young
President
/s/ W. G. Smith /s/ R. E. Young
- ------------------------- ----------------------------
W. G. Smith R. E. Young
/s/ Lee Wiegard
- --------------------------
Lee Wiegard
BOARD OF DIRECTORS
None ST. PAUL LIFE AND CASUALTY COMPANY
(Corporate Seal) A Minnesota Corporation
/s/ /s/ R. E. Young
- ------------------------- --------------------------
Secretary R. E. Young
President
/s/ R. M. Collins, Jr. /s/ R. E. Young
- ------------------------- ----------------------------
R. M. Collins, Jr. R. E. Young
/s/ C. B. Drake, Jr.
- --------------------------
C. B. Drake, Jr.
BOARD OF DIRECTORS
<PAGE>
<PAGE>
T-41,712
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
This is to certify that on the 10th day of December, 1973, before
me, personally came R. E. Young, President of St. Paul Life
Insurance Company, a Minnesota corporation with whom I am
personally acquainted, who being by me duly sworn says that he is
President and R. A. Dreis is the Secretary of St. Paul Life
Insurance Company, a Minnesota corporation, one of the
corporations described in and a party to the foregoing Merger
Agreement; that he knows the common seal of said corporation;
that the said seal affixed to said Agreement is the common seal
of said corporation, and the name of the corporation was
subscribed thereto by said President and said Secretary and the
common seal was affixed thereto all by the order of the Board of
Directors of said corporation and that the said Agreement is the
act and deed of said corporation.
WITNESS, my hand and official seal this 10th day of December,
1973.
/s/ Sally LaMirande
-------------------
Notary Public
SALLY LAMIRANDE, Notary
Public, Ramsey County, Minn.
My Commission Expires
Sept. 23, 1975.
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
The undersigned Secretary of St. Paul Life Insurance Company, a
Minnesota corporation, one of the corporations described herein
and a party to the foregoing Merger Agreement, hereby certified
that a majority of the directors of said corporation signed the
foregoing Merger Agreement before him and his presence.
IN WITNESS WHEREOF, the undersigned set his hand and affixed the
corporate seal of said corporation this 6th day of December,
1973.
(Corporate Seal) /s/ R. A. Dreis
----------------------
R. A. Dreis, Secretary
<PAGE>
<PAGE>
T-41,713
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
This is to certify that on the 10th day of December, 1973, before
me, personally came R. E. Young, President of St. Paul Life and
Casualty Company, a Minnesota corporation with whom I am
personally acquainted, who being by me duly sworn says that he is
President and R. A. Dreis is the Secretary of St. Paul Life and
Casualty Company, a Minnesota corporation, one of the
corporations described in and a party to the foregoing Merger
Agreement; that he knows the common seal of said corporation;
that the said seal affixed to said Agreement is the common seal
of said corporation, and the name of the corporation was
subscribed thereto by said President and said Secretary and the
common seal was affixed thereto all by the order of the Board of
Directors of said corporation and that the said Agreement is the
act and deed of said corporation.
WITNESS, my hand and official seal this 10th day of December,
1973.
/s/ Sally LaMirande
-------------------
Notary Public
SALLY LAMIRANDE, Notary
Public, Ramsey County, Minn.
My Commission Expires
Sept. 23, 1975.
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
The undersigned Secretary of St. Paul Life and Casualty Company,
a Minnesota corporation, one of the corporations described herein
and a party to the foregoing Merger Agreement, hereby certified
that a majority of the directors of said corporation signed the
foregoing Merger Agreement before him and his presence.
IN WITNESS WHEREOF, the undersigned set his hand and affixed the
corporate seal of said corporation this 6th day of December,
1973.
(Corporate Seal) /s/ R. A. Dreis
----------------------
R. A. Dreis, Secretary
<PAGE>
<PAGE>
T-41, 714
CERTIFICATE OF ADOPTION OF MERGER AGREEMENT
I, R. A. Dreis, Secretary of St. Paul Life Insurance Company, a
Minnesota corporation, do hereby certify:
1. That said Merger Agreement was submitted to the
directors of St. Paul Life Insurance Company, a
Minnesota corporation, at a meeting thereof duly called
and held on the 6TH day of DECEMBER, 1973 in St. Paul,
Minnesota.
2. That at said meeting of directors on the 6TH day of
DECEMBER, 1973, said Merger Agreement was adopted and
approved by unanimous vote of those directors present
and voting.
IN WITNESS WHEREOF, I have hereunto signed my name as the
Secretary of St. Paul Life Insurance Company on the 6TH day of
DECEMBER, 1973.
(Corporate Seal) /s/ R. A. Dreis
----------------------
R. A. Dreis, Secretary
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
I, SALLY LAMIRANDE, Notary Public, certify that R. A. Dreis,
personally came before me this day and acknowledged that he is
the Secretary of the St. Paul Life Insurance Company, a Minnesota
corporation, and that by due authority given and as the act of
the corporation, the foregoing Certificate of Adoption of Merger
Agreement was signed in its name by said Secretary and sealed
with its corporation seal.
WITNESS, my hand and official seal this 10TH day of DECEMBER,
1973.
/s/ Sally LaMirande
-------------------
Notary Public
SALLY LAMIRANDE, Notary
Public, Ramsey County, Minn.
My Commission Expires
Sept. 23, 1975.
<PAGE>
<PAGE>
T-41, 716
CERTIFICATE OF ADOPTION OF MERGER AGREEMENT
I, R. A. Dreis, Secretary of St. Paul Life and Casualty Company,
a Minnesota corporation, do hereby certify:
1. That said Merger Agreement was submitted to the
directors of St. Paul Life and Casualty Company, a
Minnesota corporation, at a meeting thereof duly called
and held on the 6TH day of DECEMBER, 1973 in St. Paul,
Minnesota.
2. That at said meeting of directors on the 6TH day of
DECEMBER, 1973, said Merger Agreement was adopted and
approved by unanimous vote of those directors present
and voting.
IN WITNESS WHEREOF, I have hereunto signed my name as the
Secretary of St. Paul Life and Casualty Company on the 6TH day
of DECEMBER, 1973.
(Corporate Seal) /s/ R. A. Dreis
----------------------
R. A. Dreis, Secretary
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
I, SALLY LAMIRANDE, Notary Public, certify that R. A. Dreis,
personally came before me this day and acknowledged that he is
the Secretary of the St. Paul Life and Casualty Company, a
Minnesota corporation, and that by due authority given and as the
act of the corporation, the foregoing Certificate of Adoption of
Merger Agreement was signed in its name by said Secretary and
sealed with its corporation seal.
WITNESS, my hand and official seal this 10TH day of DECEMBER,
1973.
/s/ Sally LaMirande
-------------------
Notary Public
SALLY LAMIRANDE, Notary
Public, Ramsey County, Minn.
My Commission Expires
Sept. 23, 1975.
<PAGE>
<PAGE>
T-41, 715
CERTIFICATE OF ADOPTION OF MERGER AGREEMENT
I, R. A. Dreis, Secretary of St. Paul Life and Casualty Company,
a Minnesota corporation, do hereby certify:
1. That said Merger Agreement was submitted to the
directors of St. Paul Life and Casualty Company, a
Minnesota corporation, at a meeting thereof duly called
and held on the 6TH day of DECEMBER, 1973 in St. Paul,
Minnesota.
2. That at said meeting of directors on the 6TH day of
DECEMBER, 1973, said Merger Agreement was adopted and
approved by unanimous vote of those directors present
and voting.
IN WITNESS WHEREOF, I have hereunto signed my name as the
Secretary of St. Paul Life and Casualty Company on the 6TH day
of DECEMBER, 1973.
(Corporate Seal) /s/ R. A. Dreis
----------------------
R. A. Dreis, Secretary
STATE OF MINNESOTA )
:SS
COUNTY OF RAMSEY )
I, SALLY LAMIRANDE, Notary Public, certify that R. A. Dreis,
personally came before me this day and acknowledged that he is
the Secretary of the St. Paul Life and Casualty Company, a
Minnesota corporation, and that by due authority given and as the
act of the corporation, the foregoing Certificate of Adoption of
Merger Agreement was signed in its name by said Secretary and
sealed with its corporation seal.
WITNESS, my hand and official seal this 10TH day of DECEMBER,
1973.
/s/ Sally LaMirande
-------------------
Notary Public
SALLY LAMIRANDE, Notary
Public, Ramsey County, Minn.
My Commission Expires
Sept. 23, 1975.
<PAGE>
<PAGE>
T-41,717
CERTIFICATE OF COMMISSIONER OF INSURANCE
STATE OF MINNESOTA
This is to certify that I have examined the foregoing Merger
Agreement and find the same to comply with all the laws of
Minnesota, and I do hereby fully approve the same for filing with
the Secretary of State.
WITNESS my hand and official seal the 10 day of DECEMBER, 1973.
(Official Seal)
/s/ Berton W. Heaton
---------------------------------
Commission of Insurance
Filed ---------------------------
---------------------------------
Secretary of State
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
I hereby certify that the
within Instrument was filed
for record in the office on
the 12 day of December A. D.
1973, at 8 o'clock a.m. and
was duly recorded in book T-41
of Incorporation on page 707
/s/ Arlen I Erdahl
------------------
Secretary of State
-----------------------------
<PAGE>
<PAGE>
9-AA
H-52,531
AMENDMENT TO ARTICLES OF INCORPORATION
ST. PAUL LIE INSURANCE COMPANY
The undersigned, the duly elected President and Secretary of
St. Paul Life Insurance Company, hereby certify that the Articles
of Incorporation for said corporation were amended at a
Stockholder's Meeting held December 21, 1984, as follows:
RESOLVED, That Article III of the Articles of Incorporation
of the St. Paul Life Insurance Company, and the same is
hereby, amended effective as of the date of approval of the
Insurance Commissioner of Minnesota and the filing with the
Secretary of State of Minnesota to read as follows:
Article III. The principal of transacting the business
of this Company shall be in Woodbury, a suburb of Saint
Paul, County of Washington, State of Minnesota.
IN WITNESS WHEREOF, the undersigned have signed and acknowledged
this Amendment to Articles of Incorporation this 6th day of
February, 1980
(Corporate Seal) /S/ R. L. Gunderson
--------------------------
R. L. Gunderson, President
/S/ George M. Hof
--------------------------
George M. Hof, Secretary
STATE O MINNESOTA
COUNTY OF WASHINGTON
The foregoing instrument was acknowledged before me this 5th day
of February, 1980, by R. L. Gunderson and George M. Hof the
President and Secretary of St. Paul Life Insurance Company, a
Minnesota corporation, on behalf of the corporation.
(Notary Public Stamp) /s/ Joanne F. Humpal
--------------------
Notary Public
Ramsey County
The foregoing Amendment to Articles of Incorporation for St. Paul
Life Insurance Company is hereby approved this 13th day of
February, 1980.
/s/ Michael D. ________
--------------------
Commissioner of Insurance
State of Minnesota
<PAGE>
<PAGE>
H-52,532
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
I hereby certify that the
within Instrument was filed
for record in the office on
the 19 day of February A. D.
