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As filed with the Securities and Exchange Commission on September 24, 1999
Registration No. 333-76945
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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. 1
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)
1475 Dunwoody Drive
West Chester, PA 19380
(610) 425-3400
(Address and Telephone Number of registrant's principal executive office)
Marilyn Talman, Esq. COPY TO:
Golden American Life Insurance Company Stephen E. Roth, Esq.
1475 Dunwoody Drive Sutherland Asbill & Brennan LLP
West Chester, PA 19380 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,
check the following box ................................................ [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering [ ]
If this Form is post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering [X]
If this Form is post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box [ ]
____________________________________________________________________________
Pursuant to Rule 429 under the Securities Act of 1933, a prospectus herein
also relates to Registration Statement Nos. 333-28743, 333-51949 and 333-65009.
Calculation of Registration Fee
____________________________________________________________________________
<TABLE>
<CAPTION>
Proposed Maximum Proposed Amount of
Title of Securities Amount Being Offering Price Maximum Aggregate Registration
Being Registered Registered (1) Per Unit (1) Offering Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Annuity Contracts
Annuity Contracts
(Interests in N/A N/A $630,000,000 $175,140
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. Amounts previously registered in connection with File
Nos. 333-28743, 333-51949 and 333-65009 were $100,320,000, $350,000,000
and $1,050,000,000 respectively.
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PART I
This Registration Statement contains two separate Profiles and Prospectuses
for the GoldenSelect Premium Plus Contract. This Amendment to the Registration
Statement contains only a single Profile and Prospectus (Version B) which is a
variation of the GoldenSelect Premium Plus Profile and Prospectus (Version A)
filed previously with the Securities and Exchange Commission in the initial
filing of this Registration Statement on Form S-1 on or about April 23, 1999
(file no. 333-76945) and contemporaneously with Post-Effective Amendment No. 5
to Registration Statement on Form N-4 for Separate Account B on or about
April 23, 1999 (file nos. 333-28755, 811-5626). The distribution system and
the underlying investment options for the Contracts offered by each version
of the Profile and Prospectus is different. Version A contains eighteen
portfolios of The GCG Trust, two portfolios of the PIMCO Variable Insurance
Trust and one portfolio of the Warburg Pincus Trust. Version B contains five
portfolios of The Galaxy VIP Fund in addition to all portfolios offered in
Version A. Other than these differences, Version A and Version B are
substantially similar.
The Profile and Prospectus filed herein does not contain all of the
information permitted by Securities and Exchange Commission Regulations.
Therefore, this Registration Statement on Form S-1 for Golden American Life
Insurance Company ("Golden American") incorporates by reference the Statement
of Additional Information for the Version B GoldenSelect PREMIUM PLUS
Combination Variable and Fixed Annuity, and Part C (Other Information)
contained in the Registration Statement on Form N-4 (Post-Effective Amendment
No.6, File Nos. 333-28755, 811-5626, filed contemporaneously with this
Amendment to the Registration Statement on Form S-1, on or about
September 24, 1999) 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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ING VARIABLE ANNUITIES
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
[begin shaded block]
PROFILE OF
GOLDENSELECT PREMIUM PLUS/R/
FEATURING THE GALAXY VIP FUND
FIXED AND VARIABLE ANNUITY CONTRACT
October 1, 1999
[inset within shaded block]
This Profile is a summary of some of the more important points
that you should know and consider before purchasing the Contract.
The Contract is more fully described in the full prospectus which
accompanies this Profile. Please read the prospectus carefully.
[end inset within shaded block]
[end shaded block]
1. THE ANNUITY CONTRACT
The Contract offered in this prospectus is a deferred combination
variable and fixed annuity contract between you and Golden American
Life Insurance Company. It is offered exclusively to customers of
Fleet Financial Group, Inc. and its affiliates. The Contract features
a minimum 4% credit to each premium you pay. The Contract provides
a means for you to invest on a tax-deferred basis in (i) one or more
of 26 mutual fund investment portfolios through our Separate Account B
and/or (ii) in a fixed account of Golden American with guaranteed interest
periods. The 26 mutual fund portfolios are listed on page 3 below. We
currently offer guaranteed interest periods of 6 months, 1, 3, 5, 7 and
10 years in the fixed account. We set the interest rates in the fixed account
(which will never be less than 3%) periodically. We may credit a different
interest rate for each interest period. The interest you earn in the fixed
account as well as your principal is guaranteed by Golden American as long
as you do not take your money out before the maturity date for the applicable
interest period. If you withdraw your money from the fixed account more than
30 days before the applicable maturity date, we will apply a market value
adjustment. A market value adjustment could increase or decrease your contract
value and/or the amount you take out. Generally, the investment portfolios are
designed to offer a better return than the fixed account. However, this is
NOT guaranteed. You may not make any money and you can even lose the money you
invest.
The Contract, like all deferred variable annuity contracts, has two
phases: the accumulation phase and the income phase. The accumulation
phase is the period between the contract date and the date on which you
start receiving the annuity payments under your Contract. The amounts
you accumulate during the accumulation phase will determine the amount
of annuity payments you will receive. The income phase
begins on the annuity start date which is the date you
start receiving regular annuity payments from your Contract.
You determine (1) the amount and frequency of premium payments, (2)
the investments, (3) transfers between investments, (4) the type of
annuity to be paid after the accumulation phase, (5) the beneficiary
who will receive the death benefits, (6) the type of death benefit,
and (7) the amount and frequency of withdrawals.
PREMIUM PLUS PROFILE
PROSPECTUS BEGINS AFTER
PAGE 9 OF THIS PROFILE
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2. YOUR ANNUITY PAYMENTS (THE INCOME PHASE)
Annuity payments are the periodic payments you will begin receiving
on the annuity start date. You may choose one of the following
annuity payment options:
[Table with Shaded Heading]
Annuity Options
|------------------------------------------------------------------------|
| Option 1 Income for a Payments are made for a specified |
| fixed period number of years to you |
| or your beneficiary. |
|------------------------------------------------------------------------|
| Option 2 Income for Payments are made for the rest |
| life with a of your life or longer |
| period certain for a specified period such as |
| 10 or 20 years or until the |
| total amount used to buy this |
| option has been repaid. This |
| option comes with an added |
| guarantee that payments will |
| continue to your beneficiary for |
| the remainder of such period if |
| you should die during the period. |
|------------------------------------------------------------------------|
| Option 3 Joint life income Payments are made for your life |
| and the life of another person |
| (usually your spouse). |
|------------------------------------------------------------------------|
| Option 4 Annuity plan Any other annuitization plan that |
| we choose to offer on the annuity |
| start date. |
|------------------------------------------------------------------------|
Annuity payments under Options 1, 2 and 3 are fixed. Annuity
payments under Option 4 may be fixed or variable. Once you elect an
annuity option and begin to receive payments, it cannot be changed.
3. PURCHASE (BEGINNING OF THE ACCUMULATION PHASE)
You may purchase the Contract with an initial payment of $10,000 or
more ($1,500 for a qualified Contract) up to and including age 85.
You may make additional payments of $500 or more ($250 for a
qualified Contract) at any time before you turn 85 during the
accumulation phase. Under certain circumstances, we may waive the
minimum initial and additional premium payment requirement. Any
initial or additional premium payment that would cause the contract
value of all annuities that you maintain with us to exceed $1,000,000
requires our prior approval. Each time you make a premium payment, we
will add a credit of at least 4% of each premium payment to your
contract value. Any credit added within 1 year may be deducted from
your contract value under certain circumstances which are described
in the prospectus for the Contract. After 1 year, a credit added to
your contract value becomes permanent.
Who may purchase this Contract? Contracts offered by the prospectus
accompanying this Profile are available only to customers of Fleet
Financial Group, Inc. and its affiliates. The Contract may be purchased
by individuals as part of a personal retirement plan (a "non-qualified
Contract"), or as a Contract that qualifies for special tax treatment
when purchased as either an Individual Retirement Annuity (IRA) or in
connection with a qualified retirement plan (each a "qualified
Contract").
The Contract is designed for people seeking long-term tax-deferred
accumulation of assets, generally for retirement or other long-term
purposes. The tax-deferred feature is more attractive to people in
high federal and state tax brackets. You should not buy this
Contract if you are looking for a short-term investment or if you
cannot risk getting back less money than you put in.
4. THE INVESTMENT PORTFOLIOS
You can direct your money, and the credit we add, into (1) the fixed
account with guaranteed interest periods of 6 months, and 1, 3, 5, 7
and 10 years, and/or (2) into any one or more of the following 21
mutual fund investment portfolios through our Separate Account B.
The investment portfolios are described in the prospectuses for the
GCG Trust, the Galaxy VIP Fund, the PIMCO Variable Insurance Trust
and the Warburg Pincus Trust. Keep in mind that while an investment
in the fixed account earns a fixed interest
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rate, an investment in any investment portfolio, depending on market
conditions, may cause you to make or lose money. The investment
portfolios available under your Contract are:
<TABLE>
<S> <C> <C>
THE GCG TRUST
Liquid Asset Series Rising Dividends Series Capital Appreciation Series
Limited Maturity Bond Series Capital Growth Series Mid-Cap Growth Series
Global Fixed Income Series Growth Series Small Cap Series
Total Return Series Value Equity Series Real Estate Series
Equity Income Series Research Series Hard Assets Series
Fully Managed Series Strategic Equity Series Developing World Series
THE GALAXY VIP FUND
Equity Fund Small Company Growth Fund High Quality Bond Fund
Growth and Income Fund Asset Allocation Fund
THE PIMCO TRUST
PIMCO High Yield Bond Portfolio
PIMCO StocksPLUS Growth and Income Portfolio
THE WARBURG PINCUS TRUST
International Equity Portfolio
5. EXPENSES
The Contract has insurance features and investment features, and
there are charges related to each. For the insurance features, the
Company deducts an annual contract administrative charge of $40, and
if you invest in an investment portfolio, a mortality and expense risk
charge and an asset-based administrative charge. The mortality and expense
risk charge and the asset-based administrative charges are deducted daily
directly from your contract value in the investment portfolios. The mortality
and expense risk charge (depending on the death benefit you choose) and, the
asset-based administrative charge, on an annual basis, are as follows:
STANDARD ENHANCED DEATH BENEFIT
DEATH BENEFIT ANNUAL RATCHET 7% SOLUTION
Mortality & Expense
Risk Charge............ 1.25% 1.40% 1.55%
Asset-Based
Administrative Charge.. 0.15% 0.15% 0.15%
----- ----- -----
Total.................. 1.40% 1.55% 1.70%
Each investment portfolio has charges for investment management fees
and other expenses. These charges, which vary by investment
portfolio, currently range from 0.59% to 1.83% annually (see
following table) of the portfolio's average daily net asset balance.
If you withdraw money from your Contract, or if you begin receiving
annuity payments, we may deduct a premium tax of 0%-3.5% to pay to
your state.
We deduct a surrender charge if you surrender your Contract or
withdraw an amount exceeding the free withdrawal amount. The free
withdrawal amount in any year is 10% of your contract value on the
date of the withdrawal less any prior withdrawals during that
contract year. The following table shows the schedule of the
surrender charge that will apply. The surrender charge is a percent
of each premium payment.
COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9+
SINCE PREMIUM PAYMENT | | | | | | | | |
SURRENDER CHARGE 8% | 8% | 8% | 8% | 7% | 6% | 5% | 3% | 1% | 0%
The following table is designed to help you understand the Contract
charges. The "Total Annual Insurance Charges" column includes the
maximum mortality and expense risk charge, the asset-based
administrative charge, and reflects the annual contract
administrative charge as 0.05% (based on an average contract value of
$80,000). The "Total Annual Investment Portfolio Charges" column
reflects the portfolio charges for each portfolio and are based on
actual expenses as of December 31, 1998, except for (i) the portfolios
that
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commenced operations during 1998 where the charges have been
annualized, and (ii) the newly formed portfolios where the charges
have been estimated. The column "Total Annual Charges" reflects the
sum of the previous two columns. The columns under the heading
"Examples" show you how much you would pay under the Contract for
a 1-year period and for a 10-year period.
As required by the Securities and Exchange Commission, the examples
assume that you invested $1,000 in a Contract that earns 5% annually
and that you withdraw your money at the end of Year 1 or at the end
of Year 10. For Years 1 and 10, the examples show the total annual
charges assessed during that time and assume that you have elected the
7% Solution Enhanced Death Benefit. For these examples, the premium tax
is assumed to be 0%.
[Table with shaded heading and shaded lines for readability]
TOTAL ANNUAL EXAMPLES:
TOTAL ANNUAL INVESTMENT TOTAL TOTAL CHARGES AT THE END OF:
INSURANCE PORTFOLIO ANNUAL
INVESTMENT PORTFOLIO CHARGES CHARGES CHARGES 1 YEAR 10 YEARS
THE GCG TRUST
Liquid Asset 1.75% 0.59% 2.34% $104.66 $278.31
Limited Maturity Bond 1.75% 0.60% 2.35% $104.76 $279.36
Global Fixed Income 1.75% 1.60% 3.35% $115.13 $378.54
Total Return 1.75% 0.97% 2.72% $108.61 $317.32
Equity Income 1.75% 0.98% 2.73% $108.71 $318.32
Fully Managed 1.75% 0.98% 2.73% $108.71 $318.32
Rising Dividends 1.75% 0.98% 2.73% $108.71 $318.32
Capital Growth 1.75% 1.08% 2.83% $109.75 $328.31
Growth 1.75% 1.09% 2.84% $109.85 $329.31
Value Equity 1.75% 0.98% 2.73% $108.71 $318.32
Research 1.75% 0.94% 2.69% $108.30 $314.30
Mid-Cap Growth 1.75% 0.95% 2.70% $108.40 $315.30
Strategic Equity 1.75% 0.99% 2.74% $108.82 $319.33
Capital Appreciation 1.75% 0.98% 2.73% $108.71 $318.32
Small Cap 1.75% 0.99% 2.74% $108.82 $319.33
Real Estate 1.75% 0.99% 2.74% $108.82 $319.33
Hard Assets 1.75% 1.00% 2.75% $108.92 $320.33
Developing World 1.75% 1.83% 3.58% $117.50 $399.85
THE GALAXY VIP FUND
Equity 1.75% 1.05% 2.80% $109.44 $325.33
Growth and Income 1.75% 1.50% 3.25% $114.10 $369.10
Small Company Growth 1.75% 1.60% 3.35% $115.13 $378.54
Asset Allocation 1.75% 1.07% 2.82% $109.65 $327.32
High Quality Bond 1.75% 0.90% 2.65% $107.88 $310.25
THE PIMCO TRUST
PIMCO High Yield Bond 1.75% 0.75% 2.50% $106.33 $294.93
PIMCO StocksPLUS
Growth and Income 1.75% 0.65% 2.40% $105.28 $284.58
THE WARBURG PINCUS TRUST
International Equity 1.75% 1.33% 3.08% $112.34 $352.82
The "Total Annual Investment Portfolio Charges" column above reflects current
expense reimbursements for applicable investment portfolios. The Year 1
examples above include an 8% surrender charge. For more detailed information,
see the fee table in the prospectus for the Contract.
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6. TAXES
Under a qualified Contract, your premiums are generally pre-tax
contributions and accumulate on a tax-deferred basis. Premiums and
earnings are generally taxed as income when you make a withdrawal or
begin receiving annuity payments, presumably when you are in a lower
tax bracket.
Under a non-qualified Contract, premiums are paid with after-tax
dollars, and any earnings will accumulate tax-deferred. You will be
taxed on these earnings, but not on premiums, when you withdraw them
from the Contract.
For owners of most qualified Contracts, when you reach age 70 1/2 (or,
in some cases, retire), you will be required by federal tax laws to
begin receiving payments from your annuity or risk paying a penalty
tax. In those cases, we can calculate and pay you the minimum
required distribution amounts. If you are younger than 59 1/2 when you
take money out, in most cases, you will be charged a 10% federal
penalty tax on the amount withdrawn.
7. WITHDRAWALS
You can withdraw your money at any time during the accumulation
phase. You may elect in advance to take systematic withdrawals which
are described on page 9. Withdrawals above the free withdrawal
amount may be subject to a surrender charge. We will apply a market
value adjustment if you withdraw your money from the fixed account
more than 30 days before the applicable maturity date. Income taxes
and a penalty tax may apply to amounts withdrawn.
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8. PERFORMANCE
The value of your Contract will fluctuate depending on the investment
performance of the portfolio(s) you choose. The following chart
shows average annual total return for each portfolio that was in
operation for the entire year of 1998. These numbers reflect the
deduction of the mortality and expense risk charge (based on the 7%
Solution Enhanced Death Benefit), the asset-based administrative
charge and the annual contract fee, but do not reflect deductions for
surrender charges, if any. If surrender charges were reflected, they
would have the effect of reducing performance. Please keep in mind
that past performance is not a guarantee of future results.
[Table with shaded heading and shaded lines for readability]
CALENDAR YEAR
INVESTMENT PORTFOLIO 1998
Managed by A I M Capital Management, Inc.
Capital Appreciation(1) 10.71%
Strategic Equity(2) (0.92)%
Managed by T. Rowe Price Associates, Inc.
Fully Managed 4.05%
Equity Income(2) 6.37%
Managed by Kayne Anderson Investment Management, LLC
Rising Dividends 12.15%
Managed by EII Realty Securities, Inc.
Real Estate (14.97)%
Managed by Eagle Asset Management, Inc.
Value Equity (0.22)%
Managed by Fred Alger Management, Inc.
Small Cap 18.88%
Managed by ING Investment Management, LLC
Limited Maturity Bond 5.00%
Liquid Asset 3.22%
Managed by Alliance Capital Management L.P.
Capital Growth(2) 10.02%
Managed by Janus Capital Corporation
Growth(2) 24.62%
Managed by Massachusetts Financial Services Company
Mid-Cap Growth 20.68%
Total Return 9.65%
Research 20.91%
Managed by Baring International Investment Limited
Global Fixed Income 9.90%
Hard Assets(2) (30.83)%
Developing World(2) --
Managed by Fleet Investment Advisors Inc.
Equity --
Growth and Income --
Small Company Growth --
Asset Allocation --
High Quality Bond --
Managed by Pacific Investment Management Company
PIMCO High Yield Bond --
PIMCO StocksPLUS Growth and Income --
Managed by Credit Suisse Asset Management, LLC
International Equity 3.52%
________________________
(1)Prior to April 1, 1999, a different firm managed the Portfolio.
(2)Prior to March 1, 1999, a different firm managed the Portfolio.
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9. DEATH BENEFIT
You may choose (i) the Standard Death Benefit, (ii) the 7% Solution
Enhanced Death Benefit or (iii) the Annual Ratchet Enhanced Death
Benefit. The 7% Solution Enhanced Death Benefit is available only if
the contract owner or the annuitant (if the contract owner is not an
individual) is not more than 80 years old at the time of purchase.
The Annual Ratchet Enhanced Death Benefit is available only if the
contract owner or the annuitant (if the contract owner is not an
individual) is not more than 79 years old at the time of purchase.
The 7% Solution and Annual Ratchet Enhanced Death Benefits may not be
available where a Contract is held by joint owners.
The death benefit is payable when the first of the following persons
die: the contract owner, joint owner, or annuitant (if a contract
owner is not an individual). Assuming you are the contract owner, if
you die during the accumulation phase, your beneficiary will receive
a death benefit unless the beneficiary is your surviving spouse and
elects to continue the Contract. The death benefit paid depends on
the death benefit you have chosen. The death benefit value is
calculated at the close of the business day on which we receive due
proof of death at our Customer Service Center. If your beneficiary
elects to delay receipt of the death benefit until a date after the
time of your death, the amount of the benefit payable in the future
may be affected. If you die after the annuity start date and you are
the annuitant, your beneficiary will receive the death benefit you
chose under the annuity option then in effect.
The death benefit may be subject to certain mandatory distribution
rules required by federal tax law.
Under the STANDARD DEATH BENEFIT, if you die before the annuity start
date, your beneficiary will receive the greatest of:
1) the contract value minus any credits added within 1 year;
2) the total premium payments made under the Contract after
subtracting any withdrawals; or
3) the cash surrender value.
Under the 7% SOLUTION ENHANCED DEATH BENEFIT, if you die before the
annuity start date, your beneficiary will receive the greatest of:
1) the contract value minus any credits added within 1 year prior
to death;
2) the total premium payments made under the Contract after
subtracting any withdrawals;
3) the cash surrender value; or
4) the enhanced death benefit minus any credits added within 1
year of death, which we determine as follows: we credit
interest each business day at the 7% annual effective rate to
the enhanced death benefit from the preceding day (which would
be the initial premium and the credit added if the preceding
day is the contract date), then we add additional premiums
paid and credits added since the preceding day, then we
subtract any withdrawals (including any market value
adjustment applied to such withdrawal) since the preceding
day, and then we subtract any associated surrender charges.
The maximum enhanced death benefit is 2 times all premium
payments and credits added, less an amount to reflect
withdrawals.
Note: The actual interest rate used for calculating the death
benefit for the Liquid Asset and Limited Maturity Bond
investment portfolios will be the lesser of the 7% annual
effective rate or the net rate of return for such
portfolios during the applicable period. The interest
rate used for calculating the death benefit for your
investment in the fixed account will be the lesser of the
7% annual effective rate or the interest credited to such
investment during the applicable period. Thus, selecting
these investments may limit the enhanced death benefit.
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Under the ANNUAL RATCHET ENHANCED DEATH BENEFIT, if you die before
the annuity start date, your beneficiary will receive the greatest
of:
1) the contract value minus any credits added within 1 year prior
to death;
2) the total premium payments made under the Contract after
subtracting any withdrawals;
3) the cash surrender value; or
4) the enhanced death benefit minus any credits added within 1
year prior to death, which is determined as follows: On each
contract anniversary that occurs on or before the contract
owner turns age 80, we compare the prior enhanced death
benefit to the contract value and select the larger amount as
the new enhanced death benefit. On all other days, the
enhanced death benefit is the following amount: On a daily
basis we first take the enhanced death benefit from the
preceding day (which would be the initial premium and credit
added if the preceding day is the contract date), then we add
additional premiums paid and credits added since the preceding
day, and then we subtract any withdrawals (including any
market value adjustment applied to such withdrawal) since the
preceding day, and then we subtract any associated surrender
charges. That amount becomes the new enhanced death benefit.
Note: In all cases described above, the amount of the death benefit
could be reduced by premium taxes owed and withdrawals not
previously deducted. The enhanced death benefits may not be
available in your state.
10. OTHER INFORMATION
FREE LOOK. If you cancel the Contract within 10 days after you
receive it, you will receive a full refund of the contract value.
We determine your contract value at the close of business on the day
we receive your written refund request. For purposes of the refund
during the free look period, (i) we adjust your contract value for
any market value adjustment (if you have invested in the fixed account),
(ii) then we exclude any credit initially applied, and (iii) then we
include a refund of any charges deducted from your contract value.
Because of the market risks associated with investing in the portfolios
and the potential positive or negative effect of the market value
adjustment, the contract value returned may be greater or less than the
premium payment you paid. Some states require us to return to you the
amount of the paid premium (rather than the contract value) in which case
you will not be subject to investment risk during the free look
period. Also, in some states, you may be entitled to a longer free
look period.
TRANSFERS AMONG INVESTMENT PORTFOLIOS AND THE FIXED ACCOUNT. You
can make transfers among your investment portfolios and your
investment in the fixed account as frequently as you wish without any
current tax implications. The minimum amount for a transfer is $100.
There is currently no charge for transfers, and we do not limit the
number of transfers allowed. The Company may, in the future, charge
a $25 fee for any transfer after the twelfth transfer in a contract
year or limit the number of transfers allowed. Keep in mind that if
you transfer or otherwise withdraw your money from the fixed account
more than 30 days before the applicable maturity date, we will apply
a market value adjustment. A market value adjustment could increase
or decrease your contract value and/or the amount you transfer or
withdraw.
NO PROBATE. In most cases, when you die, the person you choose as
your beneficiary will receive the death benefit without going through
probate.
ADDITIONAL FEATURES. This Contract has other features you may be
interested in. These include:
Dollar Cost Averaging. This is a program that allows you to
invest a fixed amount of money in the investment portfolios each
month, which may give you a lower average cost per unit over
time than a single one-time purchase. Dollar cost averaging
requires regular investments regardless of fluctuating price
levels, and does not guarantee profits or prevent losses in a
declining market. This option is currently available only if
you have $1,200 or more in the Limited Maturity Bond or the
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Liquid Asset investment portfolios or in the fixed account with
either a 6-month or 1-year guaranteed interest period.
Transfers from the fixed account under this program will not be
subject to a market value adjustment.
Systematic Withdrawals. During the accumulation phase, you
can arrange to have money sent to you at regular intervals
throughout the year. Within limits these withdrawals will not
result in any withdrawal charge. Withdrawals from your money in
the fixed account under this program are not subject to a market
value adjustment. Of course, any applicable income and penalty
taxes will apply on amounts withdrawn.
Automatic Rebalancing. If your contract value is $10,000 or
more, you may elect to have the Company automatically readjust
the money between your investment portfolios periodically to
keep the blend you select. Investments in the fixed account are
not eligible for automatic rebalancing.
11. INQUIRIES
If you need more information after reading this profile and the prospectus,
please contact us at:
CUSTOMER SERVICE CENTER
P.O. BOX 2700
WEST CHESTER, PENNSYLVANIA 19380
(800) 366-0066
or your registered representative.
9
PREMIUM PLUS PROFILE
<PAGE>
<PAGE>
[begin shaded block]
ING VARIABLR ANNUITIES
GOLDEN AMERICAN LIFE INSURANCE COMPANY
SEPARATE ACCOUNT B OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
OCTOBER 1, 1999
DEFERRED COMBINATION VARIABLE AND FIXED ANNUITY PROSPECTUS
GOLDENSELECT PREMIUM PLUS/R/
FEATURING THE GALAXY VIP FUND
[end shaded block]
- ----------------------------------------------------------------------
This prospectus describes GOLDENSELECT PREMIUM PLUS, a group and
individual deferred variable annuity contract (the "Contract")
offered by Golden American Life Insurance Company (the "Company,"
"we" or "our"). The Contract is available in connection with certain
retirement plans that qualify for special federal income tax
treatment ("qualified Contracts") as well as those that do not
qualify for such treatment ("non-qualified Contracts").
The Contract provides a means for you to invest your premium payments
and credits in one or more of 26 mutual fund investment portfolios.
You may also allocate premium payments and credits to our Fixed
Account with guaranteed interest periods. Your contract value will
vary daily to reflect the investment performance of the investment
portfolio(s) you select and any interest credited to your allocations
in the Fixed Account. The investment portfolios available under your
Contract and the portfolio managers are:
</TABLE>
<TABLE>
<C> <C>
T. ROWE PRICE ASSOCIATES, INC. JANUS CAPITAL CORPORATION
Equity Income Series Growth Series
Fully Managed Series MASSACHUSETTS FINANCIAL SERVICES COMPANY
A I M CAPITAL MANAGEMENT, INC. Total Return Series
Capital Appreciation Series Research Series
Strategic Equity Series Mid-Cap Growth Series
KAYNE ANDERSON INVESTMENT MANAGEMENT, LLC ING INVESTMENT MANAGEMENT, LLC (AN AFFILIATE)
Rising Dividends Series Liquid Asset Series
EII REALTY SECURITIES, INC. Limited Maturity Bond Series
Real Estate Series FLEET INVESTMENT ADVISORS INC.
BARING INTERNATIONAL INVESTMENT LIMITED (AN AFFILIATE) Equity Fund
Global Fixed Income Series Growth and Income Fund
Hard Assets Series Small Company Growth Fund
Developing World Series Asset Allocation Fund
EAGLE ASSET MANAGEMENT, INC. High Quality Bond Fund
Value Equity Series PACIFIC INVESTMENT MANAGEMENT COMPANY
FRED ALGER MANAGEMENT, INC. PIMCO High Yield Bond Portfolio
Small Cap Series PIMCO StocksPLUS Growth and Income Portfolio
ALLIANCE CAPITAL MANAGEMENT L. P. CREDIT SUISSE ASSET MASNAGEMENT, LLC
Capital Growth Series International Equity Portfolio
</TABLE>
The above mutual fund investment portfolios are purchased and held by
corresponding divisions of our Separate Account B. We refer to the
divisions as "subaccounts" and the money you place in the Fixed
Account's guaranteed interest periods as "Fixed Interest Allocations"
in this prospectus.
We will credit your Fixed Interest Allocation(s) with a fixed rate of
interest. We set the interest rates periodically. We will not set
the interest rate to be less than a minimum annual rate of 3%. You
may choose guaranteed interest periods of 6 months, and 1, 3, 5, 7
and 10 years. The interest earned on your money as well as your
principal is guaranteed as long as you hold them until the maturity
date. If you take your money out from a Fixed Interest Allocation
more than 30 days before the applicable maturity date, we will apply
a market value adjustment ("Market Value Adjustment"). A Market
Value Adjustment could increase or decrease your contract value
and/or the amount you take out. You bear the risk that you may
receive less than your principal if we take a Market Value
Adjustment. For Contracts sold in some states, not all Fixed
Interest Allocations or subaccounts are available. You have a right
to return a Contract within 10 days after you receive it for a full
refund of the contract value less credits we added (which may be more
or less than the premium payments you paid), or if required by your
state, the original amount of your premium payment. Longer free look
periods apply in some states.
This prospectus provides information that you should know before
investing and should be kept for future reference. A Statement of
Additional Information, dated October 1, 1999, has been filed with the
Securities and Exchange Commission. It is available without charge
upon request. To obtain a copy of this document, write to our
Customer Service Center at P.O. Box 2700, West Chester, Pennsylvania
19380 or call (800) 366-0066, or access the SEC's website
(http://www.sec.gov). The table of contents of the Statement of
Additional Information ("SAI") is on the last page of this prospectus
and the SAI is made part of this prospectus by reference.
- ----------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE GCG TRUST, THE GALAXY VIP FUND, THE PIMCO TRUST
OR THE WARBURG PINCUS TRUST IS NOT A BANK DEPOSIT AND IS NOT INSURED
OR GUARANTEED BY A BANK OR BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.
THIS PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE GCG
TRUST, THE GALAXY VIP FUND THE PIMCO TRUST AND THE WARBURG PINCUS TRUST.
<PAGE>
<PAGE>
[Shaded Section Header]
- ----------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------------------------
PAGE
Index of Special Terms 1
Fees and Expenses 2
Performance Information 6
Accumulation Unit 6
Net Investment Factor 7
Condensed Financial Information 7
Financial Statements 7
Performance Information 7
Golden American Life Insurance Company 8
The Trusts 8
Golden American Separate Account B 9
The Investment Portfolios 10
Investment Objectives 10
Investment Advisory Fee 12
The Fixed Interest Allocation 13
Selecting a Guaranteed Interest Period 13
Guaranteed Interest Rates 14
Transfers from a Fixed Interest Allocation 14
Withdrawals from a Fixed Interest Allocation 15
Market Value Adjustment 15
The Annuity Contract 16
Contract Date and Contract Year 16
Annuity Start Date 16
Contract Owner 16
Annuitant 17
Beneficiary 17
Purchase and Availability of the Contract 18
Crediting of Premium Payments 18
Additional Credit to Premium 19
Contract Value 19
Cash Surrender Value 20
Surrendering to Receive the Cash Surrender Value 20
Addition, Deletion or Substitution
of Subaccounts and Other Changes 20
The Fixed Account 20
Other Contracts 20
Other Important Provisions 21
Withdrawals 21
Regular Withdrawals 21
Systematic Withdrawals 21
IRA Withdrawals 22
Transfers Among Your Investments 23
Dollar Cost Averaging 24
Automatic Rebalancing 24
Death Benefit Choices 25
Death Benefit During the Accumulation Phase 25
Standard Death Benefit 25
Enhanced Death Benefits 25
Death Benefit During the Income Phase 26
Charges and Fees 27
i
<PAGE>
<PAGE>
[Shaded Section Header]
- ----------------------------------------------------------------------
TABLE OF CONTENTS (CONTINUED)
- ----------------------------------------------------------------------
PAGE
Charge Deduction Subaccount 27
Charges Deducted from the Contract Value 27
Surrender Charge 27
Free Withdrawal Amount 27
Surrender Charge for Excess Withdrawals 27
Premium Taxes 28
Administrative Charge 28
Transfer Charge 28
Charges Deducted from the Subaccounts 28
Mortality and Expense Risk Charge 28
Asset-Based Administrative Charge 28
Trust Expenses 29
The Annuity Options 29
Annuitization of Your Contract 29
Selecting the Annuity Start Date 29
Frequency of Annuity Payments 30
The Annuity Options 30
Income for a Fixed Period 30
Income for Life with a Period Certain 30
Joint Life Income 30
Annuity Plan 30
Payment When Named Person Dies 30
Other Contract Provisions 31
Reports to Contract Owners 31
Suspension of Payments 31
In Case of Errors in Your Application 31
Assigning the Contract as Collateral 31
Contract Changes-Applicable Tax Law 31
Free Look 31
Group or Sponsored Arrangements 32
Selling the Contract 32
Other Information 32
Voting Rights 32
Year 2000 Problem 33
State Regulation 33
Legal Proceedings 33
Legal Matters 33
Experts 33
Federal Tax Considerations 33
More Information About Golden American 39
Unaudited Financial Statement of Golden
American Life Insurance Company 66
Financial Statements of Golden American
Life Insurance Company 75
Statement of Additional Information
Table of Contents 105
Appendix A
Condensed Financial Information A1
Appendix B
Market Value Adjustment Examples B1
Appendix C
Surrender Charge for Excess Withdrawals Example C1
ii
<PAGE>
<PAGE>
[Shaded Section Header]
- ----------------------------------------------------------------------
INDEX OF SPECIAL TERMS
- ----------------------------------------------------------------------
The following special terms are used throughout this prospectus.
Refer to the page(s) listed for an explanation of each term:
SPECIAL TERM PAGE
Accumulation Unit 6
Annual Ratchet Enhanced Death Benefit 25
Annuitant 17
Annuity Start Date 16
Cash Surrender Value 20
Contract Date 16
Contract Owner 16
Contract Value 19
Contract Year 16
Fixed Interest Allocation 13
Free Withdrawal Amount 27
Market Value Adjustment 15
Net Investment Factor 7
7% Solution Enhanced Death Benefit 25
Standard Death Benefit 25
The following terms as used in this prospectus have the same or
substituted meanings as the corresponding terms currently used in the
Contract:
TERM USED IN THIS PROSPECTUS CORRESPONDING TERM USED
IN THE CONTRACT
Accumulation Unit Value Index of Investment Experience
Annuity Start Date Annuity Commencement Date
Contract Owner Owner or Certificate Owner
Contract Value Accumulation Value
Transfer Charge Excess Allocation Charge
Fixed Interest Allocation Fixed Allocation
Free Look Period Right to Examine Period
Guaranteed Interest Period Guarantee Period
Subaccount(s) Division(s)
Net Investment Factor Experience Factor
Regular Withdrawals Conventional Partial Withdrawals
Withdrawals Partial Withdrawals
1
<PAGE>
<PAGE>
[Shaded Section Header]
- ----------------------------------------------------------------------
FEES AND EXPENSES
- ----------------------------------------------------------------------
CONTRACT OWNER TRANSACTION EXPENSES*
Surrender Charge:
COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9+
SINCE PREMIUM PAYMENT | | | | | | | | |
SURRENDER CHARGE 8% | 8% | 8% | 8% | 7% | 6% | 5% | 3% | 1% | 0%
Transfer Charge....................................... None**
* If you invested in a Fixed Interest Allocation, a Market Value
Adjustment may apply to certain transactions. This may increase
or decrease your contract value and/or your transfer or
surrender amount.
** We may in the future charge $25 per transfer if you make more
than 12 transfers in a contract year.
ANNUAL CONTRACT ADMINISTRATIVE CHARGE
Administrative Charge................................. $40
(We waive this charge if the total of your premium payments is $100,000
or more, or if your contract value at the end of a contract year is
$100,000 or more.)
SEPARATE ACCOUNT ANNUAL CHARGES***
STANDARD ENHANCED DEATH BENEFIT
DEATH BENEFIT ANNUAL RATCHET 7% SOLUTION
Mortality & Expense
Risk Charge............ 1.25% 1.40% 1.55%
Asset-Based
Administrative Charge.. 0.15% 0.15% 0.15%
----- ----- -----
Total Separate Account
Charges.............. 1.40% 1.55% 1.70%
*** As a percentage of average assets in each subaccount. The mortality and
expense risk charge and the asset-based administrative charge are deducted
daily.
2
<PAGE>
<PAGE>
THE GCG TRUST ANNUAL EXPENSES (as a percentage of the average daily
net assets of an investment portfolio or on the combined average
daily net assets of the indicated groups of portfolios):
[Table with Shaded Heading and Shaded lines for readability]
|---------------------------------------------------------------------------|
| OTHER TOTAL |
| EXPENSES(2) EXPENSES |
| MANAGEMENT AFTER EXPENSE AFTER EXPENSE |
| PORTFOLIO FEES(1) REIMBURSEMENT REIMBURSEMENT(3) |
|---------------------------------------------------------------------------|
| Liquid Asset 0.59% 0.00% 0.59% |
| Limited Maturity Bond 0.60% 0.00% 0.60% |
| Global Fixed Income 1.60% 0.00% 1.60%(3) |
| Total Return 0.94% 0.03% 0.97%(3) |
| Equity Income 0.98% 0.00% 0.98% |
| Fully Managed 0.98% 0.00% 0.98% |
| Rising Dividends 0.98% 0.00% 0.98% |
| Capital Growth 1.08% 0.00% 1.08% |
| Growth 1.08% 0.01% 1.09% |
| Value Equity 0.98% 0.00% 0.98% |
| Research 0.94% 0.00% 0.94% |
| Mid-Cap Growth 0.94% 0.01% 0.95% |
| Strategic Equity 0.98% 0.01% 0.99% |
| Capital Appreciation 0.98% 0.00% 0.98% |
| Small Cap 0.98% 0.01% 0.99% |
| Real Estate 0.98% 0.01% 0.99% |
| Hard Assets 0.98% 0.02% 1.00% |
| Developing World 1.75% 0.08% 1.83% |
|---------------------------------------------------------------------------|
(1) Fees decline as the total assets of certain combined portfolios increase.
See the prospectus for the GCG Trust for more information.
(2) Other expenses generally consist of independent trustees fees and
certain expenses associated with investing in international
markets. Other expenses are based on actual expenses for the
year ended December 31, 1998, except for portfolios that
commenced operations in 1998 where the charges have been
annualized.
(3) Total expenses are based on actual expenses for the fiscal year ended
December 31, 1998. Directed Services, Inc. is currently reimbursing
expenses to maintain total expenses at 0.97% for the Total Return
portfolio and 1.60% for the Global Fixed Income portfolio as shown.
Without this reimbursement, and based on current estimates, total
expenses would be 0.98% for the Total Return portfolio and 1.74% for
the Global Fixed Income portfolio. This reimbursement agreement
will remain in place through December 31, 1999.
THE GALAXY VIP FUND ANNUAL EXPENSES (as a percentage of the average daily
net assets of a portfolio):
[Table with Shaded Heading]
|---------------------------------------------------------------------------|
| OTHER TOTAL |
| EXPENSES EXPENSES |
| MANAGEMENT AFTER EXPENSE AFTER EXPENSE |
| PORTFOLIO FEES REIMBURSEMENT(1) REIMBURSEMENT(1) |
| AFTER FEE |
| WAIVER(1) |
|---------------------------------------------------------------------------|
| Equity 0.75% 0.30% 1.05% |
| Growth and Income 0.75% 0.75% 1.50% |
| Small Company Growth 0.75% 0.85% 1.60% |
| Asset Allocation 0.75% 0.32% 1.07% |
| High Quality Bond 0.40% 0.50% 0.90% |
|---------------------------------------------------------------------------|
(1) For the Equity, Asset Allocation and High Quality Bond portfolios, total
expenses are based on actual expenses for the fiscal year ended
December 31, 1998. For the Growth and Income and Small Company Growth
portfolios, total expenses are based on estimates for the current year.
Fleet Investment Advisors Inc. and/or the administrator has agreed to waive
certain fees and/or reimburse fund expensesof 0.35%, 6.09% and 0.20% for the
Growth and Income, Small Company Growth, and High Quality Bond portfolios,
respectively, for the current year. Without this agreement, and based on
actual waivers and reimbursements for fiscal year ended December 31, 1998,
total expenses would have been 1.05%, 2.58%, 12.86%, 1.07% and 1.10%,
respeectively, for the portfolios.
3
<PAGE>
<PAGE>
THE PIMCO TRUST ANNUAL EXPENSES (as a percentage of the average daily
net assets of a portfolio):
[Table with Shaded Heading]
|---------------------------------------------------------------------------|
| OTHER TOTAL |
| EXPENSES EXPENSES |
| MANAGEMENT AFTER EXPENSE AFTER EXPENSE |
| PORTFOLIO FEES REIMBURSEMENT REIMBURSEMENT(1) |
|---------------------------------------------------------------------------|
| PIMCO High Yield Bond 0.50% 0.25%(2) 0.75% |
| PIMCO StocksPLUS Growth |
| and Income 0.40% 0.25% 0.65% |
|---------------------------------------------------------------------------|
(1) Total expenses are based on actual expenses for the fical year ended
December 31, 1998. PIMCO has agreed to waive and reimburse expenses
of the portfolios to the extent necessary in order to limit the expenses
to 0.75% and 0.65% of the PIMCO High Yield Bond portfolio and PIMCO
StocksPLUS Growth and Income portfolio, respectively. Under the agreement,
PIMCO may recoup these waivers and reimbursements in future periods,
not exceeding three years, provided total expenses, including any such
recoupment, do not exceed the annual expense limit. Without this agreement,
and based on current waivers and reimbursements for the fical year ended
December 31, 1998, total expenses would have been 0.81% and 0.72%,
respectively, for the PIMCO High Yield Bond portfolio and the PIMCO
StocksPLUS Growth and Income portfolio.
(2) Since the PIMCO High Yield Bond portfolio commenced operations on
April 30, 1998, other expenses as shown have been annualized for
the year ended December 31, 1998.
THE WARBURG PINCUS TRUST ANNUAL EXPENSES (as a percentage of the
average daily net assets of the portfolio):
[Table with Shaded Heading]
|---------------------------------------------------------------------------|
| ADVISORY OTHER TOTAL |
| PORTFOLIO FEE EXPENSES EXPENSES(1) |
|---------------------------------------------------------------------------|
| International Equity 1.00% 0.33% 1.33% |
|---------------------------------------------------------------------------|
(1) Total expenses are based on actual expenses for the fiscal year
ended December 31, 1998.
The purpose of the foregoing tables is to help you understand the
various costs and expenses that you will bear directly and
indirectly. See the prospectuses of The GCG Trust, The Galaxy VIP Fund,
the PIMCO Trust and the Warburg Pincus Trust for additional information
on portfolio expenses.
Premium taxes (which currently range from 0% to 3.5% of premium
payments) may apply, but are not reflected in the tables above or in
the examples below.
4
<PAGE>
<PAGE>
EXAMPLES:
In the following examples, surrender charges may apply if you choose
to annuitize within the first 9 contract years. The examples also
assume election of the 7% Solution Enhanced Death Benefit and are
based on an assumed 5% annual return.