1980, at 4:30 o'clock p.m. and
was duly recorded in book H-52
of Incorporation on page 531
/s/ Joan Anderson Grace
----------------------
Secretary of State
-----------------------------
<PAGE>
<PAGE>
9-AA
S-63,221
AMENDMENT TO ARTICLES OF INCORPORATION
ST. PAUL LIE INSURANCE COMPANY
The undersigned, the duly elected President and Secretary of
St. Paul Life Insurance Company, hereby certify that the Articles
of Incorporation for said corporation were amended at a
Stockholder's Meeting held December 21, 1984, as follows:
RESOLVED FURTHER, That Article VIII of the Articles of
Incorporation be amended as follows:
The highest amount of indebtedness and liability to
which the corporation shall at any time be subject,
exclusive of policy liabilities an other reserves,
shall be One Hundred Million Dollars ($100,000,000).
IN WITNESS WHEREOF, the undersigned have signed and acknowledged
this Amendment to Articles of Incorporation this 2nd day of
January, 1985
(Corporate Seal) /S/ R. L. Gunderson
--------------------------
R. L. Gunderson, President
/S/ David C. Storlie
--------------------------
David C. Storlie, Secretary
STATE O MINNESOTA
COUNTY OF WASHINGTON
The foregoing instrument was acknowledged before me this 2nd day
of January, 1985, by R. L. Gunderson and David C. Storlie the
President and Secretary of St. Paul Life Insurance Company, a
Minnesota corporation, on behalf of the corporation.
(Notary Public Stamp) /s/ Joanne F. Humpal
--------------------
Notary Public
Ramsey County
<PAGE>
<PAGE>
S-63,222
The foregoing Amendment to Articles of Incorporation for St. Paul
Life Insurance Company is hereby approved this 14 day of January,
1985.
/s/ Michael D. Hatch
--------------------
Commissioner of Commerce
State of Minnesota
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
I hereby certify that the
within Instrument was filed
for record in the office on
the 31 day of January A. D.
1985, at 4:30 o'clock p.m. and
was duly recorded in book S-63
of Incorporation on page 221
/s/ Joan Anderson Grace
----------------------
Secretary of State
-----------------------------
<PAGE>
<PAGE>
9-AA
D-64,355
AMENDMENT TO ARTICLES OF INCORPORATION
ST. PAUL LIE INSURANCE COMPANY
The undersigned, the duly elected President and Secretary of
St. Paul Life Insurance Company, hereby certify that the Articles
of Incorporation for said corporation were amended at a
Stockholder's Meeting held December 21, 1984, as follows:
RESOLVED FURTHER, That Article VII of the Articles of
Incorporation be amended as follows:
The highest amount of indebtedness and liability to
which the corporation shall at any time be subject,
exclusive of policy liabilities an other reserves,
shall be One Hundred Million Dollars ($100,000,000).
IN WITNESS WHEREOF, the undersigned have signed and acknowledged
this Amendment to Articles of Incorporation this 2nd day of
January, 1985
(Corporate Seal) R. L. Gunderson
--------------------------
R. L. Gunderson, President
/S/ David C. Storlie
--------------------------
David C. Storlie, Secretary
STATE O MINNESOTA
COUNTY OF WASHINGTON
The foregoing instrument was acknowledged before me this 6TH day
of March, 1985, by R. L. Gunderson and David C. Storlie the
President and Secretary of St. Paul Life Insurance Company, a
Minnesota corporation, on behalf of the corporation.
(Notary Public Stamp) /s/ Joanne F. Humpal
--------------------
Notary Public
Ramsey County
This Amendment to Articles of Incorporation is hereby approved
this 13 day of March, 1985.
/s/ Michael D. Hatch
--------------------
Commissioner of Commerce
State of Minnesota
<PAGE>
<PAGE>
D-64,356
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
I hereby certify that the
within Instrument was filed
for record in the office on
the 8th day of April A. D.
1985, at 4:30 o'clock p.m. and
was duly recorded in book D-64
of Incorporation on page 355
/s/ Joan Anderson Grace
----------------------
Secretary of State
-----------------------------
<PAGE>
<PAGE>
4009
ARTICLES OF INCORPORATION
OF
GOLDEN AMERICAN INSURANCE COMPANY
ARTICLE I
The name of this Company is Golden American Life Insurance
Company.
ARTICLE II.
The name of the business and the objects and purposes to be
transacted, provided, and carried on by the Company are those of
an insurance company. To this end it shall have the powers:
(1) To engage in the general business of life insurance
company, and to effect all forms, types, variations and
combinations of life insurance, endowment or annuity
contracts or policies on a group of individuals fixed or
variable basis, for the payment of money in a single sum or
in installations upon the contingencies of death, disability
or survivorship. To provide in such policies or contracts
supplemental thereto, for additional benefits in the event
of the death of the insured by accident, total and permanent
disability of the insured, or specific dismemberment or
disablement suffered by the insured.
(2) To engage in the general business of an accident and
health insurance company for the purpose of effecting
insurance against loss or damage by the sickness, bodily
injury or death accident of the insured or dependents on a
group of individual basis; to effect all forms, types,
variations and combinations of policies or contracts of
insurance providing for indemnities in the event of death,
sickness or disability.
(3) To effect contracts of reinsurance or co-insurance of
any individual or group risk underwritten by this company,
to reinsure risks of this company or any part thereof with
any other company or to reinsure the whole of any portion of
the risks of any other company.
(4) To effect any kinds of classes of insurance business
which companies of its kind are now or any hereafter be
permitted by law to transact, whether or not such kinds or
classes of insurance are specifically enumerated elsewhere
in these Articles of Incorporation r existing amendments
thereto.
(5) To conduct business in any state or territory of the
United States in the Dominion of Canada and in any foreign
country.
(6) To acquire, hold and dispose of shares of stock,
notes, bonds or other evidences of indebtedness or
securities of any other corporation or corporations.
<PAGE>
<PAGE>
4010
(7) To transact all business and to do all other things
necessary or incidental to the foregoing purpose.
(8) The powers herein conferred upon the company are in
furtherance and not in limitation to the powers conferred by
the statutes of the State of Minnesota as from time to time
in force and effect, and the Corporation shall have in
addition to such authorized statutory powers as are in these
Articles of Incorporation recited; all other powers and
privileges conferred by the statutes of the State of
Minnesota now existing or hereinafter enacted.
(9) The Company hall have the power and authority to
acquire, own, and hold stock in any other insurance company;
whether previously existing or in the process of being
organized, and whether or not engaged in the type of
insurance heretofore specified.
ARTICLE III.
*The principal place of transacting the business of this Company
shall in Woodbury, a suburb of Saint Paul, County of Washington,
State of Minnesota.
ARTICLE IV.
The duration of this Company shall be perpetual.
ARTICLE V.
The government of the Company and the management of its affairs
shall be vested in a Board of Directors of not less than three
(3) nor more than eighteen (18) members, all of whom shall be
shareholders and shall be elected annually by the shareholders at
each annual meeting. The annual meeting shall be held, unless
otherwise designated by the Board of Directors, on the Friday
preceding the first Tuesday of February of each year at such time
and place within or without the State of Minnesota as the Board
shall determine. The first Board of Directors of this Company
who shall hold office until their respective successors are
elected and qualified, shall consist of:
R. B. Richardson 600 Park Avenue
Helena, Montana 59601
R. E. Young 385 Washington Street
St. Paul, Minnesota 55102
Lee Wiegard 385 Washington Street
St. Paul, Minnesota 55102
W. G. Smith 385 Washington Street
St. Paul, Minnesota 55102
*Amended 2-1-80
<PAGE>
<PAGE>
4011
ARTICLE VI.
The authorized amount of capital stock of this Company shall be
One Million, Five Hundred Thousand Dollars ($1,500,000) divided
into One Hundred Fifty Thousand (150,000) shares of common stock
of the par value of Ten Dollars ($10.00) each.
Each share of stock shall entitle the holder to one vote, and
shareholders shall not be entitled to cumulate their votes for
the election of directors. The Board of Directors of the Company
shall have the power to cause to be issued from time to time any
and all of the authorized but unissued share of the stock of the
Company at such prices and for such consideration as they in
their unrestricted discretion deem wise and advisable.
Shareholders shall not have any preemptive right to subscribe for
any shares of such unissued stock.
ARTICLE VII.
*The highest amount of indebtedness or liability to which the
corporation shall at any time be subject, exclusive of policy
liability and other reserves shall be One Hundred Million Dollars
($100,000,000)
ARTICLE VIII.
The name sand post office address of the incorporators forming
this company are:
R. M. Hubbs 385 Washington Street
St. Paul, Minnesota 55102
C. B. Drake, Jr. 385 Washington Street
St. Paul, Minnesota 55102
R. E. Young 385 Washington Street
St. Paul, Minnesota 55102
The foregoing Articles of Incorporation are hereby approved this
18th day of December, 1987, to be effective January 1, 1988.
/s/ James G. Miller
- -------------------------------
James G. Miller
Deputy Commissioner of Commerce
*Amended 12-21-84
<PAGE>
<PAGE>
4012
I, David C. Storlie, Secretary of the St. Paul Life Insurance
Company of St. Paul, Minnesota, do hereby certify that the
foregoing Articles of Incorporation are a true and correct of the
Articles of Incorporation as of December 18, 1987.
ST. PAUL LIFE INSURANCE COMPANY
/s/ David C. Storlie
--------------------
Dated: December 18, 1987
St. Paul, Minnesota
Subscribed and sworn to before me this
18th day of December, 1987.
/s/ Joanne F. Humpal
- --------------------
Notary Public
(Stamp)
- ----------------------------------
JOANNE F. HUMPAL
Notary Public, Ramsey County, Minn.
My Commission Expires
December 30, 1989
- ----------------------------------
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
DECEMBER 18, 1987
/s/ Joan Anderson Grace
----------------------
Secretary of State
-----------------------------
<PAGE>
<PAGE>
3538
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
WE, THE UNDERSIGNED, officers of Golden American Life Insurance
Company, a corporation subject to the provisions of Chapter 300,
Minnesota Statutes, do hereby certify that resolutions as
hereinafter set forth were adopted as of the 7th day of March,
1988, by written authorization of the sole shareholder:
RESOLVED, that the sole shareholder of this corporation
hereby amends the corporation's Articles of
Incorporation to include a new Article, Article VIII,
to read as follows:
A director of the corporation shall not be personally
liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a
director, except for (i) liability based on a breach of
the duty of loyalty to the corporation or the
shareholders; (ii) liability or acts of omissions not
in good faith or that involve intentional misconduct or
a knowing violation of law; (iii) liability for acts
prohibited under Minnesota Statutes, Section 300.60;
(iv) liability under Minnesota Statutes, Section
300.64, Subdivisions 1, 2, and 3; (v) liability for any
transaction from which the director derived an improper
personal benefit; or (vi) liability for any act or
omission occurring prior to the date this Article
becomes effective. If Chapter 300 of the Minnesota
Statues hereafter is amended to authorize the further
elimination or limitation of the liability of
directors, then the liability of a director of the
corporation in addition to the limitation on personal
liability provided herein, shall be limited to the
fullest extent permitted by the amended Chapter 300 of
the Minnesota Statutes. Any repeal of amendment of
this Article by the shareholders of the corporation
shall be prospective only, shall not adversely affect
any elimination of or limitation on the personal
liability of a director of the corporation existing at
the time of such repeal or amendment and shall e made
only upon the affirmative vote of the same percentage
of votes represented by shares of the common stock of
the corporation present, in person or by proxy, at a
meeting of shareholders duly called for such purpose,
as were
<PAGE>
<PAGE>
3537
originally obtained to adopt this Article. If after
the adoption of this Article, Chapter 300 of the
Minnesota Statutes is amended to adversely affect any
elimination of or limitation on the personal liability
of a director of the corporation, any such amendment
shall be prospective only and shall not adversely
affect any elimination of or limitation on the personal
liability of a director of the corporation existing at
the time of such amendment.
RESOLVED, FURTHER, the President and Secretary be, and
they hereby are, authorized, empowered and directed to
make, execute and acknowledge such documents as may be
required by Minnesota Statutes, Chapter 300, to reflect
this amendment in the articles of Incorporation and to
cause such document or documents to be filed for record
in the manner required by law.
/s/ Fred Davidson
--------------------
Fred Davidson
President
/s/ Helene K. Netter
--------------------
Helene K. Netter
Assistant Secretary
STATE OF NEW YORK )
: SS.:
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before as this __ day
of March, 1988, by Fred Davidson and Helene K. Netter, the
President and Assistant Secretary, respectively, of Golden
American Life Insurance Company, a Minnesota corporation, on
behalf of the corporation.
/s/ Rhonda Silverman
--------------------
Notary Public
(Stamp) (Stamp)
STATE OF MINNESOTA Rhonda Silverman
DEPARTMENT OF STATE Notary Public, State of N. Y.
FILED No. 473115
MARCH 18, 1988
JOAN ANDERSON GRACE
SECRETARY OF STATE
<PAGE>
<PAGE>
-----------------------------
STATE OF MINNESOTA
DEPARTMENT OF STATE
I hereby certify that
this is a true and complete
copy of the document as filed
for record in this office
DATED: June 9, 1988
/s/ Joan Anderson Grace
----------------------
Secretary of State
-----------------------------
By /s/ Teresa Nutt
-----------------------
-----------------------------
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 3(b)(i)
NO. 000642
----------
STATE OF MINNESOTA
[GRAPHIC: STATE OF MINNESOTA CIRCULAR SEAL]
DEPARTMENT OF COMMERCE
THE UNDERSIGNED
COMMISSIONER OF COMMERCE
FOR THE STATE OF MINNESOTA
HEREBY CERTIFIES THAT
GOLDEN AMERICAN LIFE INSURANCE COMPANY
organized under the laws of MINNESOTA
has made application, paid the fees required and in all other respects
complied with the laws of the State of Minnesota and is hereby authorized to
transact the business of an insurance company for the lines of insurance
specified in Minnesota Statues, Section 60A. 06, Subdivision 1, Clause(s) 4
(INCLUDING VARIABLE CONTRACTS), 5A
unless this authority be suspended, revoked, or otherwise legally terminated.
This certificate shall be in effect until June 1, 1991.
IN TESTIMONY WHEREOF, I have hereunto
set my hand and affixed the official
seal of the Department of Commerce, of
the State of Minnesota at my office in
the City of St. Paul,
Minnesota, this FIRST day of JUNE,
1990
/S/ THOMAS H. B__MAN
--------------------
THOMAS H. B__MAN
Commissioner of Commerce
CM-00526-01
CHARTER LICENSE INSURANCE
<PAGE>
<PAGE>
BYLAWS
OF
MB VARIABLE LIFE INSURANCE COMPANY
<PAGE>
<PAGE>
MB VARIABLE LIFE INSURANCE COMPANY
INDEX
ARTICLE I.
STOCKHOLDERS
------------
Page
Sec. 1 Notice of Meetings 1
Sec. 2 Annual Stockholders' Meetings 1
Sec. 3 Special Stockholders' Meetings 2
Sec. 4 Quorum and Adjournments 2
Sec. 5 Form of Proxy 2
ARTICLE II.
BOARD OF DIRECTORS
------------------
Sec. 1 Authority and Duties of Directors 2
Sec. 2 Regular Meetings 3
Sec. 3 Annual Meetings 3
Sec. 4 Special Meetings 3
Sec. 5 Waiver of Notice of Special Meetings 3
Sec. 6 Action in Writing 4
Sec. 7 Quorum 4
Sec. 8 Vacancies 4
ARTICLE III.
OFFICERS
--------
Sec. 1 Election and Removal 4
Sec. 2 Number 4
Sec. 3 Duties of Chairman 5
Sec. 4 Duties of President 5
Sec. 5 Duties of Executive Vice President 5
Sec. 6 Duties of Vice Presidents 5
Sec. 7 Duties of Secretary 5
Sec. 8 Duties of Treasurer 6
Sec. 9 Duties of Actuary 6
Sec. 10 Duties of General Counsel 6
Sec. 11 Duties of Medical Director 6
Sec. 12 Duties of Other Officers 6
ARTICLE IV.
CAPITAL STOCK
-------------
Sec. 1 Certificates 7
Sec. 2 Transfer 7
ARTICLE V.
COMMITTEES
----------
Sec. 1 Executive Committee 7
Sec. 2 Other Committees 7
<PAGE>
<PAGE>
ARTICLE VI.
CORPORATE ACTIONS
-----------------
Sec. 1 Dividends 8
Sec. 2 Loaning Company's Moneys 8
Sec. 3 Borrowing Money 8
Sec. 4 Depositories 8
ARTICLE VII.
MISCELLANEOUS
-------------
Sec. 1 Fiscal Year 8
Sec. 2 Corporate Seal 8
Sec. 3 Nominees 8
Sec. 4 Officers' and Employees' Bonds 9
Sec. 5 Indemnification of Directors and Officers 9
Sec. 6 Voting Stock 9
Sec. 7 Execution of Documents 9
Sec. 8 Amendments 9
<PAGE>
<PAGE>
BYLAWS
OF
MB VARIABLE LIFE INSURANCE COMPANY
ARTICLE I.
STOCKHOLDERS
NOTICE OF MEETINGS
Section 1. Not less than fifteen (15) days prior to the time appointed
for the holding of any stockholders' meetings, a notice thereof shall be given
either in person or by mail addressed to each stockholder at his last known
address, over the signature of an officer of the Company. In the case of an
annual meeting, the said notice shall state that it is to be held for the
election of directors and the transaction of such other business as may come
before the meeting. In case of a special meeting of the stockholders, the
notice shall state generally the nature of the business to be considered.
Unless the Board of Directors shall otherwise determine, stockholders of
record on the date of mailing shall be entitled to notice of any meeting, and
stockholders of record on the date of any meeting shall be entitled to vote
thereat.
All business transacted at any meeting of the stockholders at which all
of the stockholders are present, or the holding of which shall have consented
to in writing or by telegraph shall be valid, though no previous notice of
such meeting be given.
ANNUAL STOCKHOLDERS' MEETINGS
*Section 2. The Annual Meeting of the Stockholders shall be held each
year at the office of the Company in the City of St. Paul, Minnesota, or at
such other place as may be designated by the Board of Directors, in accordance
with the Articles of Incorporation.
At said meeting the stockholders shall elect a Board of Directors
consisting of not less than five (5) nor more than twelve (12) members who
shall hold office for one year or until their successors are elected and
qualified. At such meeting there may be transacted any other business that
may be brought before it.
Should the annual election of directors not take place in any year on the
day hereinbefore fixed therefor, for any reason whatever, such election may be
held on such other day within six (6) months thereafter as may be appointed
therefor by the Board of Directors, they giving notice thereof as in the case
of the Annual Meeting.
* Amended 12-21-84
-1-
<PAGE>
<PAGE>
SPECIAL STOCKHOLDERS' MEETINGS
Section 3. Special meetings of the stockholders may be held on call of
the Board of Directors with notice of said meeting being given in the same
manner as notice of an Annual Meeting.
QUORUM AND ADJOURNMENTS
Section 4. At all annual or special meetings of the stockholders, the
holders of a majority of the outstanding shares of the capital stock, whether
present in person or by proxy, shall constitute a quorum for the transaction
of business, but less than a majority may adjourn from time to time or sine
die.
FORM OF PROXY
Section 5. Any stockholder may be represented at any stockholders'
meeting by written proxy or power of attorney signed by the stockholder, and
filed with the Secretary of the Company at any time prior to the opening of
the meeting.
ARTICLE II.
BOARD OF DIRECTORS
AUTHORITY AND DUTIES OF DIRECTORS
*Section 1. The Board of Directors shall have authority and
responsibility for the general management of the corporation in all those
matters which are not reserved for action by the stockholders. Without
limiting the generality of the foregoing, the Board shall have specific
authority:
A. To call special meetings of the stockholders when they deem it
necessary, in the manner provided in these Bylaws.
B. To make rules and regulations not inconsistent with the law, the
Articles of Incorporation or the Bylaws of the Company.
C. To incur such indebtedness as may be deemed necessary and to
authorize the execution by the appropriate officers, in the name of
the Company, of any required evidence of such indebtedness.
It shall be the duty of the Board of Directors, without limiting the
generality of the forgoing:
A. To cause to be kept a complete record of all its meetings and acts,
and also all proceedings of the meetings of stockholders, and to
cause to be presented a full statement at the regular meetings of
the stockholders, showing in detail the assets and liabilities of
the Company and generally the condition of its affairs.
* Amended 12-21-84
-2-
<PAGE>
<PAGE>
B. To require the Secretary and the Treasurer and their assistants to
keep full and accurate books and accounts and to prescribe the form
and mode of keeping such books.
C. To cause to be issued to the stockholders certificates of stock in
the proportion to their several interests, not to exceed in the
aggregate the authorized capital stock of the Company.
D. To cause the monies of the Company to be safely kept and to
determine the method of signing Company checks and orders for
transfer or withdrawal of the funds of this Company on deposit with
any bank in whatever form.
E. To reserve, allot, or set aside such a amount in excess of the
reserve required by law to be held and maintained as shall, in their
judgment, be for the best interests of the Company.
F. To adopt and exercise such plans and systems of insurance as they
may deem necessary for the best interests of the Company.
REGULAR MEETINGS
*Section 2. The Board of Directors shall meet from time to time without
notice at such places within or without the State of Minnesota, and at such
times and dates as the Board of Directors shall determine.
ANNUAL MEETINGS
Section 3. The Annual Meeting of the Board of Directors shall be held
immediately following the annual stockholders' meeting, and no notice thereof
shall be required.
SPECIAL MEETINGS
Section 4. Special meetings of the Board of Directors may be called by
the Chairman, the President, or any two (2) directors on written request to
the Secretary stating the object of the meeting. Notices of special meetings
of the Board of Directors, stating the time, date, place and object of the
meeting, shall be given to each director either in person or by telephone, or
by telegraph or mail addressed to each director's last known address at least
twenty-four (24) hours prior to the time of such meeting.