If you surrender your Contract at the end of the applicable time
period, you would pay the following expenses for each $1,000
invested:
------------------------------------------------------------------------
THE GCG TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Liquid Asset $104.66 $155.96 $200.03 $278.31
Limited Maturity Bond $104.76 $156.28 $200.56 $279.36
Global Fixed Income $115.13 $187.13 $251.53 $378.54
Total Return $108.61 $167.80 $219.73 $317.32
Equity Income $108.71 $168.11 $220.24 $318.32
Fully Managed $108.71 $168.11 $220.24 $318.32
Rising Dividends $108.71 $168.11 $220.24 $318.32
Capital Growth $109.75 $171.20 $225.35 $328.31
Growth $109.85 $171.51 $225.86 $329.31
Value Equity $108.71 $168.11 $220.24 $318.32
Research $108.30 $166.87 $218.19 $314.30
Mid-Cap Growth $108.40 $167.18 $218.70 $315.30
Strategic Equity $108.82 $168.42 $220.75 $319.33
Capital Appreciation $108.71 $168.11 $220.24 $318.32
Small Cap $108.82 $168.42 $220.75 $319.33
Real Estate $108.82 $168.42 $220.75 $319.33
Hard Assets $108.92 $168.73 $221.26 $320.33
Developing World $117.50 $194.09 $262.88 $399.85
THE GALAXY VIP FUND
Equity $109.44 $170.28 $223.82 $325.33
Growth and Income $114.10 $184.09 $246.55 $369.10
Small Company Growth $115.13 $187.13 $251.53 $378.54
Asset Allocation $109.65 $170.90 $224.84 $327.32
High Quality Bond $107.88 $165.63 $216.13 $310.25
THE PIMCO TRUST
PIMCO High Yield Bond $106.33 $160.97 $208.37 $294.93
PIMCO StocksPLUS Growth
and Income $105.28 $157.84 $203.17 $284.58
THE WARBURG PINCUS TRUST
International Equity $112.34 $178.89 $238.03 $352.82
5
<PAGE>
<PAGE>
If you do not surrender your Contract or if you annuitize on the
annuity start date, you would pay the following expenses for each
$1,000 invested:
------------------------------------------------------------------------
THE GCG TRUST 1 YEAR 3 YEARS 5 YEARS 10 YEARS
Liquid Asset $24.66 $75.96 $130.03 $278.31
Limited Maturity Bond $24.76 $76.28 $130.56 $279.36
Global Fixed Income $35.13 $107.13 $181.53 $378.54
Total Return $28.61 $87.80 $149.73 $317.32
Equity Income $28.71 $88.11 $150.24 $318.32
Fully Managed $28.71 $88.11 $150.24 $318.32
Rising Dividends $28.71 $88.11 $150.24 $318.32
Capital Growth $29.75 $91.20 $155.35 $328.31
Growth $29.85 $91.51 $155.86 $329.31
Value Equity $28.71 $88.11 $150.24 $318.32
Research $28.30 $86.87 $148.19 $314.30
Mid-Cap Growth $28.40 $87.18 $148.70 $315.30
Strategic Equity $28.82 $88.42 $150.75 $319.33
Capital Appreciation $28.71 $88.11 $150.24 $318.32
Small Cap $28.82 $88.42 $150.75 $319.33
Real Estate $28.82 $88.42 $150.75 $319.33
Hard Assets $28.92 $88.73 $151.26 $320.33
Developing World $37.50 $114.09 $192.88 $399.85
THE GALAXY VIP FUND
Equity $29.44 $ 90.28 $153.82 $325.33
Growth and Income $34.10 $104.09 $176.55 $369.10
Small Company Growth $35.13 $107.13 $181.53 $378.54
Asset Allocation $29.65 $ 90.90 $154.84 $327.32
High Quality Bond $27.88 $ 85.63 $146.13 $310.25
THE PIMCO TRUST
PIMCO High Yield Bond $26.33 $80.97 $138.37 $294.93
PIMCO StocksPLUS Growth
and Income $25.28 $77.84 $133.17 $284.58
THE WARBURG PINCUS TRUST
International Equity $32.34 $98.89 $168.03 $352.84
The examples above reflect the annual administrative charge as an
annual charge of 0.05% of assets (based on an average contract value
of $80,000). If the Standard Death Benefit or the Annual Ratchet
Enhanced Death Benefit is elected instead of the 7% Solution Enhanced
Death Benefit used in the examples, the actual expenses will be less
than those represented in the examples.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE
SHOWN SUBJECT TO THE TERMS OF YOUR CONTRACT.
[Shaded Section Header]
- ----------------------------------------------------------------------
PERFORMANCE INFORMATION
- ----------------------------------------------------------------------
ACCUMULATION UNIT
We use accumulation units to calculate the value of a Contract. Each
subaccount of Separate Account B has its own accumulation unit value.
The accumulation units are valued each business day that the New York
Stock Exchange is open for trading. Their values may increase or
decrease from day to day according to a
6
<PAGE>
<PAGE>
Net Investment Factor, which is primarily based on the investment performance
of the applicable investment portfolio. Shares in the investment portfolios
are valued at their net asset value.
THE NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects charges
under the Contract and the investment performance of the subaccount.
The Net Investment Factor is calculated as follows:
(1) We take the net asset value of the subaccount at the end of
each business day.
(2) We add to (1) the amount of any dividend or capital gains
distribution declared for the subaccount and reinvested in
such subaccount. We subtract from that amount a charge for
our taxes, if any.
(3) We divide (2) by the net asset value of the subaccount at the
end of the preceding business day.
(4) We then subtract the applicable daily mortality and expense
risk charge and the daily asset-based administrative charge
from each subaccount.
Calculations for the subaccounts are made on a per share basis.
CONDENSED FINANCIAL INFORMATION
Tables containing (i) the accumulation unit value history of each
subaccount of Golden American Separate Account B offered in this
prospectus and (ii) the total investment value history of each such
subaccount are presented in Appendix A -- Condensed Financial
Information.
FINANCIAL STATEMENTS
The audited financial statements of Separate Account B for the years
ended December 31, 1998 and 1997 are included in the Statement of Additional
Information. The unaudited condensed
consolidated financial statements of Golden American for the six months
ended June 30, 1999 and the audited consolidated financial statements of
Golden American for the years ended December 31, 1998, 1997 and 1996
are included in this prospectus.
PERFORMANCE INFORMATION
From time to time, we may advertise or include in reports to contract
owners performance information for the subaccounts of Separate
Account B, including the average annual total return performance,
yields and other nonstandard measures of performance. Such
performance data will be computed, or accompanied by performance data
computed, in accordance with standards defined by the SEC.
Except for the Liquid Asset subaccount, quotations of yield for the
subaccounts will be based on all investment income per unit (contract
value divided by the accumulation unit) earned during a given 30-day
period, less expenses accrued during such period. Information on
standard total average annual return performance will include average
annual rates of total return for 1, 5 and 10 year periods, or lesser
periods depending on how long the subaccount of Separate Account B
has been in existence. We may show other total returns for periods
less than one year. Total return figures will be based on the actual
historic performance of the subaccounts of Separate Account B,
assuming an investment at the beginning of the period, withdrawal of
the investment at the end of the period, and the deduction of all
applicable portfolio and contract charges. We may also show rates of
total return on amounts invested at the beginning of the period with
no withdrawal at the end of the period. Total return figures which
assume no withdrawals at the end of the period will reflect all
recurring charges, but will not reflect the surrender charge.
Quotations of average annual return for the Managed Global subaccount
take into account the period before September 3, 1996, during which
it was maintained as a subaccount of Golden American Separate Account
D. In addition, we may present historic performance data for the
investment portfolios since their inception reduced by some or all of
the fees and charges under the Contract. Such adjusted historic
performance includes data that precedes the inception dates of the
subaccounts of Separate Account B. This data is designed to show the
performance that would have resulted if the Contract had been in
existence during that time.
7
<PAGE>
<PAGE>
Current yield for the Liquid Asset subaccount is based on income
received by a hypothetical investment over a given 7-day period, less
expenses accrued, and then "annualized" (i.e., assuming that the 7-
day yield would be received for 52 weeks). We calculate "effective
yield" for the Liquid Asset subaccount 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 thus be slightly higher than the "yield" because of the
compounding effect of earnings. We calculate quotations of yield for
the remaining subaccounts on all investment income per accumulation
unit earned during a given 30-day period, after subtracting fees and
expenses accrued during the period.
We may compare performance information for a subaccount to: (i) the
Standard & Poor's 500 Stock Index, Dow Jones Industrial Average,
Donoghue Money Market Institutional Averages, or any other applicable
market indices, (ii) other variable annuity separate accounts or
other investment products tracked by Lipper Analytical Services (a
widely used independent research firm which ranks mutual funds and
other investment companies) or any other rating service, and (iii)
the Consumer Price Index (a measure for inflation) to determine the
real rate of return of an investment in the Contract. Our reports and
promotional literature may also contain other information including
the ranking of any subaccount based on rankings of variable annuity
separate accounts or other investment products tracked by Lipper
Analytical Services or by similar rating services.
Performance information reflects only the performance of a
hypothetical contract and should be considered in light of other
factors, including the investment objective of the investment
portfolio and market conditions. Please keep in mind that past
performance is not a guarantee of future results.
[Shaded Section Header]
- ----------------------------------------------------------------------
GOLDEN AMERICAN LIFE INSURANCE COMPANY
- ----------------------------------------------------------------------
Golden American Life Insurance Company is a Delaware stock life
insurance company, originally incorporated in Minnesota on
January 2, 1973. Golden American is a wholly owned subsidiary of
Equitable of Iowa Companies, Inc. ("Equitable of Iowa"). Equitable
of Iowa is a wholly owned subsidiary of ING Groep N.V. ("ING"), a
global financial services holding company with approximately $461.8
billion in assets as of December 31, 1998. Golden American is
authorized to sell insurance and annuities in all states, except New
York, and the District of Columbia. In May 1996, Golden American
established a subsidiary, First Golden American Life Insurance
Company of New York, which is authorized to sell annuities in New
York and Delaware. Golden American's consolidated financial
statements appear in this prospectus.
Equitable of Iowa is the holding company for Golden American,
Directed Services, Inc. (the investment adviser of the GCG Trust and
the distributor of the Contracts) and other interests. Equitable of
Iowa and another ING affiliate own ING Investment Management, LLC,
one of the portfolio managers of the GCG Trust. ING also owns Baring
International Investment Limited, another portfolio manager of the
GCG Trust.
Our principal office is located at 1475 Dunwoody Drive, West Chester,
Pennsylvania 19380.
[Shaded Section Header]
- ----------------------------------------------------------------------
THE TRUSTS
- ----------------------------------------------------------------------
In this prospectus, we refer to The GCG Trust, The Galaxy VIP Fund,
the PIMCO Trust and the Warburg Pincus Trust collectively as the
"Trusts" and individually as a "Trust".
The GCG Trust is a mutual fund whose shares are offered to separate
accounts funding variable annuity and variable life insurance
policies offered by Golden American and other affiliated insurance
companies. The GCG Trust may also sell its shares to separate accounts of
insurance companies not affiliated with Golden American. Pending SEC
approval, shares of the GCG Trust may also be sold to certain
qualified pension and retirement plans. The principal address of the GCG
Trust is 1475 Dunwoody Drive, West Chester, PA 19380.
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The Galaxy VIP Fund is a mutual fund whose shares are offered to separate
accounts of various life insurance companies for variable annuity
contracts, including certain variable contracts of Golden American and its
affiliates. The principal address of The Galaxy VIP Fund is 4400 Computer
Drive, Westborough, MA 01581.
The PIMCO Trust is also a mutual fund whose shares are available to
separate accounts of insurance companies, including Golden American,
for both variable annuity contracts and variable life insurance
policies and by qualified pension and retirement plans. The
principal address of the PIMCO Trust is 840 Newport Center Drive,
Suite 300, Newport Beach, CA 92660.
The Warburg Pincus Trust is also a mutual fund whose shares are
available to separate accounts of life insurance companies, including
Golden American and Equitable Life Insurance Company of Iowa, and to
certain qualified and retirement plans. The principal address of the
Warburg Pincus Trust is 153 East 53rd Street, New York, NY 10022.
In the event that, due to differences in tax treatment or other
considerations, the interests of contract owners of various contracts
participating in the Trusts conflict, we, the Boards of Trustees of
The GCG Trust, The Galaxy VIP Fund, the PIMCO Trust and the Warburg
Pincus Trust, Directed Services, Inc.,Fleet Investment Advisors Inc.,
Pacific Investment Management Company, Credit Suisse Asset
Management, LLC and any other insurance companies participating in the
Trusts will monitor events to identify and resolve any material conflicts
that may arise.
YOU WILL FIND COMPLETE INFORMATION ABOUT THE GCG TRUST, THE GALAXY VIP FUND
THE PIMCO TRUST AND THE WARBURG PINCUS TRUST IN THE ACCOMPANYING PROSPECTUS
FOR EACH TRUST. YOU SHOULD READ THEM CAREFULLY BEFORE INVESTING.
[Shaded Section Header]
- ----------------------------------------------------------------------
GOLDEN AMERICAN SEPARATE ACCOUNT B
- ----------------------------------------------------------------------
Golden American Separate Account B ("Account B") was established as a
separate account of the Company on July 14, 1988. It is registered
with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940. Account B is a
separate investment account used for our variable annuity contracts.
We own all the assets in Account B but such assets are kept separate
from our other accounts.
Account B is divided into subaccounts. Each subaccount invests
exclusively in shares of one investment portfolio of The GCG Trust,
The Galaxy VIP Fund, the PIMCO Trust or the Warburg Pincus Trust.
Each investment portfolio has its own distinct investment objectives
and policies. Income, gains and losses, realized or unrealized, of
a portfolio are credited to or charged against the corresponding
subaccount of Account B without regard to any other income, gains or
losses of Golden American. Assets equal to the reserves and other
contract liabilities with respect to each are not chargeable with
liabilities arising out of any other business of the Golden American.
They may, however, be subject to liabilities arising from subaccounts
whose assets we attribute to other variable annuity contracts supported
by Account B. If the assets in Account B exceed the required reserves
and other liabilities, we may transfer the excess to our general account.
We are obligated to pay all benefits and make all payments provided
under the Contracts.
We currently offer other variable annuity contracts that invest in
Account B but are not discussed in this prospectus. Account B may
also invest in other investment portfolios which are not available
under your Contract.
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[Shaded Section Header]
- ----------------------------------------------------------------------
THE INVESTMENT PORTFOLIOS
- ----------------------------------------------------------------------
During the accumulation phase, you may allocate your premium payments
and contract value to any of the investment portfolios listed in the
section below. YOU BEAR THE ENTIRE INVESTMENT RISK FOR AMOUNTS YOU
ALLOCATE TO THE INVESTMENT PORTFOLIOS, AND YOU MAY LOSE YOUR PRINCIPAL.
INVESTMENT OBJECTIVES
The investment objective of each investment portfolio is set forth
below. You should understand that there is no guarantee that any
portfolio will meet its investment objective. Meeting objectives
depends on various factors, including, in certain cases, how well the
portfolio managers anticipate changing economic and market
conditions. YOU CAN FIND MORE DETAILED INFORMATION ABOUT THE
INVESTMENT PORTFOLIOS IN THE PROSPECTUSES FOR THE GCG TRUST, THE
GALAXY VIP FUND, THE PIMCO TRUST AND THE WARBURG PINCUS TRUST.
YOU SHOULD READ THESE PROSPECTUSES BEFORE INVESTING.
[Shaded Table Header]
INVESTMENT PORTFOLIO INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------
THE GCG TRUST
Liquid Asset Seeks high level of current income consistent with
the preservation of capital and liquidity.
Invests primarily in obligations of the U.S.
Government and its agencies and
instrumentalities, bank obligations,
commercial paper and short-term corporate debt
securities. All securities will mature in
less than one year.
----------------------------------------------------
Limited Maturity Seeks highest current income consistent with Bond
low risk to principal and liquidity. Also seeks to
enhance its total return through capital appreciation
when market factors, such as falling interest rates
and rising bond prices, indicate that capital
appreciation may be available without significant
risk to principal.
Invests primarily in diversified limited maturity
debt securities with average maturity dates of
five years or shorter and in no cases more than
seven years.
----------------------------------------------------
Global Fixed Seeks high total return.
Income Invests primarily in high-grade fixed income
securities, both foreign and domestic.
----------------------------------------------------
Total Return Seeks above-average income (compared to a portfolio
entirely invested in equity securities)
consistent with the prudent employment of
capital.
Invests primarily in a combination of equity
and fixed income securities.
----------------------------------------------------
Equity Income Seeks substantial dividend income as well as long-
term growth of capital.
Invests primarily in common stocks of well-
established companies paying above-average
dividends.
----------------------------------------------------
Fully Managed Seeks, over the long term, a high total investment
return consistent with the preservation of
capital and with prudent investment risk.
Invests primarily in the common stocks of
established companies believed by the
portfolio manager to have above-average
potential for capital growth.
----------------------------------------------------
Rising Dividends Seeks capital appreciation. A secondary
objective is dividend income.
Invests in equity securities that meet the
following quality criteria: regular dividend
increases; 35% of earnings reinvested
annually; and a credit rating of "A" to "AAA".
----------------------------------------------------
Capital Growth Seeks long-term total return.
Invests primarily in common stocks of
companies where the potential for change
(earnings acceleration) is significant.
----------------------------------------------------
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Growth Seeks capital appreciation.
Invests primarily in common stocks of growth
companies that have favorable relationships between
price/earnings ratios and growth rates in sectors
offering the potential for above-average returns.
----------------------------------------------------
Value Equity Seeks capital appreciation. Dividend income
is a secondary objective.
Invests primarily in common stocks of domestic
and foreign issuers which meet quantitative
standards relating to financial soundness and
high intrinsic value relative to price.
----------------------------------------------------
Research Seeks long-term growth of capital and future income.
Invests primarily in common stocks or
securities convertible into common stocks of
companies believed to have better than average
prospects for long-term growth.
----------------------------------------------------
Mid-Cap Growth Seeks long-term growth of capital.
Invests primarily in equity securities of
companies with medium market capitalization
which the portfolio manager believes have
above-average growth potential.
----------------------------------------------------
Strategic Equity Seeks capital appreciation.
Invests primarily in common stocks of medium-
and small-sized companies.
----------------------------------------------------
Capital Seeks long-term capital growth.
Appreciation Invests primarily in equity securities
believed by the portfolio manager to be
undervalued.
----------------------------------------------------
Small Cap Seeks long-term capital appreciation.
Invests primarily in equity securities of
companies that have a total market
capitalization within the range of companies
in the Russell 2000 Growth Index or the
Standard & Poor's Small-Cap 600 Index.
----------------------------------------------------
Real Estate Seeks capital appreciation. Current income is a
secondary objective.
Invests primarily in publicly-traded real
estate equity securities.
----------------------------------------------------
Hard Assets Seeks long-term capital appreciation.
Invests primarily in hard asset securities.
Hard asset companies produce a commodity which
the portfolio manager is able to price on a
daily or weekly basis.
----------------------------------------------------
Managed Global Seeks capital appreciation. Current income is
only an incidental consideration.
Invests primarily in common stocks traded in
securities markets throughout the world.
----------------------------------------------------
Developing World Seeks capital appreciation.
Invests primarily in equity securities of
companies in developing or emerging countries.
----------------------------------------------------
THE GALAXY VIP FUND
Equity Seeks long-term growth by investing in companies
that the portfolio manager beliesves have
above-average earnings potential.
Invests at least 75% of its total assets in common
stocks and securities convertible into common stocks
issued by U.S. companies.
----------------------------------------------------
Growth and
Income Seeks to provide a relatively high total return
through long-term capital appreciation and current
income.
Invests at least 65% of its total assets in the
common stocks of U.S. companies with large market
capitalizations (generally over $2 billion) that
have prospects for above-average growth and
dividends.
----------------------------------------------------
Small Company
Growth Seeks capital appreciation.
Invests normally at least 65% of its total assets
in the equity securities, primarily common stocks,
of small companies that have market capitalizations
of $1.5 billion or less. The portfolio invests
primarily in the common stock of U.S. companies, but
may invest up to 20% of its total assets in foreign
equity securities.
----------------------------------------------------
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Asset
Allocation Seeks a high total return by providing both a
current level of income that is greater than that
provided by the popular stock market averages, as
well as long-term growth in the value of the
portfolio's assets.
Invests in a mix of stocks and bonds that the
portfolio manager believes will produce both income
and long-term capital growth. This mix will change
from time to time as a result of economic and market
conditions. However, the portfolio keeps at least
25% of its total assets in fixed income investments,
including debt securities and perferred stocks, at
all times.
----------------------------------------------------
High Quality
Bond Seeks a high level of current income consistent with
prudent risk of capital.
Invests primarily in obligations issued or
guaranteed by the U.S. Government, its agencies and
instrumentalities, as well as in corporate debt
obligations such as notes and bonds. The portfolio
also invests in asset-backed and mortgage-backed
securities and in money market instruments, such as
commercial paper and bank obligations. Normally, at
least 65% of the portfolio's total assets will be
invested in high quality debt obligations that have
one of the top two ratings assigned by the Standard
& Poor's Ratings Group or Moody's Investor Services,
Inc. or are unrated securities determined by the
portfolio manager to be of comparable quality.
----------------------------------------------------
THE PIMCO TRUST
PIMCO High Yield Seeks to maximize total return, consistent with
Bond preservation of capital and prudent investment
management.
Invests in at least 65% of its assets in a
diversified portfolio of junk bonds rated at least
B by Moody's Investor Services, Inc. or Standard &
Poor's or, if unrated, determined by the portfolio
manager to be of comparable quality.
----------------------------------------------------
PIMCO StocksPLUS Seeks to achieve a total return which exceeds
Growth and the total return performance of the S&P 500.
Income Invests primarily in common stocks, options,
futures, options on futures and swaps.
----------------------------------------------------
THE WARBURG PINCUS TRUST
International
Equity Seeks long term appreciation.
Invests primarily in a broadly diversified portfolio
of equity securities of companies that have their
principal business activities outside of the United
States.
----------------------------------------------------
INVESTMENT ADVISORY FEE
The investment manager of The GCG Trust is Directed Services, Inc. The GCG
Trust pays Directed Services a monthly fee for its investment advisory as
well as administrative services. The monthly fee is based on the average
daily net assets of an investment portfolio, and in some cases, the combined
total assets of certain grouped portfolios. Directed Services provides or
procures, at its own expense, the services necessary for the operation of
the portfolios. Directed Services (and not The GCG Trust) pays each
portfolio manager a monthly fee for managing the assets of a portfolio.
For a list of the portfolio managers, see the front cover of this prospectus.
Directed Services does not bear the expense of brokerage fees and other
transactional expenses for securities, taxes (if any) paid by a portfolio,
interest on borrowing, fees and expenses of the independent trustees, and
extraordinary expenses, such as litigation or indemnification expenses.
The investment advisor of The Galaxy VIP Fund is Fleet Investment Advisors
Inc. The Galaxy VIP Fund pays Fleet Investment Advisors a monthly advisory
fee based on the average daily net of each investment portfolio. Each
portfolio pays its own administrative costs. Except for agreements to
reimburse certain expense of some portfolios, Fleet Investment Advisors does
not bear any portfolio expenses.
The investment advisor of the PIMCO Trust is Pacific Investment Management
Company ("PIMCO"). The PIMCO Trust pays PIMCO a monthly advisory fee for its
investment advisory services and a monthly administrative fee based on the
average daily net assets of an investment portfolio for its administrative
services. PIMCO provides or procures, its own expense, the services necessary
for the operation of the
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portfolios. PIMCO does not bear the expense of brokerage fees and other
transactional expenses for securities, taxes (if any) paid by a portfolio,
interest on borrowing, and extraordinary expenses, such as litigation or
indemnification expenses.
The investment advisor of the Warburg Pincus Trust is Credit Suisse Asset
Management, LLC. The Warburg Trust pays Credit Suisse Asset Management a
monthly advisory fee based on the average daily net assets of the investment
portfolio and also procures the services necessary for the operations of its
portfolios. The Warburg Trust pays monthly administrative fees to two
co-administrators for administrative services, one of which is an affiliate
of Credit Suisse Asset Management. The monthly administrative fee is based on
the portfolio's average daily net assets. Credit Suisse Asset Management does
not bear any portfolio expenses.
YOU CAN FIND MORE DETAILED INFORMATION ABOUT EACH PORTFOLIO INCLUDING IT'S
MANAGEMENT FEES IN THE PROSPECTUSES FOR EACH OF THE TRUSTS. YOU SHOULD
READ THESE PROSPECTUSES BEFORE INVESTING.
[Shaded Section Header]
- ----------------------------------------------------------------------
THE FIXED INTEREST ALLOCATION
- ----------------------------------------------------------------------
You may allocate premium payments and transfer your contract value to
the guaranteed interest periods of our Fixed Account at any time
during the accumulation period. Every time you allocate money to the
Fixed Account, we set up a Fixed Interest Allocation for the
guaranteed interest period you select. We currently offer guaranteed
interest periods of 6 months, 1, 3, 5, 7 and 10 years, although we
may not offer all these periods in the future. You may select one or
more guaranteed interest periods at any one time. We will credit
your Fixed Interest Allocation with a guaranteed interest rate for
the interest period you select, so long as you do not withdraw money
from that Fixed Interest Allocation before the end of the guaranteed
interest period. Each guaranteed interest period ends on its
maturity date which is the last day of the month in which the
interest period is scheduled to expire.
If you surrender, withdraw, transfer or annuitize your investment in
a Fixed Interest Allocation more than 30 days before the end of the
applicable guaranteed interest period, we will apply a Market Value
Adjustment to the transaction. A Market Value Adjustment could increase
or decrease the amount you surrender, withdraw, transfer or annuitize,
depending on current interest rates at the time of the transaction.
YOU BEAR THE RISK THAT YOU MAY RECEIVE LESS THAN YOUR PRINCIPAL IF WE
APPLY A MARKET VALUE ADJUSTMENT.
Assets supporting amounts allocated to the Fixed Account are
available to fund the claims of all classes of our customer, contract
owners and other creditors. Interests under your Contract relating
to the Fixed Account are registered under the Securities Act of 1933,
but the Fixed Account is not registered under the 1940 Act.
SELECTING A GUARANTEED INTEREST PERIOD
You may select one or more Fixed Interest Allocations with specified
guaranteed interest periods. A guaranteed interest period is the
period that a rate of interest is guaranteed to be credited to your
Fixed Interest Allocation. We may at any time decrease or increase
the number of guaranteed interest periods offered. In addition, we
may offer DCA Fixed Interest Allocations, which are 6-month and 1-
year Fixed Interest Allocations available exclusively in connection
with our dollar cost averaging program. For more information on DCA
Fixed Interest Allocations, see "Transfers Among Your Investments -
Dollar Cost Averaging."
Your contract value in the Fixed Account is the sum of your Fixed
Interest Allocations and the interest credited as adjusted for any
withdrawals (including any Market Value Adjustment applied to such
withdrawal), transfers or other charges we may impose. Your Fixed
Interest Allocation will be credited with the guaranteed interest rate
in effect for the guaranteed interest period you selected when we receive
and accept your premium or reallocation of contract value. We will credit
interest daily at a rate which yields the quoted guaranteed interest rate.
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GUARANTEED INTEREST RATES
Each Fixed Interest Allocation will have an interest rate that is
guaranteed as long as you do not take your money out until its maturity
date. We do not have a specific formula for establishing the guaranteed
interest rates for the different guaranteed interest periods. We
determine guaranteed interest rates at our sole discretion. To find out
the current guaranteed interest rate for a guaranteed interest period
you are interested in, please contact our Customer Service Call
Center or your registerd representative. The determination
may be influenced by the interest rates on fixed income investments
in which we may invest with the amounts we receive under the
Contracts. We will invest these amounts primarily in investment-
grade fixed income securities (i.e., rated by Standard & Poor's
rating system to be suitable for prudent investors) although we are
not obligated to invest according to any particular strategy, except
as may be required by applicable law. You will have no direct or
indirect interest in these investments. We will also consider other
factors in determining the guaranteed interest rates, including
regulatory and tax requirements, sales commissions and administrative
expenses borne by us, general economic trends and competitive
factors. We cannot predict the level of future interest rates but no
Fixed Interest Allocation will ever have a guaranteed interest rate
of less than 3% per year.
We may from time to time at our discretion offer interest rate
specials for new premiums that are higher than the current base
interest rate then offered. Renewal rates for such rate specials
will be based on the base interest rate and not on the special rates
initially declared.
TRANSFERS FROM A FIXED INTEREST ALLOCATION
You may transfer your contract value in a Fixed Interest Allocation
to one or more new Fixed Interest Allocations with new guaranteed
interest periods, or to any of the subaccounts of Account B. Unless
you tell us the Fixed Interest Allocations from which such transfers
will be made, we will transfer amounts from your Fixed Interest
Allocations starting with the guaranteed interest period nearest its
maturity date, until we have honored your transfer request.
The minimum amount that you can transfer to or from any Fixed
Interest Allocation is $100. If a transfer request would reduce the
contract value remaining in a Fixed Interest Allocation to less than
$100, we will treat such transfer request as a request to transfer
the entire contract value in such Fixed Interest Allocation.
Transfers from a Fixed Interest Allocation may be subject to a Market
Value Adjustment. If you have a special Fixed Interest Allocation
that was offered exclusively with our dollar cost averaging program,
cancelling dollar cost averaging will cause a transfer of the entire
contract value in such Fixed Interest Allocation to the Liquid Asset
subaccount, and such a transfer will be subject to a Market Value
Adjustment.
On the maturity date of a guaranteed interest period, you may
transfer amounts from the applicable Fixed Interest Allocation to the
subaccounts and/or to new Fixed Interest Allocations with guaranteed
interest periods of any length we are offering at that time. You may
not, however, transfer amounts to any Fixed Interest Allocation with
a guaranteed interest period that extends beyond the annuity start
date.
At least 30 calendar days before a maturity date of any of your Fixed
Interest Allocations, or earlier if required by state law, we will
send you a notice of the guaranteed interest periods that are
available. You must notify us which subaccounts or new guaranteed
interest periods you have selected before the maturity date of your
Fixed Interest Allocations. If we do not receive timely instructions
from you, we will transfer the contract value in the maturing Fixed
Interest Allocation to a new Fixed Interest Allocation with a
guaranteed interest period that is the same as the expiring
guaranteed interest period. If such guaranteed interest period is
not available or would go beyond the annuity start date, we will
transfer your contract value in the maturing Fixed Interest
Allocation to the next shortest guaranteed interest period which does
not go beyond the annuity start date. If no such guaranteed interest
period is available, we will transfer the contract value to a
subaccount specially designated by the Company for such purpose.
We currently use the Liquid Asset subaccount for such purpose.
WITHDRAWALS FROM A FIXED INTEREST ALLOCATION
During the accumulation phase, you may withdraw a portion of your
contract value in any Fixed Interest Allocation. You may make
systematic withdrawals of only the interest earned during the prior
month,
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quarter or year, depending on the frequency chosen, from a
Fixed Interest Allocation under our systematic withdrawal option.
Systematic withdrawals from a Fixed Interest Allocation are not
permitted if such Fixed Interest Allocation is currently participating
in the dollar cost averaging program. A withdrawal from a Fixed
Interest Allocation may be subject to a Market Value Adjustment and,
in some cases, a surrender charge. Be aware that withdrawals may have
federal income tax consequences, including a 10% penalty tax.
If you tell us the Fixed Interest Allocation from which your
withdrawal will be made, we will assess the withdrawal against that
Fixed Interest Allocation. If you do not, we will assess your
withdrawal against the subaccounts in which you are invested, unless
the withdrawal exceeds the contract value in the subaccounts. If
there is no contract value in those subaccounts, we will deduct your
withdrawal from your Fixed Interest Allocations starting with the
guaranteed interest periods nearest their maturity dates until we
have honored your request.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment may decrease, increase or have no effect
on your contract value. We will apply a Market Value Adjustment:
(i) whenever you withdraw or transfer money from a Fixed Interest
Allocation (unless made within 30 days before the maturity date of
the applicable guaranteed interest period, or under the systematic
withdrawal or dollar cost averaging program) and/or
(ii) if on the annuity start date a guaranteed interest period for any
Fixed Interest Allocation does not end on or within 30 days of the
annuity start date.
We determine the Market Value Adjustment by multiplying the amount
you withdraw, transfer or apply to an income plan by the following
factor:
( 1+I )N/365
(---------) -1
(1+J+.0050)
Where,
o "I" is the Index Rate for a Fixed Interest Allocation on the
first day of the guaranteed interest period;
o "J" is equal to the following:
(1) If calculated for a Fixed Interest Allocation of 1 year or
more, then "J" is the Index Rate for a new Fixed Interest
Allocation with a guaranteed interest period equal to the
time remaining (rounded up to the next full year except in
Pennsylvania) in the guaranteed interest period;
(2) If calculated for a Fixed Interest Allocation of 6 months,
then "J" is the lesser of the Index Rate for a new Fixed
Interest Allocation with (i) a 6-month guaranteed interest
period, or (ii) a 1-year guaranteed interest period, at
the time of calculation; and
o "N" is the remaining number of days in the guaranteed interest
period at the time of calculation.
The Index Rate is the average of the Ask Yields for U.S. Treasury
Strips as quoted by a national quoting service for a period equal to
the applicable guaranteed interest period. The average is currently
based on the period starting from the 22nd day of the calendar month
two months prior to the month of the Index Rate determination and
ending the 21st day of the calendar month immediately before the
month of determination. We currently calculate the Index Rate once
each calendar month but have the right to calculate it more
frequently. The Index Rate will always be based on a period of at
least 28 days. If the Ask Yields are no longer available, we will
determine the Index Rate by using a suitable and approved, if required,
replacement method.
A Market Value Adjustment may be positive, negative or result in no
change. In general, if interest rates are rising, you bear the
risk that any Market Value Adjustment will likely be negative and
reduce your contract
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value. On the other hand, if interest rates are falling, it is more
likely that you will receive a positive Market Value Adjustment that
increases your contract value. In the event of a full surrender,
transfer or annuitization from a Fixed Interest Allocation, we will
add or subtract any Market Value Adjustment from the amount surrendered,
transferred or annuitized. In the event of a partial withdrawal, transfer
or annuitization, we will add or subtract any Market Value Adjustment
from the total amount withdrawn, transferred or annuitized in order to
provide the amount requested. If a negative Market Value Adjustment
exceeds your contract value in the Fixed Interest Allocation, we will
consider your request to be a full surrender, transfer or
annuitization of the Fixed Interest Allocation.
Several examples which illustrate how the Market Value Adjustment
works are included in Appendix B.
[Shaded Section Header]
- ----------------------------------------------------------------------
THE ANNUITY CONTRACT
- ----------------------------------------------------------------------
The Contract described in this prospectus is a deferred combination
variable and fixed annuity contract. The Contract provides a means
for you to invest in one or more of the available mutual fund
portfolios of The GCG Trust, The Galaxy VIP Fund, the PIMCO Trust
and the Warburg Pincus Trust funded by Account B. It also provides
a means for you to invest in a Fixed Interest Allocation through the
Fixed Account.
CONTRACT DATE AND CONTRACT YEAR
The date the Contract became effective is the contract date. Each
12-month period following the contract date is a contract year.
ANNUITY START DATE
The annuity start date is the date you start receiving annuity
payments under your Contract. The Contract, like all deferred
variable annuity contracts, has two phases: the accumulation phase
and the income phase. The accumulation phase is the period between
the contract date and the annuity start date. The income phase
begins when you start receiving regular annuity payments from your
Contract on the annuity start date.
CONTRACT OWNER
You are the contract owner. You are also the annuitant unless
another annuitant is named in the application. 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 will determine the applicable death benefit if such
death benefit is available for multiple owners.
The death benefit becomes payable when you die. In the case of a
sole contract owner who dies before the income phase begins, we will
pay the beneficiary the death benefit when due. The sole contract
owner's estate will be the beneficiary if no beneficiary has been
designated or the beneficiary has predeceased the contract owner. In
the case of a joint owner of the Contract dying before the income
phase begins, we will designate the surviving contract owner as the
beneficiary. This will override any previous beneficiary
designation.
If the contract owner is a trust and a beneficial owner of the trust
has been designated, the beneficial owner will be treated as the
contract owner for determining the death benefit. If a beneficial
owner is changed or added after the contract date, this will be
treated as a change of contract owner for determining the death
benefit. If no beneficial owner of the trust has been designated,
the availability of enhanced death benefits will be based on the age
of the annuitant at the time you purchase the Contract.
JOINT OWNER. For non-qualified Contracts only, joint owners may be
named in a written request before the Contract is in effect. Joint
owners may independently exercise transfers and other transactions
allowed under the Contract. All other rights of ownership must be
exercised by both owners. Joint owners own equal shares of any benefits
accruing or payments made to them. All rights of a joint owner end at
death of that owner if the other joint owner survives. The entire interest
of the deceased joint owner in the Contract will
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pass to the surviving joint owner. The age of the older owner will determine
the applicable death benefit if Enhanced Death Benefits are available for
multiple owners.
ANNUITANT
The annuitant is the person designated by you to be the measuring
life in determining annuity payments. The annuitant's age determines
when the income phase must begin and the amount of the annuity
payments to be paid. You are the annuitant unless you choose to name
another person. The annuitant may not be changed after the Contract
is in effect.
The contract owner will receive the annuity benefits of the Contract
if the annuitant is living on the annuity start date. If the
annuitant dies before the annuity start date, and a contingent
annuitant has been named, the contingent annuitant becomes the
annuitant (unless the contract owner is not an individual, in which
case the death benefit becomes payable).
If there is no contingent annuitant when the annuitant dies before
the annuity start date, the contract owner will become the annuitant.
The contract owner may designate a new annuitant within 60 days of
the death of the annuitant.
If there is no contingent annuitant when the annuitant dies before
the annuity start date and the contract owner is not an individual,
we will pay the designated beneficiary the death benefit then due.
If a beneficiary has not been designated, or if there is no
designated beneficiary living, the contract owner will be the
beneficiary. If the annuitant was the sole contract owner and there
is no beneficiary designation, the annuitant's estate will be the
beneficiary.
Regardless of whether a death benefit is payable, if the annuitant
dies and any contract owner is not an individual, distribution rules
under federal tax law will apply. You should consult your tax
advisor for more information if you are not an individual.
BENEFICIARY
The beneficiary is named by you in a written request. The
beneficiary is the person who receives any death benefit proceeds and
who becomes the successor contract owner if the contract owner (or
the annuitant if the contract owner is other than an individual) dies
before the annuity start date. We pay death benefits to the primary
beneficiary (unless there are joint owners, in which case death
proceeds are payable to the surviving owner(s)).
If the beneficiary dies before the annuitant or the contract owner,
the death benefit proceeds are paid to the contingent beneficiary, if
any. If there is no surviving beneficiary, we pay the death benefit
proceeds to the contract owner's estate.
One or more persons may be a beneficiary or contingent beneficiary.
In the case of more than one beneficiary, we will assume any death
benefit proceeds are to be paid in equal shares to the surviving
beneficiaries.
You have the right to change beneficiaries during the annuitant's
lifetime unless you have designated an irrevocable beneficiary. When
an irrevocable beneficiary has been designated, you and the
irrevocable beneficiary may have to act together to exercise some of
the rights and options under the Contract.
CHANGE OF CONTRACT OWNER OR BENEFICIARY. During the annuitant's
lifetime, you may transfer ownership of a non-qualified Contract. A
change in ownership may affect the amount of the death benefit and
the guaranteed death benefit. You may also change the beneficiary.
All requests for changes must be in writing and submitted to our
Customer Service Center in good order. The change will be effective
as of the day you sign the request. The change will not affect any
payment made or action taken by us before recording the change.
PURCHASE AND AVAILABILITY OF THE CONTRACT
We will issue a Contract only if both the annuitant and the contract
owner are not older than age 85.
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The initial premium payment must be $10,000 or more ($1,500 for
qualified Contracts). You may make additional payments of $500 or
more ($250 for qualified Contracts) at any time after the free look
period before you turn age 85. Under certain circumstances, we may
waive the minimum premium payment requirement. We may also change
the minimum initial or additional premium requirements for certain
group or sponsored arrangements. An initial or additional premium payment
that would cause the contract value of all annuities that you maintain
with us to exceed $1,000,000 requires our prior approval.
The Contracts offered by this prospectus are available only to customers
of Fleet Financial Group, Inc. and its affiliates.
CREDITING OF PREMIUM PAYMENTS
We will allocate your initial premium and credit within 2 business
days after receipt, if the application and all information necessary
for processing the Contract are complete. Subsequent premium
payments and credits will be credited to a Contract within 1 business
day if they are received in good order. In certain states we also
accept initial and additional premium payments by wire order. Wire
transmittals must be accompanied by sufficient electronically
transmitted data. We may retain premium payments for up to 5
business days while attempting to complete an incomplete application.
If the application cannot be completed within this period, we will
inform you of the reasons for the delay. We will also return the
premium payment immediately unless you direct us to hold the premium
payment until the application is completed. Once the completed
application is received, we will allocate the payment and credit to
the subaccount and/or Fixed Interest Allocation specified by you
within 2 business days. We will make inquiry to discover any missing
information related to subsequent payments. For any subsequent
premium payments, the payment and credit will be credited at the
accumulation unit value next determined after receipt of your premium
payment.
Once we allocate your premium payment and credit to the subaccounts
selected by you, we convert the premium payment and credit into
accumulation units. We divide the amount of the premium payment and
credit allocated to a particular subaccount by the value of an
accumulation unit for the subaccount to determine the number of
accumulation units of the subaccount to be held in Account B with
respect to your Contract. The net investment results of each
subaccount vary with its investment performance.
If your premium payment was transmitted by wire order from your
broker-dealer, we will follow one of the following two procedures
after we receive and accept the wire order and investment
instructions. The procedure we follow depends on state availability
and the procedures of your broker-dealer.
(1) If either your state or broker-dealer do not permit us to
issue a Contract without an application, we reserve the right
to rescind the Contract if we do not receive and accept a
properly completed application or enrollment form within 15
days of the premium payment. If we do not receive the
application or form within 15 days of the premium payment, we
will refund the contract value plus any charges we deducted,
and the Contract will be voided. Some states require that we
return the premium paid, in which case we will comply.
(2) If your state and broker-dealer allow us to issue a Contract
without an application, we will issue and mail the Contract to
you, together with an Application Acknowledgement Statement
for your execution. Until our Customer Service Center receives
the executed Application Acknowledgement Statement, neither you
nor the broker-dealer may execute any financial transactions
on your Contract unless they are requested in writing by you.
In some states, we may require that an initial premium designated for
a subaccount of Account B or the Fixed Account be allocated with the
added credit to a subaccount specially designated by the Company
(currently, the Liquid Asset subaccount) during the free look period.
After the free look period, we will convert your contract value (your
initial premium and credit plus any earnings less any expenses) into
accumulation units of the subaccounts you previously selected. The
accumulation units will be allocated based on the accumulation unit
value next computed for each subaccount. Initial premiums designated
for Fixed Interest Allocations will be allocated with the added
credit to a Fixed Interest Allocation with the
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guaranteed interest period you have chosen; however, in the future we
may allocate the premiums and credits to the specially designated
subaccount during the free look period.
ADDITIONAL CREDIT TO PREMIUM
A credit will be added to your contract value based on each premium
payment. The credit will be added proportionally to each subaccount
and Fixed Interest Allocation as the premium payment is allocated.
The credit is a minimum of 4% of the premium payment. We may
increase the credit at our discretion. If we
increase the credit we may reduce it also at our discretion, but we
will not reduce it below the minimum credit of 4%, and we will give
at least 30 days notice of any planned reduction.
In any of the following circumstances, we deduct a credit from the
amount we pay to you or your beneficiary:
(1) If you return your Contract within the free look period, we
will deduct the credit from the refund amount;
(2) If a death benefit of contract value becomes payable, we
will deduct any credits added within 1 year; and
(3) If we waive any surrender charge, we will deduct any credit
added to your contract value within 1 year.
If we deduct a credit from any amount payable, any gains or losses
attributable to that credit will not be considered as part of the
deduction.
Once we have waived any surrender charge, we will not add any
additional credit to any additional premium you pay on or after the
date of any such waiver.
CONTRACT VALUE
We determine your contract value on a daily basis beginning on the
contract date. Your contract value is the sum of (a) the contract
value in the Fixed Interest Allocations, and (b) the contract value
in each subaccount in which you are invested.
CONTRACT VALUE IN FIXED INTEREST ALLOCATIONS. The contract value
in your Fixed Interest Allocation is the sum of premium payments and
credits allocated to the Fixed Interest Allocation under the
Contract, plus contract value transferred to the Fixed Interest
Allocation, plus credited interest, minus any transfers and
withdrawals from the Fixed Interest Allocation (including any Market
Value Adjustment applied to such withdrawal), contract fees, and
premium taxes.
CONTRACT VALUE IN THE SUBACCOUNTS. On the contract date, the
contract value in the subaccount in which you are invested is equal
to the initial premium paid and added credit that was designated to
be allocated to the subaccount. On the contract date, we allocate
your contract value to each subaccount and/or a Fixed Interest
Allocation specified by you, 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 of your initial premium and added
credit not allocated to a Fixed Interest Allocation will be allocated
to a subaccount specially designated by the Company during the free
look period for this purpose (currently, the Liquid Asset
subaccount).
On each business day after the contract date, we calculate the amount
of contract value in each subaccount as follows:
(1) We take the contract value in the subaccount at the end of the
preceding business day.
(2) We multiply (1) by the subaccount's Net Investment Factor
since the preceding business day.
(3) We add (1) and (2).
(4) We add to (3) any additional premium payments and credits, and
then add or subtract any transfers to or from that subaccount.
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(5) We subtract from (4) any withdrawals and any related charges,
and then subtract any contract fees and premium taxes.
CASH SURRENDER VALUE
The cash surrender value is the amount you receive when you surrender
the Contract. The cash surrender value will fluctuate daily based on
the investment results of the subaccounts in which you are invested
and interest credited to Fixed Interest Allocations and any Market
Value Adjustment. We do not guarantee any minimum cash surrender
value. On any date during the accumulation phase, we calculate the
cash surrender value as follows: we start with your contract value,
then we adjust for any Market Value Adjustment, and then we deduct
any surrender charge, any charge for premium taxes, and any other
charges incurred but not yet deducted.
SURRENDERING TO RECEIVE THE CASH SURRENDER VALUE
You may surrender the Contract at any time while the annuitant is
living and before the annuity start date. A surrender will be
effective on the date your written request and the Contract are
received at our Customer Service Center. We will determine and pay
the cash surrender value at the price next determined after receipt
of all paperwork required in order for us to process your surrender.
Once paid, all benefits under the Contract will be terminated.
For administrative purposes, we will transfer your money to a
specially designated subaccount (currently the Liquid Asset subaccount)
prior to processing the surrender. This transfer will have no effect
on your cash surrender value. You may receive the cash surrender value
in a single sum payment or apply it under one or more annuity options.
We will usually pay the cash surrender value within 7 days.
Consult your tax advisor regarding the tax consequences associated
with surrendering your Contract. A surrender made before you reach
age 59 1/2 may result in a 10% tax penalty. See "Federal Tax
Considerations" for more details.
ADDITION, DELETION OR SUBSTITUTION OF SUBACCOUNTS AND OTHER CHANGES
We may make additional subaccounts available to you under the
Contract. These subaccounts will invest in investment portfolios we
find suitable for your Contract.