WAIVER OF NOTICE OF SPECIAL MEETINGS
Section 5. All business transacted at any special meeting at which all
of the directors are either present, or to the holding of which they shall
have consented in writing, or by telegraph, shall be valid, though no previous
notice of such meeting be given.
* Amended 12-21-84
-3-
<PAGE>
<PAGE>
ACTION IN WRITING
Section 6. Any action which may be taken by the Board of Directors or
any committee thereof may be taken without a meeting if done in writing signed
by all members of the Board of Directors or Committee.
QUORUM
Section 7. A majority of the full Board of Directors shall constitute a
quorum for the transaction of business, but less than a majority may adjourn
from time to time or sine die. In case of adjournment to a subsequent sate
and hour, the Secretary shall give notice of the adjourned meeting in the
manner provided by Section 4 of this Article.
VACANCIES
*Section 8. The Board of Directors shall have the power to elect
successors to fill up to three(3) vacancies that may occur in their own body,
such successors to serve until the next annual meeting of the stockholders.
If more than three (3) vacancies occur during any year, the remaining
directors may call a special meeting of stockholders to fill such additional
vacancies or the remaining directors may continue to act so long as a quorum
remains, but such directors, if less than a quorum, shall promptly call a
special meeting of the stockholders to fill such additional vacancy or
vacancies.
ARTICLE III.
OFFICERS
ELECTION AND REMOVAL
Section 1. The officer of the Company shall be elected to serve during
the pleasure of the Board of Directors, except that the Chairman, if any, and
the President shall be elected by the Board of Directors at its Annual Meeting
to serve for one year and until the election and qualification of their
successors; and the Board of Directors may at any time create additional
offices and define the duties thereof, or, with or without cause, abolish
offices and remove the incumbents therefrom.
NUMBER
*Section 2. The Board of Directors may elect a Chairman, an Executive
Vice President and shall elect a President; one or more Vice Presidents; an
Actuary, a General Counsel; a Secretary; a Treasurer; a Medical Director, and
such additional officers as it may in its discretion determine.
* Amended 12-21-84
-4-
<PAGE>
<PAGE>
DUTIES OF CHAIRMAN
*Section 3. CHAIRMAN. The Chairman shall be responsible for making
recommendations concerning Company policy to the Board of Directors or the
Executive Committee. He shall preside at meetings of stockholders and the
Board of Directors. He shall be consulted on major policy decisions and shall
act in an advisory capacity in connection with the business of the
corporation, and shall perform such duties as may be specifically assigned to
him by the Board of Directors.
DUTIES OF PRESIDENT
*Section 4. PRESIDENT. The President shall be the chief executive
officer of the Company with general responsibility for the efficient,
profitable management of the Company, and for designating the duties, powers
and authority of all officers and employees of the Company. He shall be a
member of the Executive Committee. He shall have the authority to delegate
any of said duties as he may from time to time, in his discretion, determine.
In the absence of the Chairman, the President shall assume his duties.
In the event of the inability of the President to act, the Executive Vice
President, if any, otherwise the Vice President with the greatest seniority in
that office shall perform the duties and exercise the powers of the President
until some person is appointed by the Board of Directors or the Executive
Committee.
DUTIES OF EXECUTIVE VICE PRESIDENT
*Section 5. EXECUTIVE VICE PRESIDENT. The Executive Vice President, if
one is elected, shall assist the President, shall assume the President's
duties in his absence, and shall have specific accountability for the quality
of performance in those areas of the Company's operations which the President
shall determine. He shall have such additional responsibilities as may be
assigned by the Board of Directors or the President.
DUTIES OF VICE PRESIDENTS
Section 6. VICE PRESIDENTS. The Vice Presidents, one or more of whom
may be elected in the discretion of the Board of Directors, shall have such
duties as the Board of Directors or the President shall prescribe.
DUTIES OF SECRETARY
Section 7. SECRETARY. The Secretary shall take charge of and affix the
seal of the Company to all certificates of stock. He shall be present at all
meetings of the stockholders and of the Board of Directors, shall attend
meetings of the Executive Committee and other committees as requested, and
shall keep a true and accurate record of all meetings in books provided for
that purpose. He shall be the custodian of all the official corporate papers
of the Company except those of a financial nature. In the absence of the
Secretary, an Assistant Secretary shall be appointed by the President to
execute the foregoing duties. He shall perform such other assignments as may
be made by the Board of Directors or the President.
* Amended 12-21-84
-5-
<PAGE>
<PAGE>
DUTIES OF THE TREASURER
Section 8. TREASURER. The Treasurer shall be accountable, jointly with
such other officer or officers as may be designated by the Board of Directors,
for the safekeeping of all monies and securities of the company, consistent
with the rules adopted by the board of Directors therefor. He shall keep a
complete record of all investments, mortgages and securities and shall attend
to the collection of payments and interest due thereon. It shall be his
responsibility to keep the Company's monies deposited in the name of the
Company unless the Board of Directors shall direct otherwise, and to control
the amount of bank balances in each depository of the Company, and he shall
have such other responsibilities as may be assigned by the Board of Directors
or the President.
DUTIES OF ACTUARY
Section 9. ACTUARY. The Actuary shall supervise and be responsible for
the routine duties of the Actuarial Department and shall have the general
duties of supervision and management usually vested in the office of Actuary
for a life insurance company and such additional responsibilities as may be
assigned by the Board of Directors or the President.
DUTIES OF GENERAL COUNSEL
Section 10. GENERAL COUNSEL. The General Counsel shall be accountable
for providing representation for the Company in all litigation, for promoting
legality of the Company's operations by providing legal advice to the Company,
its directors, officers and employees upon all matters pertaining to Company
affairs, and for conducting such reviews and investigations as may be needed
to measure and assure compliance. He shall have such additional
responsibilities as may be assigned by the Board of Directors or the
President.
DUTIES OF MEDICAL DIRECTOR
Section 11. MEDICAL DIRECTOR. The Medical Director, if one is elected,
shall be accountable for providing quality medical evaluations and advice to
aid in the underwriting of risks and settlement of claims, for the
qualification and appointment of local medical examiners as required, for
advising the officers and directors of the Company on medical matters, and for
such additional assignments as may be made by the Board of Directors or the
President.
DUTIES OF OTHER OFFICERS
Section 12. OTHER OFFICERS. The Other Officers, who may be elected in
such manner and with such titles as the Board if Directors may in its
discretion determine, shall have such duties as the Board of Directors or the
President shall prescribe.
-6-
<PAGE>
<PAGE>
ARTICLE IV.
CAPITAL STOCK
CERTIFICATES
Section 1. The certificates of capital stock of the Company shall be
numbered in progression, and they shall exhibit the name or names of the
person or persons owning the shares represented thereby, the number of shares
for which they are issued, the name of the state in which the Company is
organized, the name of Company, and shall be signed by the President or a Vice
President and the Secretary or and Assistant Secretary under the corporate
seal of the Company.
TRANSFER
Section 2. Shares of capital stock of the Company may be transferred at
any time by the holder or by an attorney legally constituted or by a legal
representative of the holder. No transfer shall be valid except between the
parties thereto until entered in proper form on the books of the Company.
Surrendered certificates shall be canceled by the Secretary and shall be
placed in the certificate book opposite the memorandum of the issue of that
certificate before a new certificate shall be issued in lieu thereof.
ARTICLE V.
COMMITTEES
EXECUTIVE COMMITTEE
Section 1. There shall be an Executive Committee consisting of three or
more Directors, including the President, to be elected annually by the Board
of Directors.
The Executive Committee shall be responsible for officers' salary
administration and shall have and exercise the authority of the Board of
Directors in the management of the business of the Company in the interval
between meetings of the Board of Directors, provided, however, that the
Executive Committee shall not have the power to declare a dividend or to cause
to be issued any of the Company's authorized but unissued stock.
The Executive Committee may meet upon the call of the President or any
two members and a majority of the Committee shall constitute a quorum.
Any action which may be taken by the committee may be taken without a
meeting if done in writing signed by each member of the Committee.
Actions of the Executive Committee shall be recorded by the Secretary and
reported to the Board of Directors at its next meeting.
OTHER COMMITTEES
Section 2. Additional standing committees may be created as desired or
required for specific purposes at any time by action of the Board of
Directors.
-7-
<PAGE>
<PAGE>
ARTICLE VI.
CORPORATE ACTIONS
DIVIDENDS
Section 1. The Board of Directors may declare dividends on the stock
issued and outstanding from any source as permitted by the laws of Minnesota.
LOANING COMPANY'S MONEYS
Section 2. The Company shall not loan any of its funds to any officer,
Director or member of any committee passing on investments.
BORROWING MONEY
Section 3. The Board of Directors may authorize its officers to negotiate
and borrow money with such limitations as the Board of Directors may from time
to time determine, and within such limitations, such duly authorized officers
may execute, in the name of the Company, its bonds, notes or other suitable
obligation therefore; and to secure the payment thereof, may mortgage its
income, rights or property, whether real, personal or both.
DEPOSITORIES
Section 4. All moneys, checks and evidences of money received by or
belonging to this Company shall be deposited to the credit of the company in
such banks or trust companies as may designated pursuant to authority of the
Board of Directors.
ARTICLE VII.
MISCELLANEOUS
FISCAL YEAR
Section 1. The fiscal year of the Company shall end at December 31 of
each year.
CORPORATE SEAL
Section 2. The corporate seal of this Company shall be a circular die,
around the edge of which shall appear the word, "Golden American Life
Insurance Company," and in the center of which shall appear the words
"Corporate Seal."
NOMINEES
Section 3. The Board of Directors may by resolution, if permitted under
the applicable laws of the State of Minnesota, authorize the establishment or
designation of a nominee or nominees for the purpose of registering securities
owned by the Company in the name of such nominee or nominees rather than in
the Company's name. Upon such establishment or designating shares of stock
and other securities owned by this Company may be registered in the name of
such nominee or nominees.
-8-
<PAGE>
<PAGE>
OFFICERS' AND EMPLOYEES' BONDS
Section 4. The officers and the employees of the Company shall furnish
bonds for the faithful performance of their duties when so required, and in
the form as from time to time may be determined by the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6. The Company shall indemnify (including therein the prepayment
of expenses) any person who is or was a director, officer or employee, or who
is or was serving at the request of the Company as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise for expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him with
respect to any threatened, pending or completed action, suit or proceedings
against him by reason of the fact that he is or was such a director, officer
or employee to the extent and in the manner permitted by law.
The Company may also, to the extent permitted by law, indemnify any other
person who is or was serving the Company in any capacity. The Board of
Directors shall have the power and authority to determine who may be
indemnified under this paragraph and to what extent (not to exceed the extent
provided in the above paragraph) any such person may be indemnified.
The Company may purchase and maintain insurance on behalf of any such
person or persons to be indemnified under the provisions in the above
paragraphs, against any such liability to the extent permitted by law.