We may amend the Contract to conform to applicable laws or
governmental regulations. If we feel that investment in any of the
investment portfolios has become inappropriate to the purposes of the
Contract, we may, with approval of the SEC (and any other regulatory
agency, if required) substitute another portfolio for existing and
future investments.
We also reserve the right to: (i) deregister Account B under the 1940
Act; (ii) operate Account B as a management company under the 1940
Act if it is operating as a unit investment trust; (iii) operate
Account B as a unit investment trust under the 1940 Act if it is
operating as a managed separate account; (iv) restrict or eliminate
any voting rights as to Account B; and (v) combine Account B with
other accounts.
We will, of course, provide you with written notice before any of
these changes are effected.
THE FIXED ACCOUNT
The Fixed Account is a segregated asset account which contains the
assets that support a contract owner's Fixed Interest Allocations.
See "The Fixed Interest Allocations" for more information.
OTHER CONTRACTS
We offer other variable annuity contracts that also invest in the
same investment portfolios of the Trusts. These contracts have different
charges that could effect their performance, and may offer different
benefits more suitable to your needs. To obtain more information
about these other contracts, contact our Customer Service Center or
your registered representative.
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OTHER IMPORTANT PROVISIONS
See "Withdrawals," "Transfers Among Your Investments," "Death Benefit
Choices," "Charges and Fees," "The Annuity Options" and "Other
Contract Provisions" in this prospectus for information on other
important provisions in your Contract.
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WITHDRAWALS
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Any time during the accumulation phase and before the death of the
annuitant, you may withdraw all or part of your money. Keep in mind
that if you request a withdrawal for more than 90% of the cash
surrendervalue, we will treat it as a request to surrender the
Contract. If any single withdrawal or the sum of withdrawals exceeds
the Free Withdrawal Amount, you will incur a surrender charge. The
Free Withdrawal Amount in any Contract year is 10% of your contract
value on the date of the withdrawal less any withdrawals during that
contract year.
You need to submit to us a written request specifying the Fixed
Interest Allocations or subaccounts from which amounts are to be
withdrawn, otherwise the withdrawal will be made on a pro rata basis
from all of the subaccounts in which you are invested. If there is
not enough contract value in the subaccounts, we will deduct the
balance of the withdrawal from your Fixed Interest Allocations
starting with the guaranteed interest periods nearest their maturity
dates until we have honored your request. We will apply a Market
Value Adjustment to any withdrawal from your Fixed Interest
Allocation taken more than 30 days before its maturity date. We will
determine the contract value as of the close of business on the day
we receive your withdrawal request at our Customer Service Center.
The contract value may be more or less than the premium payments
made.
For administrative purposes, we will transfer your money to a
specially designated subaccount (currently, the Liquid Asset
subaccount) prior to processing the withdrawal. This transfer will
not effect the withdrawal amount you receive.
We offer the following three withdrawal options:
REGULAR WITHDRAWALS
After the free look period, you may make regular withdrawals. Each
withdrawal must be a minimum of $1,000. We will apply a Market Value
Adjustment to any regular withdrawal from a Fixed Interest Allocation
that is taken more than 30 days before its maturity date.
SYSTEMATIC WITHDRAWALS
You may elect to receive automatic systematic withdrawal payments (1)
from the contract value in the subaccounts in which you are invested,
or (2) from the interest earned in your Fixed Interest Allocations.
Systematic withdrawals may be taken monthly, quarterly or annually.
You decide when you would like systematic payments to start as long
as it is at least 28 days after your contract date. You also select
the date on which the systematic withdrawals will be made, but this
date cannot be later than the 28th day of the month. If you have
elected to receive systematic withdrawals but have not chosen a date,
we will make the withdrawals on the same calendar day of each month
as your contract date. If your contract date is after the 28th day of
the month, your systematic withdrawal will be made on the 28th day of
each month.
Each systematic withdrawal amount must be a minimum of $100. The
amount of your systematic withdrawal can either be (1) a fixed dollar
amount, or (2) an amount based on a percentage of your contract
value. Both forms of systematic withdrawals are subject to the
following maximum, which is calculated on each withdrawal date:
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MAXIMUM PERCENTAGE
FREQUENCY OF CONTRACT VALUE
Monthly 0.833%
Quarterly 2.50%
Annually 10.00%
If your systematic withdrawal is a fixed dollar amount and the amount
to be systematically withdrawn would exceed the applicable maximum
percentage of your contract value on any withdrawal date, we will
automatically reduce the amount withdrawn so that it equals such
percentage. Thus, your fixed dollar systematic withdrawals will
never exceed the maximum percentage. If you want fixed dollar
systematic withdrawals to exceed the maximum percentage and are
willing to incur associated surrender charges, consider the Fixed
Dollar Systematic Withdrawal Feature which you may add to your
regular fixed dollar systematic withdrawal program.
If your systematic withdrawal is based on a percentage of your
contract value and the amount to be systematically withdrawn based on
that percentage would be less than $100, we will automatically
increase the amount to $100 as long as it does not exceed the maximum
percentage. If the systematic withdrawal would exceed the maximum
percentage, we will send the amount, and then automatically cancel
your systematic withdrawal option.
Systematic withdrawals from Fixed Interest Allocations are limited to
interest earnings during the prior month, quarter, or year, depending
on the frequency you chose. Systematic withdrawals are not subject
to a Market Value Adjustment, unless you have added the Fixed Dollar
Systematic Withdrawal Feature discussed below and the payments exceed
interest earnings. Systematic withdrawals from Fixed Interest Allocations
under the Fixed Dollar Systematic Withdrawal Feature are available only
in connection with Section 72(q) or 72(t) distributions. A Fixed Interest
Allocation may not participate in both the systematic withdrawal option and
the dollar cost averaging program at the same time.
You may change the amount or percentage of your systematic withdrawal
once each contract year or cancel this option at any time by sending
satisfactory notice to our Customer Service Center at least 7 days
before the next scheduled withdrawal date. The systematic withdrawal
option may commence in a contract year where a regular withdrawal has
been taken but you may not change the amount or percentage of your
withdrawals in any contract year during which you have previously
taken a regular withdrawal. You may not elect the systematic
withdrawal option if you are taking IRA withdrawals.
FIXED DOLLAR SYSTEMATIC WITHDRAWAL FEATURE. You may add the
Fixed Dollar Systematic Withdrawal Feature to your regular fixed
dollar systematic withdrawal program. This feature allows you to
receive a systematic withdrawal in a fixed dollar amount regardless
of any surrender charges or Market Value Adjustments. Systematic
withdrawals from Fixed Interest Allocations under the Fixed Dollar
Systematic Withdrawal Feature are available only in connection with
Section 72(q) or 72(t) distributions. You choose the amount of the
fixed systematic withdrawals, which may total up to a maximum of 10%
of your contract value as determined on the day we receive your election
of this feature. The maximum limit will not be recalculated when you
make additional premium payments, unless you instruct us to do us.
We will assess a surrender charge on the withdrawal date if the
systematic withdrawal exceeds the maximum limit as calculated on the
withdrawal date. We will assess a Market Value Adjustment on the
withdrawal date if the systematic withdrawal from a Fixed Interest
Allocation exceeds your interest earnings on the withdrawal date.
We will apply the surrender charge and any Market Value Adjustment
directly to your contract value (rather than to the systematic
withdrawal)so that the amount of each systematic withdrawal remains fixed.
Flat dollar systematic withdrawals which are intended to satisfy
the requirements of Section 72(q) or 72(t) of the Tax Code and may exceed
the maximum. Such withdrawals are subject to surrender charges and Market
Value Adjustment when they exceed the applicable free withdrawal amount.
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IRA WITHDRAWALS
If you have a non-Roth IRA Contract and will be at least age 70 1/2
during the current calendar year, you may elect to have distributions
made to you to satisfy requirements imposed by Federal tax law. IRA
withdrawals provide payout of amounts required to be distributed by
the Internal Revenue Service rules governing mandatory distributions
under qualified plans. We will send you a notice before your
distributions commence. You may elect to take IRA withdrawals at
that time, or at a later date. You may not elect IRA withdrawals and
participate in systematic withdrawals at the same time. If you do not
elect to take IRA withdrawals, and distributions are required by Federal
tax law, distributions adequate to satisfy the requirements imposed by
Federal tax law may be made. Thus, if you are participating in systematic
withdrawals, distributions under that option must be adequate to satisfy
the mandatory distribution rules imposed by federal tax law.
You may choose to receive IRA withdrawals on a monthly, quarterly or
annual basis. Under this option, you may elect payments to start as
early as 28 days after the contract date. 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, we will make the
withdrawals on the same calendar day of the month as the contract
date.
You may request that we calculate for you the amount that is required
to be withdrawn 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. When we determine the required IRA 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 IRA
withdrawal amount is greater than the contract value, we will cancel
the Contract and send you the amount of the cash surrender value.
You may change the payment frequency of your IRA withdrawals once
each contract year or cancel this option at any time by sending us
satisfactory notice to our Customer Service Center at least 7 days
before the next scheduled withdrawal date.
An IRA withdrawal in excess of the amount allowed under systematic
withdrawals will be subject to a Market Value Adjustment.
CONSULT YOUR TAX ADVISER REGARDING THE TAX CONSEQUENCES ASSOCIATED
WITH TAKING WITHDRAWALS. You are responsible for determining that
withdrawals comply with applicable law. A withdrawal made before the
taxpayer reaches age 59 1/2 may result in a 10% penalty tax. See
"Federal Tax Considerations" for more details.
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TRANSFERS AMONG YOUR INVESTMENTS
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You may transfer your contract value among the subaccounts in which
you are invested and your Fixed Interest Allocations at the end of
the free look period until the annuity start date. We currently do
not charge you for transfers made during a contract year, but reserve
the right to charge $25 for each transfer after the twelfth transfer
in a contract year. We also reserve the right to limit the number of
transfers you may make and may otherwise modify or terminate transfer
privileges if required by our business judgement or in accordance
with applicable law. We will apply a Market Value Adjustment to
transfers from a Fixed Interest Allocation taken more than 30 days
before its maturity date, unless the transfer is made under the
dollar cost averaging program.
Transfers will be based on values at the end of the business day in
which the transfer request is received at our Customer Service
Center.
The minimum amount that you may transfer is $100 or, if less, your
entire contract value held in a subaccount or a Fixed Interest
Allocation.
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To make a transfer, you must notify our Customer Service Center and
all other administrative requirements must be met. Any transfer
request received after 4:00 p.m. eastern time or the close of the New
York Stock Exchange will be effected on the next business day.
Account B and the Company will not be liable for following
instructions communicated by telephone that we reasonably believe to
be genuine. We require personal identifying information to process a
request for transfer made over the telephone.
DOLLAR COST AVERAGING
You may elect to participate in our dollar cost averaging program if
you have at least $1,200 of contract value in the (i) Limited
Maturity Bond subaccount or the Liquid Asset subaccount, or (ii) a
Fixed Interest Allocation with either a 6-month or a 1-year
guaranteed interest period. These subaccounts or Fixed Interest
Allocations serve as the source accounts from which we will, on a
monthly basis, automatically transfer a set dollar amount of money to
other subaccounts selected by you. We also may offer DCA Fixed
Interest Allocations, which are 6-month and 1-year Fixed Interest
Allocations available exclusively for use with the dollar cost
averaging program. The DCA Fixed Interest Allocations require a
minimum premium payment of $1,200 directed into a DCA Fixed Interest
Allocation.
The dollar cost averaging program is designed to lessen the impact of
market fluctuation on your investment. Since we transfer the same
dollar amount to other subaccounts each month, more units of a
subaccount are purchased if the value of its unit is low and less
units are purchased if the value of its unit is high. Therefore, a
lower than average value per unit may be achieved over the long term.
However, we cannot guarantee this. When you elect the dollar cost
averaging program, you are continuously investing in securities
regardless of fluctuating price levels. You should consider your
tolerance for investing through periods of fluctuating price levels.
Unless you have a DCA Fixed Interest Allocation, you elect the dollar
amount you want transferred under this program. Each monthly
transfer must be at least $100. If your source account is the
Limited Maturity Bond subaccount, the Liquid Asset subaccount or a 1-
year Fixed Interest Allocation, the maximum amount that can be
transferred each month is your contract value in such source account
divided by 12. If your source account is a 6-month Fixed Interest
Allocation, the maximum amount that can be transferred each month is
your contract value in such source account divided by 6. You may
change the transfer amount once each contract year. If you have a
DCA Fixed Interest Allocation, there is no minimum or maximum
transfer amount; we will transfer all your money allocated to that
source account into the subaccount(s) in equal payments over the
selected 6-month or 1-year period. The last payment will include
earnings accrued over the course of the selected period.
Transfers from a Fixed Interest Allocation or a DCA Fixed Interest
Allocation under the dollar cost averaging program are not subject to
a Market Value Adjustment. However, if you terminate the dollar cost
averaging program for a DCA Fixed Interest Allocation and there is
money remaining in the DCA Fixed Interest Allocation, we will
transfer the remaining money to the Liquid Asset subaccount. Such
transfer will trigger aMarket Value Adjustment if the transfer is
made more than 30 days before the maturity date of the DCA Fixed Interest
Allocation.
If you do not specify the subaccounts to which the dollar amount of
the source account is to be transferred, we will transfer the money
to the subaccounts in which you are invested on a proportional basis.
The transfer date is the same day each month as your contract date.
If, on any transfer date, your contract value in a source account is
equal or less than the amount you have elected to have transferred,
the entire amount will be transferred and the program will end. You
may terminate the dollar cost averaging program at any time by
sending satisfactory notice to our Customer Service Center at least 7
days before the next transfer date. A Fixed Interest Allocation or
DCA Fixed Interest Allocation may not participate in the dollar cost
averaging program and in systematic withdrawals at the same time.
We may in the future offer additional subaccounts or withdraw any
subaccount or Fixed Interest Allocation to or from the dollar cost
averaging program, stop offering DCA Fixed Interest Allocations or
otherwise modify, suspend or terminate this program. Of course, such
change will not affect any dollar cost averaging programs in
operation at the time.
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AUTOMATIC REBALANCING
If you have at least $10,000 of contract value invested in the
subaccounts of Account B, you may elect to have your investments in
the subaccounts automatically rebalanced. We will transfer funds
under your Contract on a quarterly, semi-annual, or annual calendar
basis among the subaccounts to maintain the investment blend of your
selected subaccounts. The minimum size of any allocation 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 withdrawal option only if 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, send satisfactory notice to
our Customer Service Center. We will begin the program on the last
business day of the 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 contract value among the
subaccounts 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.
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DEATH BENEFIT CHOICES
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DEATH BENEFIT DURING THE ACCUMULATION PHASE
During the accumulation phase, a death benefit is payable when either
the annuitant (when a contract owner is not an individual), the
contract owner or the first of joint owners dies. Assuming you are
the contract owner, your beneficiary will receive a death benefit
unless the beneficiary is your surviving spouse and elects to
continue the Contract. The death benefit value is calculated at the
close of the business day on which we receive written notice and due
proof of death, as well as any required claim forms, at our Customer
Service Center. If your beneficiary elects to delay receipt
of the death benefit until a date after the time of death, the amount
of the benefit payable in the future may be affected. The proceeds
may be received in a single sum or applied to any of the annuity
options. If we do not receive a request to apply the death benefit
proceeds to an annuity option, we will make a single sum
distribution. We will generally pay death benefit proceeds within 7
days after our Customer Service Center has received sufficient
information to make the payment.
You may choose from the following 3 death benefit choices: (1) the
Standard Death Benefit Option; (2) the 7% Solution Enhanced Death
Benefit Option; and (3) the Annual Ratchet Enhanced Death Benefit
Option. Once you choose a death benefit, it cannot be changed. We
may in the future stop or suspend offering any of the enhanced death
benefit options to new Contracts. A change in ownership of the
Contract may affect the amount of the death benefit and the
guaranteed death benefit.
STANDARD DEATH BENEFIT. You will automatically receive the
Standard Death Benefit unless you elect one of the enhanced death
benefits. The Standard Death Benefit under the Contract is the
greatest of (i) your contract value minus any credits added within 1
year; (ii) total premium payments less any withdrawals; and (iii) the
cash surrender value.
ENHANCED DEATH BENEFITS. If the 7% Solution Enhanced Death Benefit
or the Annual Ratchet Enhanced Death Benefit is elected, the death
benefit under the Contract is the greatest of (i) the contract value
minus any credits added within 1 year; (ii) total premium payments
less any withdrawals; (iii) the cash surrender value; and (iv) the
enhanced death benefit as calculated below minus any credits added
within 1 year.
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[Shaded Table Header]
|--------------------------------------------------------------------|
| |
| HOW THE ENHANCED DEATH BENEFIT IS CALCULATED |
| |
| 7% SOLUTION ANNUAL RATCHET |
|--------------------------------------------------------------------|
| We credit interest each | On each contract anniversary |
| business day at the 7% annual | that occurs on or before the |
| effective rate* to the enhanced | contract owner turns age 80, |
| death benefit from the | we compare the prior enhanced |
| preceding day (which would be | death benefit to the contract |
| the initial premium if the | value and select the larger |
| preceding day is the contract | amount as the new enhanced |
| date), then we add additional | death benefit. |
| premiums paid since the | On all other days, the |
| preceding day, then we subtract | enhanced death benefit is the |
| any withdrawals made (including | amount determined below. We |
| any Market Value Adjustment | first take the enhanced death |
| applied to such withdrawals) | benefit from the preceding day |
| since the preceding day and | (which would be the initial |
| then we subtract any associated | premium if the valuation date |
| surrender charges.** | is the contract date) and then |
| The maximum enhanced death | we add additional premiums |
| benefit is 2 times all premium | paid since the preceding day, |
| payments, as reduced by | then we subtract any |
| withdrawals.*** | withdrawals made (including |
| | any Market Value Adjustment |
| | applied to such withdrawals) |
| | since the preceding day, and |
| | then we subtract any |
| | associated surrender charges. |
| | That amount becomes the new |
| | enhanced death benefit. |
|--------------------------------------------------------------------|
* The interest rate used for calculating the death benefit for
the Liquid Asset and Limited Maturity Bond subaccounts will
be the lesser of the 7% annual effective rate or the net
rate of return for such subaccounts during the applicable
period. The interest rate used for calculating the death
benefit for your Fixed Interest Allocation will be the
lesser of the 7% annual effective rate or the interest
credited to such investment during the applicable period.
Thus, selecting these investments may limit the enhanced
death benefit. If we offer additional subaccounts in the
future, we may restrict those new subaccounts from
participating in the 7% Solution Enhanced Death Benefit.
** Each premium payment reduced by any withdrawals and any
associated surrender charges incurred will continue to grow
at the 7% annual effective rate.
*** Each withdrawal reduces the maximum enhanced death benefit
as follows: first, the maximum enhanced death benefit is
reduced by the amount of any withdrawal of earnings; then,
it is reduced in proportion to the reduction in the
contract value for any withdrawal of premium (in each case,
including any associated surrender charges) and as adjusted
for any Market Value Adjustment. If those 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. Once withdrawals in any
contract year exceed 7% of cumulative premiums, withdrawals
will reduce the maximum enhanced death benefit in
proportion to the reduction in contract value.
The 7% Solution Enhanced Death Benefit is available only at the time
you purchase your Contract and only if the contract owner or
annuitant (when the contract owner is other than an individual) is
not more than 80 years old at the time of purchase. The Annual
Ratchet Enhanced Death Benefit is available only at the time you
purchase your Contract and only if the contract owner or annuitant
(when the contract owner is other than an individual) is not more
than 79 years old at the time of purchase. The 7% Solution and
Annual Ratchet Enhanced Death Benefits may not be available where a
Contract is held by joint owners.
DEATH BENEFIT DURING THE INCOME PHASE
If any contract owner or the annuitant dies after the annuity start
date, the Company will pay the beneficiary any certain benefit
remaining under the annuity in effect at the time.
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[Shaded Section Header]
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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 expenses for distributing and administrating the
Contracts, for paying the benefits payable under the Contracts and
for bearing various risks associated with the Contracts. The amount
of a charge will not always correspond to the actual costs
associated. For example, the surrender charge collected may not
fully cover all of the distribution expenses incurred by us with the
service or benefits provided. In the event there are any profits
from fees and charges deducted under the Contract, we may use such
profits to finance the distribution of contracts.
CHARGE DEDUCTION SUBACCOUNT
You may elect to have all charges against your contract value
deducted directly from a single subaccount designated by the Company.
We currently use the Liquid Asset subaccount for this purpose. If
you do not elect this option, or if the amount of the charges is
greater than the amount in the designated subaccount, the charges
will be deducted as discussed below. You may cancel this option at
any time by sending satisfactory notice to our Customer Service
Center.
CHARGES DEDUCTED FROM THE CONTRACT VALUE
We deduct the following charges from your contract value:
SURRENDER CHARGE. We will deduct a contingent deferred sales
charge (a "surrender charge") if you surrender your Contract or if
you take a withdrawal in excess of the Free Withdrawal Amount during
the 7-year period from the date we receive and accept a premium
payment. The surrender charge is based on a percentage of each
premium payment. This charge is intended to cover sales expenses
that we have incurred. We may in the future reduce or waive the
surrender charge in certain situations and will never charge more
than the maximum surrender charges. The percentage of premium
payments deducted at the time of surrender or excess withdrawal
depends on 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 payment as follows:
COMPLETE YEARS ELAPSED 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9+
SINCE PREMIUM PAYMENT | | | | | | | | |
SURRENDER CHARGE 8% | 8% | 8% | 8% | 7% | 6% | 5% | 3% | 1% | 0%
WAIVER OF SURRENDER CHARGE FOR EXTENDED MEDICAL CARE. We will waive
the surrender charge in most states in the following events: (i) you
begin receiving qualified extended medical care on or after the first
contract anniversary for at least 45 days during a 60 day period and
your request for the surrender or withdrawal, together with all
required documentation is received at our Customer Service Center
during the term of your care or within 90 days after the last
day of your care; or (ii) you are first diagnosed by a qualifying
medical professional, on or after the first contract anniversary, as
having a qualifying terminal illness. We have the right to require
an examination by a physician of our choice. If we require such an
examination, we will pay for it. You are required to send us
satisfactory written proof of illness. See your Contract for more
information. The waiver of surrender charge may not be available in
all states. If we waive the surrender charge, we will deduct any
credit added to your contract value within 1 year, and we will not
add any additional credit to any additional premium you pay on or
after the date of any such waiver.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount in any contract
year is 10% of your contract value on the date of withdrawal less any
withdrawals during that contract year.
SURRENDER CHARGE FOR EXCESS WITHDRAWALS. We will deduct a
surrender charge for excess withdrawals. We consider a withdrawal to
be an "excess withdrawal" when the amount you withdraw in any
contract year exceeds the Free Withdrawal Amount. Where you are
receiving systematic withdrawals, any combination of regular
withdrawals taken and any systematic withdrawals expected to be
received in a
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contract year will be included in determining the amount of the excess
withdrawal. Such a withdrawal will be considered a partial surrender
of the Contract and we will impose a surrender charge and any associated
premium tax. We will deduct such charges from the contract value in
proportion to the contract value in each subaccount or Fixed Interest
Allocation from which the excess withdrawal was taken. In instances
where the excess withdrawal equals the entire contract value in such
subaccounts or Fixed Interest Allocations, we will deduct charges
proportionately from all other subaccounts and Fixed Interest Allocations
in which you are invested. ANY WITHDRAWAL FROM A FIXED INTEREST ALLOCATION
MORE THAN 30 DAYS BEFORE ITS MATURITY DATE WILL TRIGGER A MARKET VALUE
ADJUSTMENT.
For the purpose of calculating the surrender charge for an excess
withdrawal: a) we treat premiums as being withdrawn on a first-in,
first-out basis; and b) amounts withdrawn which are not considered an
excess withdrawal are not considered a withdrawal of any premium
payments. We have included an example of how this works in Appendix
C. Although we treat premium payments as being withdrawn before
earnings for purpose of calculating the surrender charge for excess
withdrawals, the federal tax law treats earnings as withdrawn first.
PREMIUM TAXES. We may make a charge for state and local premium
taxes depending on your state of residence. The tax can range from
0% to 3.5% of the premium payment. We have the right to change this
amount to conform with changes in the law or if you change your state
of residence.
We deduct the premium tax from your contract value on the annuity
start date. However, some jurisdictions impose a premium tax at the
time the initial and additional premiums are paid, regardless of
when the annuity payments begin. In those states we may defer
collection of the premium taxes from your contract value and deduct
it when you surrender the Contract, when you take an excess withdrawal
or on the annuity start date.
ADMINISTRATIVE CHARGE. We deduct the annual administrative charge
on each Contract anniversary, or if you surrender your Contract prior
to a Contract anniversary, at the time we determine the cash
surrender value payable to you. The amount deducted is $40 per
Contract. This charge is waived if you have a contract value
of $100,000 or more at the end of a contract year or the sum of the
premiums paid equals or exceeds $100,000. We deduct the charge
proportionately from all subaccounts in which you are invested. If
there is no contract value in those subaccounts, we will deduct the
charge from your Fixed Interest Allocations starting with the
guaranteed interest periods nearest their maturity dates until the
charge has been paid.
TRANSFER CHARGE. We currently do not deduct any charges for
transfers made during a contract year. We have the right, however,
to assess up to $25 for each transfer after the twelfth transfer in a
contract year. If such a charge is assessed, we would deduct the
charge from the subaccounts and the Fixed Interest Allocations from
which each such transfer is made in proportion to the amount being
transferred from each such subaccount and Fixed Interest Allocation
unless you have chosen to have all charges deducted from a single
subaccount. The charge will not apply to any transfers due to the
election of dollar cost averaging, automatic rebalancing and
transfers we make to and from any subaccount specially designated by
the Company for such purpose.
CHARGES DEDUCTED FROM THE SUBACCOUNTS
MORTALITY AND EXPENSE RISK CHARGE. The mortality and
expense risk charge is deducted each business day. The mortality and
expense charge depends on the death benefit you have elected. If you
have elected the Standard Death Benefit, the charge, on an annual
basis, is equal to 1.25% of the assets you have in each subaccount.
The charge is deducted on each business day at the rate of .003446%
for each day since the previous business day. If you have elected an
enhanced death benefit, the charge, on an annual basis, is equal to
1.40% for the Annual Ratchet Enhanced Death Benefit, or 1.55% for the
7% Solution Enhanced Death Benefit, of the assets you have in each
subaccount. The charge is deducted each business day at the rate of
.003863% or .004280%, respectively, for each day since the previous
business day.
ASSET-BASED ADMINISTRATIVE CHARGE. The amount of the asset-based
administrative charge, on an annual basis, is equal to 0.15% of the
assets you have in each subaccount. The charge is deducted on each
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business day at the rate of .000411% for each day since the pervious
business day. This charge is deducted daily from your assets in each
subaccount, in order to compensate Golden American for a portion of
the administrative expenses under the Contract.
TRUST EXPENSES
There are fees and charges deducted from each investment portfolio of
the Trusts. Please read the respective Trust prospectus for details.
[Shaded Section Header]
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THE ANNUITY OPTIONS
- ----------------------------------------------------------------------
ANNUITIZATION OF YOUR CONTRACT
If the annuitant and contract owner are living on the annuity start
date, we will begin making payments to the contract owner under an
income plan. We will make these payments under the annuity option
chosen. You may change annuity option by making a written request to
us at least 30 days before the annuity start date. The amount of the
payments will be determined by applying your contract value adjusted
for any applicable Market Value Adjustment on the annuity start date
in accordance with the annuity option you chose.
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 start date. If, at the time of the
contract owner's death or the annuitant's death (if the contract
owner is not an individual), no option has been chosen for paying
death benefit proceeds, the beneficiary may choose an annuity option
within 60 days. In all events, payments of death benefit proceeds
must comply with the distribution 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 contract
value is less than $2,000 or if the calculated monthly annuity income
payment is less than $20.
For each annuity option we will issue a separate written agreement
putting the annuity option into effect. Before we pay any annuity
benefits, we require the return of your Contract. If your Contract
has been lost, we will require that you complete and return the
applicable lost Contract form. Various factors will affect the level
of annuity benefits, such as the annuity option chosen, the
applicable payment rate used and the investment performance of the
portfolios and interest credited to the Fixed Interest Allocations.
Our current annuity options provide only for fixed payments. Fixed
annuity payments are regular payments, the amount of which is fixed
and guaranteed by us. Some fixed annuity options provide fixed
payments either for a specified period of time or for the life of the
annuitant. The amount of life income payments will depend on the
form and duration of payments you chose, the age of the annuitant or
beneficiary (and gender, where appropriate), the total contract value
applied to purchase a Fixed Interest Allocation, and the applicable
payment rate.
Our approval is needed for any option where:
(1) The person named to receive payment is other than the contract
owner or beneficiary;
(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.
SELECTING THE ANNUITY START DATE
You select the annuity start date, which is the date on which the
annuity payments commence. The annuity start date must be at least
3 years from the contract date but before the month immediately
following the
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annuitant's 90th birthday, or 10 years from the contract date, if
later. If, on the annuity start date, a surrender charge remains,
the elected annuity option must include a period certain of at
least 5 years.
If you do not select an annuity start date, it will automatically
begin in the month following the annuitant's 90th birthday, or 10
years from the contract date, if later.
If the annuity start 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" and the Statement of Additional Information. For a
Contract purchased in connection with a qualified plan, other than a
Roth IRA, distributions must commence not later than April 1st of the
calendar year following the calendar year in which you attain age 70 1/2
or, in some cases, retire. Distributions may be made through
annuitization or withdrawals. You should consult your tax advisor for tax
advise.
FREQUENCY OF ANNUITY PAYMENTS
You choose the frequency of the annuity payments. They may be
monthly, quarterly, semi-annually or annually. If we do not receive
written notice from you, we will make the payments monthly. There
may be certain restrictions on minimum payments that we will allow.
THE ANNUITY OPTIONS
We offer the 4 annuity options shown below. Payments under Options
1, 2 and 3 are fixed. Payments under Option 4 may be fixed or
variable. For a fixed annuity option, the contract value in the
subaccounts is transferred to the Company's general account.
OPTION 1. INCOME FOR A FIXED PERIOD. Under this option, we make
monthly payments in equal installments for a fixed number of years
based on the contract value on the annuity start date. We guarantee
that each monthly payment will be at least the amount stated in your
Contract. If you prefer, you may request that payments be made in
annual, semi-annual or quarterly installments. We will provide you
with illustrations if you ask for them. If the cash surrender value
or contract value is applied under this option, a 10% penalty tax may
apply to the taxable portion of each income payment until the contract
owner reaches age 59 1/2.
OPTION 2. INCOME FOR LIFE WITH A PERIOD CERTAIN. Payment is made
for the life of the annuitant in equal monthly installments and
guaranteed for at least a period certain such as 10 or 20 years.
Other periods certain may be available to you on request. You may
choose a refund period instead. Under 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 specified in the Contract corresponding to the person's age on
his or her last birthday before the annuity start date. Amounts for
ages not shown in the Contract are available if you ask for them.
OPTION 3. JOINT LIFE INCOME. This option is available when there
are 2 persons named to determine annuity payments. At least one of
the persons named must be either the contract owner or beneficiary of
the Contract. We guarantee monthly payments will be made as long as
at least one of the named persons is living. There is no minimum
number of payments. Monthly payment amounts are available if you ask
for them.
OPTION 4. ANNUITY PLAN. The contract value can be applied to any
other annuitization plan that we choose to offer on the annuity start
date.
PAYMENT WHEN NAMED PERSON DIES
When the person named to receive payment dies, we will pay any
amounts still due as provided in the annuity agreement between you
and Golden American. The amounts we will pay are determined as
follows:
(1) For Option 1, or any remaining guaranteed payments under
Option 2, we will continue payments. 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
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payment would have earned had it not been paid out early.
The discount interest rate is never less than 3% for Option
1 and 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 option agreement will state the
amount we will pay, if any.
[Shaded Section Header]
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OTHER CONTRACT PROVISIONS
- ----------------------------------------------------------------------
REPORTS TO CONTRACT OWNERS
We will send you a quarterly report within 31 days after of each
calendar quarter. The report will show the contract value, cash
surrender value, and the death benefit as of the end of the calendar
quarter. The report will also show the allocation of your contract
value and reflects the amounts deducted from or added to the contract
value since the last report. We will also send you copies of any
shareholder reports of the investment portfolios in which Account B
invests, as well as any other reports, notices or documents we are
required by law to furnish to you.
SUSPENSION OF PAYMENTS
The Company reserves the right to suspend or postpone the date of any
payment or determination of values on any business day (1) when the
New York Stock Exchange is closed; (2) when trading on the New York
Stock Exchange is restricted; (3) when an emergency exists as
determined by the SEC so that the sale of securities held in Account B
may not reasonably occur or so that the Company may not reasonably
determine the value of Account B's net assets; or (4) during any other
period when the SEC so permits for the protection of security holders.
We have the right to delay payment of amounts from a Fixed Interest
Allocation for up to 6 months.
IN CASE OF ERRORS IN YOUR APPLICATION
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.
ASSIGNING THE CONTRACT AS COLLATERAL
You may assign a non-qualified Contract as collateral security for a
loan but you should understand that your rights and any beneficiary's
rights may be subject to the terms of the assignment. An assignment
may have federal tax consequences. 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 validity of any
assignment.
CONTRACT CHANGES - APPLICABLE TAX LAW
We have the right to make changes in the Contract to continue to
qualify the Contract as an annuity. You will be given advance notice
of such changes.
FREE LOOK
You may cancel your Contract within your 10-day free look period. We
deem the free look period to expire 15 days after we mail the
Contract to you. Your state may require a longer free look period.
To cancel, you need to send your Contract to our Customer Service
Center or to the agent from whom you purchased it. We will refund
the contract value. For purposes of the refund during the free look
period, (i) we adjust your contract value for any market value
adjustment (if you have invested in the fixed account), (ii) then we
exclude any credit initially applied, and (iii) then we include a refund
of any charges deducted from your contract value. Because of the market
risks associated with investing in the portfolios and the potential
positive or negative
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effect of the market value adjustment, the contract value returned may
be greater or less than the premium payment you paid. Some states
require us to return to you the amount of the paid premium (rather
than the contract value) in which case you will not be subject to
investment risk during the free look period. In these states, your
premiums designated for investment in the subaccounts will be allocated
during the free look period to a subaccount specially designated by the
Company for this purpose (currently, the Liquid Asset subaccount).
We may, in our discretion, require that premiums designated for investment
in the subaccounts from all other states as well as premiums designated
for a Fixed Interest Allocation be allocated to the specially designated
subaccount during the free look period. Your Contract is void as of
the day we receive your Contract and cancellation request. We
determine your contract value at the close of business on the day we
receive your written request. If you keep your Contract after the
free look period, we will put your money in the subaccount(s) chosen
by you, based on the accumulation unit value next computed for each
subaccount, and/or in the Fixed Interest Allocation chosen by you.
GROUP OR SPONSORED ARRANGEMENTS
For certain group or sponsored arrangements, we may reduce any
surrender, administration, and mortality and expense risk charges.
We may also change the minimum initial and additional premium
requirements, or offer an alternative or reduced death benefit.
SELLING THE CONTRACT
Directed Services, Inc. is the 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 Directed
Services for acting as principal underwriter under a distribution agreement
which in turn pays the writing agent. The principal address of Directed
Services is 1475 Dunwoody Drive, West Chester, Pennsylvania 19380.
Directed Services enters into sales agreements with broker-dealers
to affiliated with Fleet Financial Group, Inc. sell the Contracts through
registered representatives who are licensed to sell securities and variable
insurance products. These broker-dealers are registered with the SEC and
are members of the National Association of Securities Dealers, Inc.
Directed Services receives a maximum of 4.5% commission, and passes through
100% of the commission to the Fleet affiliated broker-dealers whose registered
representative sold the contract.
[Shaded Table Header]
Underwriter Compensation
|----------------------------------------------------------------------------|
| NAME OF PRINCIPAL | AMOUNT OF | OTHER |
| UNDERWRITER | COMMISSION TO BE PAID | COMPENSATION |
| | | |
| Directed Services, Inc. | Maximum of 4.5% | Reimbursement of any |
| | of any initial | covered expenses incurred|
| | or additional | by registered |
| | premium payments. | representatives in |
| | | connection with |
| | | the distribution |
| | | of the Contracts. |
|----------------------------------------------------------------------------|
[Shaded Section Header]
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OTHER INFORMATION
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VOTING RIGHTS
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 subaccount by
dividing the Contract's contract value in that subaccount by the net
asset value of one share of the portfolio in which a subaccount
invests. We
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count fractional votes. 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 receive your instructions in time,
we will vote the shares in the same proportion as the instructions
received from all contracts in that subaccount. We will also vote
shares we hold in Account B which are not attributable to contract
owners in the same proportion.
YEAR 2000 PROBLEM
Like other business organizations and individuals around the world,
Golden American and Account B could be adversely affected if the
computer systems doing the accounts processing or on which Golden
American and/or Account B relies do not properly process and
calculate date-related information related to the end of the year
1999. This is commonly known as the Year 2000 (or Y2K) Problem.
Golden American is taking steps that it believes are reasonably
designed to address the Year 2000 Problem with respect to the
computer systems that it uses and to obtain satisfactory assurances
that comparable steps are being taken by its and Account B's major
service providers. At this time, however, we cannot guarantee that
these steps will be sufficient to avoid any adverse impact on Golden
American and Account B.
STATE REGULATION
We are regulated by the Insurance Department of the State of
Delaware. 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 where required by those
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
The Company, like other insurance companies, may be involved in
lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been
sought and/or material settlement payments have been made. We
believe that currently there are no pending or threatened lawsuits
that are reasonably likely to have a materially adverse impact on the
Company or Account B.
LEGAL MATTERS
The legal validity of the Contracts was 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 and Account B appearing in this Prospectus or in the Statement
of Additional Information and Registration Statement have been audited
by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing in this Prospectus or in the Statement of
Additional Information and in the Registration Statement and are included
in this Prospectus or incorporated by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting
and auditing.
[Shaded Section Header]
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FEDERAL TAX CONSIDERATIONS
- ----------------------------------------------------------------------
The following summary provides a general description of the federal
income tax considerations associated with this Contract and does not
purport to be complete or to cover all tax situations. This
discussion is not intended as tax advice. You should consult your
counsel or other competent tax advisers for more complete information.
This discussion is based upon our understanding of the present federal
income tax laws. We do not make any representations as to the likelihood
of continuation of the present federal income tax laws or as to how they
may be interpreted by the IRS.
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TYPES OF CONTRACTS: NON-QUALIFIED OR QUALIFIED
The Contract may be purchased on a non-tax-qualified basis or
purchased on a tax-qualified basis. Qualified Contracts are designed
for use by individuals whom premium payments are comprised solely of
proceeds from and/or contributions under retirement plans that are
intended to qualify as plans entitled to special income tax treatment
under Sections 401(a), 403(b), 408, or 408A of the Code. The
ultimate effect of federal income taxes on the amounts held under a
Contract, or annuity payments, depends on the type of retirement
plan, on the tax and employment status of the individual concerned,
and on our tax status. In addition, certain requirements must be
satisfied in purchasing a qualified Contract with proceeds from a
tax-qualified plan and receiving distributions from a qualified
Contract in order to continue receiving favorable tax treatment.
Some retirement plans are subject to distribution and other
requirements that are not incorporated into our Contract
administration procedures. Contract owners, participants and
beneficiaries are responsible for determining that contributions,
distributions and other transactions with respect to the Contract
comply with applicable law. Therefore, you should seek competent
legal and tax advice regarding the suitability of a Contract for your
particular situation. The following discussion assumes that
qualified Contracts are purchased with proceeds from and/or
contributions under retirement plans that qualify for the intended
special federal income tax treatment.
TAX STATUS OF THE CONTRACTS
DIVERSIFICATION REQUIREMENTS. The Code requires that the
investments of a variable account be "adequately diversified" in
order for the Contracts to be treated as annuity contracts for
federal income tax purposes. It is intended that Account B, through
the subaccounts, will satisfy these diversification requirements.
In certain circumstances, owners of variable annuity contracts have
been considered for federal income tax purposes to be the owners of
the assets of the separate account supporting their contracts due to
their ability to exercise investment control over those assets. When
this is the case, the contract owners have been currently taxed on
income and gains attributable to the separate account assets. There
is little guidance in this area, and some features of the Contracts,
such as the flexibility of a contract owner to allocate premium
payments and transfer contract values, have not been explicitly
addressed in published rulings. While we believe that the Contracts
do not give contract owners investment control over Account B assets,
we reserve the right to modify the Contracts as necessary to prevent
a contract owner from being treated as the owner of the Account B
assets supporting the Contract.
REQUIRED DISTRIBUTIONS. In order to be treated as an annuity
contract for federal income tax purposes, the Code requires any non-
qualified Contract to contain certain provisions specifying how your
interest in the Contract will be distributed in the event of your
death. The non-qualified Contracts contain provisions that are
intended to comply with these Code requirements, although no
regulations interpreting these requirements have yet been issued.
We intend to review such provisions and modify them if necessary to
assure that they comply with the applicable requirements when such
requirements are clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
The following discussion assumes that the Contracts will qualify as
annuity contracts for federal income tax purposes.
TAX TREATMENT OF ANNUITIES
IN GENERAL. We believe that if you are a natural person you will
generally not be taxed on increases in the value of a Contract until
a distribution occurs or until annuity payments begin. (For these
purposes, the agreement to assign or pledge any portion of the contract
value, and, in the case of a qualified Contract, any portion of an
interest in the qualified plan, generally will be treated as a
distribution.)
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. The owner of any annuity contract who is not a
natural person generally must include in income any increase in the
excess of the contract value over the "investment in the contract"
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(generally, the premiums or other consideration paid for the
contract) during the taxable year. There are some exceptions to this
rule and a prospective contract owner that is not a natural person
may wish to discuss these with a tax adviser. The following
discussion generally applies to Contracts owned by natural persons.
WITHDRAWALS. When a withdrawal from a non-qualified Contract
occurs, the amount received will be treated as ordinary income
subject to tax up to an amount equal to the excess (if any) of the
contract value (unreduced by the amount of any surrender charge)
immediately before the distribution over the contract owner's
investment in the Contract at that time. The tax treatment of market
value adjustments is uncertain. You should consult a tax adviser if
you are considering taking a withdrawal from your Contract in
circumstances where a market value adjustment would apply.
In the case of a surrender under a non-qualified Contract, the amount
received generally will be taxable only to the extent it exceeds the
contract owner's investment in the Contract.
PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution
from a non-qualified Contract, there may be imposed a federal tax
penalty equal to 10% of the amount treated as income. In general,
however, there is no penalty on distributions:
o made on or after the taxpayer reaches age 59 1/2;
o made on or after the death of a contract owner;
o attributable to the taxpayer's becoming disabled; or
o made as part of a series of substantially equal periodic
payments for the life (or life expectancy) of the taxpayer.
Other exceptions may be applicable under certain circumstances and
special rules may be applicable in connection with the exceptions
enumerated above. A tax adviser should be consulted with regard to
exceptions from the penalty tax.
ANNUITY PAYMENTS. Although tax consequences may vary depending on
the payment option elected under an annuity contract, a portion of
each annuity payment is generally not taxed and the remainder is
taxed as ordinary income. The non-taxable portion of an annuity
payment is generally determined in a manner that is designed to allow
you to recover your investment in the Contract ratably on a tax-free
basis over the expected stream of annuity payments, as determined
when annuity payments start. Once your investment in the Contract
has been fully recovered, however, the full amount of each annuity
payment is subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed
from a Contract because of your death or the death of the annuitant.
Generally, such amounts are includible in the income of recipient as
follows: (i) if distributed in a lump sum, they are taxed in the
same manner as a surrender of the Contract, or (ii) if distributed
under a payment option, they are taxed in the same way as annuity
payments.
TRANSFERS, ASSIGNMENTS, EXCHANGES AND ANNUITY DATES OF A CONTRACT.
A transfer or assignment of ownership of a Contract, the designation
of an annuitant, the selection of certain dates for commencement of
the annuity phase, or the exchange of a Contract may result in
certain tax consequences to you that are not discussed herein. A
contract owner contemplating any such transfer, assignment or
exchange, should consult a tax advisor as to the tax consequences.
WITHHOLDING. Annuity distributions are generally subject to
withholding for the recipient's federal income tax liability.
Recipients can generally elect, however, not to have tax withheld
from distributions.
MULTIPLE CONTRACTS. All non-qualified deferred annuity contracts
that are issued by us (or our affiliates) to the same contract owner
during any calendar year are treated as non-qualified deferred no one
annuity contract for purposes of determining the amount includible in
such contract owner's income when a taxable distribution occurs.
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TAXATION OF QUALIFIED CONTRACTS
The Contracts are designed for use with several types of qualified
plans. The tax rules applicable to participants in these qualified
plans vary according to the type of plan and the terms and
contributions of the plan itself. Special favorable tax treatment
may be available for certain types of contributions and
distributions. Adverse tax consequences may result from:
contributions in excess of specified limits; distributions before age
59 1/2 (subject to certain exceptions); distributions that do not
conform to specified commencement and minimum distribution rules; and
in other specified circumstances. Therefore, no attempt is made to
provide more than general information about the use of the Contracts
with the various types of qualified retirement plans. Contract
owners, annuitants, and beneficiaries are cautioned that the rights
of any person to any benefits under these qualified retirement plans
may be subject to the terms and conditions of the plans themselves,
regardless of the terms and conditions of the Contract, but we shall
not be bound by the terms and conditions of such plans to the extent
such terms contradict the Contract, unless the Company consents.
DISTRIBUTIONS. Annuity payments are generally taxed in the same
manner as under a non-qualified Contract. When a withdrawal from a
qualified Contract occurs, a pro rata portion of the amount received
is taxable, generally based on the ratio of the contract owner's
investment in the Contract (generally, the premiums or other
consideration paid for the Contract) to the participant's total
accrued benefit balance under the retirement plan. For Qualified
Contracts, the investment in the Contract can be zero. For Roth
IRAs, distributions are generally not taxed, except as described
below.
For qualified plans under Section 401(a) and 403(b), the Code
requires that distributions generally must commence no later than the
later of April 1 of the calendar year following the calendar year in
which the contract owner (or plan participant) (i) reaches age 70 1/2 or
(ii) retires, and must be made in a specified form or manner. If the
plan participant is a "5 percent owner" (as defined in the Code),
distributions generally must begin no later than April 1 of the
calendar year following the calendar year in which the contract owner
(or plan participant) reaches age 70 1/2. For IRAs described in Section
408, distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the
contract owner (or plan participant) reaches age 70 1/2. Roth IRAs
under Section 408A do not require distributions at any time before
the contract owner's death.
WITHHOLDING. Distributions from certain qualified plans generally
are subject to withholding for the contract owner's federal income
tax liability. The withholding rates vary according to the type of
distribution and the contract owner's tax status. The contract owner
may be provided the opportunity to elect not to have tax withheld
from distributions. "Eligible rollover distributions" from section
401(a) plans and section 403(b) tax-sheltered annuities are subject
to a mandatory federal income tax withholding of 20%. An eligible
rollover distribution is the taxable portion of any distribution from
such a plan, except certain distributions that are required by the
Code or distributions in a specified annuity form. The 20%
withholding does not apply, however, if the contract owner chooses a
"direct rollover" from the plan to another tax-qualified plan or IRA.
Brief descriptions of the various types of qualified retirement plans
in connection with a Contract follow. We will endorse the Contract
as necessary to conform it to the requirements of such plan.
REQUIRED DISTRIBUTIONS UPON CONTRACT OWNER'S DEATH
We will not allow any payment of benefits provided under the Contract
which do not satisfy the requirements of Section 72(s) of the Code.
If any contract owner of a non-qualified Contract dies before the
annuity start date, the death benefit payable to the beneficiary will
be distributed as follows: (a) the death benefit must be completely
distributed within 5 years of the contract owner's date of death; or
(b) the beneficiary may elect, within the 1-year period after the
contract owner's date of death, to receive the death benefit in the
form of an annuity from us, provided that (i) such annuity is
distributed in substantially equal installments over the life of such
beneficiary or over a period not extending beyond the life expectancy
of such beneficiary; and (ii) such distributions begin not later than
1 year after the contract owner's date of death.
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Notwithstanding (a) and (b) above, if the sole contract owner's
beneficiary is the deceased owner's surviving spouse, then such
spouse may elect to continue the Contract under the same terms as
before the contract owner's death. Upon receipt of such election
from the spouse at our Customer Service Center: (1) all rights of
the spouse as contract owner's beneficiary under the Contract in
effect prior to such election will cease; (2) the spouse will become
the owner of the Contract and will also be treated as the contingent
annuitant, if none has been named and only if the deceased owner was
the annuitant; and (3) all rights and privileges granted by the
Contract or allowed by Golden American will belong to the spouse as
contract owner of the Contract. This election will be deemed to have
been made by the spouse if such spouse makes a premium payment to the
Contract or fails to make a timely election as described in this
paragraph. If the owner's beneficiary is a nonspouse, the
distribution provisions described in subparagraphs (a) and (b) above,
will apply even if the annuitant and/or contingent annuitant are
alive at the time of the contract owner's death.
If we do not receive an election from a nonspouse owner's beneficiary
within the 1-year period after the contract owner's date of death,
then we will pay the death benefit to the owner's beneficiary in a
cash payment within five years from date of death. We will determine
the death benefit as of the date we receive proof of death. We will
make payment of the proceeds on or before the end of the 5-year
period starting on the owner's date of death. Such cash payment will
be in full settlement of all our liability under the Contract.
If the contract owner dies after the annuity start date, we will
continue to distribute any benefit payable at least as rapidly as
under the annuity option then in effect. All of the contract owner's
rights granted under the Contract or allowed by us will pass to the
contract owner's beneficiary.
If the Contract has joint owners we will consider the date of death
of the first joint owner as the death of the contract owner and the
surviving joint owner will become the contract owner of the Contract.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Section 401(a) of the Code permits corporate employers to establish
various types of retirement plans for employees, and permits self-
employed individuals to establish these plans for themselves and
their employees. These retirement plans may permit the purchase of
the Contracts to accumulate retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the
participant, or to both may result if this Contract is assigned or
transferred to any individual as a means to provide benefit payments,
unless the plan complies with all legal requirements applicable to
such benefits before transfer of the Contract. Employers intending
to use the Contract with such plans should seek competent advice.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to
an individual retirement program known as an "Individual Retirement
Annuity" or "IRA." These IRAs are subject to limits on the amount
that can be contributed, the deductible amount of the contribution,
the persons who may be eligible, and the time when distributions
commence. Also, distributions from certain other types of qualified
retirement plans may be "rolled over" or transferred on a tax-deferred
basis into an IRA. There are significant restrictions on rollover or
transfer contributions from Savings Incentive Match Plans (SIMPLE),
under which certain employers may provide contributions to
IRAs on behalf of their employees, subject to special restrictions.
Employers may establish Simplified Employee Pension (SEP) Plans to
provide IRA contributions on behalf of their employees. Sales of the
Contract for use with IRAs may be subject to special requirements of
the IRS.
ROTH IRAS
Section 408A of the Code permits certain eligible individuals to
contribute to a Roth IRA. Contributions to a Roth IRA, which are
subject to certain limitations, are not deductible, and must be made
in cash or as a rollover or transfer from another Roth IRA or other
IRA. A rollover from or conversion of an IRA to a Roth IRA may be
subject to tax, and other special rules may apply. Distributions
from a Roth IRA generally are not taxed, except that, once aggregate
distributions exceed contributions to the Roth IRA, income tax and a
10% penalty tax may apply to distributions made (1) before age 59 1/2
(subject to certain exceptions) or (2) during the five taxable years
starting with the year in which the first contribution is made to the
Roth IRA.
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TAX SHELTERED ANNUITIES
Section 403(b) of the Code allows employees of certain Section
501(c)(3) organizations and public schools to exclude from their
gross income the premium payments made, within certain limits, on a
Contract that will provide an annuity for the employee's retirement.
These premium payments may be subject to FICA (social security) tax.
Distributions of (1) salary reduction contributions made in years
beginning after December 31, 1988; (2) earnings on those
contributions; and (3) earnings on amounts held as of the last year
beginning before January 1, 1989, are not allowed prior to age 59 1/2,
separation from service, death or disability. Salary reduction
contributions may also be distributed upon hardship, but would
generally be subject to penalties.
ENHANCED DEATH BENEFIT
The Contract includes an Enhanced Death Benefit that in some cases
may exceed the greater of the premium payments or the contract value.
The Internal Revenue Service has not ruled whether an Enhanced Death
Benefit could be characterized as an incidental benefit, the amount
of which is limited in any Code section 401(a) pension or profit-
sharing plan or Code section 403(b) tax-sheltered annuity. Employers
using the Contract may want to consult their tax adviser regarding
such limitation. Further, the Internal Revenue Service has not
addressed in a ruling of general applicability whether a death
benefit provision such as the Enhanced Death Benefit provision in the
Contract comports with IRA qualification requirements.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the federal tax
consequences under the Contracts are not exhaustive, and special
rules are provided with respect to other tax situations not discussed
in this prospectus. Further, the federal income tax consequences
discussed herein reflect our understanding of current law, and the
law may change. Federal estate and state and local estate,
inheritance and other tax consequences of ownership or receipt of
distributions under a Contract depend on the individual circumstances
of each contract owner or recipient of the distribution. A competent
tax adviser should be consulted for further information.
POSSIBLE CHANGES IN TAXATION
Although the likelihood of legislative change is uncertain, there is
always the possibility that the tax treatment of the Contracts could
change by legislation or other means. It is also possible that any
change could be retroactive (that is, effective before the date of
the change). A tax adviser should be consulted with respect to
legislative developments and their effect on the Contract.
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[Shaded Section Header]
- --------------------------------------------------------------------------
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 October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a Delaware
corporation, acquired all of the outstanding capital stock of
Equitable of Iowa Companies ("Equitable of Iowa"), pursuant to a
merger agreement among Equitable of Iowa, PFHI, and ING Groep N.V.
(the "ING acquisition"). On August 13, 1996, Equitable of Iowa
acquired all of the outstanding capital stock of BT Variable,
Inc., then the parent of Golden American (the "Equitable
acquisition"). For financial statement purposes, the ING
acquisition was accounted for as a purchase effective October 25,
1997 and the Equitable acquisition was accounted for as a purchase
effective August 14, 1996. As a result, the financial data
presented below for periods after October 24, 1997, are presented
on the Post-Merger new basis of accounting, for the period August
14, 1996 through October 24, 1997, are presented on the Post-
Acquisition basis of accounting, and for August 13, 1996 and prior
periods are presented on the Pre-Acquisition basis of accounting.
<TABLE>
SELECTED GAAP BASIS FINANCIAL DATA
(IN THOUSANDS)
Post-Merger | Post-Acquisition
--------------------------------------------|---------------------------------
For the Period For For the Period | For the Period For the Period
January 1, 1999 the Year October 25, | January 1, August 14, 1996
through Ended 1997 through | 1997 through 1996 through
June 30, December 31, December 31, | October 24, December 31,
1999 1998 1997 | 1997 1996
------------ ------------ -------------- | -------------- ---------------
<S> <C> <C> <C> | <C> <C>
Annuity and Interest |
Sensitive Life |
Product Charges....... $ 34,783 $ 39,119 $ 3,834 | $18,288 $ 8,768
Net Income before |
Federal Income Tax.... $ 3,367 $ 10,353 $ (279) | $ (608) $ 570
Net Income (Loss)....... $ 1,422 $ 5,074 $ (425) | $ 729 $ 350
Total Assets............ $6,495,162 $4,752,533 $2,446,395 | N/A $1,677,899
Total Liabilities....... $6,063,345 $4,398,639 $2,219,082 | N/A $1,537,415
Total Stockholder's |
Equity................ $ 431,817 $ 353,894 $ 227,313 | N/A $ 140,484
</TABLE>
<TABLE>
(IN THOUSANDS)
Pre-Acquisition
---------------------------------------
For the Period For the Years
1996 through Ended December 31,
August 13, ----------------------
1996 1995 1994
-------------- ---------- ----------
<S> <C> <C> <C>
Annuity and Interest
Sensitive Life
Product Charges....... $12,259 $ 18,388 $ 17,519
Net Income before
Federal Income Tax.... $ 1,736 $ 3,364 $ 2,222
Net Income (Loss)....... $ 3,199 $ 3,364 $ 2,222
Total Assets............ N/A $1,203,057 $1,044,760
Total Liabilities....... N/A $1,104,932 $ 955,254
Total Stockholder's
Equity................ N/A $ 98,125 $ 89,506
</TABLE>
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BUSINESS ENVIRONMENT
The current business and regulatory environment remains
challenging for the insurance industry. The variable annuity
competitive environment is intense and is dominated by a number of
large variable product companies with strong distribution, name
recognition and wholesaling capabilities. 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 five
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 October of 1997, Golden American introduced three new variable
annuity products (GoldenSelect Access, GoldenSelect ES II and
GoldenSelect Premium Plus) which have contributed significantly to
sales.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The purpose of this section is to discuss and analyze Golden
American Life Insurance Company's ("Golden American") 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 jointly with
the consolidated financial statements, related notes and the
Cautionary Statement Regarding Forward-Looking Statements, which
appear elsewhere in this report. The Companies report financial
results on a consolidated basis. The consolidated financial
statements include the accounts of Golden American and its wholly
owned subsidiary, First Golden American Life Insurance Company of
New York ("First Golden," and collectively with Golden American,
the "Companies").
RESULTS OF OPERATIONS
MERGER. On October 23, 1997, Equitable of Iowa Companies'
("Equitable") shareholders approved an Agreement and Plan of
Merger ("Merger Agreement") dated 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 according 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 owned all the outstanding
capital stock of Equitable Life Insurance Company of Iowa
("Equitable Life") and Golden American and their wholly owned
subsidiaries. In addition, Equitable owned all the outstanding
capital stock of Locust Street Securities, Inc., Equitable
Investment Services, Inc. (subsequently dissolved), Directed
Services, Inc. ("DSI"), Equitable of Iowa Companies Capital Trust,
Equitable of Iowa Companies Capital Trust II and Equitable of Iowa
Securities Network, Inc. (subsequently renamed ING Funds
Distributor, Inc.). In exchange for the outstanding capital stock
of Equitable, ING paid total consideration of approximately $2.1
billion in cash and stock and assumed approximately $400 million
in debt. As a result of this transaction, Equitable of Iowa
Companies was merged into PFHI, which was simultaneously renamed
Equitable of Iowa Companies, Inc. ("EIC" or "Parent"), a Delaware
corporation.
For financial statement purposes, the change in control of the
Companies through the ING merger was accounted for as a purchase
effective October 25, 1997. This merger resulted in a new basis of
accounting reflecting estimated fair values of assets and
liabilities at the merger date. As a result, the Companies'
financial statements for periods after October 24, 1997 are
presented on the Post-Merger new basis of accounting.
The purchase price was allocated to EIC and its subsidiaries with
$227.6 million allocated to the Companies. Goodwill of $1.4
billion was established for the excess of the merger cost over the
fair value of the assets and liabilities of EIC with $151.1
million attributed to the Companies. Goodwill resulting
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from the merger is being amortized over 40 years on a straight-line
basis. The carrying value will be reviewed periodically for any
indication of impairment in value.
CHANGE IN CONTROL--ACQUISITION. On August 13, 1996, Equitable
acquired all of the outstanding capital stock of BT Variable, Inc.
("BT Variable") and its wholly owned subsidiaries, Golden American
and DSI. After 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. On December 30, 1997,
EIC Variable, Inc. was dissolved.
For financial statement purposes, the change in control of Golden
American through the acquisition of BT Variable was accounted for
as a purchase effective August 14, 1996. This acquisition resulted
in a new basis of accounting reflecting estimated fair values of
assets and liabilities at the acquisition date. As a result, the
Companies' financial statements for the period August 14, 1996
through October 24, 1997 are presented on the Post-Acquisition
basis of accounting and for August 13, 1996 and prior periods are
presented on the Pre-Acquisition basis of accounting.
The purchase price was allocated to the three companies purchased
- - BT Variable, DSI, and Golden American. The allocation of the
purchase price to Golden American was approximately $139.9
million. Goodwill of $41.1 million was established for the excess
of the acquisition cost over the fair value of the assets and
liabilities and attributed to Golden American. At June 30, 1997,
goodwill was increased by $1.8 million due to the adjustment of
the value of a receivable existing at the acquisition date. Before
the ING merger, goodwill resulting from the acquisition was being
amortized over 25 years on a straight-line basis.
<TABLE>
THE FIRST SIX MONTHS OF 1999 COMPARED TO THE SAME PERIOD OF 1998
PREMIUMS.
PERCENTAGE DOLLAR
SIX MONTHS ENDED JUNE 30 1999 CHANGE CHANGE 1998
---- ---------- ------ ----
(Dollars in millions)
<S> <C> <C> <C> <C>
Variable annuity premiums:
Separate account................ $1,087.8 62.3% $417.7 $670.1
Fixed Account................... 330.2 65.5 130.6 199.6
-------- ---- ----- -----
Total variable annuity premiums... 1,418.0 63.0 548.3 869.7
Variable life premiums............ 4.7 (32.5) (2.3) 7.0
-------- ---- ----- -----
Total premiums.................... $1,422.7 62.3% $546.0 $876.7
======== ===== ======= ======
</TABLE>
For the Companies' variable contracts, premiums collected are not reported as
revenues, but as deposits to insurance liabilities. Revenues for these
products are recognized over time in the form of investment income and
product charges.
Variable annuity separate account premiums increased 62.3% during the first
six months of 1999. The fixed account portion of the Companies' variable
annuity premiums increased sales of the Premium Plus product.
Premium, net of reinsurance, for variable products from two significant
broker/dealers each having at least ten percent of total sales for the six
months ended June 30, 1999 totaled $406.6 million, or 29% of total premiums
($195.7 million, or 22%, from the same two significant broker/dealers for
the six months ended June 30, 1998).
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<TABLE>
REVENUES.
PERCENTAGE DOLLAR
SIX MONTHS ENDED JUNE 30 1999 CHANGE CHANGE 1998
---- ---------- ------ ----
(Dollars in millions)
<S> <C> <C> <C> <C>
Annuity and interest sensitive
life product charges............ $ 34.8 106.2% $ 17.9 $ 16.9
Management fee revenue............ 4.1 102.4 2.1 2.0
Net investment income............. 28.1 51.2 9.4 18.7
Realized gains(losses) on
investments..................... (1.7) (1,395.3) (1.8) 0.1
Other income...................... 6.2 113.0 3.3 2.9
-------- ------- ------- -----
Total premiums.................... $ 71.5 76.3% $ 30.9 $ 40.6
======== ===== ======= ======
</TABLE>
Total revenues increased 76.3% in the first six months of 1999 from
the same period in 1998. Annuity and interest sensitive life product
charges increased 106.2% in the first six months of 1999 due to
additional fees earned from the increasing block of business under
management in the separate accounts and an increase in surrender
charges.
Golden American provides certain managerial and supervisory services
to Directed Services, Inc. ("DSI"). The fee paid to Golden American
for these services, calculated as a percentage of average assets in
the variable separate accounts, was $4.1 million and $2.0 million
for the first six months of 1999 and 1998, respectively.
Net investment income increased 51.2% in the first six months of 1999
due to growth in invested assets from June 30, 1998. The Companies
had $1.7 million of realized losses resulting from the write down of
two fixed maturities and the sale of investments in the first six
months of 1999, compared to gains of $133,000 in the same period of
1998. Other income increased $3.3 million to $6.2 million in the
first six months of 1999 due primarily to income received due to a
modified coinsurance agreement with an unaffiliated reinsurer, which
was largely offset by a reduction in the Companies' deferred policy
acquisition costs.
EXPENSES. Total insurance benefits and expenses increased $32.7
million, or 102.3%, to $64.6 million in the first six months of 1999.
Interest credited to account balances increased $44.4 million, or
117.1%, to $82.4 million in the first six months of 1999. The extra
credit bonus on the Premium Plus product increased $30.8 million to
$51.2 million at June 30, 1999 resulting in an increase in interest
credited during the first six months of 1999 compared to the same
period in 1998. The bonus interest on the fixed account increased
$4.1 million to $7.1 million at June 30, 1999 resulting in an increase
in interest credited during the first six months of 1999 compared to
the same period in 1998. The remaining increase in interest credited
relates to higher account balances associated with the Companies'
fixed account option within the variable products.
Commissions increased $31.0 million, or 59.5%, to $83.2 million in the
first six months of 1999. Insurance taxes, state licenses, and fees
increased $0.8 million, or 47.4%, to $2.6 million in the first six
months of 1999. Changes in commissions and insurance taxes, state
licenses, and fees are generally related to changes in the level and
composition of variable product sales. Insurance taxes, state
licenses, and fees are impacted by several other factors, which
include an increase in FICA taxes primarily due to bonuses and
expenses for the triennial insurance department examination. Most
costs incurred as the result of sales have been deferred, thus having
very little impact on current earnings.
General expenses increased $15.3 million, or 112.7%, to $28.8 million
in the first six months of 1999. Management expects general expenses
to continue to increase in 1999 as a result of the emphasis on
expanding the salaried wholesaler distribution network and the growth
in sales. The Companies use a network of wholesalers to distribute
products and the salaries of these wholesalers are included in
42
<PAGE>
<PAGE>
general expenses. The portion of these salaries and related expenses that
varies directly with production levels is deferred thus having little
impact on current earnings. The increase in general expenses was
partially offset by reimbursements received from DSI and Equitable
Life Insurance Company of Iowa ("Equitable Life"), an affiliate, for
certain advisory, computer and other resources and services provided
by Golden American.
The Companies' previous balances of deferred policy acquisition costs
("DPAC"), value of purchased insurance in force ("VPIF"), and unearned
revenue reserve were eliminated and an asset of $44.3 million
representing VPIF was established for all policies in force at the
merger date. During the first six months of 1999, VPIF was adjusted
to increase amortization by $0.7 million to reflect changes in the
assumptions related to the timing of estimated gross profits. During
the first six months of 1998, VPIF decreased $2.7 million to adjust
the value of other receivables and increased $0.2 million as a result
of an adjustment to the merger costs. Amortization of DPAC increased
$8.9 million, or 176.7%, in the first six months of 1999. This
increase resulted from growth in policy acquisition costs deferred
from $80.9 million at June 30, 1998 to $150.0 million at June 30,
1999, which was generated by expenses associated with the large sales
volume experienced since June 30, 1998. Based on current conditions
and assumptions as to the impact of future events on acquired policies
in force, the expected approximate net amortization relating to VPIF
as of June 30, 1999 is $2.2 million for the remainder of 1999, $4.3
million in 2000, $4.0 million in 2001, $3.6 million in 2002, $3.2
million in 2003, and $2.4 million in 2004. Actual amortization may
vary based upon changes in assumptions and experience.
Amortization of goodwill during the first six months of 1999 totaled
$1.9 million unchanged from the first six months of 1998. Goodwill
resulting from the merger is being amortized on a straight-line basis
over 40 years.
Interest expense on the $25 million surplus note issued in December
1996 and expiring December 2026 was $1.0 million in the first six
months of 1999, unchanged from the same period of 1998. Interest
expense on the $60 million surplus note issued in December 1998 and
expiring December 2028 was $2.2 million in the first six months of
1999. Golden American also paid $0.2 million in the first six months
of 1999 compared to $0.8 million in the same period of 1998 to ING
America Insurance Holdings, Inc. ("ING AIH") for interest on the
reciprocal loan agreement. Interest expense on the revolving note
payable with SunTrust Bank, Atlanta was $0.1 million for the first six
months of 1999. In addition, Golden American paid interest of $0.2
million during the first six months of 1998 on the line of credit with
Equitable, which was repaid with a capital contribution from the
Parent and with funds borrowed from ING AIH.
INCOME. Net income for the first six months of 1999 was $1.4 million,
a decrease of $2.2 million from net income of $3.6 million in the same
period of 1998.
Comprehensive loss for the first six months of 1999 was $2.1 million,
a decrease of $5.2 million from comprehensive income of $3.1 million
in the same period of 1998.
43
<PAGE>
<PAGE>
1998 COMPARED TO 1997
The following analysis combines Post-Merger and Post-Acquisition
activity for 1997.
PREMIUMS.
<TABLE>
POST-MERGER COMBINED POST-MERGER | POST-ACQUISITION
For the Period | For the Period
For the Year For the Year October 25, 1997 | January 1, 1997
ended ended through | through
December 31, 1998 December 31, 1997 December 31, 1997 | October 24, 1997
----------------- ----------------- ----------------- | ----------------
(Dollars in millions) |
<S> <C> <C> <C> | <C>
Variable annuity |
premiums: |
Separate account.... $1,513.3 $291.2 $111.0 | $180.2
Fixed account....... 588.7 318.0 60.9 | 257.1
-------- ------ ------ | ------
2,102.0 609.2 171.9 | 437.3
Variable life |
premiums............ 13.8 15.6 1.2 | 14.4
-------- ------ ------ | ------
Total premiums........ $2,115.8 $624.8 $173.1 | $451.7
======== ====== ====== | ======
</TABLE>
For the Companies' variable contracts, premiums collected are not
reported as revenues, but are reported as deposits to insurance
liabilities. Revenues for these products are recognized over time in
the form of investment income and product charges.
Variable annuity separate account premiums increased 419.7% in 1998
primarily due to increased sales of the Premium Plus product
introduced in October of 1997 and the increased sales levels of the
Companies' other products. The fixed account portion of the Companies'
variable annuity premiums increased 85.1% in 1998. Variable life
premiums decreased 11.4% in 1998. Total premiums increased 238.7% in
1998.
During 1998, the Companies' sales were further diversified among
broker/dealers. Premiums, net of reinsurance, for variable products
from two significant broker/dealers having at least ten percent of
total sales for the year ended December 31, 1998 totaled $580.7
million, or 27% of premiums ($328.2 million, or 53% from two
significant broker/dealers for the year ended December 31, 1997).
REVENUES.
<TABLE>
POST-MERGER COMBINED POST-MERGER | POST-ACQUISITION
For the Period | For the Period
For the Year For the Year October 25, 1997 | January 1, 1997
ended ended through | through
December 31, 1998 December 31, 1997 December 31, 1997 | October 24, 1997
----------------- ----------------- ----------------- | ----------------
(Dollars in millions) |
<S> <C> <C> <C> | <C>
Annuity and interest |
sensitive life |
product charges...... $39.1 $22.1 $3.8 | $18.3
Management fee |
revenue.............. 4.8 2.8 0.5 | 2.3
Net investment |
income............... 42.5 26.8 5.1 | 21.7
Realized gains (losses) |
on investments....... (1.5) 0.1 -- | 0.1
Other income........... 5.6 0.7 0.3 | 0.4
----- ----- ---- | -----
$90.5 $52.5 $9.7 | $42.8
===== ===== ==== | =====
</TABLE>
44
<PAGE>
<PAGE>
Total revenues increased 72.3%, or $38.0 million, to $90.5 million in
1998. Annuity and interest sensitive life product charges increased
76.8%, or $17.0 million, to $39.1 million in 1998 due to additional
fees earned from the increasing block of business under management in
the separate accounts and an increase in surrender charge revenues.
This increase was partially offset by the elimination of the unearned
revenue reserve related to in force acquired business at the merger
date, which resulted in lower annuity and interest sensitive life
product charges compared to Post-Acquisition levels.
Golden American provides certain managerial and supervisory services
to DSI. The fee paid to Golden American for these services, calculated
as a percentage of average assets in the variable separate accounts,
was $4.8 million for 1998 and $2.8 million for 1997.
Net investment income increased 58.6%, or $15.7 million, to $42.5
million in 1998 from $26.8 million in 1997 due to growth in invested
assets. During 1998, the Company had net realized losses on
investments of $1.5 million, which included a $1.0 million write down
of two impaired bonds, compared to gains of $0.1 million in 1997.
Other income increased $4.9 million to $5.6 million in 1998 due
primarily to income received under a modified coinsurance agreement
with an unaffiliated reinsurer as a result of increased sales.
EXPENSES.
<TABLE>
POST-MERGER COMBINED POST-MERGER | POST-ACQUISITION
For the Period | For the Period
For the Year For the Year October 25, 1997 | January 1, 1997
ended ended through | through
December 31, 1998 December 31, 1997 December 31, 1997 | October 24, 1997
----------------- ----------------- ----------------- | ----------------
(Dollars in millions) |
<S> <C> <C> <C> | <C>
Insurance benefits |
and expenses: |
Annuity and interest |
sensitive life |
benefits: |
Interest credited to |
account balances.. $94.9 $26.7 $7.4 | $19.3
Benefit claims |
incurred in excess |
of account |
balances.......... 2.1 0.1 -- | 0.1
Underwriting, |
acquisition, and |
insurance expense: |
Commission.......... 121.2 36.3 9.4 | 26.9
General Expenses.... 37.6 17.3 3.4 | 13.9
Insurance taxes..... 4.1 2.3 0.5 | 1.8
Policy acquisition |
costs deferred (197.8) (42.7) (13.7) | (29.0)
Amortization: |
Deferred policy |
acquisition |
costs........... 5.1 2.6 0.9 | 1.7
Value of purchased |
insurance in |
force........... 4.7 6.1 0.9 | 5.2
Goodwill............ 3.8 2.0 0.6 | 1.4
------ ----- ----- | -----
$ 75.7 $50.7 $ 9.4 | $41.3
====== ===== ===== | =====
</TABLE>
Total insurance benefits and expenses increased 49.2%, or $25.0
million, in 1998 from $50.7 million in 1997. Interest credited to
account balances increased 255.4%, or $68.2 million, in 1998 from
$26.7 in 1997. The extra credit bonus on the Premium Plus product
introduced in October of 1997 generated a $51.6 million increase in
interest credited during 1998 compared to 1997. The remaining increase
in interest credited related to higher account balances associated
with the Companies' fixed account option within its variable products.
45
<PAGE>
<PAGE>
Commissions increased 234.2%, or $84.9 million, in 1998 from $36.3
million in 1997. Insurance taxes increased 77.0%, or $1.8 million, in
1998 from $2.3 million in 1997. Changes 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,
which include an increase in FICA taxes primarily due to bonuses. Most
costs incurred as the result of new sales including the extra credit
bonus were deferred, thus having very little impact on current
earnings.
General expenses increased 117.7%, or $20.3 million, in 1998 from
$17.3 million in 1997. Management expects general expenses to continue
to increase in 1999 as a result of the emphasis on expanding the
salaried wholesaler distribution network. The Companies use a network
of wholesalers to distribute products and the salaries of these
wholesalers are included in general expenses. The portion of these
salaries and related expenses that varies with production levels is
deferred thus having little impact on current earnings. The increase
in general expenses was partially offset by reimbursements received
from Equitable Life, an affiliate, for certain advisory, computer and
other resources and services provided by Golden American.
At the merger date, the Companies' deferred policy acquisition costs
("DPAC"), previous balance of value of purchased insurance in force
("VPIF") and unearned revenue reserve were eliminated and a new asset
of $44.3 million representing VPIF was established for all policies in
force at the merger date. During 1998, VPIF was adjusted to reduce
amortization by $0.2 million to reflect changes in the assumptions
related to the timing of future gross profits. VPIF decreased $2.6
million in the second quarter of 1998 to adjust the value of other
receivables recorded at the time of merger and increased $0.2 million
in the first quarter of 1998 as the result of an adjustment to the
merger costs. The amortization of VPIF and DPAC increased $1.1
million, or 13.0%, in 1998. During the second quarter of 1997, VPIF
was adjusted by $2.3 million to reflect narrower 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, the expected approximate net amortization relating to VPIF as
of December 31, 1998 is $4.3 million in 1999, $4.0 million in 2000,
$3.9 million in 2001, $3.7 million in 2002 and $3.3 million in 2003.
Actual amortization may vary based upon changes in assumptions and
experience.
Amortization of goodwill for the year ended December 31, 1998 totaled
$3.8 million compared to $2.0 million for the year ended December 31,
1997. Goodwill resulting from the merger is being amortized on a
straight-line basis over 40 years.
Interest expense on the $25 million surplus note issued December 1996
and expiring December 2026 was $2.1 million for the year ended
December 31, 1998, unchanged from the same period of 1997. In
addition, Golden American incurred interest expense of $0.2 million in
1998 compared to $0.5 million in 1997 on the line of credit with
Equitable which was repaid with a capital contribution. Golden
American also paid $1.8 million in 1998 to ING America Insurance
Holdings, Inc. ("ING AIH") for interest on the reciprocal loan
agreement. Interest expense on the revolving note payable with
SunTrust Bank, Atlanta was $0.3 million for the year ended December
31, 1998.
INCOME. Net income for 1998 was $5.1 million, an increase of $4.8
million from $0.3 million in 1997.
Comprehensive income for 1998 was $3.9 million, an increase of $1.8
million from $2.1 million in 1997.
1997 COMPARED TO 1996
The following analysis combines Post-Merger and Post-Acquisition
activity for 1997 and Post-Acquisition and Pre-Acquisition activity
for 1996 for comparison purposes. Such a comparison does not
recognize the impact of the purchase accounting and goodwill
amortization except for the periods after August 13, 1996.
46
<PAGE>
<PAGE>
PREMIUMS.
<TABLE>
POST-MERGER | COMBINED | POST-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
October 25, 1997 | For the Year | January 1, 1997
through | ended | through
December 31, 1997 | December 31, 1997 | October 24, 1997
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Variable annuity | |
premiums: | |
Separate account............. $111.0 | $291.2 | $180.2
Fixed account................ 60.9 | 318.0 | 257.1
------ | ------ | ------
171.9 | 609.2 | 437.3
Variable life premiums......... 1.2 | 15.6 | 14.4
------ | ------ | ------
Total premiums................. $173.1 | $624.8 | $451.7
====== | ====== | ======
</TABLE>
<TABLE>
POST-ACQUISITION | COMBINED | PRE-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
August 14, 1996 | For the Year | January 1, 1996
through | ended | through
December 31, 1996 | December 31, 1996 | August 13, 1996
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Variable annuity | |
premiums: | |
Separate account............. $ 51.0 | $182.4 | $131.4
Fixed account................ 118.3 | 245.3 | 127.0
------ | ------ | ------
169.3 | 427.7 | 258.4
Variable life premiums......... 3.6 | 14.1 | 10.5
------ | ------ | ------
Total premiums................. $172.9 | $441.8 | $268.9
====== | ====== | ======
</TABLE>
Variable annuity separate account and variable life premiums increased
59.6% and 10.1%, respectively in 1997. During 1997, stock market
returns, a relatively low interest rate environment and flat yield
curve made returns provided by variable annuities and mutual funds
more attractive than fixed rate products such as certificates of
deposits and fixed annuities. The fixed account portion of Golden
American's variable annuity premiums increased 29.7% in 1997 due to
Golden American's marketing emphasis on fixed rates during the second
and third quarters. Premiums, net of reinsurance, for variable
products from two significant broker/dealers having at least ten
percent of total sales for the year ended December 31, 1997, totaled
$328.2 million, or 53% of premiums ($298.0 million or 67% from two
significant broker/dealers for the year ended December 31, 1996).
47
<PAGE>
<PAGE>
REVENUES.
<TABLE>
POST-MERGER | COMBINED | POST-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
October 25, 1997 | For the Year | January 1, 1997
through | ended | through
December 31, 1997 | December 31, 1997 | October 24, 1997
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Annuity and interest sensitive | |
life product charges......... $3.8 | $22.1 | $18.3
Management fee revenue......... 0.5 | 2.8 | 2.3
Net investment income.......... 5.1 | 26.8 | 21.7
Realized gains (losses) on | |
investments.................. -- | 0.1 | 0.1
Other Income................... 0.3 | 0.7 | 0.4
---- | ----- | -----
$9.7 | $52.5 | $42.8
==== | ===== | =====
</TABLE>
<TABLE>
POST-ACQUISITION | COMBINED | PRE-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
August 14, 1996 | For the Year | January 1, 1996
through | ended | through
December 31, 1996 | December 31, 1996 | August 13, 1996
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Annuity and interest sensitive | |
life product charges......... $ 8.8 | $21.0 | $12.2
Management fee revenue......... 0.9 | 2.3 | 1.4
Net investment income.......... 5.8 | 10.8 | 5.0
Realized gains (losses) on | |
investments.................. -- | (0.4) | (0.4)
Other income 0.5 | 0.6 | 0.1
----- | ----- | -----
$16.0 | $34.3 | $18.3
===== | ===== | =====
</TABLE>
Total revenues increased 53.3%, or $18.2 million, to $52.5 million in
1997. Annuity and interest sensitive life product charges increased
5.2%, or $1.1 million in 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 $2.8 million for 1997 and $2.3 million
for 1996.
Net investment income increased 148.3%, or $16.0 million, to $26.8
million in 1997 from $10.8 million in 1996 due to growth in invested
assets. During 1997, the Company had net realized gains on the
disposal of investments, which were the result of voluntary sales, of
$0.1 million compared to net realized losses of $0.4 million in 1996.
48
<PAGE>
<PAGE>
EXPENSES.
<TABLE>
POST-MERGER | COMBINED | POST-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
October 25, 1997 | For the Year | January 1, 1997
through | ended | through
December 31, 1997 | December 31, 1997 | October 24, 1997
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Insurance benefits and | |
expenses: | |
Annuity and interest | |
sensitive life benefits: | |
Interest credited to account | |
balances................... $ 7.4 | $ 26.7 | $ 19.3
Benefit claims incurred in | |
excess of account balances. -- | 0.1 | 0.1
Underwriting, acquisition and | |
insurance expenses: | |
Commissions.................. 9.4 | 36.3 | 26.9
General expenses............. 3.4 | 17.3 | 13.9
Insurance taxes.............. 0.5 | 2.3 | 1.8
Policy acquisition costs | |
deferred................... (13.7) | (42.7) | (29.0)
Amortization: | |
Deferred policy acquisition | |
costs...................... 0.9 | 2.6 | 1.7
Present value of in force | |
acquired................... 0.9 | 6.1 | 5.2
Goodwill..................... 0.6 | 2.0 | 1.4
------ | ------ | ------
$ 9.4 | $ 50.7 | $ 41.3
====== | ====== | ======
</TABLE>
<TABLE>
POST-ACQUISITION | COMBINED | PRE-ACQUISITION
-------------------|-------------------|-----------------
For the Period | | For the Period
August 14, 1996 | For the Year | January 1, 1996
through | ended | through
December 31, 1996 | December 31, 1996 | August 13, 1996
-------------------|-------------------|-----------------
(Dollars in millions)
<S> <C> | <C> | <C>
Insurance benefits and | |
expenses: | |
Annuity and interest sensitive | |
life benefits: | |
Interest credited to account | |
balances.................. $ 5.7 | $ 10.1 | $ 4.4
Benefit claims incurred in | |
excess of account | |
balances.................. 1.3 | 2.2 | 0.9
Underwriting, acquisition and | |
insurance expenses: | |
Commissions................. 9.9 | 26.5 | 16.6
General expenses............ 5.9 | 15.3 | 9.4
Insurance taxes............. 0.7 | 1.9 | 1.2
Policy acquisition costs.... | |
deferred (11.7) | (31.0) | (19.3)
Amortization: | |
Deferred policy acquisition | |
costs..................... 0.2 | 2.6 | 2.4
Present value of in force | |
acquired.................. 2.7 | 3.7 | 1.0
Goodwill.................... 0.6 | 0.6 | --
------ | ------ | ------
$ 15.3 | $ 31.9 | $ 16.6
====== | ====== | ======
</TABLE>
Total insurance benefits and expenses increased 59.3%, or $18.8
million, in 1997 from $31.9 million in 1996. Interest credited to
account balances increased 164.4%, or $16.6 million, in 1997 as a
result of higher account balances associated with the Company's fixed
account option within its variable products.
Commissions increased 37.3%, or $9.8 million, in 1997 from $26.5
million in 1996. Insurance taxes increased 23.3%, or $0.4 million, in
1997 from $1.9 million in 1996. Increases and decreases in
commissions and insurance taxes are generally related to changes in
the level of variable product sales.
49
<PAGE>
<PAGE>
Insurance taxes are also impacted by several other factors which 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
were deferred, thus having very little impact on earnings.
General expenses increased 12.6%, or $2.0 million, in 1997 from $15.3
million in 1996 due in part to certain expenses associated with the
merger occurring on October 24, 1997. In addition, 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. This
increase in general expenses was partially offset by reimbursements
received from Equitable Life, an affiliate, for certain advisory,
computer and other resources and services provided by Golden American.
During the second quarter of 1997, present value of in force acquired
("PVIF") was unlocked by $2.3 million to reflect narrower current
spreads than the gross profit model assumed. The Company's deferred
policy acquisition costs ("DPAC"), previous balance of PVIF and
unearned revenue reserve, as of the merger date, were eliminated and
an asset of $44.3 million representing PVIF was established for all
policies in force at the merger date. The amortization of PVIF and
DPAC increased $2.4 million, or 37.1%, in 1997. Based on current
conditions and assumptions as to the impact of future events on
acquired policies in force, the expected approximate net amortization
for the next five years, relating to the PVIF as of December 31, 1997,
is $6.2 million in 1998, $6.0 million in 1999, $5.6 million in 2000,
$5.0 million in 2001 and $4.2 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 merger/acquisition dates will result in lower annuity
and interest sensitive life product charges compared to pre-merger/pre-
acquisition levels.
Amortization of goodwill for the year ended December 31, 1997 totaled
$2.0 million compared to $0.6 million for the year ended December 31,
1996. Goodwill resulting from the merger is being amortized on a
straight-line basis over 40 years and is expected to total
approximately $3.8 million annually.
Interest expense on the $25 million surplus note issued December 1996
was $2.0 million for the year ended December 31, 1997. Interest on
any line of credit borrowings was charged at the rate of Equitable's
monthly average aggregate cost of short-term funds plus 1.00%. During
1997, the Company paid $0.6 million to Equitable for interest on the
line of credit.
INCOME. Net income on a combined basis for 1997 was $0.3 million, a
decrease of $3.2 million, or 91.4%, from 1996.
FINANCIAL CONDITION
RATINGS. During 1998, the Companies' ratings were upgraded by
Standard & Poor's Rating Services ("Standard & Poor's") from AA to
AA+. During the first quarter of 1999, the Companies' ratings were
upgraded by Duff & Phelps Credit Rating Company from AA+ to AAA.
INVESTMENTS. The financial statement carrying value and amortized
cost basis of the Companies' total investments increased 2.7% and
4.2%, respectively, during the first six months of 1999 (72.3% and
72.6%, respectively, in 1998). All of the Companies' investments,
other than mortgage loans on real estate, are carried at fair value in
the Companies' financial statements. As such, growth in the carrying
value of the Companies' investment portfolio included changes in
unrealized appreciation and depreciation of fixed maturities as well
as growth in the cost basis of these securities. Growth in the cost
basis of the Companies' investment portfolio resulted from the
investment of premiums from the sale of the Companies' fixed account
options. The Companies manage the growth of insurance operations in
order to maintain adequate capital ratios. To support the fixed
account options of the Companies' variable insurance products, cash
flow was invested primarily in fixed maturities and short-term
investments.
At June 30, 1999 and December 31, 1998, the Companies had no
investments in default. At June 30, 1999 and December 31, 1998, the
Companies' investment portfolio had a yield of 6.5% and 6.4%,
respectively.
50
<PAGE>
<PAGE>
The Companies estimate the total investment portfolio,
excluding policy loans, had a fair value approximately equal to 98.3%
of its amortized cost value for accounting purposes at June 30, 1999
(100.2% at December 31, 1998).
Fixed Maturities: At June 30, 1999, the Companies had fixed maturities
with an amortized cost of $745.7 million and an estimated fair value
of $731.0 million. At December 31, 1998, the Companies had fixed
maturities with an amortized cost of $739.8 million and an estimated
fair value of $742.0 million.
The Companies classify 100% of securities as available for sale. At
June 30, 1999, net unrealized depreciation of fixed maturities of
$14.7 million was comprised of gross appreciation of $0.5 million and
gross depreciation of $15.2 million. Net unrealized holding losses on
these securities, net of adjustments to VPIF, DPAC, and deferred
income taxes of $4.6 million, was included in stockholder's equity at
June 30, 1999. Net unrealized appreciation of fixed maturities of
$2.2 million was comprised of gross appreciation of $6.7 million and
gross depreciation of $4.5 million. Net unrealized holding gains on
these securities, net of adjustments to VPIF, DPAC, and deferred
income taxes of $1.0 million, was included in stockholder's equity at
December 31, 1998.
The individual securities in the Companies' fixed maturities portfolio
(at amortized cost) include investment grade securities, which include
securities issued by the U.S. government, its agencies and
corporations that are rated at least A- by Standard & Poor's ($492.5
million or 66.0% at June 30, 1999 and $477.4 million or 64.5% at
December 31, 1998), that are rated BBB+ to BBB- by Standard & Poor's
($121.8 million or 16.3% at June 30, 1999 and $124.0 million or 16.8%
at December 31, 1998) and below investment grade securities which are
securities issued by corporations that are rated BB+ to B- by
Standard & Poor's ($69.0 million or 9.3% at June 30, 1999 and $51.6
million or 7.0% at December 31, 1998). Securities not rated by
Standard & Poor's had a National Association of Insurance
Commissioners ("NAIC") rating of 1, 2 or 3 ($62.4 million or 8.4% at
June 30, 1999 and $86.8 million or 11.7% at December 31, 1998). The
Companies' fixed maturity investment portfolio had a combined yield at
amortized cost of 6.5% at June 30, 1999 and December 31, 1998.
Fixed maturities rated BBB+ to BBB- may have speculative
characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity of the
issuer to make principal and interest payments than is the case with
higher rated fixed maturities.
At June 30, 1999, the amortized cost value of the Companies' total
investment in below investment grade securities, excluding mortgage-
backed securities, was $76.2 million, or 8.2%%, of the Companies'
investment portfolio ($52.7 million, or 5.9%, at December 31, 1998).
The Companies intend to purchase additional below investment grade
securities but do not expect the percentage of the portfolio invested
in such securities to exceed 10% of the investment portfolio. At June
30, 1999, the yield at amortized cost on the Companies' below
investment grade portfolio was 7.7% compared to 6.4% for the
Companies' investment grade corporate bond portfolio. AAt December
31, 1998, the yield at amortized cost on the Companies' below
investment grade portfolio was 7.9% compared to 6.4% for the
Companies' investment grade corporate bond portfolio. The Companies
estimate the fair value of the below investment grade portfolio was
$73.2 million, or 96.0% of amortized cost value, at June 30, 1999
($51.7 million, or 98.1% of amortized cost value, at December 31,
1998).