VOTING STOCK
Section 6. The President or the Treasurer, or a proxy appointed by
either of them, unless some other person or persons shall be appointed by the
Board of Directors, may vote shares in another corporation owned by the
Company.
EXECUTION OF DOCUMENTS
Section 7. All contracts, including policies of insurance issued by the
Company, shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary. Both signatures may be facsimile,
engraved or printed if the contract is countersigned by a duly authorized
registrar, agent, officer or employee designated by the Board of Directors for
such purpose. The President, a Vice President or the Treasurer shall execute
the transfer and assignment of any and all securities owned by the Company.
AMENDMENTS
Section 8. These Bylaws may be amended by a majority vote of the
stockholders at their Annual Meeting, or at any other meeting called for that
purpose.
-9-
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 3(b)(ii)
BYLAWS
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
INDEX
ARTICLE I.
STOCKHOLDERS
------------
Page
Sec. 1 Notice of Meetings 1
Sec. 2 Annual Stockholders' Meetings 1
Sec. 3 Special Stockholders' Meetings 2
Sec. 4 Quorum and Adjournments 2
Sec. 5 Form of Proxy 2
ARTICLE II.
BOARD OF DIRECTORS
------------------
Sec. 1 Authority and Duties of Directors 2
Sec. 2 Regular Meetings 3
Sec. 3 Annual Meetings 3
Sec. 4 Special Meetings 3
Sec. 5 Waiver of Notice of Special Meetings 3
Sec. 6 Action in Writing 4
Sec. 7 Quorum 4
Sec. 8 Vacancies 4
ARTICLE III.
OFFICERS
--------
Sec. 1 Election and Removal 4
Sec. 2 Number 4
Sec. 3 Duties of Chairman 5
Sec. 4 Duties of President 5
Sec. 5 Duties of Executive Vice President 5
Sec. 6 Duties of Vice Presidents 5
Sec. 7 Duties of Secretary 5
Sec. 8 Duties of Treasurer 6
Sec. 9 Duties of Actuary 6
Sec. 10 Duties of General Counsel 6
Sec. 11 Duties of Medical Director 6
Sec. 12 Duties of Other Officers 6
ARTICLE IV.
CAPITAL STOCK
-------------
Sec. 1 Certificates 7
Sec. 2 Transfer 7
ARTICLE V.
COMMITTEES
----------
Sec. 1 Executive Committee 7
Sec. 2 Other Committees 7
<PAGE>
<PAGE>
ARTICLE VI.
CORPORATE ACTIONS
-----------------
Sec. 1 Dividends 8
Sec. 2 Loaning Company's Moneys 8
Sec. 3 Borrowing Money 8
Sec. 4 Depositories 8
ARTICLE VII.
MISCELLANEOUS
-------------
Sec. 1 Fiscal Year 8
Sec. 2 Corporate Seal 8
Sec. 3 Nominees 8
Sec. 4 Officers' and Employees' Bonds 9
Sec. 5 Indemnification of Directors and Officers 9
Sec. 6 Voting Stock 9
Sec. 7 Execution of Documents 9
Sec. 8 Amendments 9
<PAGE>
<PAGE>
BYLAWS
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
ARTICLE I.
STOCKHOLDERS
NOTICE OF MEETINGS
Section 1. Not less than fifteen (15) days prior to the time appointed
for the holding of any stockholders' meetings, a notice thereof shall be given
either in person or by mail addressed to each stockholder at his last known
address, over the signature of an officer of the Company. In the case of an
annual meeting, the said notice shall state that it is to be held for the
election of directors and the transaction of such other business as may come
before the meeting. In case of a special meeting of the stockholders, the
notice shall state generally the nature of the business to be considered.
Unless the Board of Directors shall otherwise determine, stockholders of
record on the date of mailing shall be entitled to notice of any meeting, and
stockholders of record on the date of any meeting shall be entitled to vote
thereat.
All business transacted at any meeting of the stockholders at which all
of the stockholders are present, or the holding of which shall have consented
to in writing or by telegraph shall be valid, though no previous notice of
such meeting be given.
ANNUAL STOCKHOLDERS' MEETINGS
*Section 2. The Annual Meeting of the Stockholders shall be held each
year at the office of the Company in the City of St. Paul, Minnesota, or at
such other place as may be designated by the Board of Directors, in accordance
with the Articles of Incorporation.
At said meeting the stockholders shall elect a Board of Directors
consisting of not less than five (5) nor more than twelve (12) members who
shall hold office for one year or until their successors are elected and
qualified. At such meeting there may be transacted any other business that
may be brought before it.
Should the annual election of directors not take place in any year on the
day hereinbefore fixed therefor, for any reason whatever, such election may be
held on such other day within six (6) months thereafter as may be appointed
therefor by the Board of Directors, they giving notice thereof as in the case
of the Annual Meeting.
* Amended 12-21-84
-1-
<PAGE>
<PAGE>
SPECIAL STOCKHOLDERS' MEETINGS
Section 3. Special meetings of the stockholders may be held on call of
the Board of Directors with notice of said meeting being given in the same
manner as notice of an Annual Meeting.
QUORUM AND ADJOURNMENTS
Section 4. At all annual or special meetings of the stockholders, the
holders of a majority of the outstanding shares of the capital stock, whether
present in person or by proxy, shall constitute a quorum for the transaction
of business, but less than a majority may adjourn from time to time or sine
die.
FORM OF PROXY
Section 5. Any stockholder may be represented at any stockholders'
meeting by written proxy or power of attorney signed by the stockholder, and
filed with the Secretary of the Company at any time prior to the opening of
the meeting.
ARTICLE II.
BOARD OF DIRECTORS
AUTHORITY AND DUTIES OF DIRECTORS
*Section 1. The Board of Directors shall have authority and
responsibility for the general management of the corporation in all those
matters which are not reserved for action by the stockholders. Without
limiting the generality of the foregoing, the Board shall have specific
authority:
A. To call special meetings of the stockholders when they deem it
necessary, in the manner provided in these Bylaws.
B. To make rules and regulations not inconsistent with the law, the
Articles of Incorporation or the Bylaws of the Company.
C. To incur such indebtedness as may be deemed necessary and to
authorize the execution by the appropriate officers, in the name of
the Company, of any required evidence of such indebtedness.
It shall be the duty of the Board of Directors, without limiting the
generality of the forgoing:
A. To cause to be kept a complete record of all its meetings and acts,
and also all proceedings of the meetings of stockholders, and to
cause to be presented a full statement at the regular meetings of
the stockholders, showing in detail the assets and liabilities of
the Company and generally the condition of its affairs.
* Amended 12-21-84
-2-
<PAGE>
<PAGE>
B. To require the Secretary and the Treasurer and their assistants to
keep full and accurate books and accounts and to prescribe the form
and mode of keeping such books.
C. To cause to be issued to the stockholders certificates of stock in
the proportion to their several interests, not to exceed in the
aggregate the authorized capital stock of the Company.
D. To cause the monies of the Company to be safely kept and to
determine the method of signing Company checks and orders for
transfer or withdrawal of the funds of this Company on deposit with
any bank in whatever form.
E. To reserve, allot, or set aside such a amount in excess of the
reserve required by law to be held and maintained as shall, in their
judgment, be for the best interests of the Company.
F. To adopt and exercise such plans and systems of insurance as they
may deem necessary for the best interests of the Company.
REGULAR MEETINGS
*Section 2. The Board of Directors shall meet from time to time without
notice at such places within or without the State of Minnesota, and at such
times and dates as the Board of Directors shall determine.
ANNUAL MEETINGS
Section 3. The Annual Meeting of the Board of Directors shall be held
immediately following the annual stockholders' meeting, and no notice thereof
shall be required.
SPECIAL MEETINGS
Section 4. Special meetings of the Board of Directors may be called by
the Chairman, the President, or any two (2) directors on written request to
the Secretary stating the object of the meeting. Notices of special meetings
of the Board of Directors, stating the time, date, place and object of the
meeting, shall be given to each director either in person or by telephone, or
by telegraph or mail addressed to each director's last known address at least
twenty-four (24) hours prior to the time of such meeting.
WAIVER OF NOTICE OF SPECIAL MEETINGS
Section 5. All business transacted at any special meeting at which all
of the directors are either present, or to the holding of which they shall
have consented in writing, or by telegraph, shall be valid, though no previous
notice of such meeting be given.
* Amended 12-21-84
-3-
<PAGE>
<PAGE>
ACTION IN WRITING
Section 6. Any action which may be taken by the Board of Directors or
any committee thereof may be taken without a meeting if done in writing signed
by all members of the Board of Directors or Committee.
QUORUM
Section 7. A majority of the full Board of Directors shall constitute a
quorum for the transaction of business, but less than a majority may adjourn
from time to time or sine die. In case of adjournment to a subsequent sate
and hour, the Secretary shall give notice of the adjourned meeting in the
manner provided by Section 4 of this Article.
VACANCIES
*Section 8. The Board of Directors shall have the power to elect
successors to fill up to three(3) vacancies that may occur in their own body,
such successors to serve until the next annual meeting of the stockholders.
If more than three (3) vacancies occur during any year, the remaining
directors may call a special meeting of stockholders to fill such additional
vacancies or the remaining directors may continue to act so long as a quorum
remains, but such directors, if less than a quorum, shall promptly call a
special meeting of the stockholders to fill such additional vacancy or
vacancies.
ARTICLE III.
OFFICERS
ELECTION AND REMOVAL
Section 1. The officer of the Company shall be elected to serve during
the pleasure of the Board of Directors, except that the Chairman, if any, and
the President shall be elected by the Board of Directors at its Annual Meeting
to serve for one year and until the election and qualification of their
successors; and the Board of Directors may at any time create additional
offices and define the duties thereof, or, with or without cause, abolish
offices and remove the incumbents therefrom.
NUMBER
*Section 2. The Board of Directors may elect a Chairman, an Executive
Vice President and shall elect a President; one or more Vice Presidents; an
Actuary, a General Counsel; a Secretary; a Treasurer; a Medical Director, and
such additional officers as it may in its discretion determine.
* Amended 12-21-84
-4-
<PAGE>
<PAGE>
DUTIES OF CHAIRMAN
*Section 3. CHAIRMAN. The Chairman shall be responsible for making
recommendations concerning Company policy to the Board of Directors or the
Executive Committee. He shall preside at meetings of stockholders and the
Board of Directors. He shall be consulted on major policy decisions and shall
act in an advisory capacity in connection with the business of the
corporation, and shall perform such duties as may be specifically assigned to
him by the Board of Directors.
DUTIES OF PRESIDENT
*Section 4. PRESIDENT. The President shall be the chief executive
officer of the Company with general responsibility for the efficient,
profitable management of the Company, and for designating the duties, powers
and authority of all officers and employees of the Company. He shall be a
member of the Executive Committee. He shall have the authority to delegate
any of said duties as he may from time to time, in his discretion, determine.
In the absence of the Chairman, the President shall assume his duties.
In the event of the inability of the President to act, the Executive Vice
President, if any, otherwise the Vice President with the greatest seniority in
that office shall perform the duties and exercise the powers of the President
until some person is appointed by the Board of Directors or the Executive
Committee.