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 a
recession or increasing interest rates, than are investment grade
issuers. The Companies attempt to reduce the overall risk in the below
investment grade portfolio, as in all investments, through careful credit
analysis, strict investment policy guidelines, and diversification by
company and by industry.
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The Companies analyze the investment portfolio, including below
investment grade securities, at least quarterly in order to determine
if the Companies' ability to realize the 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 the Companies 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
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 Companies' portfolio. Significant write-downs in
the carrying value of investments could materially adversely affect
the Companies' net income in future periods.
During the six months ended June 30, 1999 and Ifor the year ended
December 31, 1998, fixed maturities designated as available for sale
with a combined amortized cost of $83.6 million and $145.3 million,
respectively, were called or repaid by their issuers. In total, net
pre-tax losses from sales, calls, and repayments of fixed maturity
investments amounted to $78,000 and $0.5 million, for the first six
months of 1999 and for the year ended December 31, 1998, respectively.
During the fourth quarter of 1998, Golden American determined that the
carrying value of two of its bonds exceeded their estimated net
realizable value. As a result, at December 31, 1998, Golden American
recognized a total pre-tax loss of approximately $1.0 million to
reduce the carrying value of the bonds to their combined net
realizable value of $2.9 million. During the second quarter of 1999,
further information was received regarding these bonds and Golden
American determined that the carrying value of the two bonds exceeded
their estimated net realizeable value. As a result, at June 30, 1999
Golden American recognized a total pre-tax loss of approximately $1.6
million to further reduce the carrying value of the bonds to their
combined net realizeable value of $1.1 million.
Equity Securities: At June 30, 1999 and December 31, 1998, Eequity
securities represented 1.5% and 1.6%, respectively, of the Companies'
investment portfolio. At June 30, 1999 and December 31, 1998, the
Companies owned equity securities with a cost of $14.4 million and an
estimated fair value of $14.7 million and $11.5 million, respectively.
Net unrealized appreciation of $0.3 million was comprised of gross
appreciation of $0.8 million and gross depreciation of $0.5 million at
June 30, 1999. Net unrealized depreciation of equity securities was
comprised entirely of gross depreciation of $2.9 million at December
31, 1998. Equity securities are primarily comprised of investments in
shares of the mutual funds underlying the Companies' registered
separate accounts.
Mortgage Loans on Real Estate: Mortgage loans on real estate
represented 10.0% and 10.9% of the Companies' investment portfolio at
June 30, 1999 and at December 31, 1998, respectively. Mortgages
outstanding were $93.6 million at June 30, 1999 with an estimated fair
value of $92.2 million. Mortgages outstanding were $97.3 million at
December 31, 1998 with an estimated fair value of $99.8 million. At
June 30, 1999, the Companies' mortgage loan portfolio included 56
loans with an average size of $1.7 million and average seasoning of
0.9 years if weighted by the number of loans. At December 31, 1998,
Tthe Companies' mortgage loan portfolio includeds 57 loans with an
average size of $1.7 million and average seasoning of 0.9 years if
weighted by the number of loans. The Companies' mortgage loans on real
estate are typically secured by occupied buildings in major
metropolitan locations and not speculative developments and are
diversified by type of property and geographic location.
Mortgage loans on real estate have been analyzed by geographical
location with concentrations by state identified as California (12% in
1998 and 1997), Utah (11% in 1998, 13% in 1997) and Georgia (10% in
1998, 11% in 1997). There are no other concentrations of mortgage
loans in any state exceeding ten percent at December 31, 1998 and
1997. Mortgage loans on real estate have also been analyzed by
collateral type with significant concentrations identified in office
buildings (36% in 1998, 43% in 1997), industrial buildings (32% in
1998, 33% in 1997) and retail facilities (20% in 1998, 15% in 1997).
As of June 30, 1999, there have been no significant changes to the
concentrations of mortgage loans on real estate compared to December
31, 1998. At June 30, 1999 and December 31, 1998, the yield on the
Companies' mortgage loan portfolio was 7.3%.
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At June 30, 1999 and December 31, 1998, no mortgage loan was
delinquent by 90 days or more. The Companies' loan investment strategy
is consistent with other life insurance subsidiaries of ING. The
insurance subsidiaries of EIC have experienced a historically low
default rate in their mortgage loan portfolios.
OTHER ASSETS. Accrued investment income increased $0.4 million during
the first six months of 1999 and $3.2 million during 1998 due to an
increase in the overall size of the portfolio resulting from the
investment of premiums allocated to the fixed account options of the
Companies' variable products.
DPAC represents certain deferred costs of acquiring insurance
business, principally first year commissions and interest bonuses,
extra credit bonuses and other expenses related to the production of
new business after the merger. The Companies' previous balances of
DPAC and VPIF were eliminated as of the merger date, and an asset
representing VPIF was established for all policies in force at the
merger date. VPIF is amortized into income in proportion to the
expected gross profits of in force acquired business in a manner
similar to DPAC amortization. Any expenses which vary directly with
the sales of the Companies' products are deferred and amortized. At
June 30, 1999, the Companies had DPAC and VPIF balances of $351.1
million and $34.3 million ($205.0 million and $36.0 million,
respectively at December 31, 1998). During the first six months of
1999, VPIF decreased $2.7 million to adjust the value of other
receivables and increased $0.2 million as a result of an adjustment to
the merger costs.
Property and equipment increased $4.1 million, or 55.1%, Property and
equipment increased $5.8 million during 1998, due to installation of a
new policy administration system, introduction of an imaging system as
well as the growth in the business.
Goodwill totaling $151.1 million, representing the excess of the
acquisition cost over the fair value of net assets acquired, was
established at the merger date. Accumulated amortization of goodwill
as of June 30, 1999 and December 31, 1998 was $6.3 million and $4.4
million, respectively.
Other assets increased $5.5 million during 1998 due mainly to an
increase in amounts due from an unaffiliated reinsurer under a
modified coinsurance agreement.
At June 30, 1999, the Companies had $5.0 billion of separate account
assets compared to $3.4 billion at December 31, 1998. The increase in
separate account assets resulted from market appreciation, increased
transfer activity, and sales of the Companies' variable annuity
products, net of redemptions. At December 31, 1998, the Companies had
$3.4 billion of separate account assets compared to $1.6 billion at
December 31, 1997. The increase in separate account assets resulted
from market appreciation and growth in sales of the Companies'
variable annuity products, net of redemptions.
At June 30, 1999, the Companies had total assets of $6.5 billion, an
increase of 36.7% from December 31, 1998. At December 31, 1998, the
Companies had total assets of $4.8 billion, an increase of 94.3% from
December 31, 1997.
LIABILITIES. In conjunction with the volume of variable annuity
sales, the Companies' total liabilities increased $1.7 billion, or
37.8%, during the first six months of 1999 and totaled $6.1 billion at
June 30, 1999. At June 30, 1999, future policy benefits for annuity
and interest sensitive life products increased $85.3 million, or 9.7%,
to $966.4 million reflecting premium growth in the Companies' fixed
account options of its variable products, net of transfers to the
separate accounts. Market appreciation, increased transfer activity,
and premiums, net of redemptions, accounted for the $1.6 billion, or
46.3%, increase in separate account liabilities to $5.0 billion at
June 30, 1999.
In conjunction with the volume of variable annuity sales, the
Companies' total liabilities increased $2.2 billion, or 98.2%, during
1998 and totaled $4.4 billion at December 31, 1998. Future policy
benefits for annuity and interest sensitive life products increased
$375.8 million, or 74.4%, to $881.1 million reflecting premium growth
in the Companies' fixed account option of its variable products.
Market appreciation and premium growth, net of redemptions, accounted
for the $1.7 billion, or 106.3%, increase in separate account liabilities
to $3.4 billion at December 31, 1998.
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On December 30, 1998, Golden American issued a $60 million, 7.25%
surplus note to Equitable Life, which matures on December 29, 2028.
On December 17, 1996, Golden American issued a $25 million, 8.25%
surplus note to Equitable which matures on December 17, 2026. As a
result of the merger, the surplus note is now payable to EIC.
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 agreement, which became effective
December 1, 1996 and expired on December 31, 1997, Golden American
could borrow up to $25 million. At December 31, 1997, $24.1 million
was outstanding under this agreement. The outstanding balance was
repaid by a capital contribution.
At December 31, 1998, other liabilities increased $15.3 million from
$17.3 million at December 31, 1997, due primarily to increases in
accounts payable, outstanding checks, guaranty fund assessment
liability, and pension liability.
The effects of inflation and changing prices on the Companies'
financial position 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 stockholder's equity when monetary assets exceed monetary
liabilities.
STOCKHOLDER'S EQUITY. Additional paid-in capital increased $80.0
million, or 23.0%, from December 31, 1998 to $427.6 million at June
30, 1999 due to capital contributions from the Parent. Additional
paid-in capital increased $122.6 million, or 54.5%, from December 31,
1997 to $347.6 million at December 31, 1998 primarily due to capital
contributions from the Parent.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of the Companies to generate sufficient cash
flows to meet the cash requirements of operating, investing and
financing activities. The Companies' principal sources of cash are
variable annuity premiums and product charges, investment income,
maturing investments, proceeds from debt issuance and capital
contributions made by the Parent. Primary uses of these funds are
payments of commissions and operating expenses, interest and extra
premium credits, investment purchases, repayment of debt, as well as
withdrawals and surrenders.
Net cash used in operating activities was $41.6 million in the first
six months of 1999 compared to $24.0 million in the same period of
1998. Net cash used in operating activities was $63.9 million in 1998
compared to $4.8 million in 1997. The Companies have predominantly had
negative cash flows from operating activities since Golden American
started issuing variable insurance products in 1989. These negative
operating cash flows result primarily from the funding of commissions
and other deferrable expenses related to the continued growth in the
variable annuity products. The 1998 increase in net cash used in
operating activities resulted principally from the introduction of
Golden American's extra premium credit product in October 1997. In
1998, $54.4 million in extra premium credits was added to contract
holders' account values versus $2.8 million in 1997.
Net cash used in investing activities was $38.6 million during the
first six months of 1999 as compared to $124.5 million in the same
period of 1998. This decrease is primarily due to greater net
purchases of fixed maturities, equity securities, and mortgage loans
on real estate during the first six months of 1998 than in the same
period of 1999. Net purchases of fixed maturities reached
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$9.3 million during the first six months of 1999 versus $104.6 million
in the same period of 1998. Net sales of mortgage loans on real estate
were $3.6 million during the first six months of 1999 compared to net
purchases of $10.7 million during the first six months of 1998.
Net cash used in investing activities was $390.0 million during 1998
as compared to $198.5 million in 1997. This increase is primarily due
to greater net purchases of fixed maturities resulting from an
increase in funds available from net fixed account deposits. Net
purchases of fixed maturities reached $331.3 million in 1998 versus
$135.3 million in 1997. Net purchases of mortgage loans on real
estate, on the other hand, declined to $12.6 million from $51.2 at
December 31, 1997 in the prior year. In 1998, net purchases of
short- term investments were unusually high due to the investment of
the remaining proceeds of Golden American's $60.0 million surplus
note issued on December 30, 1998.
Net cash provided by financing activities was $82.8 million during the
first six months of 1999 as compared to $137.9 million in the same
period of 1998. In the first six months of 1999, net cash provided by
financing activities was positively impacted by net fixed account
deposits of $264.2 million compared to $170.9 million in the same
period of 1998. This increase was offset by net reallocations to the
Companies' separate accounts, which increased to $261.4 million from
$100.4 million during the prior year, and by net borrowings of $50,000
in the first six months of 1999 compared to $13.6 million in the first
six months of 1998. In the first six months of 1999, another
important source of cash provided by financing activities was $80.0
million in capital contributions from the Parent compared to $53.8
million in the first six months of 1998..
Net cash provided by financing activities was $439.5 million during
1998 as compared to $218.6 million during the prior year. In 1998, net
cash provided by financing activities was positively impacted by net
fixed account deposits of $520.8 million compared to $303.6 million in
1997. This increase was partially offset by net reallocations to the
Companies' separate accounts, which increased to $239.7 million from
$110.1 million during the prior year. In 1998, other important sources
of cash provided by financing activities were $98.4 million of capital
contributions from the Parent and $60.0 million of proceeds from the
issuance of a surplus note on December 30, 1998. The Companies have
used part of the proceeds of the surplus note to repay outstanding
short-term debt.
The Companies' liquidity position is managed by maintaining adequate
levels of liquid assets, such as cash or cash equivalents and short-
term investments. Additional sources of liquidity include borrowing
facilities to meet short-term cash requirements. Golden American
maintains a $65.0 million reciprocal loan agreement with ING AIH and
the Companies have established an $85.0 million revolving note
facility with SunTrust Bank, Atlanta. As of July 31, 1999, the
SunTrust Bank, Atlanta revolving note facility was extended to July
31, 2000. Management believes that these sources of liquidity are
adequate to meet the Companies' short-term cash obligations.
Based on current trends, the Companies expect to continue to use net
cash in operating activities, given the continued growth of the
variable annuity products. It is anticipated that a continuation of
capital contributions from the Parent and the issuance of additional
surplus notes will cover these net cash outflows. ING is committed to
the sustained growth of Golden American. During 1999, ING will
maintain Golden American's statutory capital and surplus at the end of
each quarter at a level such that: 1) the ratio of Total Adjusted
Capital divided by Company Action Level Risk Based Capital exceeds
300%; 2) the ration of Total Adjusted Capital (excluding surplus
notes) divided by Company Action Level Risk Based Capital exceeds
200%; and 3) Golden American's statutory capital and surplus exceeds
the "Amounts Accrued for Expense Allowances Recognized in Reserves" as
disclosed on page 3, Line 13A of Golden American's Statutory
Statement.
During the first quarter of 1999, Golden American's operations were
moved to a new site in West Chester, Pennsylvania. During the second
quarter of 1999, Golden American occupied an additional 20,000 square
feet and currently occupies 85,000 square feet of leased space and has
made commitments for an additional 40,000 square feet to be added
during 1999 to be occupied by itself and its affiliates. Previously,
Golden American's home office operations were housed in leased
locations in Wilmington, Delaware and various locations in
Pennsylvania, which were leased on a short-term basis for use in the
transition to the new office building. Golden American's New York
subsidiary is housed in leased space in New York, New York. The
Companies intend to spend approximately $1.7 million on capital needs
during the remainder of 1999.
The ability of Golden American to pay dividends to its Parent is
restricted. Prior approval of insurance regulatory authorities is
required for payment of dividends to the stockholder which exceed an
annual
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limit. During 1999, Golden American cannot pay dividends to its
Parent without prior approval of statutory authorities.
Under the provisions of the insurance laws of the State of New York,
First Golden cannot distribute any dividends to its stockholder unless
a notice of its intent to declare a dividend and the amount of the
dividend has been filed with the New York Insurance Department at
least thirty days in advance of the proposed declaration. If the
Superintendent of the New York Insurance Department finds the
financial condition of First Golden does not warrant the distribution,
the Superintendent may disapprove the distribution by giving written
notice to First Golden within thirty days after the filing. The
management of First Golden does not anticipate paying any dividends to
Golden American during 1999.
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 monitor the capitalization of insurance companies based upon the
type and mixture of risks inherent in a company's operations. The
formula includes components for asset risk, liability risk, interest
rate exposure and other factors. The Companies have complied with the
NAIC's risk-based capital reporting requirements. Amounts reported
indicate the Companies have total adjusted capital well above all
required capital levels.
Reinsurance: At June 30, 1999 and at December 31, 1998, Golden
American had reinsurance treaties with four unaffiliated reinsurers
and one affiliated reinsurer 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.
Year 2000 Readiness Disclosure: Based on and in conjunction with a
1997 study and an ongoing analysis of computer software and hardware,
the Companies have assessed their exposure to the Year 2000 change of
the century date issue. Some of the Companies' computer programs were
originally written using two digits rather than four to define a
particular year. As a result, these computer programs contain "time
sensitive" software that may recognize "00" as the year 1900 rather
than the year 2000, which could cause system failure or
miscalculations resulting in disruptions to operations. These
disruptions could include, but are not limited to, a temporary
inability to process transactions. To a lesser extent, the Companies
depend on various non-information technology systems, which could also
fail or misfunction as a result of the Year 2000.
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The Companies have developed a plan to address the Year 2000 issue in
a timely manner. The following schedule details the plan's phases,
progress towards completion and actual or estimated completion dates:
<TABLE>
% Complete as of Actual/Estimated
Phases July 31, 1999 Completion Dates
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Assessment and Development of the steps to be taken
to address Year 2000 systems issues 100% 12/31/1997
Remediation of business critical systems to address
- -----------
Year 2000 issues 100% 2/28/1999
Remediation of non-critical systems to address
- -----------
Year 2000 issues 98% 9/01/1999
Testing of business critical systems 100% 3/05/1999
- -------
Testing of non-critical systems and integrated testing
- -------
of hardware and infrastructure 98% 9/01/1999
Point-to-Point Testing of external interfaces with
- ----------------------
third party computer systems that communicate
with the Companies' systems 98% 9/01/1999
Implementation of tested business critical software
- --------------
addressing Year 2000 systems issues 100% 3/05/1999
Implementation of tested non-critical software
- --------------
addressing Year 2000 systems issues 98% 9/01/1999
Contingency Plan 100% 6/30/1999
- ----------------
</TABLE>
The Companies' operations could be adversely affected if significant
customers, suppliers, and other third parties, including underlying
mutual funds available through the Companies' variable products, would
be unable to transact business in the Year 2000 and thereafter as a
result of the Year 2000 issue. To mitigate the effect of outside
influences and other dependencies relative to the Year 2000, the
Companies have identified and contacted these third parties to obtain
assurances that necessary steps are being taken to prepare for the
Year 2000. The Companies will continue these communications and
establish compliance checkpoints through the Year 2000 transition.
Management believes the Companies' systems are or will be
substantially compliant by Year 2000.. Through June 30, 1999, Golden
American has spent approximately $465,000 in connection with the Year
2000 project, which includes $130,000 of expenses charged during the
first six months of 1999. Golden American charged to expense
approximately $335,000 during 1998. These costs are incremental
expenses that Golden American does not anticipate recurring in the
Year 2000 and thereafter. The Companies anticipate charging to expense
an additional $140,000 to $240,000 during the remainder of 1999, which
includes upgrade and internal resources costs.
Despite the Companies' efforts to modify or replace "time sensitive"
computer and information systems, the Companies could experience a
disruption to their operations as a result of the Year 2000. The
Companies have developed a contingency plan to address the content of
third party compliance statements and any systems that may malfunction
despite the testing being performed. The contingency plan was
completed on June 30, 1999.
The Year 2000 project costs and completion dates are based on
management's best estimates. These estimates were derived using
numerous assumptions of future events, including the continued
availability of resources, third party Year 2000 compliance, and other
factors. There is no guarantee these estimates will be achieved and
actual results could materially differ from those anticipated.
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Specific factors that might cause such material differences include,
but are not limited to, the availability and cost of trained personnel,
the ability to locate and correct all relevant computer codes and other
uncertainties.
It is the Companies' intention to make every reasonable effort to achieve
business continuity through appropriate planning, testing and establishing
contingency scenarios; however, the Companies do not make any representations
because of many unknown factors beyond the control of the Companies.
MARKET RISK AND RISK MANAGEMENT
Asset/liability management is integrated into many aspects of the
Companies' operations, including investment decisions, product
development and crediting rates determination. As part of the risk
management process, different economic scenarios are modeled,
including cash flow testing required for insurance regulatory
purposes, to determine that existing assets are adequate to meet
projected liability cash flows. Key variables include
contractholder behavior and the variable separate accounts'
performance.
Contractholders bear the majority of the investment risks related
to the variable products. Therefore, the risks associated with the
investments supporting the variable separate accounts are assumed
by contractholders, not by the Companies (subject to, among other
things, certain minimum guarantees). The Companies' products also
provide certain minimum death benefits that depend on the
performance of the variable separate accounts. Currently the
majority of death benefit risks are reinsured, which protects the
Companies from adverse mortality experience and prolonged capital
market decline.
A surrender, partial withdrawal, transfer or annuitization made
prior to the end of a guarantee period from the fixed account may
be subject to a market value adjustment. As the majority of the
liabilities in the fixed account are subject to market value
adjustment, the Companies do not face a material amount of market
risk volatility. The fixed account liabilities are supported by a
portfolio principally composed of fixed rate investments that can
generate predictable, steady rates of return. The portfolio
management strategy for the fixed account considers the assets
available for sale. This enables the Companies to respond to
changes in market interest rates, changes in prepayment risk,
changes in relative values of asset sectors and individual
securities and loans, changes in credit quality outlook and other
relevant factors. The objective of portfolio management is to
maximize returns, taking into account interest rate and credit
risks as well as other risks. The Companies' asset/liability
management discipline includes strategies to minimize exposure to
loss as interest rates and economic and market conditions change.
On the basis of these analyses, management believes there is no
material solvency risk to the Companies. With respect to a 10%
drop in equity values from year-end 1998 levels, variable separate
account funds, which represent 84% of the in force as of June 30, 1999,
pass the risk in underlying fund performance to the contract holder
(except for certain minimum guarantees that are mostly reinsured).
With respect to interest rate movements up or down 100 basis points
from year-end 1998 levels, the remaining 16% of the in force as of
June 30, 1999 are fixed account funds and almost all of these have
market value adjustments which provide significant protection against
changes in interest rates.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Any forward-looking statement contained herein or in any other
oral or written statement by the Companies or any of their
officers, directors or employees is qualified by the fact that
actual results of the Companies may differ materially from such
statement, among other risks and uncertainties inherent in the
Companies' business, due to the following important factors:
1. Prevailing interest rate levels and stock market performance,
which may affect the ability of the Companies to sell their
products, the market value and liquidity of the Companies'
investments and the lapse rate of the Companies' policies,
notwithstanding product design features intended to enhance
persistency of the Companies' products.
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2. Changes in the federal income tax laws and regulations which
may affect the tax status of the Companies'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 Companies'
products.
4. Increasing competition in the sale of the Companies' products.
5. Other factors that could affect the performance of the
Companies, including, but not limited to, market conduct
claims, litigation, insurance industry insolvencies,
availability of competitive reinsurance on new business,
investment performance of the underlying portfolios of the
variable products, variable product design and sales volume by
significant sellers of the Companies' variable products.
6. To the extent third parties are unable to transact business in
the Year 2000 and thereafter, the Companies' operations could
be adversely affected.
OTHER INFORMATION
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 DSI are party to in excess of 140 sales
agreements with broker-dealers, three of whom, Locust Street
Securities, Inc., Vestax Securities Corporation, and Multi-
Financial Securities Corporation, are affiliates of Golden
American. Two broker-dealers produce 10% or more of Golden
American's product sales.
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 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.
SERVICE AGREEMENTS. Beginning in 1994 and continuing until August
13, 1996, Bankers Trust (Delaware), a subsidiary of Bankers Trust
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 were $0.5 million.
Pursuant to a service agreement between Golden American and
Equitable Life, Equitable Life provides certain administrative,
financial and other services to Golden American. Equitable Life
billed Golden
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American and its subsidiary First Golden American Life Insurance Company
of New York ("First Golden"), $0.8 million and $1.1 million for the first
six months of 1999 and the year ended December 31, 1998, respectively,
under this service agreement.
Golden American provides to DSI certain of its personnel to
perform management, administrative and clerical services and the
use of certain facilities. Golden American charges 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. 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 $4.1 million, $4.8 million,
$2.8 million and $2.3 million for the first six months of 1999, and the
years 1998, 1997 and 1996, respectively.
Since January 1, 1998, Golden American and First Golden have had
an asset management agreement with ING Investment Management LLC
("ING IM"), an affiliate, in which ING IM provides asset
management services for a fee, payable quarterly. For the first six
months of 1999 and for the year ended December 31, 1998, Golden
American and First Golden incurred fees of $1.1 million and $1.5
million, respectively, under this agreement. Prior to 1998, Golden
American and First Golden had a service agreement with Equitable
Investment Services, Inc. ("EISI"), an affiliate, in which EISI
provided investment management services. Golden American and First
Golden paid fees of $1.0 million for 1997 and $72,000 for the
period from August 14, 1996 through December 31, 1996,
respectively.
Since 1997, Golden American has provided certain advisory,
computer and other resources and services to Equitable Life. Fees
for these services totaled $0.7 million for the first six months of 1999,
$5.8 million for 1998 and $4.3 million for 1997.
DISTRIBUTION AGREEMENT. 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
June 30, 1999 and December 31, 1998, are sold primarily through two
broker/dealer institutions. For the six months ended June 30, 1999 and
the years 1998, 1997 and 1996, commissions paid by Golden American to DSI
(including commissions paid by First Golden) aggregated $80.3 million,
$117.5 million, $36.4 million and $27.1 million, respectively.
EMPLOYEES. Golden American, as a result of its Service Agreement
with 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 "Service
Agreement." The cost of these services were allocated to Golden
American. Since August 14, 1996, Golden American has hired
individuals to perform various management services and has looked
to Equitable of Iowa and its affiliates for certain other
management services.
Certain officers of Golden American are also officers of DSI, and
their salaries are allocated among both companies. Certain
officers of Golden American are also officers of other Equitable
of Iowa subsidiaries. See "Directors and Executive Officers."
PROPERTIES. Golden American's principal office is located at 1475
Dunwoody Drive, West Chester, Pennsylvania 19380, where all of
Golden American's records are maintained. This office space is
leased.
STATE REGULATION. Golden American is subject to the laws of the
State of Delaware governing insurance companies and to the
regulations of the Delaware Insurance Department (the "Insurance
Department"). A detailed financial statement in the prescribed
form (the "Annual Statement") is filed with the Insurance
Department each year covering Golden American's operations for the
preceding year and its financial condition as of the end of that
year. Regulation by the Insurance Department includes periodic
examination to determine contract liabilities and reserves so that
the Insurance Department may certify
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that these items are correct. Golden American's books and accounts are
subject to review by the Insurance Department at all times. A full
examination of Golden American's operations is conducted periodically
by the Insurance Department and under the auspices of the NAIC.
In addition, Golden American is subject to regulation under the
insurance laws of all jurisdictions in which it operates. The
laws of the various jurisdictions establish supervisory agencies
with broad administrative powers with respect to various matters,
including licensing to transact business, overseeing trade
practices, licensing agents, approving contract forms,
establishing reserve requirements, fixing maximum interest rates
on life insurance contract loans and minimum rates for
accumulation of surrender values, prescribing the form and content
of required financial statements and regulating the type and
amounts of investments permitted. Golden American is required to
file the Annual Statement with supervisory agencies in each of the
jurisdictions in which it does business, and its operations and
accounts are subject to examination by these agencies at regular
intervals.
The NAIC has adopted several regulatory initiatives designed to
improve the surveillance and financial analysis regarding the
solvency of insurance companies in general. These initiatives
include the development and implementation of a risk-based capital
formula for determining adequate levels of capital and surplus.
Insurance companies are required to calculate their risk-based
capital in accordance with this formula and to include the results
in their Annual Statement. It is anticipated that these standards
will have no significant effect upon Golden American. For
additional information about the Risk-Based Capital adequacy
monitoring system and Golden American, see "Management's
Discussion and Analysis Results of Operations"
In addition, many states regulate affiliated groups of insurers,
such as Golden American, and its affiliates, under insurance
holding company legislation. Under such laws, inter-company
transfers of assets and dividend payments from insurance
subsidiaries may be subject to prior notice or approval, depending
on the size of the transfers and payments in relation to the
financial positions of the companies involved.
Under insurance guaranty fund laws in most states, insurers doing
business therein can be assessed (up to prescribed limits) for
contract owner losses incurred by other insurance companies which
have become insolvent. Most of these laws provide that an
assessment may be excused or deferred if it would threaten an
insurer's own financial strength. For information regarding
Golden American's estimated liability for future guaranty fund
assessments, see Note 11 of Notes to Financial Statements.
Although the federal government generally does not directly
regulate the business of insurance, federal initiatives often have
an impact on the business in a variety of ways. Certain insurance
products of Golden American are subject to various federal
securities laws and regulations. In addition, current and
proposed federal measures which may significantly affect the
insurance business include regulation of insurance company
solvency, employee benefit regulation, removal of barriers
preventing banks from engaging in the insurance business, tax law
changes affecting the taxation of insurance companies and the tax
treatment of insurance products and its impact on the relative
desirability of various personal investment vehicles.
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DIRECTORS AND OFFICERS
NAME (AGE) POSITION(S) WITH THE COMPANY
- ---------- ----------------------------
Barnett Chernow (49) President and Director
Myles R. Tashman (56) Director, Executive Vice President,
General Counsel and Secretary
R. Brock Armstrong (52) Director
Michael W. Cunningham (50) Director
Linda B. Emory (61) Director
Phillip R. Lowery (46) Director
James R. McInnis (51) Executive Vice President
Stephen J. Preston (42) Executive Vice President and Chief
Actuary
E. Robert Koster (41) Senior Vice President and Chief Financial
Officer
Patricia M. Corbett (34) Treasurer
David L. Jacobson (50) Senior Vice President and Assistant
Secretary
William B. Lowe (35) Senior Vice President
Ronald R. Blasdell (46) Senior Vice President
Steven G. Mandel (40) Senior Vice President
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. Some directors are directors of insurance company
subsidiaries of Golden American's parent, Equitable of Iowa. The
principal positions of Golden American's directors and senior
executive officers for the past five years are listed below:
Mr. Barnett Chernow became President and Director of Golden
American Life Insurance Company and President of First Golden
American Life Insurance Company of New York in April 1998.
From 1993 to 1998, Mr. Chernow served as Executive Vice President
of Golden American. He was elected to serve as Executive Vice
President and Director of First Golden in September 1996.
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.
He also serves as a Director, Executive Vice President, General
Counsel and Secretary of First Golden.
Mr. R. Brock Armstrong was appointed to serve as President and
Chairman of The GCG Trust in February 1999. He was also elected
to serve as Director of Golden American Life Insurance Company
Director and President of Equitable Life Insurance Company of Iowa
in April 1999. He has served as Director and Chairman of the
Board of First Golden American Life Insurance Company of New York
since December 1998, and as Group Executive of ING Group since
October 1998. Mr. Armstrong was Senior Vice President, The
Prudential Insurance Company of America, April 1997 to October
1998; Executive Vice President, London Insurance Group, August
1994 to April 1997; and President and Chief Financial Officer of
Security First Group, August 1991 to August 1994.
Mr. Michael W. Cunningham became a Director of Golden American and
First Golden in April 1999. Also, he has served as a Director of
Life of Georgia and Security Life of Denver since 1995.
Currently, he serves as Executive Vice President and Chief
Financial Officer of ING North America Insurance Corporation, and
has worked for them since 1991.
Ms. Linda B. Emory became a Director of Golden American in April
1999. Since September 1995, she has served as a Director for Life
Insurance Company of Georgia, Southland Life Insurance Company,
Security Life of Denver, Midwestern United Life Insurance Company,
First ING of New York and Columbine Insurance Company. Also, she
is an Executive Vice President of ING North America Insurance
Corporation.
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Mr. Phillip R. Lowery became a Director of Golden American in
April 1999. He has served as Executive Vice President and Chief
Actuary for ING FSI North America since 1990.
Mr. James R. McInnis joined Golden American in December, 1997 as
Executive Vice President. From 1982 through November 1997, he held
several positions with the Endeavor Group and was President upon
his departure.
Mr. E. Robert Koster was elected Senior Vice President and Chief
Financial Officer of Golden American in September 1998. From
August, 1984 to September, 1998 he has held various positions with
ING companies in The Netherlands.
Ms. Patricia M. Corbett was elected Treasurer of Golden American
in December 1998. She joined Equitable Life Insurance Company of
Iowa in 1987 and is currently Treasurer and Assistant Vice
President of Equitable Life and USG Annuity & Life Company.
Mr. David L. Jacobson joined Golden American in November 1993 as
Senior Vice President and Assistant Secretary.
Mr. Stephen J. Preston joined Golden American in December, 1993 as
Senior Vice President, Chief Actuary and Controller. He became an
Executive Vice President and Chief Actuary in June 1998.
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 was also
President of Equitable of Iowa Securities Network, Inc. until
October 1998.
Mr. Steven G. Mandel joined Golden American in October 1988 and
became a Senior Vice President in June 1998.
Mr. Ronald R. Blasdell joined Golden American in February 1994 and
became a Senior Vice President in June 1998.
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, 1998. 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, Terry L. Kendall served
as a Managing Director at Bankers Trust New York Corporation.
Compensation amounts for Terry L. 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
Officers and the five other most highly compensated executive
officers for the fiscal year ended December 31, 1998.
<TABLE>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
------------------- ------------------------ ------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) OPTIONS(3)
- ------------------ ---- ------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Barnett Chernow, 1998 $284,171 $105,375 8,000
President 1997 $234,167 $ 31,859 $277,576 4,000
1996 $207,526 $150,000 $ 7,755(4)
James R. McInnis, 1998 $250,004 $626,245 2,000
Executive Vice
President
Keith Glover, 1998 $250,000 $145,120 3,900
Executive Vice
President
Myles R. Tashman, 1998 $189,337 $ 54,425 3,500
Executive Vice 1997 $181,417 $ 25,000 $165,512 5,000
President, 1996 $176,138 $ 90,000 $ 5,127(4)
General Counsel
and Secretary
Stephen J. Preston, 1998 $173,870 $ 32,152 3,500
Executive Vice 1997 $160,758 $ 16,470
President 1996 $156,937 $ 58,326
and Chief Actuary
</TABLE>
<TABLE>
LONG-TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
------------------- ------------------------ ------------
RESTRICTED SECURITIES
NAME AND STOCK AWARDS UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) OPTIONS(3)
- ------------------ ---- ------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Paul R. Schlaack, 1998 $406,730 $210,600
Former Chairman 1997 $351,000 $249,185 $1,274,518 19,000 $15,000
and Vice President 1996 $327,875 $249,185 $ 245,875 19,000 $15,000
Terry L. Kendall, 1998 $145,237 $181,417
Former President 1997 $362,833 $ 80,365 $ 644,844 16,000
and CEO 1996 $288,298 $400,000 $11,535(4)
</TABLE>
(1) The amount shown relates to bonuses paid in 1998, 1997
and 1996.
(2) Restricted stock awards granted to executive officers
vested on October 24, 1997 with the change in control of
Equitable of Iowa.
(3) Awards comprised of qualified and non-qualified stock
options. All options were granted with an exercise price equal
to the then fair market value of the underlying stock. All
options vested with the change in control of Equitable of Iowa
and were cashed out for the difference between $68.00 and the
exercise price.
(4) In 1996, 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 1996 to employees on record as of December 31,
1996, after an employee completed one year of service with the
company. This contribution could 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.
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OPTION GRANTS IN LAST FISCAL YEAR (1998)
<TABLE> POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM (3)
OPTIONS IN FISCAL OR BASE EXPIRATION ------------------
NAME GRANTED(1) YEAR PRICE (2) DATE 5% 10%
- ---- ---------- ----- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Barnett Chernow 8,000 11.99 $60.518 5/26/2003 $164,016 $362,433
James R. McInnis 2,000 3.00 $60.518 5/26/2003 $ 41,004 $ 90,608
Keith Glover 3,900 5.85 $60.518 5/26/2003 $ 79,958 $176,686
Myles R. Tashman 3,500 5.25 $60.518 5/26/2003 $ 71,758 $158,564
Stephen J. Preston 3,500 5.25 $60.518 5/26/2003 $ 71,758 $158,564
</TABLE>
(1) Stock appreciation rights granted on May 26, 1998 to the
officers of Golden American have a three-year vesting period
and an expiration date as shown.
(2) The base price was equal to the fair market value of
ING's stock on on the date of grant.
(3) Total dollar gains based on indicated rates of
appreciation of share price over a the five year term of the
rights.
Directors of Golden American receive no additional compensation
for serving as a director.
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[Shaded Section Header]
- --------------------------------------------------------------------------
UNAUDITED FINANCIAL STATEMENTS OF GOLDEN AMERICAN LIFE INSURANCE COMPANY
- --------------------------------------------------------------------------
For the Six Months Ended June 30, 1999
66
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
_____________________________________
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for sale,
at fair value (cost: 1999 - $745,735;
1998 - $739,772) $731,047 $741,985
Equity securities, at fair value
(cost: 1999 - $14,437; 1998 - $14,437) 14,688 11,514
Mortgage loans on real estate 93,563 97,322
Policy loans 12,930 11,772
Short-term investments 67,546 41,152
_____________________________________
Total investments 919,774 903,745
Cash and cash equivalents 9,339 6,679
Due from affiliates 1,798 2,983
Accrued investment income 10,006 9,645
Deferred policy acquisition costs 351,070 204,979
Value of purchased insurance in force 34,264 35,977
Current income taxes recoverable 232 628
Deferred income tax asset 31,426 31,477
Property and equipment, less allowances for
depreciation of $1,915 in 1999 and $801
in 1998 11,398 7,348
Goodwill, less accumulated amortization of
$6,297 in 1999 and $4,408 in 1998 144,830 146,719
Other assets 11,979 6,239
Separate account assets 4,969,046 3,396,114
_____________________________________
Total assets $6,495,162 $4,752,533
=====================================
See accompanying notes.
</TABLE> 67
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION> June 30, 1999 December 31, 1998
_____________________________________
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life
products $966,363 $881,112
Unearned revenue reserve 5,271 3,840
Other policy claims and benefits 4 --
_____________________________________
971,638 884,952
Surplus notes 85,000 85,000
Revolving note payable 50 --
Due to affiliates 3,595 --
Other liabilities 34,016 32,573
Separate account liabilities 4,969,046 3,396,114
_____________________________________
6,063,345 4,398,639
Commitments and contingencies
Stockholder's equity:
Common stock, par value $10 per share,
authorized, issued, and outstanding
250,000 shares 2,500 2,500
Additional paid-in capital 427,640 347,640
Accumulated other comprehensive loss (4,394) (895)
Retained earnings 6,071 4,649
_____________________________________
Total stockholder's equity 431,817 353,894
_____________________________________
Total liabilities and stockholder's
equity $6,495,162 $4,752,533
=====================================
See accompanying notes.
</TABLE> 68
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the Six For the Six
Months ended Months ended
June 30, 1999 June 30, 1998
_____________________________________
<S> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES ($41,587) ($23,989)
INVESTING ACTIVITIES
Sale, maturity or repayment of
investments:
Fixed maturities - available for sale 90,910 64,086
Mortgage loans on real estate 3,606 2,586
Short-term investments - net -- 3,397
_____________________________________
94,516 70,069
Acquisition of investments:
Fixed maturities - available for sale (100,242) (168,715)
Equity securities -- (10,000)
Mortgage loans on real estate -- (13,290)
Policy loans - net (1,158) (387)
Short term investments - net (26,394) --
_____________________________________
(127,794) (192,392)
Net purchase of property and equipment (5,324) (2,169)
_____________________________________
Net cash used in investing activities (38,602) (124,492)
FINANCING ACTIVITIES
Proceeds from reciprocal loan agreement
borrowings 265,800 121,400
Repayment of reciprocal loan agreement
borrowings (265,800) (102,500)
Proceeds from revolving note payable 56,345 --
Repayment of revolving note payable (56,295) --
Repayment of line of credit borrowings -- (5,309)
Receipts from annuity and interest
sensitive life policies credited to
account balances 330,935 202,040
Return of account balances on annuity
and interest sensitive life policies (66,732) (31,104)
Net reallocations to Separate Accounts (261,404) (100,422)
Contributions from parent 80,000 53,750
_____________________________________
Net cash provided by financing activities 82,849 137,855
_____________________________________
</TABLE>
<TABLE>
<CAPTION>
For the Six For the Six
Months ended Months ended
June 30, 1999 June 30, 1998
_____________________________________
<S> <C> <C>
Increase (decrease) in cash and cash
equivalents $2,660 ($10,626)
Cash and cash equivalents at beginning
of period 6,679 21,039
_____________________________________
Cash and cash equivalents at end of period $9,339 $10,413
=====================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for
interest $1,373 $2,006
Non-cash financing activities:
Non-cash adjustment to additional paid in
capital for adjusted merger costs -- 143
Non-cash contribution of capital from
parent to repay line of credit borrowings -- 18,750
See accompanying notes.
</TABLE>
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GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 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. 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 six months ended June 30,
1999 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1999. These financial statements should be read
in conjunction with the financial statements and related notes included in
the Golden American Life Insurance Company's annual report on Form 10-K for
the year ended December 31, 1998.
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 with
Golden American, collectively, the "Companies"). All significant
intercompany accounts and transactions have been eliminated.
ORGANIZATION
Golden American is a wholly owned subsidiary of Equitable of Iowa Companies,
Inc. ("EIC" or the "Parent"). On October 24, 1997, PFHI Holdings, Inc.
("PFHI"), a Delaware corporation, acquired all of the outstanding capital
stock of Equitable of Iowa Companies ("Equitable") according to the terms of
an Agreement and Plan of Merger dated July 7, 1997 among Equitable, PFHI, and
ING Groep N.V. ("ING"). PFHI is a wholly owned subsidiary of ING, a global
financial services holding company based in The Netherlands. As a result of
this transaction, Equitable was merged into PFHI, which was simultaneously
renamed Equitable of Iowa Companies, Inc., a Delaware corporation.
FAIR VALUES
Estimated fair values of publicly traded fixed maturities for 1999 are as
reported by an independent pricing service.
STATUTORY
Net loss for Golden American as determined in accordance with statutory
accounting practices was $44,799,000 and $13,028,000 for the six months ended
June 30, 1999 and 1998, respectively. Total statutory capital and surplus
was $233,107,000 at June 30, 1999 and $183,045,000 at December 31, 1998.
RECLASSIFICATIONS
Certain amounts in the June 30, 1998 and December 31, 1998 financial
statements have been reclassified to conform to the June 30, 1999 financial
statement presentation.
NOTE 2 -- COMPREHENSIVE INCOME
As of January 1, 1998, the Companies adopted the Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of this statement had no
impact on the Companies' net income or stockholder's equity. SFAS No. 130
requires unrealized gains or losses on the Companies' available for sale
securities (net of adjustments for value of purchased insurance in force
70
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 2 -- COMPREHENSIVE INCOME (continued)
("VPIF"), deferred policy acquisition costs ("DPAC"), and deferred income
taxes) to be included in other comprehensive income.
During the second quarter and first six months of 1999, total comprehensive
income (loss) for the Companies amounted to $(828,000) and $(2,077,000),
respectively ($2,606,000 and $3,052,000, respectively, for the same periods
of 1998). Included in these amounts are total comprehensive income (loss)
for First Golden of $(226,000) and $(244,000) for the second quarter and
first six months of 1999, respectively ($379,000 and $573,000, respectively,
for the same periods of 1998). Other comprehensive income (loss) excludes
net investment gains (losses) included in net income which merely represent
transfers from unrealized to realized gains and losses. These amounts
totaled $(2,348,000) and $(2,052,000) during the second quarter and first six
months of 1999, respectively ($50,000 and $125,000, respectively, for the
same periods of 1998). Such amounts, which have been measured through the
date of sale, are net of income taxes and adjustments for VPIF and DPAC
totaling $584,000 and $335,000 for the second quarter and first six months of
1999, respectively ($(4,000) and $8,000, respectively, for the same periods
of 1998).
NOTE 3 -- INVESTMENTS
INVESTMENT VALUATION ANALYSIS: The Companies analyze the investment
portfolio at least quarterly in order to determine if the carrying value of
any investment has been impaired. The carrying 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 the fourth quarter of 1998, Golden American determined that the
carrying value of two of its bonds exceeded their estimated net realizable
value. As a result, at December 31, 1998 Golden American recognized a total
pre-tax loss of $973,000 to reduce the carrying value of the bonds to their
combined net realizable value of $2,919,000. During the second quarter of
1999, further information was received regarding these bonds and Golden
American determined that the carrying value of the two bonds exceeded their
estimated net realizable value. As a result, at June 30, 1999 Golden American
recognized a total pre-tax loss of approximately $1,639,000 to further reduce
the carrying value of the bonds to their combined net realizable value of
$1,137,000.
NOTE 4 -- RELATED PARTY TRANSACTIONS
OPERATING AGREEMENTS: Directed Services, Inc. ("DSI"), an affiliate, acts as
the principal underwriter (as defined in the Securities Act of 1933 and the
Investment Company Act of 1940, as amended) and distributor of the variable
insurance products issued by the Companies. DSI is authorized to enter into
agreements with broker/dealers to distribute the Companies' variable
insurance products and appoint representatives of the broker/dealers as
agents. The Companies paid commissions and expenses to DSI totaling
$45,503,000 in the second quarter and $80,288,000 for the first six months of
1999 ($29,407,000 and $50,444,000, respectively, for the same periods of
1998).
Golden American provides certain managerial and supervisory services to DSI.
The fee paid by DSI for these services is calculated as a percentage of
average assets in the variable separate accounts. For the second quarter and
first six months of 1999, the fee was $2,281,000 and $4,096,000, respectively
($1,114,000 and $2,023,000, respectively, for the same periods of 1998).
The Companies have an asset management agreement with ING Investment
Management LLC ("ING IM"), an affiliate, in which ING IM provides asset
management and accounting services. Under the agreement, the Companies
record a fee based on the value of the assets under management. The fee is
payable quarterly. For the second quarter and first six months of 1999, the
Companies incurred fees of $576,000 and $1,114,000, respectively, under this
agreement ($354,000 and $672,000, respectively, for the same periods of
1998).