DUTIES OF EXECUTIVE VICE PRESIDENT
*Section 5. EXECUTIVE VICE PRESIDENT. The Executive Vice President, if
one is elected, shall assist the President, shall assume the President's
duties in his absence, and shall have specific accountability for the quality
of performance in those areas of the Company's operations which the President
shall determine. He shall have such additional responsibilities as may be
assigned by the Board of Directors or the President.
DUTIES OF VICE PRESIDENTS
Section 6. VICE PRESIDENTS. The Vice Presidents, one or more of whom
may be elected in the discretion of the Board of Directors, shall have such
duties as the Board of Directors or the President shall prescribe.
DUTIES OF SECRETARY
Section 7. SECRETARY. The Secretary shall take charge of and affix the
seal of the Company to all certificates of stock. He shall be present at all
meetings of the stockholders and of the Board of Directors, shall attend
meetings of the Executive Committee and other committees as requested, and
shall keep a true and accurate record of all meetings in books provided for
that purpose. He shall be the custodian of all the official corporate papers
of the Company except those of a financial nature. In the absence of the
Secretary, an Assistant Secretary shall be appointed by the President to
execute the foregoing duties. He shall perform such other assignments as may
be made by the Board of Directors or the President.
* Amended 12-21-84
-5-
<PAGE>
<PAGE>
DUTIES OF THE TREASURER
Section 8. TREASURER. The Treasurer shall be accountable, jointly with
such other officer or officers as may be designated by the Board of Directors,
for the safekeeping of all monies and securities of the company, consistent
with the rules adopted by the board of Directors therefor. He shall keep a
complete record of all investments, mortgages and securities and shall attend
to the collection of payments and interest due thereon. It shall be his
responsibility to keep the Company's monies deposited in the name of the
Company unless the Board of Directors shall direct otherwise, and to control
the amount of bank balances in each depository of the Company, and he shall
have such other responsibilities as may be assigned by the Board of Directors
or the President.
DUTIES OF ACTUARY
Section 9. ACTUARY. The Actuary shall supervise and be responsible for
the routine duties of the Actuarial Department and shall have the general
duties of supervision and management usually vested in the office of Actuary
for a life insurance company and such additional responsibilities as may be
assigned by the Board of Directors or the President.
DUTIES OF GENERAL COUNSEL
Section 10. GENERAL COUNSEL. The General Counsel shall be accountable
for providing representation for the Company in all litigation, for promoting
legality of the Company's operations by providing legal advice to the Company,
its directors, officers and employees upon all matters pertaining to Company
affairs, and for conducting such reviews and investigations as may be needed
to measure and assure compliance. He shall have such additional
responsibilities as may be assigned by the Board of Directors or the
President.
DUTIES OF MEDICAL DIRECTOR
Section 11. MEDICAL DIRECTOR. The Medical Director, if one is elected,
shall be accountable for providing quality medical evaluations and advice to
aid in the underwriting of risks and settlement of claims, for the
qualification and appointment of local medical examiners as required, for
advising the officers and directors of the Company on medical matters, and for
such additional assignments as may be made by the Board of Directors or the
President.
DUTIES OF OTHER OFFICERS
Section 12. OTHER OFFICERS. The Other Officers, who may be elected in
such manner and with such titles as the Board if Directors may in its
discretion determine, shall have such duties as the Board of Directors or the
President shall prescribe.
-6-
<PAGE>
<PAGE>
ARTICLE IV.
CAPITAL STOCK
CERTIFICATES
Section 1. The certificates of capital stock of the Company shall be
numbered in progression, and they shall exhibit the name or names of the
person or persons owning the shares represented thereby, the number of shares
for which they are issued, the name of the state in which the Company is
organized, the name of Company, and shall be signed by the President or a Vice
President and the Secretary or and Assistant Secretary under the corporate
seal of the Company.
TRANSFER
Section 2. Shares of capital stock of the Company may be transferred at
any time by the holder or by an attorney legally constituted or by a legal
representative of the holder. No transfer shall be valid except between the
parties thereto until entered in proper form on the books of the Company.
Surrendered certificates shall be canceled by the Secretary and shall be
placed in the certificate book opposite the memorandum of the issue of that
certificate before a new certificate shall be issued in lieu thereof.
ARTICLE V.
COMMITTEES
EXECUTIVE COMMITTEE
Section 1. There shall be an Executive Committee consisting of three or
more Directors, including the President, to be elected annually by the Board
of Directors.
The Executive Committee shall be responsible for officers' salary
administration and shall have and exercise the authority of the Board of
Directors in the management of the business of the Company in the interval
between meetings of the Board of Directors, provided, however, that the
Executive Committee shall not have the power to declare a dividend or to cause
to be issued any of the Company's authorized but unissued stock.
The Executive Committee may meet upon the call of the President or any
two members and a majority of the Committee shall constitute a quorum.
Any action which may be taken by the committee may be taken without a
meeting if done in writing signed by each member of the Committee.
Actions of the Executive Committee shall be recorded by the Secretary and
reported to the Board of Directors at its next meeting.
OTHER COMMITTEES
Section 2. Additional standing committees may be created as desired or
required for specific purposes at any time by action of the Board of
Directors.
-7-
<PAGE>
<PAGE>
ARTICLE VI.
CORPORATE ACTIONS
DIVIDENDS
Section 1. The Board of Directors may declare dividends on the stock
issued and outstanding from any source as permitted by the laws of Minnesota.
LOANING COMPANY'S MONEYS
Section 2. The Company shall not loan any of its funds to any officer,
Director or member of any committee passing on investments.
BORROWING MONEY
Section 3. The Board of Directors may authorize its officers to negotiate
and borrow money with such limitations as the Board of Directors may from time
to time determine, and within such limitations, such duly authorized officers
may execute, in the name of the Company, its bonds, notes or other suitable
obligation therefore; and to secure the payment thereof, may mortgage its
income, rights or property, whether real, personal or both.
DEPOSITORIES
Section 4. All moneys, checks and evidences of money received by or
belonging to this Company shall be deposited to the credit of the company in
such banks or trust companies as may designated pursuant to authority of the
Board of Directors.
ARTICLE VII.
MISCELLANEOUS
FISCAL YEAR
Section 1. The fiscal year of the Company shall end at December 31 of
each year.
CORPORATE SEAL
Section 2. The corporate seal of this Company shall be a circular die,
around the edge of which shall appear the word, "Golden American Life
Insurance Company," and in the center of which shall appear the words
"Corporate Seal."
NOMINEES
Section 3. The Board of Directors may by resolution, if permitted under
the applicable laws of the State of Minnesota, authorize the establishment or
designation of a nominee or nominees for the purpose of registering securities
owned by the Company in the name of such nominee or nominees rather than in
the Company's name. Upon such establishment or designating shares of stock
and other securities owned by this Company may be registered in the name of
such nominee or nominees.
-8-
<PAGE>
<PAGE>
OFFICERS' AND EMPLOYEES' BONDS
Section 4. The officers and the employees of the Company shall furnish
bonds for the faithful performance of their duties when so required, and in
the form as from time to time may be determined by the Board of Directors.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 6. The Company shall indemnify (including therein the prepayment
of expenses) any person who is or was a director, officer or employee, or who
is or was serving at the request of the Company as a director, officer or
employee of another corporation, partnership, joint venture, trust or other
enterprise for expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him with
respect to any threatened, pending or completed action, suit or proceedings
against him by reason of the fact that he is or was such a director, officer
or employee to the extent and in the manner permitted by law.
The Company may also, to the extent permitted by law, indemnify any other
person who is or was serving the Company in any capacity. The Board of
Directors shall have the power and authority to determine who may be
indemnified under this paragraph and to what extent (not to exceed the extent
provided in the above paragraph) any such person may be indemnified.
The Company may purchase and maintain insurance on behalf of any such
person or persons to be indemnified under the provisions in the above
paragraphs, against any such liability to the extent permitted by law.
VOTING STOCK
Section 6. The President or the Treasurer, or a proxy appointed by
either of them, unless some other person or persons shall be appointed by the
Board of Directors, may vote shares in another corporation owned by the
Company.
EXECUTION OF DOCUMENTS
Section 7. All contracts, including policies of insurance issued by the
Company, shall be signed by the President or a Vice President and by the
Secretary or an Assistant Secretary. Both signatures may be facsimile,
engraved or printed if the contract is countersigned by a duly authorized
registrar, agent, officer or employee designated by the Board of Directors for
such purpose. The President, a Vice President or the Treasurer shall execute
the transfer and assignment of any and all securities owned by the Company.
AMENDMENTS
Section 8. These Bylaws may be amended by a majority vote of the
stockholders at their Annual Meeting, or at any other meeting called for that
purpose.
-9-
<PAGE>
<PAGE>
I, David C. Storlie, Secretary of the Golden American Life Insurance Company
of St. Paul, Minnesota, do hereby certify that the foregoing Bylaws are a true
and correct copy of the Bylaws as of January 4, 1988.
GOLDEN AMERICAN LIFE INSURANCE COMPANY
/s/ David C. Storlie
--------------------
Dated: January 4, 1988
St. Paul, Minnesota
Subscribed and sworn to before me this
4th day of January, 1988.
/s/ Joanne F. Humpal
- --------------------
Notary Public
[GRAPHIC NOTARY STAMP: "Joanne F. Humpal
Notary Public, Ramsey County, Minn.
MY COMMISSION EXPIRES
December 30, 1989."]
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 3(b)(iii)
CERTIFICATE OF AMENDMENT
OF THE BYLAWS
OF
MB VARIABLE LIFE INSURANCE COMPANY
We, the undersigned officers of MB Variable Life Insurance Company, a
corporation subject to the provisions of Chapter 300 of the Minnesota Statues,
do hereby certify that resolutions as hereinafter set forth were adopted as of
the 13th day of April, 1992, by written authorization of the sole stockholder:
VOTED: That the Bylaws of the Corporation be amended to be know as
"Bylaws of Golden American Life Insurance Company" and that Article VII.
Section 2. of the Bylaws be amended as follows:
"Section 2. The corporate seal of this Company shall be a circular die,
around the edge of which shall appear the words, `Golden American Life
Insurance Company', and in the center of which shall appear the words
`Corporate Seal'."
VOTED: That Article I. Section 2. of the Bylaws be amended to read as
follows:
"Section 2. The Annual Meeting of the Stockholders shall be held each
year at the office of the Company in the City of Minneapolis, Minnesota, or at
such place as may be designated by the Board of Directors, in accordance with
the Articles of Incorporation.
At said meeting the stockholders hall elect a Board of Directors
consisting of not less than three (3) nor more than twelve (12) members which
shall hold office for one year or until their successors are elected and
qualified. At such meeting there may be transacted any other business that
may be brought before it.
Should the annual election of directors not take place in any year on the
day hereinbefore fixed therefor, for any reason whatever, such election may be
held on such other day within six (6) months thereafter as may be appointed
therefor by the Board of Directors, they giving notice thereof as in the case
of the Annual Meeting."
VOTED: That the directors and officers of the Corporation be, and they
hereby are, authorized to do and cause to be done all things in their judgment
necessary or advisable to effect the amendment of the Bylaws of the
Corporation.
The undersigned, Fred H. Davidson and Bernard R. Beckerlegge, the
President and Secretary, respectively, of MB Variable Life Insurance Company,
do hereby certify that the foregoing Certificate of Amendment of the Bylaws of
MB Variable Life Insurance Company is a true and correct copy of the
Resolution of The Mutual Benefit Life Insurance Company in Rehabilitation, the
sole stockholder of MB Variable Life Insurance Company as of this 16 day of
April, 1992.
<PAGE>
<PAGE>
/s/ Fred H. Davidson
-----------------------------
Fred H. Davidson, President
/s/ Bernard R. Beckerlegge
-----------------------------
Bernard R. Beckerlegge, Secretary
MB VARIABLE LIFE INSURANCE COMPANY
The foregoing amendment to the Bylaws is hereby approved this ____ day of
April, 1992.
-----------------------------
The _____ Bylaws
_____________________________
__ 24th day of April, 1992,
/s/ Bert J. McKay _____
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 3(b)(iv)
STATE OF DELAWARE
[GRAPHIC OF LIBERTY AND INDEPENDENCE SEAL WITH TWO MEN ON OUTSIDE.]
DEPARTMENT OF INSURANCE
DOVER, DELAWARE
-------[GRAPHIC OF DIAMOND SYMBOL]-------
I, DONNA LEE H. WILLIAMS, INSURANCE COMMISSIONER OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THAT the attached By-Laws (as amended December 21, 1993) of the
GOLDEN AMERICAN LIFE INSURANCE COMPANY, is a true and correct copy of the
document on file with this Department.
IN WITNESS WHEREOF, I HAVE HEREUNTO
SET MY HAND AND AFFIXED THE OFFICIAL
SEAL OF THIS DEPARTMENT AT THE CITY OF
DOVER, THIS 7TH DAY OF JANUARY, 1994,
/S/ DONNA LEE H. WILLIAMS
--------------------------------------
Insurance Commissioner
--------------------------------------
Deputy Insurance Commissioner
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
--------------------------------------
CERTIFICATION
The undersigned deposes and says that he is the Secretary and General
Counsel for Golden American Life Insurance Company; that he is familiar with
the By-Laws of Golden American Life Insurance Company and the contents
thereof; that the attached copy of the By-Laws is a true and accurate copy
duly adopted by Golden American's Board of Directors.
/s/ Bernard R. Beckerlegge
--------------------------
Bernard R. Beckerlegge
Secretary and General Counsel
January 11, 1994
<PAGE>
<PAGE>
(AS AMENDED 12/21/93)
BY-LAWS
OF
GOLDEN AMERICAN LIFE INSURANCE COMPANY
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders shall
be held for the election of directors at such date, time and place, either
within or without the State of Delaware, as may be designated by resolution of
the Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by
a committee of the Board of Directors that has been duly designated by the
Board of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting
shall be given that shall state the place, date and hour of the meeting and,
in the case of a special meeting, the purpose or purposes for which the
meeting is called. Unless otherwise provided by law, the certificate of
incorporation or these by-laws, the written notice of any meetings shall be
given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on
the records of the corporation.
Section 1.4. ADJOURNMENTS. Any meetings of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meetings at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.5. QUORUM. Except as otherwise provided by law, the
certificate of incorporation or these by-laws, at each meeting of stockholders
the presence in person or by proxy of the holders of a majority in voting
power of the outstanding shares of stock entitled to vote at the meeting shall
be necessary and sufficient to constitute a quorum. In the absence of a
quorum, the stockholders so present may, by majority vote, adjourn the meeting
from time to time in the manner provided in Section 1.4 of these by-laws until
-1-
<PAGE>
<PAGE>
a quorum shall attend. Shares of its own stock belonging to the corporation
or to another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the corporation or any subsidiary of the corporation to
vote stock, including but not limited to its own stock, held by it in a
fiduciary capacity.
Section 1.6. ORGANIZATION. Meetings of stockholders shall be presided
over by the Chairman of the Board, if any, or in his absence by the Vice
Chairman of the Board, if any, or in his absence by the President, or in his
absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of the
meeting shall announce at the meeting of stockholders the date and time of the
opening and the closing of the polls for each matter upon which the
stockholders will vote.
Section 1.7. VOTING: PROXIES. Except as otherwise provided by the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders or to express consent or dissent
to corporate action in writing without a meeting may authorize another person
or persons to act for him by proxy, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A proxy shall be irrevocable if it states that it is irrevocable and
if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy by delivering a proxy in accordance
with applicable law bearing a later date to the Secretary of the corporation.
Voting at meetings of stockholders need not be by written ballot. At all
meetings of stockholders for the election of directors a plurality of the
votes cast shall be sufficient to elect. All other elections and questions
shall, unless otherwise provided by law, the certificate of incorporation or
these by-laws, be decided by the affirmative vote of the holders of a majority
in voting power of the shares of stock which are present in person or by proxy
and entitled to vote thereon.
Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than sixty nor less than ten days before the date of such meeting; (2) in the
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case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and (3) in the case of any other action, shall not be more than
sixty days prior to such other action. If no record date is fixed: (1) the
record date of determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held; (2) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when nor prior
action of the Board of Directors is required by law, shall be the first date
ion which a signed written consent setting forth the action taken or proposed
to be taken is delivered to the corporation in accordance with applicable law,
or, if prior action by the Board of Directors is required by law, shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action; and (3) the record date for determine
stockholders for any other purpose shall be at the close of business on the
day on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole
time thereof and may be inspected by any stockholder who is present. Upon the
willful neglect or refusal of the directors to produce such a list at any
meeting for the election of directors, they shall be ineligible for election
to any office at such meeting. Except as otherwise provided by law, the stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 1.10. ACTION BY CONSENT OF STOCKHOLDERS. Unless otherwise
restricted by the certificate of incorporation, any action required or
permitted to be taken at any annual or special meeting of the stockholders may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted
and shall be delivered (by hand or by certified or registered mail, return
receipt requested) to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of minutes
of stockholders are recorded. Prompt notice of the taking of the corporate
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action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
Section 1.11. INSPECTORS OF ELECTION. The corporation may, and shall if
required by law, in advance of any meeting of stockholders, appoint one or
more inspectors of election, who may be employees of the corporation, to act
at the meeting or any adjournment thereof and to make a written report
thereof. The corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. In the event that no
inspector so appointed or designated is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath to execute
faithfully the duties of inspector with strict impartiality and according to
the best of his or her ability. The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital stock the
corporation outstanding and the voting power of each share, (ii) determine the
shares of capital stock of the corporation represented at the meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares of capital stock of the
corporation represented at the meeting and such inspectors' count of all votes
and ballots. Such certification and report shall specify such other
information as may be required by law. In determining the validity and
counting of proxies and ballots cast at any meeting of stockholders of the
corporation, the inspectors may consider such information as is permitted by
applicable law. No person who is a candidate for an office at an election may
serve as an inspector at such election.
Section 1.12. CONDUCT OF MEETINGS. The Board of Directors of the
corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to so
all such acts as, in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the chairman of the
meeting, may include, without limitations, the following: (i) the
establishment of an agenda or order of business of the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those
present; (iii) limitations on attendance at or participation in the meeting to
stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time allotted to
questions or comment by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of
stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
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ARTICLE II
BOARD OF DIRECTORS
Section 2.1. NUMBER: QUALIFICATIONS. The Board of Directors shall
consist of not less than three (3) or more than twelve (12) members, the
number thereof to be determined from time to time by resolution of the Board
of Directors. Directors need not be stockholders.
Section 2.2. ELECTION: RESIGNATION; REMOVAL; VACANCIES. The Board of
Directors shall initially consist of the persons who were directors of the
corporation at the time of its redomestication to the State of Delaware, and
each such director shall hold office until the first annual meeting of
stockholders after such redomestication or until his successor is elected and
qualified. At each annual meeting of stockholders thereafter, the
stockholders shall elect directors each of whom shall hold office for a term
of one year or until his successor is elected and qualified. Any director may
resign at any time upon written notice to the corporation. Any newly created
directorship or any vacancy occurring in the Board of Directors for any cause
may be filled by a majority of the remaining member of the Board of Directors,
although such majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders, and each director so elected shall hold
office until the expiration of the term of office of the director whom he has
replaced or until his successor is elected and qualified.
Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine,
and if so determined notices thereof need not be given.
Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary,
or by any member of the Board of Directors. Notice of a special meeting of
the Board of Directors shall be given by the person or persons calling the
meeting at least twenty-four hours before the special meeting.
Section 2.5. TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 2.6. QUORUM: VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the whole Board of Directors shall constitute
a quorum for the transaction of business. Except in cases in which the
certificate of incorporation, these by-laws or applicable law otherwise
provides, the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
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their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.8. INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted
by the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board
of Directors or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or such committee.
ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
a member of the committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in place of any such absent or disqualified member. Any
such committee, to the extent permitted by law and to the extent provided in
the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it.
Section 3.2. COMMITTEE RULES. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such
rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article II of these by-
laws.
ARTICLE IV
OFFICERS
Section 4.1. EXECUTIVE OFFICER: ELECTION; QUALIFICATIONS; TERM OF
OFFICE; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors shall elect a
President and Secretary, and it may, if it so determines, choose a Chairman of
the Board and Vice Chairman of the Board from among its members. The Board of
Directors may also choose one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers. Each such
officer shall hold office until the first meeting of the Board of Directors
after the annual meeting of stockholders next succeeding his election, and
until his successor is elected and qualified or until his earlier resignation
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or removal. Any officer may resign at any time upon written notice to the
corporation. The Board of Directors may remove any officer with or without
cause at any time, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the corporation. Any number
of offices may be held by the same person. Any vacancy occurring in any
office of the corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board of Directors at any
regular or special meeting.
Section 4.2. POWERS AND DUTIES OF EXECUTIVE OFFICERS. The officers of
the corporation shall have such powers and duties in the management of the
corporation as may be prescribed in a resolution by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
ARTICLE V
STOCK
Section 5.1. CERTIFICATES. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, of the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation certifying the number of shares
owned by him in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES: ISSUANCE OF
NEW CERTIFICATES. The corporation may issue a new certificate of stock in he
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed and the corporation may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
INDEMNIFICATION
Section 6.1. RIGHT TO INDEMNIFICATION. The corporation shall indemnify
and hold harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was or is made or
is threatened to be made a party or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding"), by reason of the fact that he, or a person for whom he is the
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legal representative, is or was a director or officer of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans (an "indemnitee"), against all liability and loss
suffered and expenses (including attorneys' fees) reasonably incurred by such
indemnitee. The corporation shall be required to indemnify an indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if the initiation of such proceeding (or part thereof) by the indemnitee
was authorized by the Board of Directors of the corporation.