71
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 4 -- RELATED PARTY TRANSACTIONS (continued)
Golden American has a guaranty agreement with Equitable Life Insurance
Company of Iowa ("Equitable Life"), an affiliate. 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 at June 30, 1999 or 1998.
Golden American provides certain advisory, computer and other resources and
services to Equitable Life. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $262,000 in the second
quarter of 1999 and $661,000 for the first six months of 1999 ($1,234,000 and
$3,567,000, respectively, for the same periods of 1998).
The Companies have a service agreement with Equitable Life in which Equitable
Life provides administrative and financial related services. Under this
agreement, the Companies incurred expenses of $488,000 in the second quarter
of 1999 and $805,000 for the first six months of 1999 ($165,000 and $314,000,
respectively, for the same periods of 1998).
The Companies provide resources and services to DSI. Revenues for these
services, which reduce general expenses incurred by the Companies, totaled
$241,000 in the second quarter of 1999 and $483,000 for the first six months
of 1999 ($19,000 and $38,000, respectively, for the same periods of 1998).
Golden American provides resources and services to ING Mutual Funds
Management Co., LLC, an affiliate. Revenues for these services, which reduce
general expenses incurred by Golden American, totaled $206,000 in the second
quarter of 1999 and $217,000 for the first six months of 1999.
For the second quarter of 1999, the Companies received 10.5% of total
premiums (10.1% in the same period of 1998), net of reinsurance, for variable
products sold through four affiliates, Locust Street Securities, Inc.
("LSSI"), Vestax Securities Corporation ("Vestax"), DSI, and Multi-Financial
Securities Corporation ("Multi-Financial") of $45,700,000, $32,600,000,
$651,000, and $7,900,000, respectively ($32,400,000, $8,800,000, $1,800,000,
and $4,500,000, respectively, for the same period of 1998). For the first
six months of 1999, the Companies received 10.5% of total premiums (9.4% in
the same period of 1998), net of reinsurance, from LSSI, Vestax, DSI, and
Multi-Financial of $75,300,000, $59,100,000, $2,300,000, and $13,400,000,
respectively ($58,100,000, $15,800,000, $8,900,000, and $5,900,000,
respectively, for the same period of 1998).
RECIPROCAL LOAN AGREEMENT: Golden American maintains a reciprocal loan
agreement with ING America Insurance Holdings, Inc. ("ING AIH"), a Delaware
corporation and affiliate, to facilitate the handling of unusual and/or
unanticipated short-term cash requirements. Under this agreement, which
became effective January 1, 1998 and expires December 31, 2007, Golden
American and ING AIH can borrow up to $65,000,000 from one another. Prior to
lending funds to ING AIH, Golden American must obtain approval from the
Department of Insurance of the State of Delaware. Interest on any Golden
American borrowings is charged at the rate of ING AIH's cost of funds for the
interest period plus 0.15%. Interest on any ING AIH borrowings is charged at
a rate based on the prevailing interest rate of U.S. commercial paper
available for purchase with a similar duration. Under this agreement, Golden
American incurred interest expense of $229,000 in the second quarter of 1999
and $236,000 for the first six months of 1999 ($577,000 and $764,000,
respectively, for the same periods of 1998). At June 30, 1999, Golden
American did not have any borrowings or receivables from ING AIH under this
agreement.
72
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 4 -- RELATED PARTY TRANSACTIONS (continued)
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. Under this agreement, which became effective
December 1, 1996 and expired December 31, 1997, Golden American could borrow
up to $25,000,000. Interest on any borrowings was charged at the rate of
Equitable's monthly average aggregate cost of short-term funds plus 1.00%.
Under this agreement, Golden American incurred interest expense of $211,000
for the first six months of 1998. The outstanding balance was paid by a
capital contribution and with funds borrowed from ING AIH.
SURPLUS NOTES: On December 30, 1998, Golden American issued a 7.25% surplus
note in the amount of $60,000,000 to Equitable Life. The note matures on
December 29, 2028. Payment of the note and related accrued interest is
subordinate to payments due to policyholders, claimant and beneficiary
claims, as well as debt owed to all other classes of debtors, other than
surplus note holders, of Golden American. Any payment of principal and/or
interest made is subject to the prior approval of the Delaware Insurance
Commissioner. Under this agreement, Golden American incurred interest
expense of $1,088,000 in the second quarter of 1999 and $2,175,000 for the
first six months of 1999.
On December 17, 1996, Golden American issued an 8.25% surplus note in the
amount of $25,000,000 to Equitable. The note matures on December 17, 2026.
Payment of the note and related accrued interest is 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 is subject to the prior approval of the Delaware Insurance Commissioner.
Golden American incurred interest totaling $515,000 in the second quarter of
1999 and $1,031,000 for the first six months of 1999, unchanged from the same
periods of 1998. As a result of the merger, the surplus note is now payable
to EIC.
STOCKHOLDER'S EQUITY: During the second quarter of 1999 and the first six
months of 1999, Golden American received capital contributions from its
Parent of $60,000,000 and $80,000,000, respectively ($18,750,000 and
$72,500,000, respectively, for the same periods of 1998).
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
REINSURANCE: At June 30, 1999, Golden American had reinsurance treaties with
four unaffiliated reinsurers and one affiliated reinsurer 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 June 30, 1999 and June 30,
1998, the Companies had a net receivable of $11,170,000 and $5,180,000,
respectively, for reserve credits, reinsurance claims or other receivables
from these reinsurers comprised of $267,000 and $205,000, respectively, for
claims recoverable from reinsurers, $794,000 and $368,000, respectively, for
a payable for reinsurance premiums and $11,697,000 and $5,343,000,
respectively, for a receivable from an unaffiliated reinsurer. Included in
the accompanying financial statements are net considerations to reinsurers of
$2,203,000 in the second quarter of 1999 and $4,018,000 for the first six
months of 1999 compared to $1,028,000 and $1,966,000, respectively, for the
same periods in 1998. Also included in the accompanying financial statements
are net policy benefits of $718,000 in the second quarter of 1999 and
$1,439,000 for the first six months of 1999 compared to $290,000 and
$824,000, respectively, for the same periods in 1998.
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.
GUARANTY FUND ASSESSMENTS: Assessments are levied on the Companies by life
and health guaranty associations in most states in which the Companies are
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 Companies 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
73
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
NOTE 5 -- COMMITMENTS AND CONTINGENCIES (continued)
upon its fixed account premium volume by line of business and state premiums
as well as its potential for premium tax offset. The Companies have
established an undiscounted reserve to cover such assessments, review
information regarding known failures, and revise estimates of future
guaranty fund assessments. Accordingly, the Companies accrued and charged to
expense an additional $217,000 and $390,000 in the second quarter and first
six months of 1998, respectively. At June 30, 1999, the Companies have an
undiscounted reserve of $2,444,000 to cover estimated future assessments (net
of related anticipated premium tax credits) and have established an asset
totaling $586,000 for assessments paid which may be recoverable through
future premium tax offsets. The Companies believe this reserve is sufficient
to cover expected future guaranty fund assessments based upon previous
premiums and known insolvencies at this time.
LITIGATION: The Companies, like other insurance companies, may be named or
otherwise involved in lawsuits, including class action lawsuits and
arbitrations. In some class action and other actions involving insurers,
substantial damages have been sought and/or material settlement or award
payments have been made. The Companies currently believe no pending or
threatened lawsuits or actions exist that are reasonably likely to have a
material adverse impact on the Companies.
VULNERABILITY FROM CONCENTRATIONS: The Companies have various concentrations
in the investment portfolio. The Companies' 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. Substantial changes in tax laws that would make these products
less attractive to consumers and extreme fluctuations in interest rates or
stock market returns, which may result in higher lapse experience than
assumed, could cause a severe impact on the Companies' financial condition.
Two broker/dealers, each having at least ten percent of total sales,
generated 29% of the Companies' sales during the first six months of 1999
(22% by the same two broker/dealers in the same period of 1998). The Premium
Plus product generated 77% of the Companies' sales during the first six
months of 1999 (55% in the same period of 1998).
REVOLVING NOTE PAYABLE: To enhance short-term liquidity, the Companies
established a revolving note payable effective July 27, 1998 and expiring
July 31, 1999 with SunTrust Bank, Atlanta (the "Bank"). The note was
approved by the Boards of Directors of Golden American and First Golden on
August 5, 1998 and September 29, 1998, respectively. The total amount the
Companies may have outstanding is $85,000,000, of which Golden American and
First Golden have individual credit sublimits of $75,000,000 and $10,000,000,
respectively. The note accrues interest at an annual rate equal to: (1) the
cost of funds for the Bank for the period applicable for the advance plus
0.25% or (2) a rate quoted by the Bank to the Companies for the advance. The
terms of the agreement require the Companies to maintain the minimum level of
Company Action Level Risk Based Capital as established by applicable state
law or regulation. During the quarter and six months ended June 30, 1999,
the Companies paid interest expense of $50,000 and $54,000, respectively. At
June 30, 1999, the Companies had a $50,000 payable outstanding.
74
<PAGE>
<PAGE>
[Shaded Section Header]
- --------------------------------------------------------------------------
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, 1998 and
1997, and the related consolidated statements of operations,
changes in stockholder's equity, and cash flows for the year ended
December 31, 1998 and for the periods from October 25, 1997
through December 31, 1997, January 1, 1997 through October 24,
1997, August 14, 1996 through December 31, 1996 and January 1,
1996 through August 13, 1996. 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Golden American Life Insurance Company at December 31,
1998 and 1997, and the consolidated results of its operations and
its cash flows for the year ended December 31, 1998 and for the
periods from October 25, 1997 through December 31, 1997, January
1, 1997 through October 24, 1997, August 14, 1996 through December
31, 1996 and January 1, 1996 through August 13, 1996 in conformity
with generally accepted accounting principles.
/s/Ernst & Young LLP
Des Moines, Iowa
February 12, 1999
75
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
POST-MERGER
------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities, available for
sale, at fair value (cost:
1998 - $739,772; 1997 -
$413,288)...................... $ 741,985 $ 414,401
Equity securities, at fair value
(cost: 1998 - $14,437; 1997 -
$4,437)........................ 11,514 3,904
Mortgage loans on real estate.... 97,322 85,093
Policy loans..................... 11,772 8,832
Short-term investments........... 41,152 14,460
---------- ----------
Total investments.................. 903,745 526,690
Cash and cash equivalents.......... 6,679 21,039
Due from affiliates................ 2,983 827
Accrued investment income.......... 9,645 6,423
Deferred policy acquisition costs.. 204,979 12,752
Value of purchased insurance in
force............................ 35,977 43,174
Current income taxes recoverable... 628 272
Deferred income tax asset.......... 31,477 36,230
Property and equipment, less
allowances for depreciation
of $801 in 1998 and $97 in 1997.. 7,348 1,567
Goodwill, less accumulated
amortization of $4,408 in 1998
and $630 in 1997................. 146,719 150,497
Other assets....................... 6,239 755
Separate account assets............ 3,396,114 1,646,169
---------- ----------
Total assets....................... $4,752,533 $2,446,395
========== ==========
</TABLE>
See accompanying notes.
76
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands, except per share data)
<TABLE>
POST-MERGER
------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life
products......................... $ 881,112 $ 505,304
Unearned revenue reserve........... 3,840 1,189
Other policy claims and benefits... -- 10
---------- ----------
884,952 506,503
Line of credit with affiliate....... -- 24,059
Surplus notes....................... 85,000 25,000
Due to affiliates................... -- 80
Other liabilities................... 32,573 17,271
Separate account liabilities........ 3,396,114 1,646,169
---------- ----------
4,398,639 2,219,082
Commitments and contingencies
Stockholder's equity:
Common stock, par value $10 per share,
authorized,issued and outstanding
250,000 shares................... 2,500 2,500
Additional paid-in capital......... 347,640 224,997
Accumulated other comprehensive
income (loss).................... (895) 241
Retained earnings (deficit)........ 4,649 (425)
---------- ----------
Total stockholder's equity.......... 353,894 227,313
---------- ----------
Total liabilities and stockholder's
equity............................ $4,752,533 $2,446,395
========== ==========
</TABLE>
See accompanying notes.
77
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
<S> <C> <C> | <C> <C> | <C>
REVENUES: | |
Annuity and interest sensitive | |
life product charges........ $ 39,119 $ 3,834 | $ 18,288 $ 8,768 | $12,259
Management fee revenue....... 4,771 508 | 2,262 877 | 1,390
Net investment income........ 42,485 5,127 | 21,656 5,795 | 4,990
Realized gains (losses) on | |
investments................. (1,491) 15 | 151 42 | (420)
Other income................. 5,569 236 | 426 486 | 70
--------- -------- | -------- ------- | -------
90,453 9,720 | 42,783 15,968 | 18,289
| |
| |
INSURANCE BENEFITS AND EXPENSES: | |
Annuity and interest sensitive | |
life benefits: | |
Interest credited to account | |
balances..................... 94,845 7,413 | 19,276 5,741 | 4,355
Benefit claims incurred in | |
excess of account balances... 2,123 -- | 125 1,262 | 915
Underwriting, acquisition | |
and insurance expenses: | |
Commissions.................. 121,171 9,437 | 26,818 9,866 | 16,549
General expenses............. 37,577 3,350 | 13,907 5,906 | 9,422
Insurance taxes.............. 4,140 450 | 1,889 672 | 1,225
Policy acquisition costs | |
deferred................... (197,796) (13,678) | (29,003) (11,712) | (19,300)
Amortization: | |
Deferred policy acquisition | |
costs..................... 5,148 892 | 1,674 244 | 2,436
Value of purchased insurance | |
in force.................. 4,724 948 | 5,225 2,745 | 951
Goodwill.................... 3,778 630 | 1,398 589 | --
--------- --------- | -------- ------ | -------
75,710 9,442 | 41,309 15,313 | 16,553
| |
Interest expense............... 4,390 557 | 2,082 85 | --
--------- --------- | -------- ------ | -------
80,100 9,999 | 43,391 15,398 | 16,553
--------- --------- | -------- ------ | -------
Income (loss) before income | |
taxes........................ 10,353 (279) | (608) 570 | 1,736
| |
Income taxes................... 5,279 146 | (1,337) 220 | (1,463)
--------- --------- | -------- ------ | -------
Net income (loss).............. $ 5,074 $ (425) | $ 729 $ 350 | $ 3,199
========= ========= | ======== ======= | ========
</TABLE>
See accompanying notes.
78
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Dollars in thousands)
<TABLE>
Accumulated
Redeemable Additional Other Retained Total
Common Preferred Paid-in Comprehensive Earnings Stockholder's
Stock Stock Capital Income (Loss) (Deficit) Equity
------------------------------------------------------------------------------
PRE-ACQUISITION
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996........ $2,500 $50,000 $ 45,030 $ 658 $ (63) $ 98,125
Comprehensive income:
Net income...................... -- -- -- -- 3,199 3,199
Change in net unrealized
investment gains (losses)..... -- -- -- (1,175) -- (1,175)
Comprehensive income............. 2,024
Preferred stock dividends........ -- -- -- -- (719) (719)
------ ------- -------- ------- ------ ---------
Balance at August 13, 1996........ $2,500 $50,000 $ 45,030 $ (517) $2,417 $ 99,430
====== ======= ======== ======== ====== =========
</TABLE>
<TABLE>
------------------------------------------------------------------------------
POST-ACQUISITION
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at August 14, 1996........ $2,500 $50,000 $ 87,372 -- -- $139,872
Comprehensive income:
Net income...................... -- -- -- -- $ 350 350
Change in net unrealized
investment gains (losses)...... -- -- -- $ 262 -- 262
Comprehensive income............. 612
Contribution of preferred stock
to additional paid-in capital... -- (50,000) 50,000 -- -- --
------ ------- -------- ------- ------ --------
Balance at December 31, 1996...... 2,500 -- 137,372 262 350 140,484
Comprehensive income:
Net income...................... -- -- -- -- 729 729
Change in net unrealized
investment gains (losses)...... -- -- -- 1,543 -- 1,543
Comprehensive income............. 2,272
Contribution of capital.......... -- -- 1,121 -- -- 1,121
------ ------- -------- ------- ------ --------
Balance at October 24, 1997 $2,500 -- $138,493 $1,805 $1,079 $143,877
====== ======= ======== ====== ====== ========
</TABLE>
<TABLE>
------------------------------------------------------------------------------
POST-MERGER
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 25, 1997....... $2,500 -- $224,997 -- -- $227,497
Comprehensive loss:
Net loss....................... -- -- -- -- $ (425) (425)
Change in net unrealized
investment gains (losses)...... -- -- -- $ 241 -- 241
Comprehensive loss............... (184)
------ ------- -------- ------- ------ --------
Balance at December 31, 1997...... 2,500 -- 224,997 241 (425) 227,313
Comprehensive income:
Net income...................... -- -- -- -- 5,074 5,074
Change in net unrealized
investment gains (losses)...... -- -- -- (1,136) -- (1,136)
Comprehensive income............. 3,938
Contribution of capital.......... -- -- 122,500 -- -- 122,500
Other............................ -- -- 143 -- -- 143
------ ------- -------- ------- ------ --------
Balance at December 31, 1998...... $2,500 -- $347,640 $ (895) $4,649 $353,894
====== ======= ======== ======= ====== ========
</TABLE>
See accompanying notes.
79
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
<S> <C> <C> | <C> <C> | <C>
OPERATING ACTIVITIES | |
Net income (loss)............ $ 5,074 $ (425) | $ 729 $ 350 | $ 3,199
Adjustments to reconcile net | |
income (loss) to net cash | |
provided by (used in) | |
operations: | |
Adjustments related to annuity | |
and interest sensitive life | |
products: | |
Interest credited and other | |
charges on interest | |
sensitive products........ 94,690 7,361 | 19,177 5,106 | 4,472
Change in unearned | |
revenues.................. 2,651 1,189 | 3,292 2,063 | 2,084
Decrease (increase) in | |
accrued investment income.. (3,222) 1,205 | (3,489) (877) | (2,494)
Policy acquisition costs | |
deferred................... (197,796) (13,678) | (29,003) (11,712) | (19,300)
Amortization of deferred | |
policy acquisition costs... 5,148 892 | 1,674 244 | 2,436
Amortization of value of | |
purchased insurance in | |
force...................... 4,724 948 | 5,225 2,745 | 951
Change in other assets, | |
other liabilities and | |
accrued income taxes....... 9,891 4,205 | (8,944) (96) | 4,672
Provision for depreciation | |
and amortization........... 8,147 1,299 | 3,203 1,242 | 703
Provision for deferred | |
income taxes............... 5,279 146 | 316 220 | (1,463)
Realized (gains) losses on | |
investments................ 1,491 (15) | (151) (42) | 420
--------- -------- | -------- -------- | ---------
Net cash provided by (used | |
in)operating activities..... (63,923) 3,127 | (7,971) (757) | (4,320)
| |
INVESTING ACTIVITIES | |
Sale, maturity or repayment | |
of investments: | |
Fixed maturities - available | |
for sale 145,253 9,871 | 39,622 47,453 | 55,091
Mortgage loans on real | |
estate..................... 3,791 1,644 | 5,828 40 | --
Short-term investments-net.. -- -- | 11,415 2,629 | 354
--------- -------- | -------- -------- | ---------
149,044 11,515 | 56,865 50,122 | 55,445
Acquisition of investments: | |
Fixed maturities - available | |
for sale................... (476,523) (29,596) | (155,173) (147,170) | (184,589)
Equity securities........... (10,000) (1) | (4,865) (5) | --
Mortgage loans on real | |
estate..................... (16,390) (14,209) | (44,481) (31,499) | --
Policy loans - net.......... (2,940) (328) | (3,870) (637) | (1,977)
Short-term investments-net.. (26,692) (13,244) | -- -- | --
--------- -------- | -------- -------- | ---------
(532,545) (57,378) | (208,389) (179,311) | (186,566)
Purchase of property and | |
equipment................... (6,485) (252) | (875) (137) | --
--------- -------- | -------- -------- | ---------
Net cash used in investing | |
activities.................. (389,986) (46,115) | (152,399) (129,326) | (131,121)
</TABLE>
See accompanying notes.
80
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
<S> <C> <C> | <C> <C> | <C>
FINANCING ACTIVITIES | |
Proceeds from issuance of | |
surplus note................ $ 60,000 -- | -- $ 25,000 | --
Proceeds from reciprocal loan | |
agreement borrowings........ 500,722 -- | -- -- | --
Repayment of reciprocal loan | |
agreement borrowings........ (500,722) -- | -- -- | --
Proceeds from revolving | |
note payable................ 108,495 -- | -- -- | --
Repayment of revolving note | |
payable..................... (108,495) -- | -- -- | --
Proceeds from line of credit | |
borrowings.................. -- $10,119 | $ 97,124 -- | --
Repayment of line of credit | |
borrowings................... -- (2,207) | (80,977) -- | --
Receipts from annuity and | |
interest sensitive life | |
policies credited to | |
account balances............ 593,428 62,306 | 261,549 116,819 | $149,750
Return of account balances | |
on annuity and interest | |
sensitive life policies..... (72,649) (6,350) | (13,931) (3,315) | (2,695)
Net reallocations to Separate | |
Accounts (239,671) (17,017) | (93,069) (10,237) | (8,286)
Contributions of capital by | |
parent...................... 98,441 -- | 1,011 -- | --
Dividends paid on preferred | |
stock....................... -- -- | -- -- | (719)
Net cash provided by | |
financing activities........ 439,549 46,851 | 171,707 128,267 | 138,050
| |
Increase (decrease) in cash | |
and cash equivalents........ (14,360) 3,863 | 11,337 (1,816) | 2,609
Cash and cash equivalents at | |
beginning of period......... 21,039 17,176 | 5,839 7,655 | 5,046
Cash and cash equivalents at | |
end of period............... $ 6,679 $21,039 | $ 17,176 $ 5,839 | $ 7,655
| |
SUPPLEMENTAL DISCLOSURE | |
OF CASH FLOW INFORMATION | |
Cash paid during the period | |
for: | |
Interest.................... $ 4,305 $ 295 | $ 1,912 -- | --
Income taxes................ 99 -- | 283 -- | --
Non-cash financing activities: | |
Non-cash adjustment to | |
additional paid-in capital | |
for adjusted merger costs.. 143 -- | -- -- | --
Contribution of property and | |
equipment from EIC Variable, | |
Inc. net of $353 of | |
accumulated depreciation... -- -- | 110 -- | --
Contribution of capital from | |
parent to repay line of | |
credit borrowings.......... 24,059 -- | -- -- | --
</TABLE>
See accompanying notes.
81
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
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," and with Golden American, collectively, the
"Companies"). All significant intercompany accounts and
transactions have been eliminated.
ORGANIZATION
Golden American, a wholly owned subsidiary of Equitable of Iowa
Companies, Inc., 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 and December
23, 1997, First Golden became licensed to sell insurance products
in New York and Delaware, respectively. The Companies' products
are marketed by broker/dealers, financial institutions and
insurance agents. The Companies' primary customers are consumers
and corporations.
On October 24, 1997, PFHI Holding, Inc. ("PFHI"), a Delaware
corporation, acquired all of the outstanding capital stock of
Equitable of Iowa Companies ("Equitable") according to the terms
of an Agreement and Plan of Merger ("Merger Agreement") dated July
7, 1997 among Equitable, PFHI and ING Groep N.V. ("ING"). PFHI is
a wholly owned subsidiary of ING, a global financial services
holding company based in The Netherlands. As a result of this
transaction, Equitable was merged into PFHI, which was
simultaneously renamed Equitable of Iowa Companies, Inc. ("EIC" or
the "Parent"), a Delaware corporation. See Note 6 for additional
information regarding the merger.
On August 13, 1996, Equitable acquired all of the outstanding
capital stock of BT Variable, Inc. (subsequently known as EIC
Variable, Inc.) and its wholly owned subsidiaries, Golden American
and Directed Services, Inc. ("DSI") from Whitewood Properties
Corporation ("Whitewood"). See Note 7 for additional information
regarding the acquisition.
For financial statement purposes, the ING merger was accounted for
as a purchase effective October 25, 1997 and the change in control
of Golden American through the acquisition of BT Variable, Inc.
was accounted for as a purchase effective August 14, 1996. The
merger and acquisition resulted in new bases of accounting
reflecting estimated fair values of assets and liabilities at
their respective dates. As a result, the Companies' financial
statements for the periods after October 24, 1997 are presented on
the Post-Merger new basis of accounting, for the period August 14,
1996 through October 24, 1997 are presented on the Post-
Acquisition basis of accounting, and for August 13, 1996 and prior
periods are presented on the Pre-Acquisition basis of accounting.
INVESTMENTS
Fixed Maturities: The Companies account for their investments
under the Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires fixed maturities 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 value
82
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
of purchased insurance in force ("VPIF"), deferred policy acquisition
costs ("DPAC") and deferred income taxes. At December 31, 1998 and 1997,
all of the Companies' fixed maturities are designated as available
for sale, although the Companies are not precluded from designating
fixed maturities as held for investment or trading at some future date.
Securities determined to have a decline in value that is other
than temporary are written down to estimated fair value, which
becomes the new cost basis by a charge to realized losses in the
Companies' Statements of Operations. Premiums and discounts are
amortized/accrued utilizing a method which results in a constant
yield over the securities' expected lives. Amortization/accrual of
premiums and discounts on mortgage and other asset-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. 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 determined to have a
decline in value that is other than temporary are written down to
estimated fair value, which then becomes the new cost basis by a
charge to realized losses in the Companies' Statements of
Operations.
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 the Companies 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.
Realized Gains and Losses: Realized gains and losses are
determined on the basis of specific identification and average
cost methods for manager initiated and issuer initiated disposals,
respectively.
Fair Values: Estimated fair values, as reported herein, of
conventional mortgage-backed securities not actively traded in a
liquid market and publicly traded fixed maturities 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 consist of the Companies'
investment in its registered separate accounts are based upon the
quoted fair value of the securities comprising the individual
portfolios underlying the separate accounts.
83
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
CASH AND CASH EQUIVALENTS
For purposes of the accompanying Statements of Cash Flows, the
Companies consider 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
first year commissions and interest bonuses, extra credit bonuses
and other expenses related to the production of new business, have
been deferred. Acquisition costs for variable annuity and variable
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 when the Companies revise their estimate of
current or future gross profits to be realized from a group of
products. DPAC is adjusted to reflect the pro forma impact of
unrealized gains and losses on fixed maturities the Companies have
designated as "available for sale" under SFAS No. 115.
VALUE OF PURCHASED INSURANCE IN FORCE
As a result of the merger and the acquisition, a portion of the
purchase price related to each transaction was allocated to the
right to receive future cash flows from existing insurance
contracts. This allocated cost represents VPIF which reflects the
value of those purchased policies calculated by discounting
actuarially determined expected future cash flows at the discount
rate determined by the purchaser. Amortization of VPIF is charged
to expense in proportion to expected gross profits of the
underlying business. This amortization is adjusted retrospectively
when the Companies revise the estimate of current or future gross
profits to be realized from the insurance contracts acquired. VPIF
is adjusted to reflect the pro forma impact of unrealized gains
and losses on available for sale fixed maturities. See Notes 6 and
7 for additional information on VPIF resulting from the merger and
acquisition.
PROPERTY AND EQUIPMENT
Property and equipment primarily represent leasehold improvements,
office furniture, certain other equipment and capitalized computer
software and are not considered to be significant to the
Companies' overall operations. Property and equipment are reported
at cost less allowances for depreciation. Depreciation expense is
computed primarily on the basis of the straight-line method over
the estimated useful lives of the assets.
GOODWILL
Goodwill was established as a result of the merger and is being
amortized over 40 years on a straight-line basis. Goodwill
established as a result of the acquisition was being amortized
over 25 years on a straight-line basis. See Notes 6 and 7 for
additional information on the merger and acquisition.
FUTURE POLICY BENEFITS
Future policy benefits for divisions with fixed interest
guarantees 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 3.00% to 10.00% during 1998, 3.30% to 8.25% during
1997 and 4.00% to 7.25% during 1996. The unearned revenue reserve
represents unearned distribution fees. These distribution fees
have been deferred and are amortized over the life of the
contracts in proportion to expected gross profits.
84
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
SEPARATE ACCOUNTS
Assets and liabilities of the separate accounts reported in the
accompanying Balance Sheets represent funds separately
administered principally for variable annuity and variable life
contracts. Contractholders, rather than the Companies, bear the
investment risk for the variable products. At the direction of the
contractholders, the separate accounts invest the premiums from
the sale of variable 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
Companies. The portion of the separate account assets equal to the
reserves and other liabilities of variable annuity and variable
life contracts cannot be charged with liabilities arising out of
any other business the Companies may conduct.
Variable separate account assets are carried at fair value of the
underlying investments and 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; the fair value of these liabilities is equal to their
carrying amount. Net investment income and realized and unrealized
capital gains and losses related to separate account assets are
not reflected in the accompanying Statements of Operations.
Product charges recorded by the Companies from variable 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 maturities the Companies have 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 Companies'
Statements of Operations 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. Prior approval of insurance regulatory authorities is
required for payment of dividends to the stockholder which exceed
an annual limit. During 1999, Golden American cannot pay dividends
to its Parent without prior approval of statutory authorities.
Under the provisions of the insurance laws of the State of New
York, First Golden cannot distribute any dividends to its
stockholder unless a notice of its intent to declare a dividend
and the amount of the dividend has been filed at least thirty days
in advance of the proposed declaration. If the Superintendent
finds the financial condition of First Golden does not warrant the
distribution, the Superintendent may disapprove the distribution
by giving written notice to First Golden within thirty days after
the filing.
85
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
SEGMENT REPORTING
As of December 31, 1998, the Companies adopted the SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related
Information." SFAS No. 131 superseded SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131
establishes standards for the way public business enterprises
report information about operating segments in annual financial
statements and requires enterprises to report selected information
about operating segments in interim financial reports. SFAS No.
131 also establishes standards for related disclosures about
products and services, geographic areas and major customers.
The Companies manage their business as one segment, the sale of
variable products designed to meet customer needs for tax-
advantaged methods of saving for retirement and protection from
unexpected death. Variable products are sold to consumers and
corporations throughout the United States. The adoption of SFAS
No. 131 did not affect the results of operations or financial
position of the Companies.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions affecting the amounts reported in
the financial statements and accompanying notes. 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 value of purchased insurance
in force, (4) fair values of assets and liabilities recorded as a
result of merger and 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 proceeding are inherently subject
to change and are reassessed periodically. Changes in estimates
and assumptions could materially impact the financial statements.
RECLASSIFICATIONS
Certain amounts in the financial statements for the periods ended
within the years ended December 31, 1997 and 1996 have been
reclassified to conform to the December 31, 1998 financial
statement presentation.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Companies 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 the merger/acquisition and is amortized
and charged to expense; (3) future policy benefit reserves for
divisions with fixed interest guarantees 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
86
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
2. BASIS OF FINANCIAL REPORTING (continued)
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 value of
purchased insurance in force, deferred policy acquisition costs
and deferred income taxes (if applicable), credited/charged
directly to stockholder's equity rather than valued at amortized
cost; (6) the carrying value of fixed maturities is reduced to
fair value by a charge to realized losses in the Statements of
Operations 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 products consist of policy charges applicable to each
contract for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges
assessed rather than premiums received; (11) the financial
statements of Golden American's wholly owned subsidiary are
consolidated rather than recorded at the equity in net assets;
(12) surplus notes are reported as liabilities rather than as
surplus; and (13) 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.
The net loss for Golden American as determined in accordance with
statutory accounting practices was $68,002,000 in 1998, $428,000
in 1997 and $9,188,000 in 1996. Total statutory capital and
surplus was $183,045,000 at December 31, 1998 and $76,914,000 at
December 31, 1997.
87
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
3. INVESTMENT OPERATIONS
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
| (Dollars in thousands) |
<S> <C> <C> | <C> <C> | <C>
Fixed maturities............. $35,224 $4,443 | $18,488 $5,083 | $4,507
Equity securities............ -- 3 | -- 103 | --
Mortgage loans on | |
real estate................. 6,616 879 | 3,070 203 | --
Policy loans................. 619 59 | 482 78 | 73
Short-term | |
investments................. 1,311 129 | 443 441 | 341
Other, net................... 246 (154) | 24 2 | 22
Funds held in | |
escrow...................... -- -- | -- -- | 145
------- ------ | ------- ------ | ------
Gross investment | |
income...................... 44,016 5,359 | 22,507 5,910 | 5,088
Less investment | |
expenses.................... (1,531) (232) | (851) (115) | (98)
------- ------ | ------- ------ | ------
Net investment | |
income...................... $42,485 $5,127 | $21,656 $5,795 | $4,990
======= ====== | ======= ====== | ======
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
| (Dollars in thousands) |
<S> <C> <C> | <C> <C> | <C>
Fixed maturities: | |
available for sale.......... $(1,428) $25 | $151 $42 | $(420)
Mortgage loans............... (63) (10) | -- -- | --
------- --- | ---- --- | -----
Realized gains (losses) | |
on investments.............. $(1,491) $15 | $151 $42 | $(420)
======= === | ==== === | =====
</TABLE>
88
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
3. INVESTMENT OPERATIONS (continued)
The change in unrealized appreciation (depreciation) of securities
at fair value is as follows:
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
| (Dollars in thousands) |
<S> <C> <C> | <C> <C> | <C>
Fixed maturities: | |
Available for sale.......... $1,100 $(3,494) | $4,197 $2,497 | $(3,045)
Held for investment......... -- -- | -- -- | (90)
Equity securities............ (2,390) (68) | (462) (4) | (2)
------ ------- | ------ ------ | -------
Unrealized appreciation | |
(depreciation) of | |
securities.................. $(1,290) $(3,562) | $3,735 $2,493 | $(3,137)
======= ======= | ====== ====== | =======
</TABLE>
At December 31, 1998 and December 31, 1997, amortized cost, gross
unrealized gains and losses and estimated fair values of fixed
maturities, all of which are designated as available for sale, are
as follows:
<TABLE>
POST-MERGER
---------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
U.S. government and governmental
agencies and authorities............. $ 13,568 $ 182 $ (8) $ 13,742
Foreign governments................... 2,028 8 -- 2,036
Public utilities...................... 67,710 546 (447) 67,809
Corporate securities.................. 365,569 4,578 (2,658) 367,489
Other asset-backed securities......... 99,877 281 (1,046) 99,112
Mortgage-backed securities............ 191,020 1,147 (370) 191,797
-------- ------ ------- --------
Total................................. $739,772 $6,742 $(4,529) $741,985
======== ====== ======= ========
DECEMBER 31, 1997
U.S. government and governmental
agencies and authorities............ $ 5,705 $ 5 $ (1) $ 5,709
Foreign governments................... 2,062 -- (9) 2,053
Public utilities...................... 26,983 55 (4) 27,034
Corporate securities.................. 259,798 1,105 (242) 260,661
Other asset-backed securities......... 3,155 32 -- 3,187
Mortgage-backed securities............ 115,585 202 (30) 115,757
-------- ------ ------- --------
Total................................. $413,288 $1,399 $ (286) $414,401
======== ====== ======= ========
</TABLE>
89
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
3. INVESTMENT OPERATIONS (continued)
At December 31, 1998, net unrealized investment gains on fixed
maturities designated as available for sale totaled $2,213,000.
Appreciation of $1,005,000 was included in stockholder's equity at
December 31, 1998 (net of an adjustment of $203,000 to VPIF, an
adjustment of $455,000 to DPAC and deferred income taxes of
$550,000). 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, 1998 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.
POST-MERGER
---------------------------
Amortized Estimated
December 31, 1998 Cost Fair Value
- ----------------------------------------------------------------------
(Dollars in thousands)
Due within one year...................... $ 50,208 $ 50,361
Due after one year through five years.... 310,291 311,943
Due after five years through ten years... 78,264 78,541
Due after ten years...................... 10,112 10,231
448,875 451,076
Other asset-backed securities............ 99,877 99,112
Mortgage-backed securities............... 191,020 191,797
-------- --------
Total.................................... $739,772 $741,985
======== ========
An analysis of sales, maturities and principal repayments of the
Companies' fixed maturities portfolio is as follows:
<TABLE>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
--------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
POST-MERGER
For the year ended December 31, 1998:
Scheduled principal repayments,
calls and tenders...................... $102,504 $ 60 $ (3) $102,561
Sales................................... 43,204 518 (1,030) 42,692
-------- ---- ------- --------
Total................................... $145,708 $578 $(1,033) $145,253
======== ==== ======= ========
For the period October 25, 1997 through
December 31, 1997:
Scheduled principal repayments,
calls and tenders..................... $ 6,708 $ 2 -- $ 6,710
Sales.................................. 3,138 23 -- 3,161
-------- ---- ------- --------
Total.................................. $ 9,846 $ 25 -- $ 9,871
======== ==== ======= ========
</TABLE>
90
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
3. INVESTMENT OPERATIONS (continued)
<TABLE>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
--------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
POST- ACQUISITION
For the period January 1, 1997 through
October 24, 1997:
Scheduled principal repayments,
calls and tenders..................... $25,419 -- -- $25,419
Sales.................................. 14,052 $153 $ (2) 14,203
------- ---- ---- -------
Total.................................. $39,471 $153 $ (2) $39,622
======= ==== ==== =======
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
======= ==== ==== =======
PRE-ACQUISITION
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
======= ==== ===== =======
</TABLE>
Investment Valuation Analysis: The Companies analyze the
investment portfolio at least quarterly in order to determine if
the carrying value of any investment has been impaired. The
carrying 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 the year ended
December 31, 1998, Golden American recognized a loss on two fixed
maturity investments of $973,000. During 1997 and 1996, no
investments were identified as having an other than temporary
impairment.
Investments on Deposit: At December 31, 1998 and 1997, affidavits
of deposits covering bonds with a par value of $6,470,000 and
$6,605,000, respectively, were on deposit with regulatory
authorities pursuant to certain statutory requirements.
Investment Diversifications: The Companies' investment policies
related to the 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
December 31, 1998 and December 31, 1997. Fixed maturities included
investments in basic industrials (26% in 1998, 30% in 1997),
conventional mortgage-backed securities (25% in 1998, 13% in
1997), financial companies (19% in 1998, 24% in 1997), other asset-
backed securities (11% in 1998) and various government bonds and
government or agency mortgage-backed securities (5% in 1998, 17%
in 1997). Mortgage loans on real estate have been analyzed
91
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
3. INVESTMENT OPERATIONS (continued)
by geographical location with concentrations by state identified as
California (12% in 1998 and 1997), Utah (11% in 1998, 13% in 1997)
and Georgia (10% in 1998, 11% in 1997). There are no other
concentrations of mortgage loans in any state exceeding ten
percent at December 31, 1998 and 1997. Mortgage loans on real
estate have also been analyzed by collateral type with significant
concentrations identified in office buildings (36% in 1998, 43% in
1997), industrial buildings (32% in 1998, 33% in 1997) and retail
facilities (20% in 1998, 15% in 1997). Equity securities are not
significant to the Companies' 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, 1998.
4. COMPREHENSIVE INCOME
As of January 1, 1998, the Companies adopted the SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 establishes new
rules for the reporting and display of comprehensive income and
its components; however, the adoption of this statement had no
impact on the Companies' net income or stockholder's equity. SFAS
No. 130 requires unrealized gains or losses on the Companies'
available for sale securities (net of VPIF, DPAC and deferred
income taxes) to be included in other comprehensive income. Prior
to the adoption of SFAS No. 130, unrealized gains (losses) were
reported separately in stockholder's equity. Prior year financial
statements have been reclassified to conform to the requirements
of SFAS No. 130.
Total comprehensive income (loss) for the Companies includes
$1,015,000 for the year ended December 31, 1998 for First Golden
($159,000, $536,000 and $(57,000), respectively, for the periods
October 25, 1997 through December 31, 1997, January 1, 1997
through October 24, 1997 and December 17, 1996 through December
31, 1996). Other comprehensive income excludes net investment
gains (losses) included in net income which merely represent
transfers from unrealized to realized gains and losses. These
amounts total $(2,133,000) in 1998. Such amounts, which have been
measured through the date of sale, are net of income taxes and
adjustments to VPIF and DPAC totaling $705,000 in 1998.
5. 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 Companies' investments, investment
contracts and debt fall within the standards' definition of a
financial instrument. Fair values for the Companies' insurance
contracts other than investment contracts are not required to be
disclosed. 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. 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 Companies' business or financial condition based on the
information presented herein.
The Companies closely monitor the composition and yield of
invested assets, the duration and interest credited on insurance
liabilities and resulting interest spreads and timing of cash
flows. These amounts
92
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
are taken into consideration in the Companies' 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. These assumptions may not
result in values consistent with those obtained through an actuarial
appraisal of the Companies' business or values that might arise in
a negotiated transaction.
The following compares carrying values as shown for financial
reporting purposes with estimated fair values:
<TABLE>
POST-MERGER
-----------------------------------------------
December 31, 1998 December 31, 1997
---------------------- -----------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----------- --------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
ASSETS
Fixed maturities, available
for sale...................... $ 741,985 $ 741,985 $ 414,401 $ 414,401
Equity securities.............. 11,514 11,514 3,904 3,904
Mortgage loans on real estate.. 97,322 99,762 85,093 86,348
Policy loans................... 11,772 11,772 8,832 8,832
Short-term investments......... 41,152 41,152 14,460 14,460
Cash and cash equivalents...... 6,679 6,679 21,039 21,039
Separate account assets........ $3,396,114 $3,396,114 $1,646,169 $1,646,169
LIABILITIES
Annuity products............... 869,009 827,597 493,181 469,714
Surplus notes.................. 85,000 90,654 25,000 28,837
Line of credit with affiliate.. -- -- 24,059 24,059
Separate account liabilities... 3,396,114 3,396,114 1,646,169 1,646,169
</TABLE>
The following methods and assumptions were used by the Companies
in estimating fair values.
Fixed Maturities: Estimated fair values of conventional mortgage-
backed securities not actively traded in a liquid market and
publicly traded securities 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 Companies' investment in the portfolios
underlying its separate accounts, are based upon the quoted fair
value of individual securities comprising the individual
portfolios. For equity securities not actively traded, estimated
fair values are based upon values of issues of comparable returns
and quality.
Mortgage Loans on Real Estate: Fair values are estimated by
discounting expected cash flows, using interest rates currently
offered for similar loans.
Policy Loans: Carrying values approximate the estimated fair value
for policy loans.
93
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Short-Term Investments and Cash and Cash Equivalents: Carrying
values reported in the Companies' historical cost basis balance
sheet approximate estimated fair value for these instruments due
to their short-term nature.
Separate Account Assets: Separate account assets are reported at
the quoted fair values of the individual securities in the
separate accounts.
Annuity Products: Estimated fair values of the Companies'
liabilities for future policy benefits for the divisions of the
variable annuity products with fixed interest guarantees and for
supplemental contracts without life contingencies are stated at
cash surrender value, the cost the Companies would incur to
extinguish the liability.
Surplus Notes: Estimated fair value of the Companies' surplus
notes were based upon discounted future cash flows using a
discount rate approximating the Companies' return on invested
assets.
Line Of Credit With Affiliate: Carrying value reported in the
Companies' historical cost basis balance sheet approximates
estimated fair value for this instrument.
Separate Account Liabilities: Separate account liabilities are
reported at full account value in the Companies' historical cost
balance sheet. Estimated fair values of separate account
liabilities are equal to their carrying amount.
6. MERGER
Transaction: On October 23, 1997, Equitable's shareholders
approved the Merger Agreement dated July 7, 1997 among Equitable,
PFHI and ING. On October 24, 1997, PFHI, a Delaware corporation,
acquired all of the outstanding capital stock of Equitable
according 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,
owned all the outstanding capital stock of Equitable Life
Insurance Company of Iowa ("Equitable Life") and Golden American
and their wholly owned subsidiaries. In addition, Equitable owned
all the outstanding capital stock of Locust Street Securities,
Inc. ("LSSI"), Equitable Investment Services, Inc. (subsequently
dissolved), DSI, Equitable of Iowa Companies Capital Trust,
Equitable of Iowa Companies Capital Trust II and Equitable of Iowa
Securities Network, Inc. (subsequently renamed ING Funds
Distributor, Inc.). In exchange for the outstanding capital stock
of Equitable, ING paid total consideration of approximately $2.1
billion in cash and stock and assumed approximately $400 million
in debt. As a result of this transaction, Equitable was merged
into PFHI, which was simultaneously renamed Equitable of Iowa
Companies, Inc. ("EIC" or the "Parent"), a Delaware corporation.
All costs of the merger, including expenses to terminate certain
benefit plans, were paid by the Parent.
Accounting Treatment: The merger was accounted for as a purchase
resulting in a new basis of accounting, reflecting estimated fair
values for assets and liabilities at October 24, 1997. The
purchase price was allocated to EIC and its subsidiaries with
$227,497,000 allocated to the Companies. Goodwill was established
for the excess of the merger cost over the fair value of the net
assets and attributed to EIC and its subsidiaries including Golden
American and First Golden. The amount of goodwill allocated to the
Companies relating to the merger was $151,127,000 at the merger
date and is being amortized over 40 years on a straight-line
basis. The carrying value of goodwill will be reviewed
periodically for any indication of impairment in value. The
Companies' DPAC, previous balance of VPIF and unearned revenue
reserve, as of the merger date, were eliminated and a new asset of
$44,297,000 representing VPIF was established for all policies in
force at the merger date.