Section 6.2. PREPAYMENT OF EXPENSES. The corporation shall pay the
expenses (including attorney's fees) incurred by an indemnitee in defending
any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that
the payment of expenses incurred by a director or officer in advance of the
final disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is not entitled
to be indemnified under this Article or otherwise.
Section 6.3. CLAIMS. If a claim for indemnification or payment of
expenses under this Article is not paid in full within sixty days after a
written claim therefor by the indemnitee has been received by the corporation,
the indemnitee may file suit to recover the unpaid amount of such claim and,
if successful in whole or in part, shall be entitled to be paid the expenses
of prosecuting such claim. In any such action the corporation shall have the
burden of proving that the indemnitee was not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 6.4. NONEXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Article VI shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of the
certificate of incorporation, these by-laws, agreement, vote of stockholders
or disinterested directors or otherwise.
Section 6.5. OTHER INDEMNIFICATION. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or nonprofit entity shall be reduced by any
amount such person may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit enterprise.
Section 6.6. AMENDMENT OR REPEAL. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
ARTICLE VII
MISCELLANEOUS
Section 7.1. FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
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Section 7.2. SEAL. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section 7.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 7.4. INTERESTED DIRECTORS: QUORUM. No contract or transaction
between the corporation and one or more of its directors or office, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are know to the Board
of Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or (2) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed
or are know to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a committee which authorizes the contract or
transaction.
Section 7.5. FORM OF RECORDS. Any records maintained by the corporation
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly
legible form within a reasonable time.
Section 7.6. AMENDMENT OF BY-LAWS. The by-laws may be altered or
repealed, and new by-laws made, by the Board of Directors, but the
stockholders may make additional by-laws and may alter and repeal any by-laws
whether adopted by them or otherwise.
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 JEFFERSON STREET, SUITE 400, WILMINGTON, DE 19801
ROTH
INDIVIDUAL RETIREMENT ANNUITY RIDER
The following language amends and takes precedence over
contrary language in the Contract to which it is attached.
All references in this rider to:
IRC or Code means the Internal Revenue Code of 1986 as
amended and all rules and regulations thereunder.
Contract means the policy, certificate or contract to which
this rider is attached.
Owner means the person ("insured" or "annuitant") covered by
the contract.
1. This Contract may not be transferred, sold, assigned,
discounted or pledged as collateral:
(a)for a loan;
(b)as security for the performance of an obligation; or
(c)for any other purpose;
to any person other than to us under surrender or settlement.
2. The premiums applicable to this Contract will be applied
to accumulate a retirement saving fund for the
annuitant/Owner.
3. All contributions shall be in cash and the total of all
contributions shall not exceed $2,000 for any taxable year,
except in the case of a rollover contribution which meets
the requirements of IRC Section 408(d)(3) and which is:
(a)from another ROTH IRA [as defined in IRC Section 408A(b)];
(b)from an individual retirement account [as defined in IRC
Section 408(a)]; or
(c)from an individual retirement annuity [as defined in IRC
Section 408(b)];
Any refund of premiums (other than those attributable to
excess contributions) will be applied before the close of the
calendar year following the year of the refund. Any such
refund will be applied towards the payment of future
premiums or the purchase of additional benefits.
4. Conversion of an individual retirement account or an
individual retirement annuity to a ROTH IRA shall be treated
as a distribution from an individual retirement plan (other
than a ROTH IRA) maintained for the benefit of an individual
which is contributed to a ROTH IRA maintained for the benefit
of such individual in a rollover contribution qualifying
under IRC Section 408(d)(3).
5. All distributions made under this Contract, after the
Owner's death, shall be made in accordance with the
requirements of IRC Section 401(a)(9) including any
regulations under that Section. The above Section and
regulations are incorporated by reference.
6. No provision of this Contract or any supplementary
contract issued upon the death of the Owner in exchange for
this Contract will apply where it permits or provides for
settlement of such amount in any manner other than a
complete distribution of the Owner's entire interest by
December 31 of the calendar year containing the fifth
anniversary of the Owner's death, except to the extent that:
GA-RA-1038-10/97
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6. Continued
(a) If the Owner's interest is payable to a designated
beneficiary, then the entire interest of the Owner may be
distributed over the life of such beneficiary, or over a
period not extending beyond the life expectancy of such
designated beneficiary, provided that distributions start
by December 31st of the year following the year of the
Owner's death. If the beneficiary is the Owner's
surviving spouse, distribution is not required to
begin before December 31st of the year in which the Owner
would have turned 70 1/2.
(b) If the designated beneficiary is the Owner's
surviving spouse, the spouse may treat the Contract as his
or her own individual retirement arrangement (IRA). This
election will be deemed to have been made if the spouse:
(i) makes a regular IRA contribution to the Contract;
(ii) makes a rollover to or from such Contract;
(iii) fails to elect either of the provisions in Sections
6 or 6(a) above.
7. Life expectancy is computed by use of the expected return
multiples in Section 1.72-9 of the Treasury Regulations.
For purposes of distributions beginning after the Owner's
death, unless otherwise elected by the surviving spouse
by the time distributions are required to begin, life
expectancies shall be recalculated annually. An election
not to recalculate shall be irrevocable by the surviving
spouse and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary shall be
calculated using the attained age of such beneficiary
during the calendar year in which distributions are
required to begin pursuant to this section, and payments
for any subsequent calendar year shall be calculated based
on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life
expectancy was first calculated.
8. This Contract will be for the exclusive benefit of the
Owner or his or her beneficiary. The entire interest of
the Owner in this Contract will be nonforfeitable.
9. We will furnish annual calendar year reports concerning the
status of this Contract, including information related to
any distribution from the Contract.
10.We may amend this Contract to conform to the provisions of
the IRC, Internal Revenue Regulations or published
Internal Revenue Rulings.
President: /s/ Terry L. Kendall Secretary: /s/ Myles R. Tashman
GA-RA-1038-10/97
Exhibit 5 Opinion and Consent of Myles R. Tashman, Esq.
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EXHIBIT 5
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400, Wilmington, DE 19801
February 4, 1998
Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ladies and Gentlemen:
In my capacity as Executive Vice President and Secretary of
Golden American Life Insurance Company, a Delaware domiciled
corporation ("Company"), I have supervised the preparation
of the registration statement for the Deferred Combination
Variable and Fixed Annuity Contract ("Contract") to be filed
by the Company with the Securities and Exchange Commission
under the Securities Act of 1933.
I am of the following opinion:
(1) The Company was organized in accordance with the
laws of the State of Delaware and is a duly
authorized stock life insurance company under the
laws of Delaware and the laws of those states in
which the Company is admitted to do business;
(2) The Company is authorized to issue Contracts in
those states in which it is admitted and upon
compliance with applicable local law;
(3) The Contracts, when issued in accordance with the
prospectus contained in the aforesaid registration
statement and upon compliance with applicable
local law, will be legal and binding obligations
of the Company in accordance with their terms.
In arriving at the foregoing opinion, I have made such
examination of law and examined such records and other
documents as in my judgment are necessary or appropriate.
I hereby consent to the filing of this opinion as an exhibit
to the aforesaid registration statement and to the reference
to me under the caption "Legal Matters" in the prospectus
contained in said registration statement. In giving this
consent I do not thereby admit that I come within the
category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the Rules and Regulations of
the Securities and Exchange Commission thereunder.
Sincerely,
/s/ Myles R. Tashman
Myles R. Tashman
Executive Vice President, General Counsel
and Secretary
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EXHIBIT 23(a)
SUTHERLAND, ASBILL & BRENNAN LLP
1275 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20004-2404
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
February 5, 1998
VIA EDGAR
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Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the Prospectus filed as part of Amendment No. 9 to
the registration statement on Form S-1 (File No. 33-87272) for Golden American
Life Insurance Company. In giving this consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN
By:/s/Stephen E. Roth
----------------------------
Stephen E. Roth
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EXHIBIT 23(b)
Exhibit 23(b) Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" and to the use of our reports dated February 11, 1997, with
respect to the financial statements of Separate Account B, and February
9, 1996 (except Note 6, as to which the date is August 27, 1996) with
respect to the financial statements of The Managed Global Account of Separate
Account D in the Statement of Additional Information incorporated by reference
from registration statement (Form N-4 No. 33-59261) filed with the Securities
and Exchange Commission contemporaneously with this registration statement.
We also consent to the use of our report dated February 11, 1997, with respect
to the financial statements of Golden American Life Insurance Company, and to
the reference to our firm under the captions "Experts" and "Financial
Statements" in the Prospectus included in this Amendment No. 9 to the
Registration Statement (Form S-1 No. 33-87272) of Golden American Life
Insurance Company.
Our audit also included the financial statement schedules of Golden American
Life Insurance Company included in Item 16(b)(2). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audit. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 24
GOLDEN AMERICAN LIFE INSURANCE COMPANY
1001 Jefferson Street, Suite 400, Wilmington, DE 198031
Phone: (302) 576-3400
Fax: (302) 576-3520
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being duly elected Directors and officers of Golden American Life
Insurance Company ("Golden American"), constitute and appoint
Myles R. Tashman, and Marilyn Talman, and each of them, his or
her true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution for him or her in his or her
name, place and stead, in any and all capacities, to sign Golden
American's registration statements and applications for exemptive
relief, and any and all amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as
s/he might or could do in person, hereby ratifying and affirming
all that said attorneys-in-fact and agents, or any of them, or
his or her substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Terry L. Kendall Director, President and February 4, 1998
- ----------------------- Chief Executive --------------------
Terry L. Kendall Officer
/s/ Myles R. Tashman Director, Executive Vice February 4, 1998
- ----------------------- President, General --------------------
Myles R. Tashman Counsel and Secretary
/s/ Susan B. Watson Director, Senior Vice February 4, 1998
- -------------------- President and Chief --------------------
Susan B. Watson Financial Officer
/s/ Beth B. Neppl Director and Vice February 4, 1998
- ----------------------- President --------------------
Beth B. Neppl
/s/ Paul E. Larson Director February 4, 1998
- ----------------------- --------------------
Paul E. Larson
/s/ Paul R. Schlaack Director February 4, 1998
- ----------------------- --------------------
Paul R. Schlaack
<TABLE> <S> <C>
<PAGE>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 389,172
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 4,766
<MORTGAGE> 64,500
<REAL-ESTATE> 0
<TOTAL-INVEST> 468,232
<CASH> 18,672
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 34,638
<TOTAL-ASSETS> 2,194,532
<POLICY-LOSSES> 440,441
<UNEARNED-PREMIUMS> 5,092
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 25,000
0
0
<COMMON> 2,500
<OTHER-SE> 141,121
<TOTAL-LIABILITY-AND-EQUITY> 2,194,532
0
<INVESTMENT-INCOME> 18,955
<INVESTMENT-GAINS> 58
<OTHER-INCOME> 18,378
<BENEFITS> 16,958
<UNDERWRITING-AMORTIZATION> 1,433
<UNDERWRITING-OTHER> 16,830
<INCOME-PRETAX> 343
<INCOME-TAX> 1
<INCOME-CONTINUING> 342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 342
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