94
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
6. Merger (continued)
Value of Purchased Insurance In Force: As part of the merger, a
portion of the acquisition cost was allocated to the right to
receive future cash flows from insurance contracts existing with
the Companies at the merger date. This allocated cost represents
VPIF reflecting the value of those purchased policies calculated
by discounting the actuarially determined expected future cash
flow at the discount rate determined by ING.
An analysis of the VPIF asset is as follows:
POST-MERGER
-------------------------------------
For the period
For the year October 25, 1997
ended through
December 31, 1998 December 31, 1997
----------------- -----------------
(Dollars in thousands)
Beginning balance................. $43,174 $44,297
-------- --------
Imputed interest.................. 2,802 1,004
Amortization...................... (7,753) (1,952)
Changes in assumptions of
timing of gross profits.......... 227 --
-------- --------
Net amortization.................. (4,724) (948)
Adjustment for unrealized gains
on available for sale
securities....................... (28) (175)
Adjustment for other receivables
and merger costs................. (2,445) --
-------- --------
Ending balance.................... $35,977 $43,174
======= =======
Interest is imputed on the unamortized balance of VPIF at a rate
of 7.38% for the year ended December 31, 1998 and 7.03% for the
period October 25, 1997 through December 31, 1997. The
amortization of VPIF, net of imputed interest, is charged to
expense. VPIF decreased $2,664,000 in the second quarter of 1998
to adjust the value of other receivables at merger date and
increased $219,000 in the first quarter of 1998 as a result of an
adjustment to the merger costs. VPIF is adjusted for the
unrealized gains (losses) on available for sale securities; such
changes are included directly in stockholder's equity. Based on
current conditions and assumptions as to the impact of future
events on acquired policies in force, the expected approximate net
amortization relating to VPIF as of December 31, 1998 is
$4,300,000 in 1999, $4,000,000 in 2000, $3,900,000 in 2001,
$3,700,000 in 2002 and $3,300,000 in 2003. Actual amortization may
vary based upon changes in assumptions and experience.
7. 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 Company ("Bankers Trust"),
according to the terms of the Purchase Agreement dated 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.
After 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
95
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
7. Acquisition (continued)
Golden American and DSI were transferred to Equitable, while the
remainder of its net assets were contributed to Golden American.
On December 30, 1997, EIC Variable, Inc. was dissolved.
Accounting Treatment: The acquisition was accounted for as a
purchase resulting in a new basis of accounting, which reflected
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. The allocation
of the purchase price to Golden American was approximately
$139,872,000. Goodwill was established for the excess of the
purchase price over the fair value of the net assets acquired and
attributed to Golden American. The amount of goodwill relating to
the acquisition was $41,113,000 and was amortized over 25 years on
a straight-line basis until the October 24, 1997 merger with ING.
Golden American's DPAC, previous balance of VPIF and unearned
revenue reserve, as of the acquisition date, were eliminated and
an asset of $85,796,000 representing VPIF was established for all
policies in force at the acquisition date.
Value of Purchased Insurance In Force: 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 VPIF reflecting 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 VPIF asset is as follows:
<TABLE>
POST-ACQUISITION | PRE-ACQUISITION
------------------------------------|----------------
For the period For the period | For the period
January 1, 1997 August 14,1996 | January 1, 1996
through through | through
October 24, 1997 December 31, 1996 | August 13, 1996
---------------- ----------------- | ---------------
(Dollars in thousands)
<S> <C> <C> | <C>
Beginning balance................ $83,051 $85,796 | $6,057
------- ------- | ------
Imputed interest................. 5,138 2,465 | 273
Amortization..................... (12,656) (5,210) | (1,224)
Changes in assumption of | ------
timing of gross profits......... 2,293 -- | --
------- ------- |
Net amortization................. (5,225) (2,745) | (951)
Adjustment for unrealized gains |
(losses) on available for sale |
securities...................... (373) -- | 11
------- ------- | ------
Ending balance $77,453 $83,051 | $5,117
======= ======= | ======
</TABLE>
Pre-Acquisition VPIF represents the remaining value assigned to in
force contracts when Bankers Trust purchased Golden American from
Mutual Benefit Life Insurance Company in Rehabilitation ("Mutual
Benefit") on September 30, 1992.
Interest was imputed on the unamortized balance of VPIF at rates
of 7.70% to 7.80% for the period August 14, 1996 through October
24, 1997. The amortization of VPIF net of imputed interest was
charged to expense. VPIF was also adjusted for the unrealized
gains (losses) on available for sale securities; such changes were
included directly in stockholder's equity.
8. INCOME TAXES
Golden American files a consolidated federal income tax return.
Under the Internal Revenue Code, a newly acquired insurance
company cannot file as part of its parent's consolidated tax
return for 5 years.
96
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
8. INCOME TAXES(continued)
At December 31, 1998, the Companies have net operating loss
("NOL") carryforwards for federal income tax purposes of
approximately $50,917,000. Approximately $5,094,000, $3,354,000
and $42,469,000 of these NOL carryforwards are available to offset
future taxable income of the Companies through the years 2011,
2012 and 2013, respectively.
INCOME TAX EXPENSE
Income tax expense (benefit) included in the consolidated
financial statements is as follows:
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
| (Dollars in thousands) |
<S> <C> <C> | <C> <C> | <C>
Current..................... -- -- | $ 12 -- | --
Deferred.................... $5,279 $146 | (1,349) $220 | $(1,463)
------ ---- | |
$5,279 $146 | $(1,337) $220 | $(1,463)
====== ==== | ======= ==== | =======
</TABLE>
The effective tax rate on income (loss) before income taxes is
different from the prevailing federal income tax rate. A
reconciliation of this difference is as follows:
<TABLE>
POST-MERGER | POST-ACQUISITION | PRE-ACQUISITION
------------------------------------ | ----------------------------------- | ---------------
For the period | For the period For the period | For the period
For the year October 25,1997 | January 1,1997 August 14, 1996 | January 1, 1996
ended through | through through | through
December 31, 1998 December 31, 1997 | October 24, 1997 December 31, 1996 | August 13, 1996
----------------- ----------------- | ---------------- ----------------- | ---------------
| (Dollars in thousands) |
<S> <C> <C> | <C> <C> | <C>
| |
Income (loss) before | |
income taxes.............. $10,353 $(279) | $ ( 608) $570 | $1,736
======= ===== | ======= ==== | ======
Income tax (benefit) at | |
federal statutory rate.... $ 3,624 $ (98) | $ (213) $200 | $ 607
Tax effect (decrease) of: | |
Realization of NOL | |
carryforwards........... -- -- | -- -- | (1,214)
Goodwill amortization..... 1,322 220 | -- -- | --
Compensatory stock | |
option and restricted | |
stock expense............ -- -- | (1,011) -- | --
Meals and | |
entertainment............ 157 23 | 53 20 | --
Other items............... 176 1 | (166) -- | --
Change in valuation | |
allowance................. -- -- | -- -- | (856)
=------ ----- | ------- ---- | -------
Income tax expense | |
(benefit)................. $ 5,279 $ 146 | $(1,337) $220 | $(1,463)
======= ===== | ======= ==== | =======
</TABLE>
97
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
8. INCOME TAXES (continued)
DEFERRED INCOME TAXES
The tax effect of temporary differences giving rise to the
Companies' deferred income tax assets and liabilities at December
31, 1998 and 1997 is as follows:
POST-MERGER
------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
(Dollars in thousands)
Deferred tax assets:
Net unrealized depreciation of
securities at fair value.......... $ 691 --
Future policy benefits............. 66,273 $27,399
Deferred policy acquisition costs.. -- 4,558
Goodwill........................... 16,323 17,620
Net operating loss carryforwards... 17,821 3,044
Other.............................. 1,272 1,548
-------- -------
102,380 54,169
POST-MERGER
------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
(Dollars in thousands)
Deferred tax liabilities:
Net unrealized appreciation of
securities at fair value.......... -- $ (130)
Fixed maturity securities.......... $ (1,034) (1,665)
Deferred policy acquisition costs.. (55,520) --
Mortgage loans on real estate...... (845) (845)
Value of purchased insurance in
force............................. (12,592) (15,172)
Other.............................. (912) (127)
-------- --------
(70,903) (17,939)
-------- --------
Deferred income tax asset........... $ 31,477 $ 36,230
======== ========
The Companies are required to establish a "valuation allowance"
for any portion of the deferred tax assets management believes
will not be realized. In the opinion of management, it is more
likely than not the Companies will realize the benefit of the
deferred tax assets; therefore, no such valuation allowance has
been established.
9. RETIREMENT PLANS
Defined Benefit Plans: In 1998 and 1997, the Companies were
allocated their share of the pension liability associated with
their employees. The Companies' employees are covered by the
employee retirement plan of an affiliate, Equitable Life. Further,
Equitable Life sponsors a defined contribution plan that is
qualified under Internal Revenue Code Section 401(k). The
following tables summarize the benefit obligations and the funded
status for pension benefits over the two-year period ended
December 31, 1998:
98
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
9. RETIREMENT PLANS (continued)
1998 1997
-------- ------
(Dollars in thousands)
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at January 1............ $ 956 $192
Service cost............................... 1,138 682
Interest cost.............................. 97 25
Actuarial loss............................. 2,266 57
Benefit payments........................... (3) --
------ ----
Benefit obligation at December 31.......... $4,454 $956
====== ====
1998 1997
-------- ------
(Dollars in thousands)
FUNDED STATUS
Funded status at December 31............... $(4,454) $(956)
Unrecognized net loss...................... 2,266 --
------- -----
Net amount recognized...................... $(2,188) $(956)
======= =====
During 1998 and 1997, the Companies' plan assets were held by
Equitable Life, an affiliate.
The weighted-average assumptions used in the measurement of the
Companies' benefit obligation are as follows:
1998 1997
------ ------
DECEMBER 31
Discount rate................................ 6.75% 7.25%
Expected return on plan assets............... 9.50 9.00
Rate of compensation increase................ 4.00 5.00
The following table provides the net periodic benefit cost for the
fiscal years 1998 and 1997:
<TABLE>
POST-MERGER | POST-ACQUISITION
------------------------------------ | ----------------
For the period | For the period
For the year October 25,1997 | January 1,1997
ended through | through
December 31, 1998 December 31, 1997 | October 24, 1997
----------------- ----------------- | ----------------
(Dollars in thousands)
<S> <C> <C> | <C>
Service cost................ $1,138 $114 | $568
Interest cost............... 97 10 | 15
Amortization of net loss.... -- -- | 1
------ ---- | ----
Net periodic benefit cost... $1,235 $124 | $584
====== ==== | ====
</TABLE>
There were no gains or losses resulting from curtailments or settlements
during 1998 or 1997.
99
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
9. RETIREMENT PLANS (continued)
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for pension plans with accumulated
benefit obligations in excess of plan assets were $4,454,000,
$3,142,000 and $0, respectively, as of December 31, 1998 and
$956,000, $579,000 and $0, respectively, as of December 31, 1997.
10. RELATED PARTY TRANSACTIONS
Operating Agreements: DSI acts as the principal underwriter (as
defined in the Securities Act of 1933 and the Investment Company
Act of 1940, as amended) and distributor of the variable insurance
products issued by the Companies. DSI is authorized to enter into
agreements with broker/dealers to distribute the Companies'
variable insurance products and appoint representatives of the
broker/dealers as agents. For the year ended December 31, 1998 and
for the periods October 25, 1997 through December 31, 1997 and
January 1, 1997 through October 24, 1997, the Companies paid
commissions to DSI totaling $117,470,000, $9,931,000 and
$26,419,000, respectively ($9,995,000 for the period August 14,
1996 through December 31, 1996 and $17,070,000 for the period
January 1, 1996 through August 13, 1996).
Golden American provides certain managerial and supervisory
services to DSI. The fee paid by DSI for these services is
calculated as a percentage of average assets in the variable
separate accounts. For the year ended December 31, 1998 and for
the periods October 25, 1997 through December 31, 1997 and January
1, 1997 through October 24, 1997, the fee was $4,771,000, $508,000
and $2,262,000, respectively. 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.
Effective January 1, 1998, the Companies have an asset management
agreement with ING Investment Management LLC ("ING IM"), an
affiliate, in which ING IM provides asset management services.
Under the agreement, the Companies record a fee based on the value
of the assets under management. The fee is payable quarterly. For
the year ended December 31, 1998, the Companies incurred fees of
$1,504,000 under this agreement.
Prior to 1998, the Companies had a service agreement with
Equitable Investment Services, Inc. ("EISI"), an affiliate, in
which EISI provided investment management services. Payments for
these services totaled $200,000, $768,000 and $72,000 for the
periods October 25, 1997 through December 31, 1997, January 1,
1997 through October 24, 1997 and August 14, 1996 through December
31, 1996, respectively.
Golden American has a guaranty agreement with Equitable Life, an
affiliate. 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 in 1998 or in 1997.
Golden American provides certain advisory, computer and other
resources and services to Equitable Life. Revenues for these
services, which reduced general expenses incurred by Golden
American, totaled $5,833,000 for the year ended December 31, 1998
($1,338,000 and $2,992,000 for the periods October 25,
100
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
10. RELATED PARTY TRANSACTIONS (continued)
1997 through December 31, 1997 and January 1, 1997 through October
24, 1997, respectively). No services were provided by Golden American
in 1996.
The Companies have a service agreement with Equitable Life in
which Equitable Life provides administrative and financial related
services. Under this agreement, the Companies incurred expenses of
$1,058,000 for the year ended December 31, 1998 ($13,000 and
$16,000 for the periods October 25, 1997 through December 31, 1997
and January 1, 1997 through October 24, 1997, respectively).
First Golden provides resources and services to DSI. Revenues for
these services, which reduce general expenses incurred by the
Companies, totaled $75,000 in 1998.
For the year ended December 31, 1998, the Companies had premiums,
net of reinsurance, for variable products from four affiliates,
Locust Street Securities, Inc., Vestax Securities Corporation, DSI
and Multi-Financial Securities Corporation of $122,900,000,
$44,900,000, $13,600,000 and $13,400,000, respectively. The
Companies had premiums, net reinsurance, for variable products
from three affiliates, Locust Street Securities, Inc., Vestax
Securities Corporation and DSI of $9,300,000, $1,900,000 and
$2,100,000 respectively, for the period October 25, 1997 through
December 31, 1997 ($16,900,000, $1,200,000 and $400,000 for the
period January 1, 1997 through October 24, 1997, respectively).
Reciprocal Loan Agreement: Golden American maintains a reciprocal
loan agreement with ING America Insurance Holdings, Inc. ("ING
AIH"), a Delaware corporation and affiliate, to facilitate the
handling of unusual and/or unanticipated short-term cash
requirements. Under this agreement which became effective January
1, 1998 and expires December 31, 2007, Golden American and ING AIH
can borrow up to $65,000,000 from one another. Prior to lending
funds to ING AIH, Golden American must obtain the approval of the
State of Delaware Department of Insurance. Interest on any Golden
American borrowings is charged at the rate of ING AIH's cost of
funds for the interest period plus 0.15%. Interest on any ING AIH
borrowings is charged at a rate based on the prevailing interest
rate of U.S. commercial paper available for purchase with a
similar duration. Under this agreement, Golden American incurred
interest expense of $1,765,000 in 1998. At December 31, 1998,
Golden American did not have any borrowings or receivables from
ING AIH under this agreement.
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. Under this
agreement which became effective December 1, 1996 and expired
December 31, 1997, Golden American could borrow up to $25,000,000.
Interest on any borrowings was charged at the rate of Equitable's
monthly average aggregate cost of short-term funds plus 1.00%.
Under this agreement, Golden American incurred interest expense of
$211,000 for the year ended December 31, 1998 ($213,000 for the
period October 25, 1997 through December 31, 1997, $362,000 for
the period January 1, 1997 through October 24, 1997 and $85,000
for the period August 14, 1996 through December 31, 1996). The
outstanding balance was paid by a capital contribution.
Surplus Notes: On December 30, 1998, Golden American issued a
7.25% surplus note in the amount of $60,000,000 to Equitable Life.
The note matures on December 29, 2028. The note and related
accrued interest is subordinate to payments due to policyholders,
claimant and beneficiary claims, as well as debts owed to all
other classes of debtors, other than surplus note holders, of
Golden American. Any payment of principal and/or interest made is
subject to the prior approval of the Delaware Insurance
Commissioner. Golden American incurred no interest in 1998.
101
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
10. RELATED PARTY TRANSACTIONS (continued)
On December 17, 1996, Golden American issued an 8.25% surplus note
in the amount of $25,000,000 to Equitable. The note matures on
December 17, 2026. The note and related accrued interest is
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 is
subject to the prior approval of the Delaware Insurance
Commissioner. Golden American incurred interest totaling
$2,063,000 in 1998 ($344,000 and $1,720,000 for the periods
October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, respectively). 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.
Stockholder's Equity: On September 23, 1996, EIC Variable, Inc.
contributed $50,000,000 of Preferred Stock to the Companies'
additional paid-in capital. During 1998, Golden American received
$122,500,000 of capital contributions from its Parent.
11. COMMITMENTS AND CONTINGENCIES
Contingent Liability: In a transaction that closed on September
30, 1992, Bankers Trust acquired from 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 estimated the
contingent liability due from Golden American amounted to $439,000
at August 13, 1996. At August 13, 1996, the balance of the escrow
account established to fund the contingent liability was
$4,293,000.
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, 1998, the Companies had reinsurance
treaties with four unaffiliated reinsurers and one affiliated
reinsurer covering a significant portion of the mortality risks
under variable contracts. The Companies remain liable to the
extent reinsurers do not meet their obligations under the
reinsurance agreements. Reinsurance ceded in force for life
mortality risks were $111,552,000 and $96,686,000 at December 31,
1998 and 1997, respectively. At December 31, 1998, the Companies
have a net receivable of $7,470,000 for reserve credits,
reinsurance claims or other receivables from these reinsurers
comprised of $439,000 for claims recoverable from reinsurers,
$543,000 for a payable for reinsurance premiums and $7,574,000 for
a receivable from an unaffiliated reinsurer. Included in the
accompanying financial statements are net considerations to
reinsurers of $4,797,000, $326,000, $1,871,000, $875,000 and
$600,000 and net policy benefits recoveries of $2,170,000,
$461,000, $1,021,000, $654,000 and $1,267,000 for the year ended
December 31, 1998 and for the periods October 25, 1997 through
December 31, 1997, January 1, 1997 through October 24, 1997,
August 14, 1996 through December 31, 1996 and January 1, 1996
through August 13, 1996, respectively.
102
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
11. COMMITMENTS AND CONTINGENCIES (continued)
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 $1,022,000, $265,000,
$335,000, $10,000 and $56,000 for the year ended December 31, 1998
and for the periods October 25, 1997 through December 31, 1997,
January 1, 1997 through October 24, 1997, August 14, 1996 through
December 31, 1996 and January 1, 1996 through August 13, 1996,
respectively.
Guaranty Fund Assessments: Assessments are levied against the
Companies by life and health guaranty associations in most states
in which the Companies are 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 Companies 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 as well as
its potential for premium tax offset. The Companies have
established an undiscounted reserve to cover such assessments and
regularly reviews information regarding known failures and revises
its estimates of future guaranty fund assessments. Accordingly,
the Companies accrued and charged to expense an additional
$1,123,000 for the year ended December 31, 1998, $141,000 for the
period October 25, 1997 through December 31, 1997, $446,000 for
the period January 1, 1997 through October 24, 1997, $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, 1998, the Companies have an undiscounted reserve of
$2,446,000 to cover estimated future assessments (net of related
anticipated premium tax credits) and has established an asset
totaling $586,000 for assessments paid which may be recoverable
through future premium tax offsets. The Companies believe this
reserve is sufficient to cover expected future guaranty fund
assessments, based upon previous premiums, and known insolvencies
at this time.
Litigation: The Companies, like other insurance companies, may be
named or otherwise involved in lawsuits, including class action
lawsuits. In some class action and other lawsuits involving
insurers, substantial damages have been sought and/or material
settlement payments have been made. The Companies currently
believe no pending or threatened lawsuits exist that are
reasonably likely to have a material adverse impact on the
Companies.
Vulnerability from Concentrations: The Companies have various
concentrations in its investment portfolio (see Note 3 for further
information). The Companies' 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. Substantial changes in tax laws that would
make these products less attractive to consumers and 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 Companies' financial condition. Two
broker/dealers generated 27% of the Companies' sales (53% by two
broker/dealers during 1997).
Leases: The Companies lease their home office space, certain
other equipment and capitalized computer software under operating
leases which expire through 2018. During the year ended December
31, 1998 and for the periods October 25, 1997 through December 31,
1997, January 1, 1997 through October 24, 1997, August 14, 1996
through December 31, 1996 and January 1, 1996 through August 13,
1996, rent expense totaled $1,241,000, $39,000, $331,000, $147,000
and $247,000, respectively. At December 31, 1998, minimum rental
payments due under all non-cancelable operating leases with
initial terms of one
103
<PAGE>
<PAGE>
GOLDEN AMERICAN LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
11. COMMITMENTS AND CONTINGENCIES (continued)
year or more are: 1999 - $1,528,000; 2000 - $1,429,000; 2001 - $1,240,000;
2002 - $1,007,000; 2003 - $991,000 and 2004 and thereafter - $5,363,000.
Revolving Note Payable: To enhance short-term liquidity, the
Companies have established a revolving note payable effective July
27, 1998 and expiring July 31, 1999 with SunTrust Bank, Atlanta
(the "Bank"). The note was approved by the Boards of Directors of
Golden American and First Golden on August 5, 1998 and September
29, 1998, respectively. The total amount the Companies may have
outstanding is $85,000,000, of which Golden American and First
Golden have individual credit sublimits of $75,000,000 and
$10,000,000, respectively. The note accrues interest at an annual
rate equal to: (1) the cost of funds for the Bank for the period
applicable for the advance plus 0.25% or (2) a rate quoted by the
Bank to the Companies for the advance. The terms of the agreement
require the Companies to maintain the minimum level of Company
Action Level Risk Based Capital as established by applicable state
law or regulation. During the year ended December 31, 1998, the
Companies incurred interest expense of $352,000. At December 31,
1998, the Companies did not have any borrowings under this
agreement.
104
<PAGE>
<PAGE>
[Shaded Section Header]
- ----------------------------------------------------------------------
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 1
Distribution of Contracts 1
Performance Information 2
IRA Withdrawal Option 7
Other Information 7
Financial Statements of Separate Account B 7
Appendix Description of Bond Ratings A-1
105
<PAGE>
<PAGE>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
PLEASE TEAR OFF, COMPLETE AND RETURN THE FORM BELOW TO ORDER A
FREE STATEMENT OF ADDITIONAL
INFORMATION FOR THE CONTRACTS OFFERED UNDER THE PROSPECTUS.
SEND THE FORM TO OUR CUSTOMER
SERVICE CENTER AT THE ADDRESS SHOWN ON THE PROSPECTUS 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
105/19 GALAXY PREMIUM PLUS (10/99)
106
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107
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<PAGE>
APPENDIX A
CONDENSED FINANCIAL INFORMATION
Except for the Equity, Growth and Income, Small Company Growth,
Asset Allocation and High Quality Bond subaccounts which commenced
operations as of the date of this prospectus (or soon after),
The following tables give (1) the accumulation unit value ("AUV"),
(2) the total number of accumulation units, and (3) the total
accumulation unit value, for each subaccount of Golden American
Separate Account B available under the Contract for the indicated
periods. The date on which the subaccount became available to
investors and the starting accumulation unit value are indicated on
the last row of each table. The Equity, Growth and Income, Small
Company Growth, Asset Allocation and High Quality Bond subaccounts
have starting accumulation unit values of $10.00.
LIQUID ASSET
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 14.33 1,185,641 $ 16,985 |
| 1997 13.83 131,429 1,818 |
| 10/1/97 13.71 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $14.11 839,093 $ 11,842 |
| 1997 13.65 61,012 846 |
| 10/1/97 13.53 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $13.88 2,967,968 $ 41,195 |
| 1997 13.44 298,288 4,009 |
| 10/1/97 13.33 -- -- |
|-------------------------------------------------------------|
LIMITED MATURITY BOND
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 16.77 633,316 $ 10,620 |
| 1997 15.91 16,839 268 |
| 10/1/97 15.72 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.52 334,521 $ 5,526 |
| 1997 15.70 10,105 159 |
| 10/1/97 15.52 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.25 910,113 $ 14,787 |
| 1997 15.47 12,557 195 |
| 10/1/97 15.29 -- -- |
|-------------------------------------------------------------|
GLOBAL FIXED INCOME
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 13.09 187,670 $ 2,456 |
| 1997 11.87 3,418 41 |
| 10/1/97 11.99 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $13.00 80,199 $1,043 |
| 1997 11.81 310 4 |
| 10/1/97 11.93 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $12.92 180,373 $ 2,330 |
| 1997 11.75 6,455 76 |
| 10/1/97 11.87 -- -- |
|-------------------------------------------------------------|
A1
<PAGE>
<PAGE>
TOTAL RETURN
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 17.72 1,708,118 $ 30,264 |
| 1997 16.10 54,291 874 |
| 10/1/97 16.10 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $17.60 1,404,222 $ 24,713 |
| 1997 16.02 25,888 415 |
| 10/1/97 15.75 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $17.49 3,742,869 $ 65,449 |
| 1997 15.94 147,659 2,354 |
| 10/1/97 15.68 -- -- |
|-------------------------------------------------------------|
EQUITY INCOME
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 21.94 257,646 $ 5,652 |
| 1997 20.55 26,372 542 |
| 10/1/97 20.55 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $21.61 207,605 $ 4,486 |
| 1997 20.28 13,243 269 |
| 10/1/97 20.29 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $21.26 713,431 $ 15,164 |
| 1997 19.97 35,002 699 |
| 10/1/97 19.99 -- -- |
|-------------------------------------------------------------|
FULLY MANAGED
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 20.53 593,655 $ 12,189 |
| 1997 19.66 36,852 725 |
| 10/1/97 9.49 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $20.23 512,203 $ 10,361 |
| 1997 19.40 28,440 552 |
| 10/1/97 19.24 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $19.90 1,673,484 $ 33,294 |
| 1997 19.11 108,003 2,064 |
| 10/1/97 18.96 -- -- |
|-------------------------------------------------------------|
RISING DIVIDENDS
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 22.61 1,802,632 $ 40,757 |
| 1997 20.09 50,068 1,006 |
| 10/1/97 19.30 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.43 1,454,269 $ 32,624 |
| 1997 19.96 34,332 685 |
| 10/1/97 19.19 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.22 4,169,562 $ 92,659 |
| 1997 19.81 169,648 3,360 |
| 10/1/97 19.05 -- -- |
|-------------------------------------------------------------|
A2
<PAGE>
<PAGE>
CAPITAL GROWTH
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 17.01 1,393,674 $ 23,707 |
| 1997 15.41 101,866 1,569 |
| 10/1/97 15.99 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.94 1,251,474 $ 21,197 |
| 1997 15.36 160,843 2,471 |
| 10/1/97 15.95 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.87 2,660,020 $ 44,867 |
| 1997 15.32 246,159 3,772 |
| 10/1/97 15.92 -- -- |
|-------------------------------------------------------------|
GROWTH
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 16.29 1,521,473 $ 24,792 |
| 1997 13.03 97,853 1,275 |
| 10/1/97 15.18 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.22 797,510 $ 12,940 |
| 1997 12.99 34,329 446 |
| 10/1/97 15.14 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $16.16 2,265,343 $ 36,602 |
| 1997 12.96 226,700 2,938 |
| 10/1/97 15.10 -- -- |
|-------------------------------------------------------------|
VALUE EQUITY
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 18.31 491,538 $ 8,998 |
| 1997 18.28 28,327 518 |
| 10/1/97 18.85 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $18.20 470,129 $ 8,556 |
| 1997 18.20 40,454 736 |
| 10/1/97 18.78 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $18.06 1,161,575 $ 20,974 |
| 1997 18.09 117,054 2,117 |
| 10/1/97 18.67 -- -- |
|-------------------------------------------------------------|
RESEARCH
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 22.89 1,882,609 $ 43,093 |
| 1997 18.87 58,635 1,106 |
| 10/1/97 19.33 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.73 1,664,084 $ 37,830 |
| 1997 18.77 29,908 561 |
| 10/1/97 19.24 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.59 3,540,785 $ 79,977 |
| 1997 18.67 154,878 2,892 |
| 10/1/97 19.15 -- -- |
|-------------------------------------------------------------|
A3
<PAGE>
<PAGE>
STRATEGIC EQUITY
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 14.23 291,183 $ 4,143 |
| 1997 14.31 13,199 189 |
| 10/1/97 14.14 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $14.16 162,917 $ 2,307 |
| 1997 14.26 15,985 228 |
| 10/1/97 14.10 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $14.07 748,842 $ 10,538 |
| 1997 14.20 49,579 704 |
| 10/1/97 14.04 -- -- |
|-------------------------------------------------------------|
CAPITAL APPRECIATION
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 24.50 552,738 $ 13,542 |
| 1997 22.05 12,122 267 |
| 10/1/97 21.95 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $24.26 436,641 $ 10,591 |
| 1997 21.87 20,531 449 |
| 10/1/97 21.78 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $23.98 999,496 $ 23,892 |
| 1997 21.65 66,918 1,449 |
| 10/1/97 21.57 -- -- |
|-------------------------------------------------------------|
MID-CAP GROWTH
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 22.43 871,756 $ 19,550 |
| 1997 18.52 35,953 666 |
| 10/1/97 18.94 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.31 523,815 $ 11,688 |
| 1997 18.45 13,732 253 |
| 10/1/97 18.88 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $22.17 1,207,879 $ 26,779 |
| 1997 18.36 48,168 885 |
| 10/1/97 18.79 -- -- |
|-------------------------------------------------------------|
SMALL CAP
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 15.37 1,029,412 $ 15,820 |
| 1997 12.88 58,584 755 |
| 10/1/97 13.85 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $15.30 594,716 $ 9,098 |
| 1997 12.84 20,111 258 |
| 10/1/97 13.82 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $15.23 1,273,236 $ 19,390 |
| 1997 12.81 99,963 1,280 |
| 10/1/97 13.78 -- -- |
|-------------------------------------------------------------|
A4
<PAGE>
<PAGE>
REAL ESTATE
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 21.74 196,372 $ 4,270 |
| 1997 25.48 10,718 273 |
| 10/1/97 25.25 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $21.42 112,984 $ 2,420 |
| 1997 25.14 8,060 203 |
| 10/1/97 24.92 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $21.07 408,418 $ 8,604 |
| 1997 24.76 44,523 1,102 |
| 10/1/97 24.56 -- -- |
|-------------------------------------------------------------|
HARD ASSETS
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 14.28 50,015 $ 714 |
| 1997 20.57 4,291 88 |
| 10/1/97 24.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $14.07 33,342 $ 469 |
| 1997 20.29 4,830 98 |
| 10/1/97 23.68 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $13.84 205,654 $ 2,846 |
| 1997 19.99 10,671 213 |
| 10/1/97 23.34 -- -- |
|-------------------------------------------------------------|
DEVELOPING WORLD
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 7.28 131,499 $ 958 |
| 2/19/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 7.27 31,253 $ 227 |
| 2/19/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 7.26 111,256 $ 808 |
| 2/19/98 -- -- -- |
|-------------------------------------------------------------|
PIMCO HIGH YIELD BOND
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $10.08 872,132 $ 8,791 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $10.07 424,746 $ 4,277 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $10.06 1,487,999 $ 14,969 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
A5
<PAGE>
<PAGE>
PIMCO STOCKSPLUS GROWTH AND INCOME
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $11.11 883,763 $ 9,820 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $11.10 467,386 $ 5,188 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $11.09 1,878,277 $ 20,828 |
| 5/1/98 10.00 -- -- |
|-------------------------------------------------------------|
INTERNATIONAL EQUITY
[3-up table with shaded headers]
|-------------------------------------------------------------|
| STANDARD DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $ 10.29 1,067,090 $ 10,979 |
| 1997 9.90 38,652 383 |
| 10/1/97 11.57 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| ANNUAL RATCHET DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $10.32 680,862 $ 7,025 |
| 1997 9.95 36,098 359 |
| 10/1/97 11.62 -- -- |
|-------------------------------------------------------------|
|-------------------------------------------------------------|
| 7% SOLUTION ENHANCED DEATH BENEFIT |
|-------------------------------------------------------------|
| TOTAL # OF |
| ACCUMULATION |
| AUV AT UNITS AT TOTAL |
| YEAR END (AND YEAR END (AND AUV AT |
| AT BEGINNING OF AT BEGINNING OF YEAR END |
| FOLLOWING YEAR) FOLLOWING YEAR) (IN THOUSANDS) |
|-------------------------------------------------------------|
| 1998 $10.27 1,736,702 $ 17,844 |
| 1997 9.92 72,955 724 |
| 10/1/97 11.60 -- -- |
|-------------------------------------------------------------|
A6
<PAGE>
<PAGE>
MARKET VALUE ADJUSTMENT EXAMPLES
`EXAMPLE #1: FULL SURRENDER -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Interest Allocation with a
guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%,
an initial Index Rate ("I") of 7%; that a full surrender is requested
3 years into the guaranteed interest period; that the then Index Rate for
a 7 year guaranteed interest period ("J") is 8%; and that no prior transfers
or withdrawals affecting this Fixed Interest Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The contract value of the Fixed Interest 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 / 1.0850 ) ^ 2,555 / 365 - 1 ) = $11,535
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $112,695 ( $124,230 - $11,535 ).
EXAMPLE #2: FULL SURRENDER -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
Assume $100,000 was allocated to a Fixed Interest Allocation with a
guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%,
an initial Index Rate ("I") of 7%; that a full surrender is requested
3 years into the guaranteed interest period; that the then Index Rate for
a 7 year guaranteed interest period ("J") is 6%; and that no prior transfers
or withdrawals affecting this Fixed Interest Allocation have been made.
CALCULATE THE MARKET VALUE ADJUSTMENT
1. The contract value of the Fixed Interest 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 / 1.0650 ) ^ 2,555 / 365 - 1 ) = $4,141
Therefore, the amount paid to you on full surrender ignoring any surrender
charge is $124,230 ( $124,230 + $4,141 ).
EXAMPLE #3: WITHDRAWAL -- EXAMPLE OF A NEGATIVE MARKET VALUE ADJUSTMENT
Assume $200,000 was allocated to a Fixed Interest Allocation with a
guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%,
an initial Index Rate ("I") of 7%; that a withdrawal of $112,695 is
requested 3 years into the guaranteed interest period; that the
then Index Rate ("J") for a 7 year guaranteed interest period is 8%;
and that no prior transfers or withdrawals affecting this Fixed
Interest Allocation have been made.
B1
<PAGE>
<PAGE>
First calculate the amount that must be withdrawn from the Fixed Interest
Allocation to provide the amount requested.
1. The contract value of the Fixed Interest 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 =
( $112,695 / ( 1.07 / 1.0850 ) ^ 2,555 / 365 - 1 ) = $124,230
Then calculate the Market Value Adjustment on that amount.
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0850 ) ^ 2,555 / 365 - 1 ) = $11,535
Therefore, the amount of the withdrawal paid to you ignoring any surrender
charge is $112,695 as requested. The Fixed Interest Allocation will be reduced
by the amount of the withdrawal, $112,695, and also reduced by the Market
Value Adjustment of $11,535, for a total reduction in the Fixed Interest
Allocation of $124,230.
EXAMPLE #4: WITHDRAWAL -- EXAMPLE OF A POSITIVE MARKET VALUE ADJUSTMENT
Assume $200,000 was allocated to a Fixed Interest Allocation with a
guaranteed interest period of 10 years, a guaranteed interest rate of 7.5%,
an initial Index Rate of 7%; that a withdrawal of $128,371 requested 3
years into the guaranteed interest period; that the then Index Rate ("J")
for a 7 year guaranteed interest period is 6%; and that no prior transfers
or withdrawals affecting this Fixed Interest Allocation have been made.
First calculate the amount that must be withdrawn from the Fixed Interest
Allocation to provide the amount requested.
1. The contract value of Fixed Interest 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 =
( $128,371 / ( 1.07 / 1.0650 ) ^ 2,555 / 365 ) = $124,230
Then calculate the Market Value Adjustment on that amount
4. Market Value Adjustment = $124,230 X
(( 1.07 / 1.0650 ) ^ 2,555 / 365 - 1 ) = $4,141
Therefore, the amount of the withdrawal paid to you ignoring any surrender
charge is $128,371, as requested. The Fixed Interest Allocation will be
reduced by the amount of the withdrawal, $128,371, but increased by the Market
Value Adjustment of $4,141, for a total reduction in the Fixed Interest
Allocation of $124,230.
B2
<PAGE>
<PAGE>
APPENDIX C
SURRENDER CHARGE FOR EXCESS WITHDRAWALS EXAMPLE
The following assumes you made an initial premium payment of $10,000
and additional premium payments of $10,000 in each of the second and
third contract years, for total premium payments under the Contract
of $30,000. It also assumes a withdrawal at the beginning of the
fifth contract year of 15% of the contract value of $35,000.
In this example, $3,500 ($35,000 x .10) is the maximum free
withdrawal amount that you may withdraw during the contract year
without a surrender charge. The total withdrawal would be $5,250
($35,000 x .15). Therefore, $1,750 ($5,250 - $3,500) is considered
an excess withdrawal of a part of the initial premium payment of
$10,000 and would be subject to a 7% surrender charge of $122.50
($1,750 x .07). This example does not take into account any Market
Value Adjustment or deduction of any premium taxes.
C1
<PAGE>
<PAGE>
ING VARIABLE ANNUITIES
GOLDEN AMERICAN LIFE INSURANCE COMPANY
Golden American Life Insurance Company is a stock company domiciled
in Delaware
105119 GALAXY PREMIUM PLUS (10/99)
<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 indemnity. 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. (1)
3(a) (i) Restated Certificate of Incorporation of Golden
American Life Insurance Company (4)
(ii) Certificate of Amendment of the Restated Articles of
Incorporation of Golden American Life Insurance
Company (4)
3(b) By-Laws of Golden American Life Insurance Company (4)
3(c) Resolution of Board of Directors for Powers of Attorney (4)
4(a) Individual Deferred Variable and Fixed Annuity
Contract (4)
4(b) Group Deferred Variable and Fixed Annuity Contract (4)
4(c) Individual Deferred Variable Annuity Contract. (4)
4(d) Individual Retirement Annuity Rider Page. (1)
4(e) Individual Deferred Combination Variable and Fixed
Annuity Application. (4)
4(f) Group Deferred Combination Variable and Fixed
Annuity Enrollment Form. (4)
4(g) Individual Deferred Variable Annuity Application. (4)
4(h) Roth Individual Retirement Annuity Rider. (2)
4(i) Schedule Page to the Premium Plus Contract featuring
The Galaxy VIP Fund
5 Opinion and Consent of Myles R. Tashman, Esq.
10(a) Administrative Services Agreement between Golden American
and Equitable Life Insurance Company of Iowa (3)
10(b) Service Agreement between Golden American Life Insurance
Company and Directed Services, Inc. (3)
10(c) Service Agreement between Golden American Life Insurance
Company and EISI (3)
10(d) Asset Management Agreement between Golden American and
ING Investment Management LLC (4)
10(e) Reciprocal Loan Agreement between Golden American and
ING America Insurance Holdings, Inc. (4)
10(f) Revolving Note Payable between Golden American and
SunTrust Bank (4)
10(g) Participation Agreement between Golden American Life Insurance
Company and Warburg Pincus Trust (4)
10(h) Participation Agreement between Golden American Life Insurance
Company and PIMCO Variable Insurance Trust (4)
10(i) Form of Participation Agreement between Golden American Life
Insurance Company and The Galaxy VIP Fund
23(a) Consent of Sutherland Asbill & Brennan LLP.
23(b) Consent of Ernst & Young LLP, independent auditors.
23(c) Consent of Myles R. Tashman, included together with Opinion
of Myles R. Tashman, Esq. in Exhibit 5 to this Registration
Statement
24 Powers of Attorney.
27 Financial Data Schedule.
(1) Incorporated herein by reference to Amendment No. 1 to Registrant's
Registration Statement on form S-1 for Golden American Life Insurance
Company filed with the Securities and Exchange Commission on
September 24, 1997 (File No. 333-28743).
(2) Incorporated herein by reference to Amendment No. 2 to Registrant's
Registration Statement on form S-1 for Golden American Life Insurance
Company filed with the Securities and Exchange Commission on February
12, 1998 (File No. 333-28743).
(3) Incorporated herein by reference to Amendment No. 3 to Registrant's
Registration Statement on form S-1 for Golden American Life Insurance
Company filed with the Securities and Exchange Commission on April 30,
1998 (File No. 333-28743).
(4) Incorporated herein by reference to Registrant's Registration
Statement on form S-1 for Golden American Life Insurance Company
filed with the Securities and Exchange Commission on April 23, 1999
(File No. 333-76945).
<PAGE>
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE.
(1) All financial statements are included in the Prospectus
or Statement of Additional Information as indicated therein
(2) Schedules I, III and IV follow. All other schedules to the
consolidated financial statements required by Article 7 of
Regulation S-X are omitted because they are not applicable
or because the information is included elsewhere in the
consolidated financial statements or notes thereto.
<PAGE>
<PAGE
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1998 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 $13,568 $13,742 $13,742
Foreign governments 2,028 2,036 2,036
Public utilities 67,710 67,809 67,809
Corporate securities 365,569 367,489 367,489
Other asset-backed securities 99,877 99,112 99,112
Mortgage-backed securities 191,020 191,797 191,797
___________ ___________ ___________
Total fixed maturities, available
for sale 739,772 741,985 741,985
Equity securities:
Common stocks: industrial, miscel-
laneous and all other 14,437 11,514 11,514
Mortgage loans on real estate 97,322 97,322
Policy loans 11,772 11,772
Short-term investments 41,152 41,152
___________ ___________
Total investments $904,455 $903,745
=========== ===========
<FN>
Note 1: Cost is defined as original cost for common stocks, amortized cost
for bonds and short-term investments, and unpaid principal for
policy loans and mortgage loans on real estate, adjusted for
amortization of premiums and accrual of discounts.
</TABLE>
<PAGE>
<PAGE>
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
________________________________________________________________________________
POST-MERGER
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance $204,979 $881,112 $3,840 -- $39,119
Period October 25, 1997
through December 31, 1997:
Life insurance 12,752 505,304 1,189 $10 3,834
POST-ACQUISITION
________________________________________________________________________________
Period January 1, 1997
through October 24, 1997:
Life insurance N/A N/A N/A N/A 18,288
Period August 14, 1996
through December 31, 1996:
Life insurance 11,468 285,287 2,063 -- 8,768
PRE-ACQUISITION
________________________________________________________________________________
Period January 1, 1996
through August 13, 1996:
Life insurance N/A N/A N/A N/A 12,259
</TABLE>
<PAGE>
<PAGE>
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
________________________________________________________________________________
POST-MERGER
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Life insurance $42,485 $96,968 $5,148 ($26,406) --
Period October 25, 1997
through December 31, 1997:
Life insurance 5,127 7,413 892 1,137 --
POST-ACQUISITION
________________________________________________________________________________
Period January 1, 1997
through October 24, 1997:
Life insurance 21,656 19,401 1,674 20,234 --
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 --
<FN>
*This includes policy acquisition costs deferred for first year
commissions and interest bonuses, extra credit bonuses and other
expenses related to the production of new business. The cost
related to first year interest bonuses and the extra credit bonus
are included in benefits claims, losses and settlement expenses.
</TABLE>
SCHEDULE IV
REINSURANCE
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
_______________________________________________________________________________
Percen-
Assumed tage of
Ceded to from Amount
Gross Other Other Net Assumed
Amount Companies Companies Amount to Net
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
At December 31, 1998:
Life insurance in
force $181,456,000 $111,552,000 -- $69,904,000 --
============= ============== ========= ============ ========
At December 31, 1997:
Life insurance in
force $149,842,000 $96,686,000 -- $53,156,000 --
============= ============== ========= ============ ========
At December 31, 1996:
Life insurance in
force $86,192,000 $58,368,000 -- $27,824,000 --
============= ============== ========= ============ ========
</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 Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the
City of West Chester and Commonwealth of Pennsylvania, on the
24th day of September, 1999.
GOLDEN AMERICAN LIFE
INSURANCE COMPANY
(Registrant)
By:
------------------------
Barnett Chernow*
President
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 September 24, 1999.
Signature Title
President and Director
- --------------------
Barnett Chernow*
Senior Vice President and
- -------------------- Chief Financial Officer
E. Robert Koster*
DIRECTORS OF DEPOSITOR
- -----------------------
Myles R. Tashman*
- -----------------------
R. Brock Armstrong*
- -----------------------
Michael W. Cunningham*
- -----------------------
Linda B. Emory*
- -----------------------
Phillip R. Lowery*
By: /s/ Marilyn Talman, Attorney-in-Fact
------------------------------------------
Marilyn Talman
_________________________
*Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
<PAGE>
<PAGE>
EXHIBIT INDEX
ITEM EXHIBIT PAGE #
4(i) Schedule Page to the Premium Plus Contract
featuring The Galaxy VIP Fund EX-4.I
5 Opinion and Consent of Myles R. Tashman, Esq. EX-5
10(i) Form of Participation Agreement between Golden
American Life Insurance Company and The Galaxy
VIP Fund EX-10.I
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>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 4(i)
THE SCHEDULE
THE VARIABLE SEPARATE ACCOUNTS
- -------------------------------------------------------------------------------
Annuitant Owner
[THOMAS J. DOE] [JOHN Q. DOE]
- -------------------------------------------------------------------------------
Initial Premium Annuity Option Annuity Commencement Date
[$10,000] [LIFE 10-YEAR CERTAIN] [JANUARY 1, 2053]
- -------------------------------------------------------------------------------
Separate Account(s)
[SEPARATE ACCOUNT B AND THE FIXED ACCOUNT] Certificate Number
[123456]
- -------------------------------------------------------------------------------
DIVISIONS INVESTING IN SHARES OF A MUTUAL FUND
Separate Account B (the "Account") is a unit investment trust Separate
Account, organized in and governed by the laws of the State of Delaware, our
state of domicile. The Account is divided into Divisions. Each Division
listed below invests in shares of the mutual fund portfolio (the "Series")
designated. Each portfolio is a part of The GCG Trust managed by Directed
Services, Inc.
SERIES SERIES
------ ------
Equity Income Real Estate
Fully Managed Hard Assets
Value Equity Limited Maturity Bond
Small Cap Liquid Assets
Capital Appreciation Strategic Equity
Rising Dividend Managed Global
Mid-Cap Growth Research
Total Return Growth
Capital Growth Global Fixed Income
Developing World
The Division listed below invests in shares of the mutual fund portfolio (the
"Portfolio") designated. The portfolio is a part of the Warburg Pincus Trust
managed by Credit Suisse Asset Management, LLC (CSAM).
PORTFOLIO
---------
International Equity
The Division listed below invests in shares of the mutual fund portfolio (the
"Portfolio") designated. The portfolio is a part of the PIMCO Trust
managed by Pacific Investment Management Company.
PORTFOLIO
---------
High Yield
StocksPlus Growth and Income
The Divisions below invests in shares of the mutual fund portfolio (the
"Portfolio") designated. The portfolio is a part of the The Galaxy VIP
fund managed by Fleet Investment Advisors, Inc.
PORTFOLIO
---------
Equity
Small Company Growth
Asset Allocation
Growth & Income
High Quality Bond
GA-IA-1036 02-97 3B
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 5
ING VARIABLE ANNUITIES
MYLES R. TASHMAN
Executive Vice President,
General Counsel and Secretary
September 24, 1999
Members of the Board of Directors
Golden American Life Insurance Company
1475 Dunwoody Drive
West Chester, PA 19380-1478
Ms. Emory 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;
(4) The interests in the Contracts will, when issued and sold in the
manner described in the registration statement, be legal and
binding obligations of the Company and will be legally and
validly issued, fully paid, and non-assessable.
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
1475 Dunwoody Drive Tel: 610-425-3405 GoldenSelect Series
West Chester, PA 19380-1478 Fax: 610-425-3735 Issued by Golden American
Life Insurance Company
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 10(i)
PARTICIPATION AGREEMENT
-----------------------
AMONG
GOLDEN AMERICAN LIFE INSURANCE COMPANY,
THE GALAXY VIP FUND,
FLEET INVESTMENT ADVISORS INC.
AND
FIRST DATA DISTRIBUTORS, INC.
THIS AGREEMENT, dated as of the 1st day of October, 1999, by and
among Golden American Life Insurance Company (the "Company"), a life
insurance company organized under the laws of the State of Delaware, on
its own behalf and on behalf of each separate account of the Company set
forth on Schedule A hereto as may be amended from time to time (each
such account hereinafter referred to as the "Account"), The Galaxy VIP
Fund (the "Fund"), a management investment company and business trust
organized under the laws of the [State of Delaware/Commonwealth of
Massachusetts], Fleet Investment Advisors Inc.(the "Adviser"), a
corporation organized under the laws of the [State of
Delaware/Commonwealth of Massachusetts],and First Data Distributors,
Inc. (the "Distributor"), a corporation organized under the laws of the
[State of Delaware/Commonwealth of Massachusetts].
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by
insurance companies which have entered into participation agreements
with the Fund, Adviser and Distributor ("Participating Insurance
Companies");
WHEREAS, the shares of beneficial interest of the Fund are divided
into several series of shares, each designated a "Portfolio" and
representing the interest in a particular managed portfolio of
securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission (the "SEC") granting Participating Insurance
Companies and variable annuity and variable life insurance separate
accounts exemptions from the provisions of sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (the "1940
Act") and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, if and to the
extent necessary to permit shares of the Fund to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (the "Mixed and
Shared Funding Exemptive Order"), and the parties to this Agreement
agree to comply with the conditions or undertakings specified in the
Mixed and Shared Funding Exemptive Order to the extent applicable to
each such party;
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the Portfolios are
registered under the Securities Act of 1933, as amended (the "1933
Act");
<PAGE>
<PAGE>
WHEREAS, the Adviser, which serves as investment adviser to the
Fund, is duly registered as an investment adviser under the federal
Investment Advisers Act of 1940, as amended;
WHEREAS, the Company has registered or will register certain
variable annuity contracts (the "Contracts") under the 1933 Act;
WHEREAS, the Account is a duly organized, validly existing
segregated asset account, established by the Company under the insurance
laws of the State of Delaware, to set aside and invest assets
attributable to the Contracts;
WHEREAS, the Company has registered the Account as a unit
investment trust under the 1940 Act;
WHEREAS, the Company has issued or will issue certain variable life
insurance and/or variable annuity contracts supported wholly or
partially by the Account (the "Contracts"), and said Contracts are
listed in Schedule A hereto, as it may be amended from time to time by
mutual written agreement;
WHEREAS, the Distributor, which serves as distributor to the Fund,
is registered as a broker dealer with the SEC under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios
listed in Schedule B hereto, as it may be amended from time to time by
mutual written agreement (the "Designated Portfolios") on behalf of the
Account to fund the aforesaid Contracts, and the Distributor is
authorized to sell such shares to the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund, the Adviser, and the Distributor agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios that each Account or the appropriate subaccount of
each Account orders, executing such orders on a daily basis at the net
asset value next computed after receipt and acceptance by the Fund or
its designee of the order for the shares of the Fund. For purposes of
this Section 1.1, the Company will be the designee of the Fund for
receipt of such orders from each Account or the appropriate subaccount
of each Account and receipt by such designee will constitute receipt by
the Fund; provided that the Fund receives notice of such order by 10:00
a.m. Eastern Time on the next following business day ("T+1"). "Business
Day" will mean any day on which the New York Stock Exchange is open for
trading and on which the Fund calculates its net asset value pursuant to
the rules of the SEC.
1.2. The Company will pay for Fund shares on T+1 that an order to
purchase Fund shares is made in accordance with Section 1.1 above.
Payment will be in federal funds transmitted by wire. This wire
transfer will be initiated by 12:00 p.m. Eastern Time.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely for purchase at the applicable net asset value
per share by Participating Insurance Companies and their separate
accounts on those days on which the Fund calculates its Designated
Portfolio net asset value pursuant to rules of the SEC and the Fund
shall use reasonable efforts to calculate such net asset value on each
day the New York Stock Exchange is open for trading; provided, however,
that the Board of
- 2 -
<PAGE>
<PAGE>
Trustees of the Fund (the "Fund Board") may refuse to
sell shares of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by law or
by regulatory authorities having jurisdiction or is, in the sole
discretion of the Fund Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary
in the best interests of the shareholders of such Portfolio.
1.4. On each Business Day on which the Fund calculates its net
asset value, the Company will aggregate and calculate the net purchase
or redemption orders for each Account or the appropriate subaccount of
each Account maintained by the Fund in which contract owner assets are
invested. Net orders will only reflect orders that the Company has
received prior to the close of regular trading on the New York Stock
Exchange, Inc. (the "NYSE") (currently 4:00 p.m., Eastern Time) on that
Business Day. Orders that the Company has received after the close of
regular trading on the NYSE will be treated as though received on the
next Business Day. Each communication of orders by the Company will
constitute a representation that such orders were received by it prior
to the close of regular trading on the NYSE on the Business Day on which
the purchase or redemption order is priced in accordance with Rule 22c-1
under the 1940 Act. Other procedures relating to the handling of orders
will be in accordance with the prospectus and statement of information
of the relevant Designated Portfolio or with oral or written
instructions that the Distributor or the Fund will forward to the
Company from time to time.
1.5. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts, qualified
pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as
amended, (the "Internal Revenue Code"), and regulations promulgated
thereunder, the sale to which will not impair the tax treatment
currently afforded the Contracts. No shares of any Portfolio will be
sold to the general public except as set forth in this Section 1.5.
1.6. The Fund agrees to redeem for cash, upon the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the
request for redemption. For purposes of this Section 1.6, the Company
will be the designee of the Fund for receipt of requests for redemption
from each Account or the appropriate subaccount of each Account and
receipt by such designee will constitute receipt by the Fund, provided
the Fund receives notice of request for redemption by 10:00 a.m. Eastern
Time on the next following Business Day. Payment will be in federal
funds transmitted by wire to the Company's account as designated by the
Company in writing from time to time, on the same Business Day the Fund
receives notice of the redemption order from the Company. The Fund
reserves the right to delay payment of redemption proceeds, but in no
event may such payment be delayed longer than the period permitted by
the 1940 Act. The Fund will not bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds; the Company
alone will be responsible for such action. If notification of
redemption is received after 10:00 a.m. Eastern Time, payment for
redeemed shares will be made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of the Fund
in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Purchase and redemption orders for Fund shares will be
recorded in an appropriate title for each Account or the appropriate
subaccount of each Account.
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1.9. The Fund will furnish same day notice (by telecopier, followed
by written confirmation) to the Company of the declaration of any
income, dividends or capital gain distributions payable on each
Designated Portfolio's shares. The Company hereby elects to receive all
such dividends and distributions as are payable on the Designated
Portfolio shares in the form of additional shares of that Designated
Portfolio. The Fund will notify the Company of the number of shares so
issued as payment of such dividends and distributions. The Company
reserves the right to revoke this election upon reasonable prior notice
to the Fund and to receive all such dividends and distributions in cash.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon
as reasonably practical after the net asset value per share is
calculated and will use its best efforts to make such net asset value
per share available by 6:00 p.m., Eastern Time, but in no event later
than 7:00 p.m., Eastern Time, each business day.
1.11. In the event adjustments are required to correct any
error in the computation of the net asset value of the Fund's shares,
the Fund or the Distributor will notify the Company as soon as
practicable after discovering the need for those adjustments that result
in an aggregate reimbursement of $150 or more to any one subaccount of
each Account maintained by a Designated Portfolio unless notified
otherwise by the Company (or, if greater, results in an adjustment of
$10 or more to each contractowner's account). Any such notice will
state for each day for which an error occurred the incorrect price, the
correct price and, to the extent communicated to the Fund's
shareholders, the reason for the price change. The Company may send
this notice or a derivation thereof (so long as such derivation is
approved in advance by the Distributor or the Adviser) to contractowners
whose accounts are affected by the price change. The parties will
negotiate in good faith to develop a reasonable method for effecting
such adjustments. The Fund shall provide the Company, on behalf of the
Account or the appropriate subaccount of each Account, with a prompt
adjustment to the number of shares purchased or redeemed to reflect the
correct share net asset value.
1.12.
(a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's shares
may be sold to other insurance companies (subject to Section 1.8
hereof) and the cash value of the Contracts may be invested in
other investment companies, provided, however, that until this
Agreement is terminated pursuant to Article X, the Company shall
promote the Designated Portfolios on the same basis as other
funding vehicles available under the Contracts and funding vehicles
other than those listed on Schedule B to this Agreement may be
available for the investment of the cash value of the Contracts.
(b) The Company shall not, without prior notice to the
Advisor and the Distributor (unless otherwise required by
applicable law), take any action to operate the Account as a
management investment company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Advisor and the Distributor (unless otherwise required by
applicable law), induce Contract owners to change or modify the
Fund or change the Fund's distributor or investment adviser.
(d) The Company shall not, without prior notice to the Fund,
induce Contract owners to vote on any matter submitted for
consideration by the shareholders of the Fund in a manner other
than as recommended by the Board of Trustees of the Fund.
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ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts will be
issued and sold in compliance with all applicable federal and state
laws, including state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has
legally and validly established each Account as a separate account under
applicable state law and has registered the Account as a unit investment
trust in accordance with the provisions of thin 1940 Act to serve as a
segregated investment account for the Contracts, and that it will
maintain such registration for so long as any Contracts are outstanding.
The Company will amend the registration statement under the 1933 Act for
the Contracts and the registration statement under the 1940 Act for the
Account from time to time as required in order to effect the continuous
offering of the Contracts or as may otherwise be required by applicable
law. The Company will register and qualify the Contracts for sale in
accordance with the securities laws of the various states only if and to
the extent deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at
the time of issuance will be treated as endowment, annuity or life
insurance contracts under applicable provisions of the Internal Revenue
Code, and that it will make every effort to maintain such treatment and
that it will notify the Fund and the Adviser immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through Contracts
purchased in connection with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be registered
under the 1933 Act and duly authorized for issuance in accordance with
applicable law and that the Fund is and will remain registered under the
1940 Act for as long as such shares of the Designated Portfolios are
outstanding. The Fund will amend the registration statement for its
shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund will
register and qualify the shares of the Designated Portfolios for sale in
accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue
Code, and that it will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provision) and that it
will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so
qualify in the future.
2.6. The Fund represents and warrants that in performing the
services described in this Agreement, the Fund will comply with all
applicable laws, rules and regulations. The Fund makes no representation
as to whether any aspect of its operations (including, but not limited
to, fees and expenses and investment policies, objectives and
restrictions) complies with the insurance laws and regulations of any
state. The Fund and the Distributor agree that upon request they will
use their best efforts to furnish the information required by state
insurance laws so that the Company can obtain the authority needed to
issue the Contracts in the various states.
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2.7. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act,
although it reserves the right to make such payments in the future. To
the extent that it decides to finance distribution expenses pursuant to
Rule 12b-1 the Fund undertakes to have its Fund Board formulate and
approve any plan under Rule 12b-1 to finance distribution expenses in
accordance with the 1940 Act.
2.8. The Distributor represents and warrants that it will
distribute the Fund shares of the Designated Portfolios in accordance
with all applicable federal and state securities laws including, without
limitation, the 1933 Act, the 1934 Act and the 1940 Act.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it
does and will comply in all material respects with applicable provisions
of the 1940 Act.
2.10. The Distributor represents and warrants that it is and
will remain duly registered under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
accordance in all material respects with any applicable state and
federal securities laws.
2.11. The Fund and the Distributor represent and warrant that
all of their trustees, officers, employees, investment advisers, and
other individuals/entities having access to the funds and/or securities
of the Fund are and continue to be at all times covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule
17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and
embezzlement and is issued by a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
-----------------------------------------
3.1. The Fund or the Distributor will provide the Company, at the
Fund's or its affiliate's expense, with as many copies of the current
Fund prospectus for the Designated Portfolios as the Company may
reasonably request for distribution, at the Company's expense, to
prospective contractowners and applicants. The Fund or the Distributor
will provide, at the Fund's or its affiliate's expense, as many copies
of said prospectus as necessary for distribution, at the Company's
expense, to existing contractowners. The Fund or the Distributor will
provide the copies of said prospectus to the Company or to its mailing
agent. If requested by the Company in lieu thereof, the Fund or the
Distributor will provide such documentation, including a computer
diskette or a final copy of a current prospectus set in type at the
Fund's or its affiliate's expense, and such other assistance as is
reasonably necessary in order for the Company at least annually (or more
frequently if the Fund prospectus is amended more frequently) to have
the Fund's prospectus and the prospectuses of other mutual funds in
which assets attributable to the Contracts may be invested printed
together in one document, in which case the Fund or its affiliate will
bear its reasonable share of expenses as described above, allocated
based on the proportionate number of pages of the Fund's and other
fund's respective portions of the document.
3.2. The Fund or the Distributor will provide the Company, at the
Fund's or its affiliate's expense, with as many copies of the statement
of additional information as the Company may reasonably request for
distribution, at the Company's expense, to prospective contractowners
and applicants. The Fund or the Distributor will provide, at the Fund's
or its affiliate's expense, as many copies of said statement of
additional information as necessary for distribution, at the Company's
expense, to any existing contractowner who requests such statement or
whenever state or federal law otherwise requires that such
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statement be
provided. The Fund or the Distributor will provide the copies of said
statement of additional information to the Company or to its mailing
agent.
3.3. The Fund or the Distributor, at the Fund's or its affiliate's
expense, will provide the Company or its mailing agent with copies of
its proxy material, if any, reports to shareholders and other
communications to shareholders in such quantity as the Company will
reasonably require. The Company will distribute this proxy material,
reports and other communications to existing contract owners and
tabulate the votes.
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from
contractowners; and
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been received, as
well as shares it owns, in the same proportion as shares of such
Designated Portfolio for which instructions have been received from
the Company's contractowners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass-through voting privileges for variable
contractowners. Except as set forth above, the Company reserves the
right to vote Fund shares held in any segregated asset account in its
own right, to the extent permitted by law. The Company will be
responsible for assuring that each of its separate accounts
participating in the Fund calculates voting privileges in a manner
consistent with all legal requirements, including the Mixed and Shared
Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund either
will provide for annual meetings (except insofar as the SEC may
interpret Section 16 of the 1940 Act not to require such meetings) or,
as the Fund currently intends to comply with Section 16(c) of the 1940
Act (although the Fund is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, the Fund will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the SEC may
promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
------------------------------
4.1. the Distributor will provide the Company on a timely basis
with investment performance information for each Designated Portfolio in
which the Company maintains a subaccount of the Account, including total
return for the preceding calendar month and calendar quarter, the
calendar year to date, and the prior one-year, five-year, and ten year
(or life of the Fund) periods. The Company may, based on the SEC
mandated information supplied by the Distributor, prepare communications
for contractowners ("Contractowner Materials"). The Company will
provide copies of all Contractowner Materials concurrently with their
first use for the Distributor's internal recordkeeping purposes. It is
understood that neither the Distributor nor any Designated Portfolio
will be responsible for errors or omissions in, or the content of,
Contractowner Materials except to the extent that the error or omission
resulted from information provided by or on behalf of the Distributor or
the Designated Portfolio. Any printed information that is furnished to
the Company pursuant to this Agreement other than each Designated
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Portfolio's prospectus or statement of additional information (or
information supplemental thereto), periodic reports and proxy
solicitation materials is the Distributor's sole responsibility and not
the responsibility of any Designated Portfolio or the Fund. The Company
agrees that the Portfolios, the shareholders of the Portfolios and the
officers and governing Board of the Fund will have no liability or
responsibility to the Company in these respects.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or concerning the
Fund in connection with the sale of the Contracts other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for Fund shares, as
such registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports or proxy statements for the Fund, or in published reports for
the Fund which are in the public domain or approved by the Fund or the
Distributor for distribution, or in sales literature or other material
provided by the Fund, Adviser or by the Distributor, except with
permission of the Distributor. Any piece of sales literature or other
promotional material intended to be used by the Company which requires
the permission of the Distributor prior to use will be furnished by
Company to the Distributor, or its designee, at least ten (10) business
days prior to its use. No such material will be used if the Distributor
reasonably objects to such use within five (5) business days after
receipt.
Nothing in this Section 4.2 will be construed as preventing the Company
or its employees or agents from giving advice on investment in the Fund.
4.3. The Fund, the Adviser or the Distributor will furnish, or will
cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company or
its Account is named, at least ten (10) business days prior to its use.
No such material will be used if the Company reasonably objects to such
use within five (5) business days after receipt of such material.
4.4. The Fund, the Adviser and the Distributor will not give any
information or make any representations or statements on behalf of the
Company or concerning the Company, each Account, or the Contracts other
than the information or representations contained in a registration
statement, prospectus or statement of additional information for the
Contracts, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time,
or in published reports for each Account or the Contracts which are in
the public domain or approved by the Company for distribution to
contractowners, or in sales literature or other material provided by the
Company, except with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements of
additions information, reports, proxy statements, sales literature and
other promotional materials, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate
to the Fund or its shares, contemporaneously with the filing of such
document with the SEC, the NASD or other regulatory authority.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, statements of
additional information, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications for
exemptions, requests for no action letters, and all amendments to any of
the above, that relate to the Contracts or each Account,
contemporaneously with the filing of such document with the SEC, the
NASD or other regulatory authority.
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4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone
or tape recording, videotape display, signs or billboards, motion
pictures, or other public media, (e.g., on-line networks such as the
Internet or other electronic messages), sales literature (i.e., any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisements sales literature, or published
article), educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials and any
other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
4.8. The Fund and the Distributor hereby consent to the Company's
use of the names Fleet Investment Advisors Inc., The Galaxy VIP Fund,
the portfolio names designated on Schedule B or other designated names
as may be used from time to time in connection with the marketing of the
Contracts, subject to the terms of Sections 4.1 and 4.2 of this
Agreement. Such consent will terminate with the termination of this
Agreement.
ARTICLE V. Fees and Expenses
-----------------
5.1. The Fund, the Adviser and the Distributor will pay no fee or
other compensation to the Company under this Agreement except if the
Fund or any Designated Portfolio adopts and implements a plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses, then,
subject to obtaining any required exemptive orders or other regulatory
approvals, the Fund may make payments to the Company or to the
underwriter for the Contracts if and in such amounts agreed to by the
Fund in writing.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by law. The
Fund will bear the expenses for the cost of registration and
qualification of the Fund's shares; preparation and filing of the Fund's
prospectus, statement of additional information and registration
statement, proxy materials and reports; setting in type and printing the
Fund's prospectus; setting in type and printing proxy materials and
reports by it to contractowners (including the costs of printing a Fund
prospectus that constitutes an annual report); the preparation of all
statements and notices required by any federal or state law; all taxes
on the issuance or transfer of the Fund's shares; any expenses permitted
to be paid or assumed by the Fund pursuant to a plan, if any, under Rule
12b-1 under the 1940 Act; and all other expenses set forth in Article
III of this Agreement.
ARTICLE VI. Diversification and Qualification
---------------------------------
6.1. The Adviser will ensure that the Fund will at all times invest
money from the Contracts in such a manner as to ensure that the
Contracts will be treated as variable annuity contracts under the
Internal Revenue Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will comply with Section
817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5, as
amended from time to time, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and any
amendments or other modifications to such Section or Regulation. In the
event of a breach of this Article VI by the Fund, it will take all
reasonable steps: (a) to notify the Company of such breach; and (b) to
adequately diversify the Fund so as to achieve compliance within the
grace period afforded by Treasury Regulation 1.817-5.
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6.2. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue
Code, and that it will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provisions) and that it
will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so
qualify in the future.
6.3. The Company represents that the Contracts are currently, and
at the time of issuance shall be, treated as life insurance or annuity
insurance contracts, under applicable provisions of the Internal Revenue
Code, and that it will make every effort to maintain such treatment, and
that it will notify the Fund and the Distributor immediately upon having
a reasonable basis for believing the Contracts have ceased to be so
treated or that they might not be so treated in the future. The Company
agrees that any prospectus offering a contract that is a "modified
endowment contract" as that term is defined in Section 7702A of the
Internal Revenue Code (or any successor or similar provision), shall
identify such contract as a modified endowment contract.
ARTICLE VII. Potential Conflicts
-------------------
7.1. The Fund Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the Contract
owners of all separate accounts investing in the Fund. An
irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e)
a difference in voting instructions given by variable annuity contract
and variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners. The
Fund Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company will assist the Fund
Board in carrying out its responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the Fund Board with all information
reasonably necessary for the Fund Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to
inform the Fund Board whenever Contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested members, that a material irreconcilable
conflict exists, the Company and other Participating Insurance Companies
shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Fund Board members), take
whatever steps are necessary to remedy or eliminate the irreconcilable
material conflict, up to and including: (1) withdrawing the assets
allocable to some or all of the separate accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented
to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (i.e., annuity contract
owners, life insurance contract owners, or variable contract owners of
one or more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected contract owners the option
of making such a change; and (2) establishing a new registered management
investment company or managed separate account.
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7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions
and that decision represents a minority position or would preclude a
majority vote, the Company may be required, at the Fund's election, to
withdraw the Account's investment in the Fund and terminate this
Agreement with respect to each Account; provided, however, that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Fund Board. Any such
withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented,
and until the end of that six month period the Fund shall continue to
accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state regulators, then the
Company will withdraw the affected Account's investment in the Fund and
terminate this Agreement with respect to such Account within six months
after the Fund Board informs the Company in writing that it has
determined that such decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the
Fund Board. Until the end of the foregoing six month period, the Fund
shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board shall determine
whether any proposed action adequately remedies any irreconcilable
material conflict, but in no event will the Fund be required to
establish a new funding medium for the Contracts. The Company shall not
be required by Section 7.3 to establish a new funding medium for the
Contract if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable
material conflict. In the event that the Fund Board determines that any
proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the
Fund and terminate this Agreement within six (6) months after the Fund
Board informs the Company in writing of the foregoing determination;
provided, however, that such withdrawal and termination shall be limited
to the extent required by any such material irreconcilable conflict as
determined by a majority of the disinterested members of the Fund Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption
Order or any amendment thereto contains terms and conditions different
from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this
Agreement, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with
the Mixed and Shared Funding Exemptive Order, and Sections 3.4, 3.5,
3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially
identical to such Sections are contained in the Mixed and Shared Funding
Exemptive Order or any amendment thereto. If and to the extent that
Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to
provide exemptive relief from any provision of the 1940 Act or the rules
promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, then (a) the Fund and/or the
Participating Insurance Companies, as appropriate, shall take such steps
as may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended,
and Rule 6e-3, as adopted, to the extent such rules are applicable; and
(b) Sections 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this Agreement
shall continue in effect only to the
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extent that terms and conditions
substantially identical to such Sections are contained in such Rule(s)
as so amended or adopted.
ARTICLE VIII. Indemnification
---------------
8.1. Indemnification By The Company
------------------------------
(a) The Company agrees to indemnify and hold harmless the
Fund, the Adviser, the Distributor, and each person, if any, who
controls or is associated with the Fund, the Adviser or the
Distributor within the meaning of such terms under the federal
securities laws and any director, trustee, officer, partner,
employee or agent of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or
litigation (including reasonable legal and other expenses), to
which the Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
(1) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Contracts or contained in the
Contracts or sales literature or other promotional material
for the Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated or necessary to make such statements not
misleading in light of the circumstances in which they were
made; provided that this agreement to indemnify will not apply
as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon
and in conformity with written information furnished to the
Company by the Fund, the Adviser or the Distributor for use in
the registration statement, prospectus or statement of
additional information for the Contracts or in the Contracts
or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company or wrongful
conduct of the Company or persons under its control, with
respect to the sale or distribution of the Contracts or Fund
shares; or
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund
registration statement, prospectus, statement of additional
information or sales literature or other promotional material
of the Fund (or amendment or supplement) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make such statements not
misleading in light of the circumstances in which they were
made, if such a statement or omission was made in reliance
upon and in conformity with information furnished to the Fund
by or on behalf of the Company or persons under its control;
or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement; or
- 12 -
<PAGE>
<PAGE>
(5) arise out of any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.3 hereof.
This indemnification will be in addition to any liability that the
Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) to the extent such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith, or gross
negligence in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties promptly will notify the Company
of the commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with
the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. Indemnification By The Adviser, the Fund and the Distributor
------------------------------------------------------------
(a) The Adviser, the Fund and the Distributor, in each case
solely to the extent relating to such party's responsibilities
hereunder, agree to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the Company
within the meaning of such terms under the federal securities laws
and any director, trustee, officer, partner, employee or agent of
the foregoing (collectively, the "Indemnified Parties" for purposes
of this Section 8.2) against any and all losses, claims, expenses,
damages, liabilities (including amounts paid in settlement with the
written consent of the Adviser) or litigation (including reasonable
legal and other expenses) to which the Indemnified Parties may
become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements:
(1) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement, prospectus or statement of
additional information for the Fund or sales literature or
other promotional material of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that this
agreement to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with
information furnished to the Adviser, the Distributor or the
Fund by or on behalf of the Company for use in the
registration statement, prospectus or statement of additional
information for the Fund or in sales literature of the Fund
(or any amendment or supplement thereto) or otherwise for use
in connection with the sale of the Contracts or Fund shares;
or
(2) arise out of or as a result of statements or
representations or wrongful conduct of the Adviser, the Fund
or the Distributor or persons under the control of the
Adviser, the Fund or the Distributor respectively, with
respect to the sale of the Fund shares; or
- 13 -
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<PAGE>
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, statement of additional information or
sales literature or other promotional material covering the
Contracts (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact
required to be stated or necessary to make such statement or
statements not misleading in light of the circumstances in
which they were made, if such statement or omission was made
in reliance upon and in conformity with written information
furnished to the Company by the Adviser, the Fund or the
Distributor or persons under the control of the Adviser, the
Fund or the Distributor; or
(4) arise as a result of any failure by the Fund, the
Adviser or the Distributor to provide the services and furnish
the materials under the terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise,
to comply with the diversification requirements and procedures
related thereto specified in Article VI of this Agreement); or
(5) arise out of or result from any material breach of
any representation and/or warranty made by the Adviser, the
Fund or the Distributor in this Agreement, or arise out of or
result from any other material breach of this Agreement by the
Adviser the Fund or the Distributor;
except to the extent provided in Sections 8.2(b) and 8.3 hereof.
This indemnification will be in addition to any liability that the
Fund, Adviser or the Distributor otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.2(a) to the extent such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad faith, or gross
negligence in the performance of such party's duties under this
Agreement, or by reason of such party's reckless disregard of its
obligations or duties under this Agreement by the party seeking
indemnification.
(c) The Indemnified Parties will promptly notify the Adviser,
the Fund and the Distributor of the commencement of any litigation,
proceedings, complaints or actions by regulatory authorities
against them in connection with the issuance or sale of the
Contracts or the operation of the account.
8.3. Indemnification Procedure
-------------------------
Any person obligated to provide indemnification under this Article
VIII ("Indemnifying Party" for the purpose of this Section 8.3) will not
be liable under the indemnification provisions of this Article VIII with
respect to any claim made against a party entitled to indemnification
under this Article VIII ("Indemnified Party" for the purpose of this
Section 8.3) unless such Indemnified Party will have notified the
Indemnifying Party in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim will have been served upon such Indemnified Party (or after such
party will have received notice of such service on any designated
agent), but failure to notify the Indemnifying Party of any such claim
will not relieve the Indemnifying Party from any liability which it may
have to the Indemnified Party against whom such action is brought
otherwise than on account of the indemnification provision of this
Article VIII, except to the extent that the failure to notify results in
the failure of actual notice to the Indemnifying Party and such
Indemnifying Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the Indemnified
Party, the
- 14 -
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<PAGE>
Indemnifying Party will be entitled to participate, at its
own expense, in the defense thereof. The Indemnifying Party also will
be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Indemnifying Party
to the Indemnified Party of the Indemnifying Party's election to assume
the defense thereof, the Indemnified Party will bear the fees and
expenses of any additional counsel retained by it, and the Indemnifying
Party will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the Indemnifying Party
and the Indemnified Party will have mutually agreed to the retention of
such counsel; or (b) the named parties to any such proceeding (including
any impleaded parties) include both the Indemnifying Party and the
Indemnified Party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. The Indemnifying Party will not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the Indemnified
Party from and against any loss or liability by reason of such
settlement or judgment. A successor by law of the parties to this
Agreement will be entitled to the benefits of the indemnification
contained in this Article VIII. The indemnification provisions
contained in this Article VIII will survive any termination of this
Agreement.
ARTICLE IX. Applicable Law
--------------
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
Delaware.
9.2 This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, any
Mixed and Shared Funding Exemptive Order) and the terms hereof shall be
interpreted and construed in accordance therewith. If, in the future,
the Mixed and Shared Funding Exemptive Order should no longer be
necessary under applicable law, then Article VII shall no longer apply.
ARTICLE X. Termination
-----------
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Designated Portfolios, upon sixty
(60) days' advance written notice to the other parties or, if
later, upon receipt of any required exemptive relief or orders from
the SEC, unless otherwise agreed in a separate written agreement
among the parties; or
(b) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if shares of the Designated Portfolio are not
reasonably available to meet the requirements of the Contracts as
determined in good faith by the Company; or
(c) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or Federal law or such law precludes the use
of such shares as the underlying investment media of the Contracts
issued or to be issued by Company; or
- 15 -
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<PAGE>
(d) at the option of the Fund, upon receipt of the Fund's
written notice by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the administration of the Contracts, the operation of
the Account, or the purchase of the Fund shares, provided that the
Fund determines in its sole judgment, exercised in good faith, that
any such proceeding would have a material adverse effect on the
Company's ability to perform its obligations under this Agreement;
or
(e) at the option of the Company, upon receipt of the
Company's written notice by the other parties, upon institution of
formal proceedings against the Fund, Adviser or the Distributor by
the NASD, the SEC, or any state securities or insurance department
or any other regulatory body, provided that the Company determines
in its sole judgment, exercised in good faith, that any such
proceeding would have a material adverse effect on the Fund's or
the Distributor's ability to perform its obligations under this
Agreement; or
(f) at the option of the Company, upon receipt of the
Company's written notice by the other parties, if the Fund ceases
to qualify as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code, or under any successor or similar
provision, or if the Company reasonably and in good faith believes
that the Fund may fail to so qualify; or
(g) at the option of the Company, upon receipt of the
Company's written notice by the other parties, with respect to any
Designated Portfolio if the Fund fails to meet the diversification
requirements specified in Article VI hereof or if the Company
reasonably and in good faith believes the Fund may fail to meet
such requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another party's material
breach of any provision of this Agreement which material breach is
not cured within thirty (30) days of said notice; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either the Fund,
the Adviser or the Distributor has suffered a material adverse
change in its business, operations or financial condition since the
date of this Agreement or is the subject of material adverse
publicity which is likely to have a material adverse impact upon
the business and operations of the Company, such termination to be
effective sixty (60) days' after receipt by the other parties of
written notice of the election to terminate; or
(j) at the option of the Fund or the Distributor, if the Fund
or the Distributor respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations or financial condition
since the date of this Agreement or is the subject of material
adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Fund or the Adviser, such
termination to be effective sixty (60) days' after receipt by the
other parties of written notice of the election to terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another investment company
for the corresponding Designated Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those
Designated Portfolio shares had been selected to serve as the
underlying investment media.
- 16 -
<PAGE>
<PAGE>
The Company will give sixty (60) days'
prior written notice to the Fund of the date of any proposed vote
or other action taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of the
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of: (1) all contractowners of
variable insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies investing in the
Fund as set forth in Article VII of this Agreement; or
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with applicable
federal and/or state law. Termination will be effective
immediately upon such occurrence without notice.
10.2. Notice Requirement. No termination of this Agreement
-------------------
will be effective unless and until the party terminating this Agreement
gives prior written notice to all other parties of its intent to
terminate, which notice will set forth the basis for the termination.
10.3. Effect of Termination. Notwithstanding any termination
----------------------
of this Agreement, the Fund and the Distributor will, at the option of
the Company, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all
Contracts in effect on the effective date of termination of this
Agreement ( hereinafter referred to as "Existing Contracts.") .
Specifically, without limitation, the owners of the Existing Contracts
will be permitted to reallocate investments in the Portfolios (as in
effect on such date), redeem investments in the Portfolios and/or invest
in the Portfolios upon the making of additional purchase payments under
the Existing Contracts.
10.4. Surviving Provisions. Notwithstanding any termination of
---------------------
this Agreement, each party's obligations under Article VIII to indemnify
other parties will survive and not be affected by any termination of
this Agreement. In addition, each party's obligations under
Section 12.7 will survive and not be affected by any termination of this
Agreement. Finally, with respect to Existing Contracts, all provisions
of this Agreement also will survive and not be affected by any
termination of this Agreement.
ARTICLE XI. Notices
-------
11.1. Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of such
party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Fund: THE GALAXY VIP FUND
[c/o ]
4400 Computer Drive
Westborough, MA 01581-9896
If to the Company: Golden American Life Insurance Company
c/o Myles Tashman
Executive Vice President and General Counsel
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
- 17 -
<PAGE>
<PAGE>
If to Adviser: Fleet Investment Advisers Inc.
[c/o ]
4400 Computer Drive
Westborough, MA 01581-9896
If to Distributor: First Data Distributors, Inc.
[c/o ]
4400 Computer Drive
Westborough, MA 01581-9896
ARTICLE XII. Miscellaneous
-------------
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund
as neither the directors, trustees, officers, partners, employees,
agents or shareholders assume any personal liability for obligations
entered into on behalf of the Fund. No Portfolio or series of the Fund
will be liable for the obligations or liabilities of any other Portfolio
or series.
12.2. The Fund, the Adviser and the Distributor acknowledge
that the identities of the customers of the Company or any of its
affiliates (collectively the "Company Protected Parties" for purposes of
this Section 12.2), information maintained regarding those customers,
and all computer programs and procedures or other information developed
or used by the Company Protected Parties or any of their employees or
agents in connection with the Company's performance of its duties under
this Agreement are the valuable property of the Company Protected
Parties. The Fund, the Adviser and the Distributor agree that if they
come into possession of any list or compilation of the identities of or
other information about the Company Protected Parties' customers, or any
other information or property of the Company Protected Parties, other
than such information as is publicly available or as may be
independently developed or compiled by the Fund, the Adviser or the
Distributor from information supplied to them by the Company Protected
Parties' customers who also maintain accounts directly with the Fund,
the Adviser or the Distributor, the Fund, the Adviser and the
Distributor will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information
or other property except: (a) with the Company's prior written consent;
or (b) as required by law or judicial process. The Company acknowledges
that the identities of the customers of the Fund, the Adviser, the
Distributor or any of their affiliates (collectively the "Adviser
Protected Parties" for purposes of this Section 12.2), information
maintained regarding those customers, and all computer programs and
procedures or other information developed or used by the Adviser
Protected Parties or any of their employees or agents in connection with
the Fund's, the Adviser's or the Distributor's performance of their
respective duties under this Agreement are the valuable property of the
Adviser Protected Parties. The Company agrees that if it comes into
possession of any list or compilation of the identities of or other
information about the Adviser Protected Parties' customers, or any other
information or property of the Adviser Protected Parties, other than
such information as is publicly available or as may be independently
developed or compiled by the Company from information supplied to them
by the Adviser Protected Parties' customers who also maintain accounts
directly with the Company, the Company will hold such information or
property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with
the Fund's, the Adviser's or the Distributor's prior written consent; or
(b) as required by law or judicial process. Each party acknowledges
that any breach of the agreements in this Section 12.2 would result in
immediate and irreparable harm to the other parties for which there
would be no adequate remedy at law and agree that in the event of such a
breach, the other parties will be entitled to equitable relief by way of
temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
- 18 -
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<PAGE>
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of
the provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together will constitute one and
the same instrument.
12.5. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto
without the prior written consent of all the parties.
12.7. Each party to this Agreement will maintain all records
required by law, including records detailing the services it provides.
Such records will be preserved, maintained and made available to the
extent required by law and in accordance with the 1940 Act and the rules
thereunder. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including without
limitation the SEC, the NASD and state insurance regulators) and will
permit each other and such authorities reasonable access to its books
and records in connection with any investigation or inquiry relating to
this Agreement or the transactions contemplated hereby. Upon request by
the Fund or the Distributor, the Company agrees to promptly make copies
or, if required, originals of all records pertaining to the performance
of services under this Agreement available to the Fund or the
Distributor, as the case may be. The Fund agrees that the Company will
have the right to inspect, audit and copy all records pertaining to the
performance of services under this Agreement pursuant to the
requirements of any state insurance department. Each party also agrees
to promptly notify the other parties if it experiences any difficulty in
maintaining the records in an accurate and complete manner. This
provision will survive termination of this Agreement.
12.8. Each party represents that the execution and delivery of
this Agreement and the consummation of the transactions contemplated
herein have been duly authorized by all necessary corporate or board
action, as applicable, by such party and when so executed and delivered
this Agreement will be the valid and binding obligation of such party
enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to
this Agreement from time to time to reflect changes in or relating to
the Contracts, the Accounts or the Designated Portfolios of the Fund or
other applicable terms of this Agreement.
12.10. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights.
[12.11. If Fund is a Mass business trust - The parties to this
Agreement acknowledge and agree that all liabilities of the Fund
arising, directly or indirectly, under this agreement, will be satisfied
solely out of the assets of the Fund and that no trustee, officer, agent
or holder of shares of beneficial interest of the Fund will be
personally liable for any such liabilities. ]
- 19 -
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as
of the date specified below:
GOLDEN AMERICAN LIFE INSURANCE
COMPANY:
By: __________________________
Title: _______________________
Date: ________________________
THE GALAXY VIP FUND:
By: __________________________
Title: _______________________
Date: ________________________
FLEET INVESTMENT ADVISORS INC :
By: __________________________
Title: _______________________
Date: ________________________
FIRST DATA DISTRIBUTORS, INC.
By: __________________________
Title: _______________________
Date: ________________________
- 20 -
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<PAGE>
SCHEDULE A
GOLDEN AMERICAN LIFE INSURANCE COMPANY
CONTRACTS AND SEPARATE ACCOUNT(S)
CONTRACT(S):
Deferred Combination Variable and Fixed Annuity
Contract - Premium Plus featuring The Galaxy VIP
Fund
SEPARATE ACCOUNT(S):
Separate Account B of Golden American Life Insurance
Company
SCHEDULE B
THE GALAXY VIP FUND
DESIGNATED PORTFOLIOS
PORTFOLIOS:
Equity Fund
Growth and Income Fund
Small Company Growth Fund
Asset Allocation Fund
High Quality Bond Fund
Schedule Date: October 1, 1999
- 21 -
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<PAGE>
<PAGE>
EXHIBIT 23(a)
Sutherland
Asbill & 1275 Pennsylvania Ave., NW
Brennan LLP Washington, DC 20004-2415
Attorneys at Law Tel: (202) 383-0100
Fax: (202) 637-3593
www.sablaw.com
September 24, 1999
STEPHEN E. ROTH
DIRECT LINE: (202) 383-0158
Internet: [email protected]
Board of Directors
Golden American Life Insurance Company
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
Ms. Emory 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. 1 to the registration statement on Form S-1 for
Golden American Life Insurance Company (File No. 333-76945).
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 LLP
By: /s/Stephen E. Roth
------------------
Stephen E. Roth
<PAGE>
<PAGE>
<PAGE>
<PAGE
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 report dated
February 25, 1999, with respect to the financial statements
of Separate Account B in the Statement of Additional
Information incorporated by reference from the Registration
Statement (Form N-4 No. 333-28755) filed with the Securities
and Exchange Commission comtemporaneously with this
registration statement. We also consent to the use of our
report dated February 12, 1999, 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. 1 to the Registration Statement
(Form S-1 No. 333-76945) of Golden American Life Insurance Company.
Our audits 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 audits. In our
opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set
forth therein.
/s/ERNST & YOUNG LLP
Des Moines, Iowa
September 22, 1999
<PAGE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned, being duly elected
Directors and/or 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 the following
Golden American registration statements and current amendments to
registration statements, and to file the same, with all exhibits thereto, on
or before September 30, 1999, 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 he or she 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.
o Post-Effective Amendment currently designated #6 to Separate Account B
of Golden American's Registration Statement on Form N-4 (Nos. 333-28755;
811-5626)
o Amendment currently designated #1 to Golden American's Registration
Statement on Form S-1 (No. 333-76945)
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Barnett Chernow Director and President September 22, 1999
- ---------------------
Barnett Chernow
/s/Myles R. Tashman Director, Executive Vice September 23, 1999
- --------------------- President, General Counsel
Myles R. Tashman and Secretary
/s/R. Brock Armstrong Director September 24, 1999
- ---------------------
R. Brock Armstrong
/s/Michael W. Cunningham Director September 23, 1999
- ---------------------
Michael W. Cunningham
/s/Linda B. Emory Director September 22, 1999
- ---------------------
Linda B. Emory
/s/Phillip R. Lowery Director September 23, 1999
- ---------------------
Phillip R. Lowery
/s/E. Robert Koster Senior Vice President and September 22, 1999
- --------------------- Chief Financial Officer
E. Robert Koster
1475 Dunwoody Drive GOLDEN SELECT SERIES
West Chester, PA 19380 Issued by Golden American Life
Insurance Company
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED BALANCE SHEETS (UNADITED) AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> Jan-30-1999
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 731,047
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 14,688
<MORTGAGE> 93,563
<REAL-ESTATE> 0
<TOTAL-INVEST> 919,774
<CASH> 9,339
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 351,070
<TOTAL-ASSETS> 6,495,162
<POLICY-LOSSES> 966,363
<UNEARNED-PREMIUMS> 5,271
<POLICY-OTHER> 4
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 85,050
0
0
<COMMON> 2,500
<OTHER-SE> 429,317
<TOTAL-LIABILITY-AND-EQUITY> 6,495,162
0
<INVESTMENT-INCOME> 28,158
<INVESTMENT-GAINS> (1,717)
<OTHER-INCOME> 45,068
<BENEFITS> 84,152
<UNDERWRITING-AMORTIZATION> 10,713
<UNDERWRITING-OTHER> (32,219)
<INCOME-PRETAX> 3,367
<INCOME-TAX> 1,945
<INCOME-CONTINUING> 1,422
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,422
<EPS-BASIC> 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
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</TABLE>
